Fresh Take: Albertsons Sues Kroger As Merger Falls Apart, And UFCW Calls For Kroger CEO To Resign

The grocery industry is reeling this week from the collapse of the proposed $25 billion merger of the nation’s second- and third- largest supermarkets, Kroger and Albertsons, and the fallout is shaping up to be a full-on holiday season drama. Someone call in the Hallmark Channel.

The engagement soured after two decisions were handed down this week by two different federal judges. They sided with the Federal Trade Commission in its lawsuit to block the merger over the potential impact on consumer prices and plans to close stores that would limit access to fresh food in several regions. Then, Albertsons turned on Kroger, terminating the merger agreement and then going a step further: filing a lawsuit against the supermarket chain.

Albertsons’ lawsuit claims Kroger willfully breached its contract. Albertsons says Kroger failed to exercise “best efforts” and to take “any and all actions” to secure regulatory approval. Kroger responded that these claims are “baseless and without merit” and that it “refutes these allegations in the strongest possible terms.” Kroger added that Albertsons “repeated intentional material breaches and interference throughout the merger process.” Kroger says Albertsons has been seeking payment of the merger’s break fee, and that Kroger thinks Albertsons is not entitled to that money.

It’s quite the lawsuit, and I’ll be following it to keep you updated. I’ve written a lot about the impacts of consolidation in the food industry, and, especially in my book Raw Deal: Hidden Corruption, Corporate Greed and the Fight for the Future of Meat. I’ve detailed the harms that consumers can face when retailers merge, close stores and streamline purchasing. There’s a lot to consider.

The largest food worker union in the U.S.—United Food and Commercial Workers—which represents 11,700 Kroger workers, has even called for Kroger CEO Rodney McMullen to step down. That latest development is breaking this morning, after Kroger announced a massive $7.5 billion stock buyback just one day after the merger was blocked. That large amount is approximately 10 times the value of what Kroger had promised to put toward price reductions at its grocery stores. The money could have also gone toward the purchase of 280 new stores, or remodeling more than 3,200 stores, according to UFCW.

“The massive shareholder payout towers above the commitments the company had promised to reduce prices for consumers and to invest in wages during the recent merger fight,” according to a statement released Friday from UFCW. “Flip flopping in less than a day’s time from a strategy of aggressive growth through the Albertsons acquisition on Tuesday to one of dramatic downsizing through shedding $7.5 billion on Wednesday should be seen for what it seems to be—an attempt to buy shareholders’ mercy through a short-term boost to the stock price in order to save CEO Rodney McMullen’s job.”

Things are getting heated! More to come!

— Chloe Sorvino, Staff Writer

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Chloe Sorvino leads coverage of food and agriculture as a staff writer on the enterprise team at Forbes. Her book, Raw Deal: Hidden Corruption, Corporate Greed and the Fight for the Future of Meat, published on December 6, 2022, with Simon & Schuster’s Atria Books. Her nearly nine years of reporting at Forbes has brought her to In-N-Out Burger’s secret test kitchen, drought-ridden farms in California’s Central Valley, burnt-out national forests logged by a timber billionaire, a century-old slaughterhouse in Omaha and even a chocolate croissant factory designed like a medieval castle in northern France.