Proposed Alaska grocery merger raises concerns for fragile food supply chain, distribution to Alaska

The proposed nation-wide merger between grocery giants Kroger, which owns Fred Meyer stores in Alaska, and Albertsons, which owns Carrs-Safeway stores, is drawing close attention from community and political leaders.

If the Federal Trade Commission approves the merger, which retail analysts say is likely, Kroger and Albertsons say they plan to sell 14 Carrs-Safeway stores in Alaska to gain FTC approval, the Anchorage Daily News has reported.

A proposed buyer is C&S Wholesale Grocers, based in New Hampshire, which operates grocery warehouses in many states and limited retail outlets, mainly Piggly Wiggly and Grand Union stores in the U.S. Midwest and Carolinas.

“Alaska already has an incredibly concentrated grocery store market, and potential divestments of stores resulting from the merger would threaten both competition and basic food security in many communities across the state,” Alaska Congresswoman Mary Peltola wrote in a letter to the Federal Trade Commission.

All of this will remake the food retail landscape in Alaska. If Carrs and Safeway stores become Piggly Wiggly or Grand Union outlets Alaskans will have to adjust to new product brands. Also, a new player like C&S Wholesale will likely establish new, long-distance distribution networks to Alaska to serve 14 former Carrs-Safeway stores, assuming these are purchased.

That is a prime concern for State Rep. Zack Fields, an Anchorage Democrat, who said the existing food distribution system is stretched and still recovering from the pandemic supply-chain disruption.

The system is hard-pressed to supply fresh produce and even milk to Alaska on a timely basis, and creating a new distribution system could aggravate that.

“I see this merger being driven by venture capital and private equity investors,” who will sell off the assets. “This is corporate slash and burn,” Fields said. He also said he is familiar with Piggly Wiggly stores in the southern U.S. and said they mainly serve lower-income communities with less-expensive products. “They don’t compete on quality,” he said.

Mat-Su State Sen. Shelley Hughes, who chairs the Legislature’s Food Security Task Force, is more upbeat. Major changes like this, if they happen, need to be watched but they can have upsides, too.

Hughes’ major concern is getting more Alaska-grown foods into Alaska households, which she sees as food security.

“This (the merger) is a way to have a conversation about getting Alaska products into stores,” under new owners, she said. Carrs-Safeway and Fred Meyer have not been particularly welcoming to Alaska farmers in contrast to the locally-owed, but small, Three Bears grocery stores, Hughes said.

“The excuse they use (for not buying local) is reliability,” meaning carrots can be supplied more reliably from California than from the Mat-Su, she said.

“Reliability is something we (the state) can help with,” by investing in agricultural infrastructure like storage and food transportation. “But we have to have ‘shelf space’ in Carrs-Safeway and Fred Meyer stores,” she said, which local farmers can’t get.

“This might be a difficult conversation. When they say ‘reliability’ our reply is that we can give that if they give us the shelf space,” Hughes said.

In her letter to the FTA Peltola wrote that on a national basis the Kroger-Albertsons combination would create an entity, “similar in size to Walmart and Amazon.”

That may be what is really behind the merger, analysts have said. “Even supermarket giants like Kroger and Albertsons (with large unionized workforces) are feeling the competitive heat from (non-union) mass retailers, which are grabbing grocery market share,” one analyst said.

Since the Albertsons’ Carrs and Safeway stores and Krogers’ Fred Meyer stores operate in close proximity in many parts of the state, mainly larger cities, it is expected that Carr and Safeway stores near Fred Meyer outlets will be sold to C&S or someone else, or closed. That could put the Carrs stores in Palmer and Wasilla in the cross-hairs as assets likely to be sold.

There are now 11 Fred Meyer, 12 Safeway and 11 Carrs grocery stores in the state, giving a combined Kroger-Albertsons entity 34 outlets. If the 14 Carrs/Safeway store are sold there would be 20.

Alaska organized labor leaders are meanwhile watching developments closely. Albertsons and Kroger workers in Alaska belong to unions, and C&S as a proposed buyer, has said it will honor existing union contracts. However, post-merger there are no guarantees, analysts said.

Also, there are questions on whether new players would maintain food warehouses or operate a just-in-time type supply chain operating, for example, directly from the Port of Alaska in Anchorage as ships dock.

This could make major population areas more vulnerable to supply disruptions in a system already dependent on one marine operator – TOTE – and one port, the Port of Alaska in Anchorage.