Will a Kroger-Albertson’s merger put more money in the pockets of retailers, making it even harder for small and mid-sized farms to access markets?
Will a Kroger-Albertson’s merger put more money in the pockets of retailers, making it even harder for small and mid-sized farms to access markets?
January 17, 2023
November is planting season in Georgia’s Vidalia onion fields. And when Shad Dasher misses a call because he’s overseeing workers who hand-plant 84,000 individual onions per acre, his voicemail message offers an explanation: “You have reached the onion man,” it says.
Dasher is a third-generation Vidalia grower in Glennville, a small town in one of the 20 counties where the special sweet onions are produced. But unlike his father and grandfather before him, he’s urging his five children to consider other professions. That’s because with 40 acres he can’t make a profit selling his onions to supermarkets anymore.
“It used to be that a small to medium-sized farmer could carry his produce to a mom-and-pop grocery store chain and bicker with the produce manager, and you’d have your fresh produce sold within 20 miles of the farm,” he said. Now, “the circle is getting smaller and smaller to sell to.”
The Vidalia onion industry offers just one example of the way that agriculture across the country has been reshaped by the demands of a few increasingly powerful retail buyers. While exact statistics are hard to pin down, Cliff Riner, chairman of the Vidalia Onion Committee, said that in the mid-2000s, there were about 200 Vidalia farmers. Now, about half of them are gone, he estimates, but the 100 that are left are farming the same number of total acres in addition to bringing in onions from South America. It’s a familiar story seen all over the country: there are fewer, larger farms, and the smaller ones are being squeezed out.
According to a new report from the U.S. Department of Agriculture’s (USDA) Economic Research Service (ERS), over the last three decades, consolidation in food retail has increased significantly at the national, state, metro-area, and county levels. And in the past 10 years, the market share of the four largest supermarket chains has increased significantly.
Depending on the specific measure used, the four biggest chains—Walmart, Kroger, Costco, and Albertsons—now control between 43 and 69 percent of sales. Walmart in particular, captures one out of every three grocery dollars spent in the U.S. by some measures. Rapid-fire mergers and acquisitions have contributed to that consolidation, with more than 300 mergers happening in 2019 alone. Now, the big four chains are poised to become the big three.
In what would be one of the biggest deals in grocery history, Kroger is planning to buy Albertsons for $24.6 billion. While a wide range of advocacy groups have been pushing back on the merger based on claims it will hurt workers and consumers, less attention has been paid to the impact on farmers, who, along with advocacy groups are speaking out about how the deal could worsen what has already become an impossible retail market for many small- and mid-size producers.
On December 1, a group of organizations including the National Farmers’ Union, the National Family Farm Coalition, and Farm Action sent a letter urging the Federal Trade Commission (FTC) to block the merger. Soon after, the FTC—which has taken on an increased focus on anti-trust and competition law since Chair Lina Khan took the helm last year—requested more information to complete its regulatory review. Then, on January 10, a coalition of influential trade groups that represent West Coast produce growers sent a letter to the FTC, adding their voices to the opposition based on what they said would be devastating impacts on fruit and vegetable farmers.
Several advocates, including Aaron Johnson, the challenging corporate power program manager at Rural Advancement Foundation International-USA (RAFI), are betting the FTC will block the merger. But if the agency does allow it to move forward, Johnson said that in places where Kroger and Albertsons have a lot of overlap, such as New England, there would likely be acute, immediate impacts on the surrounding farmers and rural communities. More broadly, he’s concerned about the bigger picture and what ongoing consolidation will mean for farmers like Dasher across the country.
During a November Senate hearing, Kroger CEO Rodney McMullen testified that the merger would “enhance competition” by allowing the company to better compete with bigger players like Walmart, although other expert witnesses disputed that claim. And while his 15-page opening statement made various arguments about how the merger would lower prices and benefit employees, it included just three paragraphs that addressed impacts on “America’s food producers.”
“With a broader network and even more customers to serve, we believe the merger will benefit our suppliers,” McMullen said, “as it will allow for a more efficient distribution chain, provide opportunities to grow sales together, and reduce waste.”
Advocates like Johnson don’t see it that way. “Such a high percentage of the overall grocery retail landscape being concentrated into this highly centralized corporate model is already a trend that is going in the wrong direction, and in the Kroger and Albertsons case, it’s [trending] in a pretty extreme way,” he said.
Onion demand has increased over the past decade. In 2021, onions were the third most popular vegetable in the country, and Riner said demand for Vidalias has gone up, too. “As retailers had shelf space dedicated to sweet onions, they kept asking, ‘Can we get more of these?’” he said.
But Dasher stopped selling to grocery stores about six years ago. Even after he invested in organic certification to fetch a premium, he said he was either breaking even or losing money at the prices supermarkets were offering. And it’s not just onions.
“It’s hard to [find] grocery stores that have patience. They don’t want to give you the shelf space if you’re not moving the volume that . . . some of the other people are moving.”
Ricky Dollison is a fourth-generation farmer in Poulan, Georgia. He used to grow collard greens that went to Glory Foods and squash that went to Publix, through a distributor. But he got out of vegetables and barely works with grocery stores anymore because the numbers didn’t work, especially given the costs of labor, packing materials, refrigeration, and food safety requirements. “You cannot make it work with 200 or 300 acres with the cost of inputs and retail prices,” he said.
Now, a road that cuts through Dollison Farms separates fields where he grows peanuts, corn, and cotton from his main business: livestock. Dollison raises pigs and cattle, gets the animals processed locally, and markets the meat under his own brand, Warrior Creek Premium Meats. But even with products that involve lower upfront costs, he’s moved away from grocery sales. “It’s hard to [find] grocery stores that have patience,” he said. “They don’t want to give you the shelf space if you’re not moving the volume that . . . some of the other people are moving.”
Volume has long been an issue for small and mid-sized farms selling into retail markets. About a decade ago, regional food advocates pushed food hubs, which aggregate food from small growers regionally, as a way to address that challenge. And while some groups found it hard to make food hubs profitable and went under not long after starting, others, like GrowFood Carolina grew by leaps and bounds.
Started in Charleston, South Carolina in 2011, GrowFood initially worked with five farms on less than 100 acres. Now, they aggregate food from 120 producers that farm about 7,000 acres. In December, they held a ribbon cutting for a new 12,000-square-foot warehouse that could fit their entire old facility into its cooler space.
But general manager Anthony Mirisciotta said that the hub’s growth has been fueled by the support of Charleston’s thriving restaurant scene and institutional buyers supplying places like schools and hospitals, which have kept them solvent despite declining supermarket sales.
While grocery stores accounted for a larger share of GrowFood’s revenue in the early days, Mirisciotta said they’ve seen a marked decrease in retail sales in the past several years. And while he can’t tie the decline specifically to an exact moment in time, the sales that have dropped the most are those to Whole Foods, which was acquired by Amazon in 2017. “There’s a lot more resistance that we’re being met with when it comes to establishing programs,” he said. “There’s less interest and a lot more reference to price point. For us, it has meant less and less items showing up on the shelves of the stores.”
Since the acquisition, Whole Foods claims it has “added 3,000 local brands” to its shelves, but it has also committed to slashing prices in stores. And other reports point to a centralization of purchasing, with local purchasing now positioned more as marketing than part of the key business. (Whole Foods did not respond a request for comment by press time.)
Interestingly, Mirisciotta said the grocery store that has maintained the most regular purchasing from GrowFood is Harris Teeter, which is also owned by Kroger. But according to the letter sent to the FTC by Western Growers, California Fresh Fruit Association, and Colorado Fruit & Vegetable Growers Association, Kroger has already been using its market power to squeeze farmers in other ways. The groups say it uses an “egregious take-it-or-leave-it contract pricing structure” that forces farmers and distributors to accept low prices and in the past, the company attempted to implement unfair payment terms. (Kroger did not respond to a request for comment.)
If the Kroger merger goes through, the groups predict their members will farm fewer acres, move production to other countries, or leave farming completely. “The buying power of the newly combined Kroger entity cannot be understated. Growers and shippers are ultimately price takers and are constantly struggling to achieve better than breakeven pricing from retailers,” they wrote. “An entity as large as Kroger-Albertsons combined will allow it to dictate pricing and leverage its buying power with even more aggressive contract pricing than is currently seen.”
While individual situations on the ground vary, in addition to demanding volume at the lowest prices, the biggest grocery chains also generally push farms to provide year-round supply. That’s a problem for Vidalia growers, since the onions are planted in November and December and are only available from April to August.
Today, nearly all the surviving onion farms in Georgia either import sweet onions from Peru in the off season or grow them there themselves.
But over the past few decades, as grocery stores saw demand for sweet onions existed all year, buyers realized they could simply import cheaper ones from the Southern hemisphere. At that point, Shad Dasher said big grocery chain buyers told growers directly that they could either start importing sweet onions from South America in the off season themselves, or the store would bypass them and buy from elsewhere. “They just have too much power,” he said.
Today, nearly all the surviving farms either import sweet onions from Peru in the off season or grow them there themselves. G&R farms, in nearby Glennville, Georgia, does the latter. G&R is owned by Dasher’s cousin, who took the alternate route: Dasher’s cousin got big, while Dasher got out.
G&R now farms Vidalia onions and other crops on 5,000 acres in the U.S. In addition, the operation plants sweet onions in its own fields in Peru. After harvest, workers ship the Peruvian onions to Georgia, and G&R sells them to grocers when Vidalias aren’t available, maintaining an uninterrupted supply. Kroger is one of its best customers. And while Cliff Riner, the research and development manager for G&S, said it was true that bigger supermarket chains drove the industry toward a system of larger, international farms that could produce higher volumes year-round, he sees that development as positive in some ways.
“We have so much consumer demand, and we’re just providing [sweet onions] six more months of the year,” he said, which allows them to keep the retail shelf space and means the overall operation runs more consistently. “Locally, it keeps all of our employees, who used to be seasonal, at the [packing] shed and on the farm full-time. The families have a standard check, and they come to work at the same place every day.”
Still, the recent ERS report’s findings suggest those farmworkers and rural residents will be hit the hardest if grocery consolidation continues, reducing competition and raising prices along the way: The agency’s data showed food retail concentration is significantly higher in smaller, rural communities compared to larger metropolitan areas.
The fact that G&R was able to grow into a massive farm corporation growing onions on thousands of acres for Kroger and other supermarkets while Dasher threw in the towel altogether points to a food system reality Susan Pavlin calls “two parallel systems.”
Pavlin is a food system expert who has worked with various food hubs and cooperatives. She explained that most food-system reform has been focused on building regional markets that support smaller farms, but those markets are still comparably tiny, especially since consolidation has simultaneously continued and accelerated in the larger, dominant system.
“The cost of things will never come down in the regional, small farm system if there’s not some scale, and to have scale you have to have a certain number of buyers,” she said. “If there are a few big grocers that have 100 percent carte blanche, then there’s never going to be pressure to merge the models.”
It’s why advocates like Johnson at RAFI support the Biden administration’s recent initiatives to invest in regional food systems but say those actions must be paired with more aggressive antitrust regulation, including blocking mergers like the Kroger-Albertson’s deal and more continuous attention to policing corporate concentration in the food system.
The administration’s recent effort to bolster local meat processors is a prime example. “If you invest in a bunch of small meat processing plants and then do nothing to change antitrust enforcement, those plants are going to struggle to compete against all of the corporate tactics that are available to large meatpackers and then be vulnerable to be acquired 10 years down the road or go out of business,” said Johnson.
That’s not to say the farmers won’t keep trying. “I love doing this, and once it’s in your blood, it’s hard to give it up, and you’re always trying to figure out different avenues,” said Dasher, who now sells his bags of onions to local nonprofits like 4-H. Dollison, on the other hand, is focusing on selling his meat directly to customers online. Instead of a grocery store selling it for $5.99 a pound and giving him a tiny cut, he can charge $9.99 a pound online and capture much more of each dollar spent.
With the state of retail markets as it is, if you’re a small or mid-sized farm and “you don’t look at trying to add value and do a portion of sales directly to consumers,” he said, “you’re going to die a slow death.”
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