Another day, and another merger is slated for the U.S. food system.
This time, it’s food retailer Kroger offering $24.6 billion to acquire one of its rivals, Albertsons.
So far, President Joe Biden’s administration has failed to block Cargill’s acquisition of Sanderson Farms, Walmart’s purchase of Sustainable Beef LLC and the U.S. Sugar-Imperial Sugar merger. All this, despite promising to challenge corporate consolidation and making key appointments to strengthen watchdog agencies such as the Federal Trade Commission.
Despite these failures, it is to the Biden administration’s benefit to enter the fray again.
Specifically, challenging Kroger would allow the administration to keep its word on confronting corporations while addressing supply chain issues in one of the most concentrated areas in the U.S. economy. Such actions could also provide momentum for Biden to take on other food industry giants, including Walmart.
According to Kroger’s official statement, the merger would help bring down inflation by providing consumers with more access to the firm’s cheap goods.
Common sense would lead one to second-guess this argument. Analyzing the data shows why.
According to the Food Price Index, which is kept by the United Nations’ Food and Agriculture Organization, wholesale food prices have fallen for months, while prices at the grocer have remained high.
This points to one issue — margins.
Or rather, the difference between what retailers sell to consumers and what the former buys either from wholesalers or directly from farmers.
The struggle over who gets how much in the food system is fierce, with farmers consistently seeing their share dwindle. As the Department of Agriculture reports, the farmers’ share of every dollar spent by consumers on food has steadily fallen — from around 18 cents in 1993 to 14.5 cents in 2021. Retailers, restaurants and advertisers have seen their share increase.
Kroger’s acquisition would not do so much for inflation as it would position the company to buy on the cheap and sell more than before.
Still, Kroger’s desire for a larger share of the food dollar is due to Walmart’s dominance.
According to government and corporate accountability nonprofit Food and Water Watch, last year, Walmart’s share of food retail was 34.8%, followed by Kroger at 13.9%, Costco at 12.2% and Albertsons with 8.1%. These four companies control nearly 70% of food retail.
Walmart’s dominance is due in no small part to its own acquisitions, many of which have taken place recently.
Besides purchasing Sustainable Beef, Walmart bought Delivery Drivers Inc. to improve its delivery service, as well as Volt Systems, which enhances the multinational’s ability to present its merchandise online.
The COVID-19 pandemic made it clear that our current concentrated supply chains neither improve prices for farmers nor food access to consumers. From processors euthanizing livestock to farmers being told to plow under produce, bottlenecks in our food system’s supply chains destroyed markets as they wasted perfectly good food. As a result, 40% of farm income came from government payments in 2020. With this happening in areas where few groceries already existed, accessing food became even more difficult when stores limited their hours and public transportation routes were reduced.
Consolidation does not make our food system more resilient in the face of adversity but rather more prone to breakdown. Why would more mergers benefit anyone other than those few consolidated entities that control our food supply?
For these reasons, not only should the administration block the Kroger-Albertsons merger, but it should investigate Walmart.
The retail behemoth should have its recent acquisitions analyzed, as well as the effect of its some 3,573 supercenters, 370 discount stores and 799 neighborhood markets, with a focus on supply chain resiliency.
Biden’s outline for national security strategy, which was issued in October, explicitly tied food security to national security. The administration equates “keeping food and agricultural markets open” with “strengthening resilience among people and food systems.”
An investigation into Walmart and supply chain resiliency may lead to a concerted effort to break up the retail giant, something akin to what we saw during the progressive era when Standard Oil was taken down by the administration of President Theodore Roosevelt. Regardless, rather than turning a blind eye to further consolidation, our government needs to take steps to break the corporate stranglehold on our food supply.
The fate of our country’s food system hangs in the balance.
Jim Goodman is a retired dairy farmer from Wonewoc, Wisconsin, and board president of the National Family Farm Coalition. Anthony Pahnke is an associate professor of international relations at San Francisco State University and vice president of Family Farm Defenders.
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