• by Sarah Mahoney , Staff Writer @mahoney_sarah, October 14, 2022

Talk about a grocery haul: With its $24.6 billion acquisition of Albertsons, Kroger’s supermarket empire will rival both Walmart and Amazon in scope.

The agreement between Kroger and Albertsons, the two biggest pure-play grocery chains in the U.S., still has to gain regulatory approvals. But if successful, it means the new company will reach 85 million households.

With more than 710,000 associates, the new company would operate a total of 4,996 stores in 48 states, besting Walmart, which has some 4,700 stores. (That total doesn’t include Walmart’s 600 Sam’s Club stores.)

The merged company will have almost 4,000 pharmacies and more than 2,000 fuel centers.

Kroger is clearly gunning for Walmart’s value positioning, promising to invest $500 million from merger synergies into lowering prices. And it plans to spend $1 billion in updating Albertsons stores.

Koroger is also aiming at Amazon and other regional grocers, such as Publix. It recently announced grocery delivery service in Florida, for example, without opening a single store. Instead, it's filling those orders with a massive, robot-staffed distribution center.

Albertsons, based in Boise, operates in several parts of the country with very few Kroger stores.

The merger will allow Kroger to “further enhance technology and innovation, promote healthier lifestyles, extend our health care and pharmacy network and grow our alternative profit businesses,” says Rodney McMullen, Kroger chairman and chief executive officer, in the announcement. He will continue serving in those roles at the combined company. 

One of those businesses, of course, is Kroger Precision Marketing, its fast-growing retail ad network.

Albertsons, a relative latecomer to the retail-media party, launched the Albertsons Media Collective late last year. It’s led by Kristi Argyilan, senior vice president of retail media, who had been at Target’s Roundel.

Kroger says the deal will speed up its go-to-market strategy, including digital efforts, its private-label brands, and personalization offers.

And logistically, it says the combined company will gain a broader supplier base, optimizing its supply chain for fresher products.

On a combined basis, the companies' 2021 results included about $210 billion in revenue. By comparison, Walmart’s grocery sales for that period are a reported $315 billion.

Still, the merger is far from a done deal, writes Zain Akbari, an analyst who follows grocery retailers for Morningstar. “While we believe a combination between the two largest pure-play grocers in the U.S. would create scale benefits (and associated cost and purchasing leverage) that would help fend off burgeoning omnichannel titans Walmart and Amazon, we suspect overlap between the two chains’ footprints in many markets may lead regulators to scrutinize a transaction closely,” he says.