Impact of proposed grocery store merger on farmers

Kroger executives have testified in Denver District Court in defense of their $25 billion merger with Albertsons, arguing that the merger would help them compete with retail giants like Walmart and Costco. Colorado Attorney General Phil Weiser, who filed a lawsuit to block the merger, argued that the grocery store consolidation would further strain farmers across Colorado, who already operate on razor-thin margins.

Farmers across the U.S. receive about 14 cents for every dollar spent at grocery stores. Out of that, about 12 cents goes to operational costs, leaving them with just 2 cents profit.

Alexis Kenyon spoke with Tyler Garrett, Director of Government Relations for the Rocky Mountain Farmers Union, who emphasized that this merger could worsen conditions for small farmers who are already struggling to make ends meet.

Alexis Kenyon: Right now, for every dollar that somebody spends at the grocery store, farmers get about 14 cents of that dollar. How do you see this changing if Albertsons and Kroger are able to merge and there’s more consolidation among grocery stores?

Tyler Garrett: Well, we have some historical data on that one. When you have increased consolidation and market concentration, that dollar that goes back to the farmer and rancher continues to go down. And so we have seen that throughout history, and the USDA tracks this, and so what we expect is if the Kroger Albertsons merger goes through, since they are the number four, number five largest grocery stores in the country, that percent will continue to decrease.

And from what I’ve been hearing from our producers is that right now, what they can do is a lot of times go to Kroger, try to get a price, if it’s too low, they’ll go to Albertsons and they may be able to use one against the other. Or (they) go to Walmart.

When you have the giant chains, Walmart, Amazon, Costco, they have a lot larger supply that they were going after and they can demand a lower price. And so we’re hearing from our producers is that you don’t have a lot of wiggle room when it comes to the really large organizations.

Kenyon: Even as it is, 14 cents is not a lot, and I’m curious what you’re hearing from farmers in terms of how much more can they be squeezed, how low can their profit margins go in order for them to stay in business. And at a certain point, will the farmers just not be able to afford it, and at that point, what will happen? It seems like at some point the government would have to step in and start subsidizing more farmers. Are people talking about what kind of cuts they can afford to take at this point?

Garrett: We do see that subsidizing in certain markets because it is getting kind of outrageous how low they’re willing to pay farmers and ranchers for the products that feed all of us, that we all rely on. And what’s happening is it’s pushing a lot of family farms and ranches out of business.

And, you know, even recently I was talking to one of our farmers on the Eastern Plains and he said he was able to make it this year, but he talked to some of his neighbors and they said they’re not going to be able to, because they’re having to pay more to farm and then get low prices. (They) aren’t able to then sustain what they had to pay so they could grow their crops.

And so it’s pushing out family farmers and ranchers. And unfortunately it’s going along with some statements that were made previously about how you have to get big or get out, which we don’t believe in. We think that the family farms and ranches and this diversity in the market is what really sustains good agricultural economy.

So I think what I just mentioned briefly is on the consumer side that it’s also going to affect our family farms and ranches and affect those who are supplying. So, a lot of towns already, they’re particularly rural or more remote areas. There may be one grocery store or two, if they’re lucky, but those stores that are close to each other are a lot of times in Colorado and they are Kroger and Albertsons stores.

And so what you’re finding, like when we talk to people in Steamboat, they said, ‘there’s a Kroger and there’s an Albertsons,’ and so, if they merge, what’s going to happen is those stores are most likely not going to keep both of those open, they are going to sell one. We’ve seen before, they keep saying that they’re going to divest to another company, and so we’ve seen that happen in the past where those companies don’t typically last and end up closing those stores.

And so what we see is the unfortunate thing that’s happening, or that could happen, is that farmers and ranchers who are supplying our food are getting paid less for the food that they are growing and selling. And then they are going to have to pay more at the grocery store. And so they’re taking a double hit. They’re going to get paid less for selling their product and then pay more to buy food at their local grocery store.

Kenyon: So, in the last couple weeks, we’ve been hearing from the CEOs of Albertsons and Kroger, and their arguments are: ‘If you don’t let us merge, we’re going to have to lay people off, people are going to lose jobs, prices may even go up, we are going to have to close stores.’ And all of this is because they’re saying they’re the underdogs and they can’t compete against the really big guys like Walmart. And I’m just curious, what is your take on this?

Garrett: It’s kind of hard to believe. I mean, again, they are the number four, number five largest grocery chains in the country. And there was a huge multi-million-dollar- payback to their stockholders last year, yes, it’s not even millions, (it’s) billions of dollars that they sent back to their stockholders right around the time that this merger was announced. And that leads me to believe that I think they’re doing okay, that they can compete and that claim is just, it’s kind of hard to believe.

The trial in Colorado’s lawsuit against the Kroger-Albertsons merger is expected to conclude by October 24.

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This story was shared via Rocky Mountain Community Radio, a network of public media stations in Colorado, Wyoming, Utah, and New Mexico, including KSJD.

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