A proposed merger between grocery giants Kroger and Albertson would remake the map of food markets across America including in Beverly Hills where two Pavilions are slated for sale.
The mega-merger was announced in 2022 but is facing legal pushback from the Federal Trade Commission (FTC), which alleges that the $24.6 billion deal would unfairly eliminate competition, resulting in higher prices and lower-quality groceries for millions of Americans.
To quell FTC’s concerns and resolve the lawsuit pending against them, Kroger is proposing selling off some 579 stores and facilities.
Locally, this includes the Beverly Hills Pavilions at 9467 W. Olympic Blvd. and the West Hollywood Pavilions at 8969 Santa Monica Blvd. At a state level this includes 31 Vons, 16 Pavilions and Albertsons and one Safeway.
The stores would be sold to smaller grocery store operator C&S Wholesale Grocers, which currently owns around 160 grocery stores. This includes chains such as Piggly Wiggly and Grand Union Supermarkets as well as many independently named stores.
It is not yet known how the two local Pavilions will be rebranded; however, C&S has issued a statement saying that current employees at newly acquired stores will keep their jobs.
Another interesting wrinkle is the fact that the property owner of the Beverly Hills Pavilions, Sammy Aflalo, submitted an application in April to redevelop the site into an eight-story, 110-unit building with ground-floor retail. This was submitted as a “Builder’s Remedy” project, which allows developers to bypass local zoning if cities do not have a certified Housing Element.
Beverly Hills’ Housing Element was approved in May and City Attorney Larry Wiener has said that the city is therefore no longer subject to the Builders Remedy. At this time, it’s unclear whether the proposed redevelopment plan is able to move forward or how it would be impacted by the pending Pavilions sale.
The sales of all 579 stores are contingent on the FTC approving the deal as part of Kroger’s bid to purchase Albertsons.
The FTC filed its lawsuit to block the merger in February and an administrative hearing by the FTC is scheduled to start July 31.
The proposed merger represents approximately 20% of the U.S. grocery market and would affect one out of six grocery laborers if approved, according to statistics from USDA and the Bureau of Labor Statistics.
In a press release issued after the lawsuit was filed Henry Liu, Director of the FTC’s Bureau of Competition, expressed his concerns about the merger, which comes on the heels of an already significant rise in the cost of groceries nationwide.
“Kroger’s acquisition of Albertsons would lead to additional grocery price hikes for everyday goods, further exacerbating the financial strain consumers across the country face today,” said Liu. “Essential grocery store workers would also suffer under this deal, facing the threat of their wages dwindling, benefits diminishing, and their working conditions deteriorating.”
Kroger, for its part, has said the merger is necessary to allow it to compete with non-unionized discount groceries like Costco and Walmart. In a statement issued in April, Kroger Chairman and CEO Rodney McMullen said that the proposed deal to sell off stores will address the concerns raised by federal regulators.
“We have reached an agreement with C&S for an updated divestiture package that maintains Kroger’s commitments to customers, associates and communities, addresses concerns raised by regulators, and will further ensure that C&S can successfully operate the divested stores as they are operated today,” McMullen said, adding that all “frontline associates” at divested stores will retain their jobs and benefits.
“Our proposed merger with Albertsons will bring lower prices and more choices to more customers and secure the long-term future of unionized grocery jobs,” he continued.
Meanwhile, many grocery union members have continued to voice their concerns about the merger, regardless of the proposed deal to sell off stores.
Five United Food and Commercial Workers Union locals, including two California chapters of the UFCW union 324 and 770 released a statement last week in opposition to the merger.
“We remain focused on stopping the proposed mega-merger for the same reasons we have stated since it was first announced over 20 months ago—because we know it would harm workers, it would harm shoppers, it would harm suppliers and communities, and it is illegal,” stated the union locals.
