Grocery stores are “incredibly competitive” (except when they’re not)
“Food retail is an incredibly competitive business in the United States,” says Randy Burt, who leads the Americas Grocery Practice at A.T. Kearney, a management consulting firm. “Not only are margins famously razor thin, but there is a tremendous amount of competition.”
So why is the FTC involved? Because while the big picture on competition is good, food retail is a local business. And in some places, competition is not so good.
“Given this situation, the decision by the FTC to force divestitures within selected markets may be justified to protect consumers in those markets,” says Burt.
Consumers are deeply divided when it comes to regulation. No one wants to spend more on food. The average U.S. household spent $4,015 on groceries in 2015, according to the Bureau of Labor Statistics, a 1.1 percent increase from the previous year. But Americans are also wary of overregulation, well, anything.
“We do not need more laws,” says Shira Newman, who works for a moving company in Portland, Ore.
Peter Hoagland, a marketing consultant in Warrenton, Va., says while the federal government has an important role in food safety,” it should not be involved in controlling prices.” He adds, “that is best left to the free market.”
To be clear, the FTC is not enacting any price controls. According to the agency, the supermarkets operated by Ahold and Delhaize “compete closely” for shoppers based on price, format, service, product offerings, promotional activity, and location. But without a remedy, a merger would eliminate direct supermarket competition, to the detriment of consumers in certain local markets.
“The merger would increase the likelihood that the combined company could unilaterally exercise market power, and that the remaining competitors could coordinate their behavior to raise prices,” the FTC noted.
So in a way, it’s trying to do the opposite of controlling prices. At least that’s what it claims.
How to get a lower price
Overall, grocery stores may be competitive — and thanks to the FTC, maybe a little more competitive — but there are ways to ensure you’re always getting the most competitive rate, say experts.
“Consumers can tell whether or not their local stores are competitive by comparing prices store-to-store within their own city, and at supermarkets nearby cities,” says Josh Elledge, the founder of SavingsAngel.com, a coupon site. “This is accomplished fairly easily online, as mainstream and even small local supermarket chains have their sale ads available online.”