The area’s two largest grocery store chains are merging in a $2.44 billion deal. Kroger announced last week it will buy Harris Teeter, putting the six stores that control almost half of local grocery sales under the ownership of one company. It’s big news in a city where food retail options are diverse, shoppers are loyal, and big changes—Wegmans, anyone?—are on the horizon.
“I’d hate to see the Krogerization of Harris Teeter,” said Sean McCord as he headed into the Barracks Road Harris Teeter store Thursday evening. “It has a more interesting variety of food. Kroger is kind of bland, and has what you’d get at any other grocery store.”
According to a joint press release, Kroger will purchase all outstanding shares of Harris Teeter for $49.38 per share in cash, a 2 percent increase over the store’s closing stock price last week.
Kroger is one of the world’s largest retailers, operating 2,419 stores in 31 states. It also owns Fry’s, Food 4 Less, King Soopers, City Market, and other markets and convenience stores. Harris Teeter, which is based in Matthews, North Carolina, operates 212 stores in eight southeastern and mid-Atlantic states and Washington, D.C. USA Today reported that the deal is the fourth-largest acquisition of a food retailer in the past decade, and will be Kroger’s biggest takeover since 1998, when it bought the Fred Meyer chain for more than $12 billion.
The merger announcement came just a few weeks after industry magazine Food World revealed that Kroger controls $104.2 million of local grocery sales, with Harris Teeter occupying a not-so-close second position at $56.4 million. Both stores have three locations in Charlottesville-Albemarle, with the merger’s epicenter in Barracks Road Shopping Center, where the two supermarkets stand only a quarter mile apart.
Some shoppers outside the two supermarkets at Barracks said they choose their groceries based on sale prices or whatever’s most convenient, and many were unaware of the merger. But loyal Harris Teeter patron Paula Hoffman said she’s seen stores go downhill after shifts in management, and she’s curious to see the impacts of a change on a larger scale.
“There’s definitely a different clientele at each one,” she said. “And with them being the two anchor tenants, I’ll be interested to see what happens.”
Economist and historian Marc Levinson, author of The Great A&P and the Struggle for Small Businesses, has studied the national grocery market for years, and said such mergers can be disastrous for local markets.
“Just because the overall merger doesn’t reduce competition nationally, doesn’t mean it might not have some adverse effect on competition locally,” Levinson said.
Kroger has publicly stated that there are no plans to close stores or warehouses. But Levinson said the deal still needs approval from the Federal Trade Commission, which will often require divestitures in a sizeable merger, and it could vary from one locality to the next.
“The trick for any acquirer is to figure out how to put the two together, while not destroying what made the company that was purchased successful,” Levinson said.