What does the Kroger-Albertsons merger mean for brands? 'It's a double-edged sword...'

Some brands have declined to speculate at this stage on how the merger might impact their business, while others had a positive outlook and were optimistic about the expanded visibility their brand may have.

"The national reach is unquestionable - it’s exciting for both growing and mature brands to scale distribution via fewer touch-points, and have the potential to get products on more shelves, in more stores, much more efficiently," said Rahul Shah, COO, and president of better-for-you frozen treats brand GoodPop. 

"As leaders in data-driven and digital business models, if Albertsons and Kroger are able to merge the best of their joint capabilities, it’ll be great for retail (e.g. combining Kroger’s shopper data capabilities and Albertsons loyalty programs should make for pretty revolutionary shopper marketing)."

Pete Speranza, CEO of plant-based frozen food brand Wicked Kitchen, which has distribution at over 2,000 Kroger stores, said, “Kroger has strong leadership in the grocery space and it’s going to be exciting to see how they leverage this additional footprint with Albertsons and Safeway to continue to drive Kroger’s mission."

Others we spoke to were more cautiously optimistic about the merger, noting how consolidation at multiple levels from store locations in overlapping markets to centralized buying teams could create a more constrained (or easier to navigate) environment for emerging brands.

Vincent Kitirattragarn, founder and CEO, of Dang Foods, which sells in both Kroger and Albertsons banners, said, "It's a double-edged sword: on one side I think they'll want to consolidate and centralize their buyer teams which is better for brands with fewer personnel on their sales team. On the other side, they'll have more bargaining power for discounts, ads, and slotting fees."

Will emerging brands suffer?

In theory, any brand selling in one retailer and not the other may stand to gain an expanded distribution footprint under the merger, but Dr. James Richardson, author of the Amazon best-seller Ramping Your Brand, said that not all emerging brands would benefit by this logic.

"The combined scale will benefit large brands and some emerging brands beyond $25m in revenue," predicted Richardson.

"Overall, the number of slots for startups will probably decrease. One reason is that Kroger is much more aggressive at using shelf space for its Own Brands and will continue this practice to boost its margins."

This could possibly create an even more competitive (and expensive) retail environment for emerging brands to get their products on shelf.

"The issue of slotting fees is one where Kroger could do the right thing by not exploiting its new power in front of emerging brands. And they may," Richardson continued.

"The Kroger Co already makes a quarter of its revenue from non-CPG items. so it may not need to boost supplier fees as much as other chains with weaker traffic, weaker profitability, and a poor shopper experience. I believe they will be able to be pickier about onboarding new brands just for the sake of slotting monies. This will ironically make it harder to buy your way in as one can do at less competent operator chains."

Future of private label offerings

Asked about what a merger might mean for private label for Kroger (Simple Truth, Private Selection etc) and Albertsons (Signature SELECT, O Organics etc), Richardson predicted Kroger would likely prioritize its own private label offering.

"I would be surprised if Kroger did not largely replace ABSCO's premium private-label brands with Private Selection and Simple Truth," he said.  

"Own Brands shelf space will probably grow because Kroger is a world leader in private label R&D, operations, and shelf management. If you do it right, it's a huge profit center that allows you to treat branded suppliers better."

'This merger hardly gives them a monopoly in supermarket channel share'

Asked whether the mega-merger is "anti-competitive" and "anti-consumer" as a group of attorneys general are arguing (they are calling for the Federal Trade Commission to step in and block the deal), Richardson said, "Kroger and ABSCO (Albertsons Companies) trade in the same general pricing tier in American food retail as hi-lo retailers.

"This merger hardly gives them a monopoly in supermarket channel share. If anything, I think Americans will benefit from constrained private-label pricing due to the new company's much larger buying power."

And even though the consolidation of the two retailers could create issues for emerging brands at the onset, consumers are still making purchases in other channels outside of traditional grocery where startups can still thrive, he said. 

"Reduced access to new startup brands may occur, but I don't think that counts as 'anti-consumer' when these brands are often now sold on Amazon and their websites. It's never been easier to find specialized brands outside of a supermarket. Shoppers don't wait for their supermarket to bring in a brand. They get it somewhere else quite happily."