After a $25 billion merger, what will happen to your local Jewel or Mariano's?
PARK RIDGE, Ill. (CBS) – The parent companies of Mariano's and Jewel are merging to the tune of about $25 billion.
CBS 2's Lauren Victory dug into what this merger might mean for your weekly trip to the store.
She traveled to a Kroger-owned Mariano's on Cumberland Avenue. Less than 10 minutes north, south and west of the store, are Jewel-Osco stores, which are owned by Albertsons.
That degree of proximity raises questions about a possible monopoly.
Another area where shoppers will find a Jewel and Mariano's located close together is in Naperville. They're on opposite sides of Naper Boulevard.
If the current competitors became the same company across the street from each other, what happens to one of those stores?
A source familiar with the situation said there's a lot more time to figure this out, but the plan is to convert some of the stores that are near each other into a third company called "Spin-Co."
That'll be sold off so there's no monopoly risk.
A monopoly could affect pricing and edge out smaller businesses.
If the merger happens, the expectation is that 100 to 375 "Spin-Cos" will pop up across the U.S. In areas with an abundance of Kroger-owed and Albertsons-owned properties.
"Because they have both, more in Chicago than probably other cities, this will most likely be an area where you will see this spun-off company having a bigger presence," said Harry Kraemer, a mergers and acquisitions expert at Northwestern University's Kellogg School of Management.
Put another way: your closest grocery store might not be a Jewel or Mariano's anymore. It could wind up becoming a Spin-Co.
Victory asked Kraemer about criticism from organizations like the National Grocers Association that said an Albertsons and Kroger merger would create, "unprecedented dominance over the nation's food supply chain."
"If they were to combine, well, then, you know in that particular area, if you only have a choice of those two stores, it could be a monopoly," Kraemer said.
The company claimed in a video it will "serve America with fresher, affordable food, faster."
That's because Albertson' distribution centers like one in Melrose Park would combine with Kroger warehouses. In the company's word, the supply chain is "optimized."
The two mega-grocers would also team up on where their food is sourced from and expand the number of private label products available.
They claim all that could mean lower prices for shoppers.
This merger is still in the very early stages. It needs federal approval and even if the OK comes, both Kroger and Albertsons said nothing will happen until early 2024.
