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Grocery Store Mergers Could Pinch Consumer Pocketbooks

Another slew of supermarket consolidation has analysts wondering if prices will start to creep up.
July 30, 2013

​WASHINGTON, D.C. – Supermarket chains have undergone another round of mergers recently, and that has analysts concerned that higher prices might be in the future, the Washington Post reports. Kroger is buying Harris Teeter, Cerberus Capital Management purchased Albertson’s and four other small grocery store chains. Spartan Stores picked up Nash Finch, a military commissary company.

Sometimes when grocery stores consolidate, consumers benefit from lower prices. However, with fewer stores in competition, that could trigger a slight uptick in prices. So it’s hard to figure out what will happen after this latest round of acquisitions and purchases. A South Dakota State University study done in 2010 found that chains with a bigger piece of the national market share tended to lower prices, but those stores also offered fewer promotions.

With Walmart, Target and dollar stores eating away at more of the grocery store dollar, supermarkets need to find new areas of growth. “I think they realized this business isn’t growing that much,” said food retail analyst Scott Mushkin with Wolfe Research. “There’s two ways to make yourself more profitable. You grow, or you consolidate.”

Mushkin pointed out that the grocery store industry hasn’t become too consolidated, with some regions actually having a plethora of competition. He said that allows smaller chains or stores could differentiate by focusing on intangibles, such as great customer service, to instill loyalty in its customers.