Grocery Mergers? Not So Good
waterwrights.net
waterwrights.net
I'm sure it is easier (read: cheaper) to run one store and all, but now everyone in the city has to come to one store, they don't have enough people working there when it's busy, it's just a huge mess.
They brag about spending 8 million dollars to make it better for shoppers and then have two checkouts open. And they don't even fix things like shattered glass on the milk cooler doors, it is just such a dumpy looking place.
It means Kroger has a nearly Comcast like monopoly where I live.
You likely have those near you. If not, the tenth is Target.
https://www.axios.com/2023/04/20/most-popular-grocery-stores...
Grocery shoppers are also extremely fickle and price sensitive. As far as mergers in the US go, I'd be surprised if this was blocked.
Are they? Don't most people just go to the one that's closest to their neighborhood?
I know I do. And I see people from my neighborhood in there every time. Good way to quickly catch up.
I could probably shop solely at Walmart but their meat, deli and bakery are far inferior.
The American grocery market is far less consolidated than e.g. the Canadian one. Perhaps there is a minimum size necessary for an efficient grocery chain, or perhaps Canadian anti-trust enforcement is far too lax.
There simply isn't meaningful competition in so many areas of society today, business included. To the point I think an entire generation has forgotten what operating in a competitive environment is like. Both as consumers and producers.
I watch friends who simply have no concept that there is an option outside of the mainstream grocery store chain they go to - as they drive past 2-3 ethnic stores on the way there, all of which are much cheaper on average for items they both carry. These same friends complain about inflation, but take zero action on their part to even learn about other options - much less pursue them. When I ask the response is usually something along the lines of "I've always went to place X for the past 20 years, why would I change now?".
It's going to take shaking a lot of people out of their comfort zones for healthy competition to return to society.
Yes. There's a whole school of thought, headed by Peter Thiel, that "competition is for losers" and "monopolies are good."[1]
[1] https://www.wsj.com/video/peter-thiel-why-monopolies-are-a-g...
That's still the prevailing mindset but the tide is now just beginning to turn back toward sanity.
https://www.rnz.co.nz/news/national/489686/fruit-and-vegetab...
Edit: It appears they aren’t related corporations.
Note that Switzerland is really a weird country, it’s difficult to compare it with other places.
And I always wondered if the goal is to provide service to customers/"owners" why are they expanding outside their geographical areas like to other countries.
Coop and Migros have the biggest margins in Europe. Hardly the picture of competition.
Seems more like tacit collusion.
Which is to say, a duopoly is never good.
https://www.abc.net.au/news/2023-02-23/supermarket-profits-s...
Then, in store, it's often difficult to tell if sale prices require a digital coupon.
Thus, many items are sold at a higher price than the buyer expected.
https://archive.is/YpsVv (NY Times)
https://couponsinthenews.com/2022/08/01/there-are-now-fewer-...
Kroger is usually pretty good about adding shelf tags that highlight the digital coupon.
I much prefer digital coupons to paper coupons that I always seem to forget. But I understand that there is a significant portion of the population who prefer paper coupons instead.
As for the topic of the post, I absolutely think regulators need to step in block the Kroger / Albertsons merger. We need more competition, not less.
Yes, it's there. You need to see pretty well to catch the small/thin font that says it requires a digital coupon.
See https://wehco.media.clients.ellingtoncms.com/img/photos/2022... (much larger than real-life, at least on my laptop)
https://www.journal-news.com/resizer/bV2Abp4e1e1DhAfhn3KYrdw... (a little closer to real-life, though in real-life your face isn't right on the tag.)
Mergers like this create less competitive markets.
"You must do this" style regulation like GDPR does raise barriers of entry.
"You can't do this," style regulation like trust busting doesn't seem like it would involve raising barriers to entry. It seems like it would lower them.
Don't keep people's data and you're fine.
Granted, some businesses need to keep some data as a matter of doing business. But the problem that pre-gdpr businesses have with the rules is that they were set up with the mindset that keeping everything is free.
A startup need merely nuke stale accounts. So it's an advantage over the incumbents, who have to figure out deletion in databases that weren't designed for it.
Conversely a big corporation will lose some % of profit to dealing with the regulation (or perhaps it will just raise prices if it’s not competitive). But it’s not an existential concern.
For example if something requires producing 10 000 pages of legalese it will block new companies and be not so problematic for large ones.
Or when company needs to heavily research what exactly they can offer/sell and it requires massive effort (it technically is "you can't do this" one).
You might think this is a bad idea, but it's not a downside of the regulation.
If vertical integration is illegal, does that mean: 1) Farms can't sell directly to customers via their own store? 2) A restaurant or grocery store needs to use Uber or Door Dash to deliver? 3) A logistics company can't own any warehouses 4) A store can't own any distribution centers or logistic systems. 5) A website can't self-host, either on their own server or via a dedicated server. It must be hosted via SaaS.
I'm sure there's more examples that blur the line of vertical integration that can be hard to determine in a fair, just manner.
Might be the kind of thing where more nuanced legislation helps, e.g. allowing vertical expansion if there are few existing competitors but disallowing it for healthy markets.
Established companies are always free to create a new company which is structured in a way that it is not vertically integrated. And so what if a large investment is required? If established companies cannot integrate vertically, the field is open for investments by people who cannot subsidize their prices to beat the competition.
Sales tax is a perfect example of how the government will never give up tax revenue it has come to depend on. The original proposal is that sales tax was fair, because the local business is using local resources (land, employees, infrastructure). Obviously not true with an out-of-state web store. Delivery companies already pay local taxes for the actual shipping, so there shouldn't be any claim against the retailer itself. Use tax, in many areas, was already designed to handle this case, but the government decided that it's easier to go after Amazon than to rely on taxpayers being honest.
But I do very much like the idea.
Company pays for candidates advertisements so they can win primary -> can only vote on candidates that companies voted for first -> politicians are responsive to their benefactors -> politicians de-regulate/ignore mergers/grid lock themselves -> companies are able to centralize more power -> company increases their influence over the government to get even more influence...
This un-virtuous cycle means the only way out is unions (or french-ery).
We have openly corrupt supreme court justices who laugh in our face and say "what are you gonna do about it?" Pelosi said "I can trade stock on companies I regulate" and basically said "what are you gonna do about it?"
Government intervention can only come after we have an answer for corrupt politicians saying "what are you gonna do about it?"
Kroger and Albertsons are gonna merge... "what are you going to do about it?"
On either side of the aisle.
Forcing companies to report on any effort above 1 mil might make reporting on big companies so horrible they prefer to split up?
It's real simple. Want a lower tax rate? Do a demerger.
In such a world, if your competitors are doing greed-flation, it might prove that you are leaving money on the table unless you also join.
Sadly this logic effectively yields collective action between competitors without any illegal agreements.
Why can't the government intervene? Because these companies have gotten so large they have literally hundreds of millions of dollars to spend preventing intervention.
Perhaps something to make customers more price-sensitive by making price comparison easier or by forcing more disclosure around when price-increases happen.
The best solution is to stop high inflation. That lengthens the window you can keep prices lower than your competitors, to take market share. But inflation is very difficult to affect.
NPR seems to agree with both of us.
> SCOTT MORTON (Yale economist who focuses on anti trust): In a concentrated market, one firm could announce it's going to raise prices because of inflation. And its rivals might look at that and say, oh, this is a good excuse to raise prices. They're raising prices, so we should match. And we should announce we're raising prices also. We call this tacit collusion. And in a setting like this one, where inflation might be giving firms permission to raise prices and then they follow each other, that could cause price increases.
> WOODS (host): So bottom line - companies raise prices when they can. That's what companies have always done. And what keeps them from doing it is usually competition. But even when we have uncompetitive markets like in the meat industry where prices are high, that is not the big driver of inflation in the economy right now. But that does not mean that it is a good thing to let monopolies keep their monopoly power. Fiona says it is good public policy to crack down. That means scrutinizing mergers, investigating possible collusion and splitting companies if needed.
> SCOTT MORTON: Is it a good idea to do? Absolutely. Because it brings down prices in general because markups are lower when there's more competition. It raises quality. It raises innovation. It increases productivity. It increases the efficiency of the economy. So there's many, many ways in which antitrust enforcement and competitive markets benefit consumers. More vigorous antitrust enforcement is a long-run project. It's not going to change prices in 2022.
My understanding in reading the article is that the economist was making a distinction that doesn't make sense to me, which is that the cause is distinct from what enables it.
It seems that what was said is that supply chain shocks and tacit collusion are the cause, but they are enabled and amplified by lack of competition.
I think the few number of grocery, food and consumer packaged goods companies, artificially create the feeling or appearance of competitive markets with many brands.
And companies don't compete solely against existing companies. They compete against the possibility of new entrants. So a duopoly can't price much higher than the cost of a couple of their customers getting together to launch a competitor.
Anecdatally what I've noticed is that branded food has increased much faster than bulk or generic items. But that's not really a bad thing. That's market dynamics rewarding a company for being good at what they do.
Greed has to be restrained by brute force or capitalism fails through monopololization/collusion.
There is nothing consumer friendly about big player buying out another part of the market and the consolidation will not be used to lower prices for the consumers, at the veryleast in long run
I think it's overall better to accept some inefficiency vs that.
Always look on the bright side of life.
You’re right there are barely any though. Most mergers seem to be bad in hindsight. It’s acquisitions that end up working out better.