More than 100 Arizona Safeway and Albertsons could be sold. What you need to know

Arizona’s supermarket shakeout might be inching closer to reality. Kroger Co., which has been seeking to purchase rival Albertsons Cos. for nearly two years, this week disclosed a list of Albertsons and Safeway stores that it plans to sell or divest to a third company, C&S Wholesale Grocers, if regulators allow the deal to go through.

Some 101 Albertsons and Safeways in Arizona were identified as being divestiture candidates, the second highest total of any state, behind only Washington. The divestiture is designed to allay regulators’ concerns that a combined Kroger-Albertsons would gain a headlock on the supermarket business in certain places, including Arizona. Albertsons operates stores under both the Albertsons and Safeway banners.

But the deal continues to raise questions among readers. Here are some issues:

Is this Kroger-Albertsons merger a done deal?

No. The proposed $24.6 billion purchase of Albertsons Cos. still awaits approval by regulators including the Federal Trade Commission, and several state attorney generals have joined legal actions against it.

Arizona Attorney General Kris Mayes, who held several public sessions on the proposed merger last year, this week said she didn’t appreciate the “shenanigans being played by Kroger and Albertsons” in publicizing the store locations.

“If their goal is to give a public appearance of this merger being a done deal — this couldn’t be further from the truth,” Mayes said in an email to The Republic. “I am proud to stand with the FTC and my fellow attorneys general in suing to block this anticompetitive, anti-consumer and anti-worker merger.”

Arizona is part of an FTC and multistate lawsuit opposing the deal.

Are layoffs likely if the deal closes?

Kroger’s CEO, Rodney McMullen, has repeatedly said that no “frontline” workers will lose their jobs and no stores will be closed — and that refers to both the stores Kroger retains and the ones C&S would be in line to take over. C&S also has vowed to maintain pay and benefits for employees who get transferred over, and to maintain collective-bargaining agreements.

Kroger, with around 20,000 Arizona employees, and Albertsons Cos., with about 14,500, both rank among Arizona’s largest employers. Kroger also intends to divest two Albertsons/Safeway distribution centers in Arizona.

Following the divestiture announcement, several United Food and Commercial Workers locals reiterated that they remain opposed to the merger, out of concern that it would harm workers, customers, suppliers and communities.

If Kroger wants to expand by purchasing Albertsons, why is it already listing some stores it plans to sell?

The $24.6 billion purchase of Albertson, announced in October 2022, originally was designed to involve nearly 2,300 Albertsons and Safeway stores nationally, to complement Kroger’s lineup of around 2,700 markets. Since then, Kroger has offered to sell 579 of them, including the 101 in Arizona, to overcome regulators’ concerns that the merger otherwise would result in a combined company exerting too much control over the supermarket landscape in places like Arizona.

Kroger currently owns 131 stores in Arizona and would add 34 Albertsons and Safeway locations if the deal is consummated. With the 101 new locations, C&S would become the No. 2 supermarket player in the state.

Would a change in ownership to those 101 Arizona stores result in higher prices or fewer products?

That remains to be seen, but some consumers are concerned. Azcentral.com reader Christy Wojtak worries about reduced selections of name-brand products, higher pharmaceutical prices and other disruptions.

Wojtak said she researches Medicare Part D drugs and has found those offered by Safeway and Albertsons to be the least expensive.

“Are regulators aware of the problems and increased costs that seniors will face” if they lose Safeway and Albertsons pricing? she said in an email to The Republic. “I am more appalled than ever.”

What about Kroger’s current stores in Arizona?

They wouldn’t be affected by the $24.6 billion purchase, in the sense that Kroger would continue to run them. The company has 131 stores here, mainly Fry’s Food Stores plus a few Smith’s in northwest Arizona.

Would the deal give a combined Kroger-Albertsons monopolistic powers?

Kroger and others contend the supermarket business isn’t all that concentrated if you include nontraditional rivals such as Walmart, Amazon, Target and Costco, not to mention smaller players like Aldi/Trader Joe’s, Raley's/Bashas' and the hundreds of dollar stores out there. Progressive Grocer, an industry publication, ranks Walmart, Amazon and Costco higher than both Kroger and Albertsons for food sales.

Regardless, Kroger has agreed to unload some of the locations it acquires to get the deal done. In fact, a major rationale for the proposed $24.6 billion purchase is that it would allow a bigger Kroger to compete more effectively against nonunion grocery retailers.

Who is C&S anyway?

The company actually has been engaged in the grocery business since 1918, but its operations are mostly focused in the eastern and southern parts of the country, and it isn’t well-known in the West, with no current grocery operations in Arizona. The company’s businesses include Piggly Wiggly and Grand Union supermarkets. A company subsidiary, 1918 Winter Street Partners, would operate the Arizona stores that would be acquired from Kroger.

The company is “very excited to welcome thousands of highly skilled grocery retail, store and distribution team members from Kroger and Albertsons who are currently responsible for these supermarkets,” according to a C&S statement made last September and re-issued this week in response to a request for comment from the Republic. “Their knowledge, along with C&S’ wholesale and supply expertise, will ensure these stores continue to successfully serve their communities.”

C&S vows to recognize the union workforce at Albertsons and Safeway, maintain all collective-bargaining agreements, retain frontline employees and invest further for growth.

“C&S is well-prepared to successfully operate these stores for many generations to come,” the statement added. “We have an experienced management team with an extensive background in food retail and distribution, and the financial strength to continue investing in growth."

Could Arizona land its first Piggly Wiggly?

Not necessarily and it's unclear at this stage. The colorfully named supermarket chain is C&S' iconic, flagship brand, with more than 150 stores concentrated in Wisconsin, Illinois, Georgia and the Carolinas. But C&S hasn't given any indication that it would name the Arizona stores under this banner. In fact, C&S hasn't provided much guidance at all about how it intends to run the Arizona locations, should the deal materialize.

What will the Arizona stores be called, if the deal goes through?

That depends on the category, and some uncertainties remain. Any Safeway stores ultimately acquired by C&S would likely retain the Safeway banner under a licensing agreement, but whether that applies to Albertsons locations in Arizona hasn't been clarified. Any Arizona stores bought and retained by Kroger could take that company's banners, possibly as Fry's.

Could the presidential election affect this proposed merger?

Possibly. Although politics hasn’t been mentioned much in the analysis, most of the opposing state attorneys general are Democrats, and the Federal Trade Commssion is headed by Lina Khan, who was appointed by President Biden. Given ongoing legal challenges, the proposed merger might not be completed until after the November election, if then.

Reach the writer at russ.wiles@arizonarepublic.com.