Support for the Merger

"KR’s price investments have driven its gross margin down by over 400 bps in the last 20 years, but yielded an estimated high-single digit price gap to ACI. We estimate that ACI’s capex/store has trailed KR by 30% on average over the last 15 years. We believe KR will look to bring the acquired ACI stores up to the standards of the core business over time given its historical success."

"A deal if completed at a reasonable price makes strategic sense...Albertsons will strengthen Kroger’s presence west of the Mississippi River. More importantly, Albertsons will increase scale and operating leverage, which provides more tools to employ to cope with inflationary headwinds."

"This deal could provide some food pricing relief for consumers, With Aldi, Lidl and other discount grocers coming in, this positions Kroger to drive the market forward."

"An argument can be made that a stronger combined company could possibly help reduce food inflation as it would have more negotiating power to push back against food producers’ proposed price increases…  It would also mean greater competition for food manufacturers... This comes at a time when consumers are increasingly looking for value and trading into private brands to help reduce the strain of higher food prices."

"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. 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."

"Specifically, we see opportunities for KR to help improve ACI’s business through better pricing, further improving loyalty/usage of data, and operating a bit more centralized without losing local advantages. And there are likely some ways that ACI can help KR as well, such as in fresh categories."

"This new entity [Kroger-Albertsons] allows them to combine all of the reach, sales and data assets of both Albertsons as well as Kroger to form an even more powerful advertising entity."

"… given KR’s more aggressive focus on price gaps, we would expect some level of future price investment."

“I think they do have really good arguments to make, and they seem well-prepared to make them. They understand completely the environment they’re working in. They understand they’ll probably have to put together a package of divestitures to overcome concerns in some markets…It has sounded in some comments that they’re also committed not to use labor redundancies as a cost-savings mechanism, and they are putting forward an investment plan that should be attractive as well…So, they have good things going for them and they seem to be patient here too. They’re giving themselves a lot of time before their anticipated closing date – well over a year.”

"The outrage over the payout and the deal is overblown: Albertsons and Kroger are in an industry with razor-thin margins. Combining would help them scale up and compete with well-capitalized e-commerce rivals. In any case, the chains' combined grocery market share would fall short of that of Walmart, which has stores within 10 miles of 90% of the U.S. population and is unlikely to give up its everyday-low-prices positioning."

"…the national food and grocery market is still pretty fragmented, with Walmart as the largest player, with about 17 percent of the market. It doesn't create a sort of behemoth that is crowding everyone out of the market.

From a broader national perspective, a combined Kroger and Albertsons does not pose any major threat to the competitive dynamics of the market. Indeed, scale is necessary to deliver the prices and investments that consumers demand."

"A national footprint may be exactly what they need to compete with Walmart in the future. They’re not thinking just a couple years ahead. They’re thinking far ahead about how you compete with the behemoths."

"Merging with Albertsons will better position Kroger to compete with Walmart and even Amazon on a national scale."

"We think the deal makes strategic sense…KR over-indexes to the Midwest, while ACI is much more concentrated in the West and Southwest."

"…we believe the combination could strengthen KR’s ability to compete with other large players and drive significant L-T earnings/cash flow accretion.

We believe a KR/ACI combination could better compete with WMT, AMZN, and TGT at a national level."

"We believe this deal would result in a more competitive national player… Albertsons Northeast locations have virtually no overlap."

"With Walmart and Amazon as competitors, it’s understandable that traditional grocery stores need to scale up to stay competitive. Critics see this as one less competitor in the market, but if Kroger and Albertsons are prevented from merging and go out of business because they can’t combine their resources to compete on price, it will be government meddling that stifled competition. If allowed to merge, they’ll be better able to put competitive pressure on the other market leaders and that’s a win for consumers."

"…allowing Kroger and Albertsons to merge will likely mean a more, not less, competitive market in the long run…Consumers deserve better when it’s a matter of putting food on the table."

"The market for groceries is the latest to grab headlines for what is both normal and heathy: dynamic responses to an evolving economic landscape. Recession, inflation, and new consumer patterns with online ordering and home delivery means suppliers must adapt or stagnate. How companies configure themselves is just one form of adaptation and we should cheer the experimentation and ward off political opportunism that would control or direct how private capital reacts to a changing world."