The FTC's Decision On Kroger/Albertson's Merger is nonsensical. It's also great for the industry.

It remains to be seen whether Kroger and Alberston's will appeal Judge Adrienne Nelson's decision to block their $25BN+ merger this week.

In the ruling, she said that supermarkets are “distinct from other grocery retailers” and are not direct competitors to Walmart, Amazon and other companies that sell a wider range of goods.

This is absurd.

This ruling reminds me of when I was at Whole Foods Market and the FTC blocked our acquisition of Wild Oats (for years) on the grounds that it would create a "monopoly" in Natural Foods, and that we didn't compete for market share with "conventional" retailers.

Meanwhile, strong new competitors like Sprouts and The Fresh Market were emerging, and "conventional" chains like Kroger were building powerhouse natural and organic brands like Simple Truth to compete against us.

10 years later, it was blatantly obvious that Whole Foods was not only competing directly with conventional retailers, but losing ground to them...and that the FTCs position was very naive.

10 years from now, when Walmart, Amazon, Aldi and Costco have continuously gained national market share at the expense of almost all others' ...this decision will look naive also.

To be clear, the merger WOULD eliminate head-to-head competition between Albertsons and Kroger, potentially exacerbating prices for consumers, but they would both still have to compete with Wal Mart and Costco on price, which is practically impossible.

It’s convenient to scapegoat the retailers and pander to voters feeling inflation pain.

Blaming grocery retailers for high food prices is “shooting the messenger”.

They operate at very low net income and are barely profitable in percentage terms.

PepsiCo makes about 3X as much money on every dollar of food sold as the retailers.

Where is the outrage at how much profit Big CPG makes on “staple” products sold to working class Americans?

In what other industry is it an ethical crime to ever increase sales beyond the rate of inflation?

Where was the outrage at the clearly anti-consumer Kellanova/Mars merger which is just as big as Kroger/Alberston's?

Some quick numbers:

2023 PepsiCo Ebitda: $14.4BN

2023 PepsiCo revenue: $91.4BN

2023 Pepsico Ebitda % 15.8%

Pepsico Market Cap $235B

2023 Kroger Ebitda :$7.8 BN

2023 Kroger revenue $150.1BN

2023 Kroger Ebitda %: 5.2%

KrogerMarket Cap: $40B

Compared to Walmart, Amazon, and Costco, even a combined Kroger/Albertsons is a "midsized" entity. They are also decidedly less powerful than Big CPG.

It's naive to think Kroger controls the pricing relationship with its multinational big CPG suppliers. Do we REALLY think Kroger calls the shots in its relationship with Pepsico?

Having said this...the best thing for the industry right now is if everyone can just move forward and focus on differentiation and innovation.

The juice isn't worth the squeeze to merge two ~2000 store chains when they would still be smaller than the big guys, with less supply chain efficiency. Kroger and Albertson's should both focus on making smaller acquisitions and continuous operational improvement.

Most importantly, they should both focus on competing with Wal Mart, Amazon, and Costco, and at put up a fight before they take more market share.

Instead of spending two years bogged down in painstaking integrations and quasi-bogus divestures, Kroger and Albertsons can do what EVERY retailer needs to be doing by finding new products to sell which Walmart does have yet.

Share of wallet is a zero-sum game, and the way to win this game isn't on price (unless you are prepared to outprice the dominant big three). If we're being realistic, it isn't going to be on customer service either, in this labor market.

The way to win in retail is to carry the products consumers want, BEFORE they reach mainstream adoption, and drive customer traffic in the process.

This also happens to be how consumers can get what they need and want also.

Thanks to the FTC, for a misguided, but ultimately very beneficial decision.

A broken clock is right twice per day.