It's no secret that Amazon has wanted to get into the grocery game in a more serious way for quite some time. The global e-commerce company first launched Amazon Fresh — a grocery delivery add-on for existing Prime members — back in 2007.
Ten years later, in a $13.4 billion deal, Amazon went on to acquire Whole Foods in a move that The New York Times categorized as "represent[ing] a major escalation in the company's long-running battle with Walmart, the largest grocery retailer in the United States, which has been struggling to play catch-up in internet shopping."
Then, in 2020, a handful of physical Amazon Fresh locations were launched across the U.S., mostly clustered in suburbs outside major cities. Despite these moves, as CNBC reported last year, Amazon is "still just a niche player in the industry."
"As of mid-December, Amazon.com and Whole Foods accounted for a combined 2.4% of the grocery market over the past 12 months," CNBC's Annie Palmer wrote. Walmart, meanwhile, accounted for nearly 18%.
But the grocery landscape has also changed a lot in the now-nearly 20 years since Amazon first launched Fresh. Most notably, our country is on the precipice of having Kroger and Albertsons, two of its largest supermarket companies, merge in a deal that is hotly contested by both food security advocates and grocery union representatives. As part of this merger, the combined companies are expected to divest at least 500 stores across the country. (The deal is currently under review by the Federal Trade Commission.)
As Salon Food reported, this has actually been one of the main concerns — in addition to those about higher food costs and lost jobs — surrounding this burgeoning grocery mega-monopoly. People having less options to buy food is hardly ever a good thing, especially in a country where the U.S. Department of Agriculture estimates about 19 million residents (6.1% of the population) live in "low-income, low-access areas and have trouble getting to a grocery store."
People having less options to buy food is hardly ever a good thing, especially in a country where the USDA estimates about 19 million residents live in "low-income, low-access areas and have trouble getting to a grocery store."
These low-access areas are often called food deserts — and the Kroger-Albertsons merger could contribute to them in ways beyond just divesting locations.
"Supermarket mergers drive out smaller, mom-and-pop grocers and regional chains," Amanda Starbuck, policy analyst at Food & Water Watch, told The Guardian in 2021. "We have roughly one-third fewer grocery stores today than we did 25 years ago, according to the U.S. census bureau."
And Amazon may be eyeing this merger as an opportunity, rather than another hurdle to jump through in its effort to gain a foothold in the grocery industry, according to a new report by Business Insider. This could mean that ultimately fewer physical grocery stores close to their communities — but at what cost?
As reporter Gloria Dawson wrote last week, analysts at the financial research firm Bernstein "laid out a model for the company to grow in grocery by embracing more acquisitions," including acquiring at least some of the stores that are being divested as part of the Kroger-Albertsons deal. The report's authors described several scenarios for the company, such as quickly rebranding stores or focusing on stores in particular regions. A deal could help Amazon build physical scale and reach in the grocery sector more quickly, the authors added.
"In theory, Amazon could plug acquired stores into its network, which would (potentially at least) prove less painful and costly than building a distribution and logistics network from scratch," they wrote. "Buying the divested Kroger/Albertsons stores should definitely be on the table at Amazon."
The authors made it clear that the scenarios they suggested were both hypothetical and viable. And while Amazon declined to comment, Bernstein's prediction comes at an interesting time for the e-commerce company. Only a few weeks prior, Amazon CEO Andy Jassy sent out his annual shareholder letter, in which he put a spotlight on their rocky run in the grocery business.
"To have a larger impact on physical grocery, we must find a mass grocery format that we believe is worth expanding broadly," he wrote in the letter, while adding that Amazon needed "a broader physical store footprint given that most of the grocery shopping still happens in physical venues."
To be clear: Is it confirmed that Amazon will acquire the divested Kroger/Albertsons locations? No. But is it possible? Yes. And would that be a good thing? Well, this is where things get a little hazier.
"Oh, great. Another monopoly benefiting from the monopolization of the American supermarket industry."
It's easy to look at the prospect of Amazon taking on these locations with a lot of cynicism. "Oh, great. Another monopoly benefiting from the monopolization of the American supermarket industry." But for many folks who live in food insecure communities, where supermarket options are already limited, an Amazon-owned grocery store is better than no grocery store.
What this prospect ultimately highlights is the extent to which the American grocery landscape is broken. Here's the thing: As Purdue University Northwest professor Anthony Sidone recently said, the merger between Kroger and Albertsons won't even make it the largest supermarket chain in the country.
It will just bring it up to the current scale of Walmart.
"It looks like their strategy will be to serve the grocery market segment that stands between the Whole Foods and Dollar General segments," Sidone told The Northwest Indiana Times. "The grocery market is extremely competitive and both Kroger and Albertsons might have sensed a squeeze between the opposite ends of the grocery market segments."
Perhaps — as the cost of a typical grocery visit has shot up by 10% over the last year — the idea of these mega-corporations feeling the squeeze feels like poetic justice. Or perhaps it's just another reminder that we — and especially our most vulnerable citizens — ultimately have to pay the price with fewer choices when they do.
