Mergers, Food and Fears
It was not so long ago that Southern California shoppers had their pick of supermarket chains. Visitors marveled at the choices and prices. But the business of scratching out a profit of two cents on every dollar of sales is brutal. To be more competitive, the chains have been bulking up by merging. The latest: Albertson’s and Lucky.
Now consumers are the ones feeling knocked around, and big mergers are the culprits. Consider the inconveniences in our daily lives caused by amalgamations of supermarkets, banks and telephone companies. One chain swallows another and a once-favorite store no longer stocks a certain ice cream or fruit. A bank with a new owner pushes electronic banking because it is more efficient for the institution, but it’s you being charged to use the ATM.
There’s frustration and there’s fear that consolidation will result in less competition, higher prices and fewer jobs. Consumers are acutely aware of food price changes because grocery shopping is a routine, and the smart shoppers know the prices and potential savings.
With the Albertson’s Inc. purchase of American Stores Co. (Lucky markets and Sav-on Drugs), three companies will dominate nearly two-thirds of supermarket business in Los Angeles County. Over the last two years, Vons was acquired by Safeway, then Ralphs and Hughes Family Markets were consolidated under the ownership of Fred Meyer Inc. of Portland, Ore.
Bigger is supposed to translate to purchasing clout and more efficient advertising--the better for the supermarkets to compete against the discount merchandise chains such as Costco and Fedco that are fast becoming big sellers of food. The question is whether all this will result in lower prices. So far, many shoppers find prices creeping upward for some goods at merged chains while the range of brand selections has been whittled down.
The California attorney general’s office will review the proposed Albertson’s deal to ensure that competition is not crimped. Earlier this year, Ralphs and Hughes agreed to sell 19 Southern California stores to settle antitrust concerns of the attorney general. The Federal Trade Commission, which reviews major supermarket mergers, so far hasn’t commented on the Albertson’s deal.
But in L.A. there clearly is reason for concern. None of the big supermarket chains now have national headquarters in Southern California, for instance. Will distance make the home offices less sensitive to the communities they do business in? Will they continue to operate in inner cities that need both the stores and jobs?
Supermarkets are communities of sorts. The familiar faces of checkers and fellow shoppers are comforting. But comfort aside, chain markets know that consumers are willing to shop with their feet when prices don’t click, shifting to warehouse chains, farmers markets and specialty stores. Any move that eliminates choices and drives up prices runs that risk.
(BEGIN TEXT OF INFOBOX / INFOGRAPHIC)
L.A. Food Costs
Prices for food in the Los Angeles / Long Beach area ar well above the rest of the nation, but that’s a recent phenomenon. Figures are for the last quarter of each year, and the national average is a constant 100.
Sources: Chamber of Commerce Research Associates and Economic Development Corp. of Los Angeles County
