Kroger Co. and Albertsons Cos. agreed to sell 413 stores to C&S Wholesale Grocers in a divestiture designed to help win antitrust approval for their $24.6 billion merger.

C&S will pay $1.9 billion in cash for the stores, which are mostly located in the West and middle of the country, the companies said in a Sept. 8 statement. This confirmed a Bloomberg News report from earlier that week. Closely held C&S is a major grocery wholesaler that also operates Grand Union and Piggly Wiggly stores.

The same day, the United Food and Commercial Workers International Union released a statement in response. It said its “team of experts will be analyzing every aspect of this proposed deal and will assess the impact, positive or negative, that it may have on our UFCW members, the customers we serve, and the communities we call home.”

The Kroger Co. is No. 8 in the Top 1000. The database is Digital Commerce 360’s ranking of the largest online retailers by web sales. Albertsons ranks No. 26.

Fighting for (antitrust) approval

Kroger is betting the store sale will help it persuade the U.S. Federal Trade Commission to allow the Albertsons transaction. The transaction is the centerpiece of the retailer’s push to keep up with Walmart Inc. and Amazon.com Inc. The FTC, which has recently challenged high-profile deals in video games, pharmaceuticals and mortgage software under Chairman Lina Khan, is scrutinizing the merger’s impact on grocery competition.

Amazon ranks No. 1 in the Top 1000. Walmart is No. 2.

“This comprehensive divestiture plan marks a key next step toward the completion of the merger by extending a well-capitalized competitor into new geographies,” Kroger and Albertsons said in the statement.

Frontline workers will remain employed and existing collective-bargaining agreements will continue, they said. Kroger may require C&S to buy a further 237 stores in connection with efforts to win regulatory approval of the Albertsons deal, which would bring the total divestitures to 650. That’s the number Kroger had earlier defined as the ceiling for store divestitures.

The Cincinnati-based company also released financial results for its fiscal second quarter. Kroger grew digital sales 12% in the quarter.

The FTC still could sue to block the deal. Labor unions including UCFW and officials from a range of states have urged the regulator to oppose the merger. They say it would hurt wages and competition. Some senators and members of Congress have also criticized the transaction.

Kroger said the Albertsons acquisition remains on track to close in early 2024, with CEO Rodney McMullen having vowed to fight in court if necessary.

Store footprint

The agreement with C&S covers stores in 17 states and Washington, DC, along with eight distribution centers and five private-label brands. The sale also includes the QFC, Mariano’s and Carrs banners, plus exclusive licensing rights to the Albertsons brand name in Arizona, California, Colorado and Wyoming.

On a combined basis, Kroger and Albertsons currently have a footprint of about 5,000 stores. Walmart has roughly 5,200 retail locations in the U.S., including about 600 Sam’s Club warehouse stores. Amazon, which is already a force in categories such as diapers and some packaged goods, recently began the biggest overhaul of its grocery business since it acquired Whole Foods Market six years ago.

When Kroger announced the Albertsons acquisition in October, the companies said they would spin off as many as 375 stores if they couldn’t find buyers. Kroger later suggested in a merger agreement that 650 was the upper limit for divestitures.

For C&S, the deal will further an expansion into retail grocery stores. The Keene, New Hampshire-based company bought 12 stores from Tops Markets in 2021 when the latter grocer merged with the Price Chopper/Market 32 chain. The FTC approved that divestiture.

“C&S recently expanded its retail operations with the acquisition of 11 Piggly Wiggly Midwest retail stores, and hired a former retail grocery executive with significant retail experience to lead retail efforts,” the regulator said at the time.

In its sprawling wholesale business, C&S supplies more than 7,500 independent supermarkets, chain stores, military bases and institutions with over 100,000 different products.

Aldi opens 1,000th UK store

Aldi opened its 1,000th UK store on Sept. 7 and committed to a further 500 outlets in the country as the German discount grocer snatches market share from rivals.

The supermarket had previously aimed to have 1,200 stores by 2025 and is now targeting 1,500 over the long term, Aldi said that day. That’s ambitious growth for a company that opened its first store in Britain in 1990.

“We’re looking for new Aldi stores from Hackney to Harrogate and Bath to Brentwood,” Giles Hurley, chief executive officer of Aldi UK and Ireland, said in a phone interview. “We’ve had an unwavering will to grow in the UK and that’s been backed up by capital.”

U.K. shoppers have been flocking to Aldi as inflation erodes their purchasing power during the cost-of-living crisis. The discounter became Britain’s fourth-largest grocer last year, knocking Morrisons off the spot. Now, £1 in every £10 spent at U.K. supermarkets is at Aldi.

Shoppers are turning more to store-brand goods to tackle rampant food inflation, a trend that favors Aldi. The grocer also stocks fewer big brands than competitors. The grocer has served more than 1.1 million new customers over the past 12 months, said Hurley.

“We’ve seen customers switch their shopping” to Aldi, he said. “Existing customers are consolidating their spend with us and treating us as a first-stop shop.”

The grocer is growing sales at the fastest pace among supermarkets, seeing an increase of 21% in August from a year earlier, according to Kantar data. Sales at fellow discounter Lidl rose by almost 20% in the same period, while revenue at higher-end rivals Waitrose and Co-op rose by 4.4% and 3.4% respectively.

Competitors are watching Aldi’s rise closely. Both Tesco Plc and J Sainsbury Plc have pledged to match Aldi’s prices on hundreds of goods, while grocers are increasingly doing away with in-store food counters and delis in favor of the discounters’ simpler approach.

More reductions

Food inflation has begun to ease in the UK, though remains at a high level, with the Office for National Statistics reporting a rate of 14.9% in July. Supermarkets are keen to demonstrate they are cutting prices where possible.

“I’m quite optimistic that between now and Christmas there will be more price reductions in our stores,” said Hurley. “When it comes to the longer-term picture on inflation it’s definitely more difficult to read. There are a lot of influences on the grocery sector.”

This year, Aldi will open 20 stores as part of its existing £1.3 billion ($1.6 billion) expansion plan. The new one opening in Woking, Surrey, is one of more than 150 that Aldi has in the South East, as it seeks to attract customers in the affluent region.

Aldi also relaunched its website, priming it for ecommerce growth. The grocer is not currently ranked in any Digital Commerce 360 databases.

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