'They are all dogs.' Texts by execs could haunt Kroger merger with Albertsons

PORTLAND, Ore. − Key to winning antitrust approval of its $25 billion takeover of Albertsons , Kroger plans to sell off 579 stores to what it has described as a “strong competitor,” so there would be no worries about potential monopolies.

During testimony in a court hearing over the controversial merger's fate, executives with Keene, New Hampshire-based C&S Wholesale Grocers answered questions about their vision for the future. But one also faced questions about text messages she made in the past – and that might create doubt about her company’s commitment to compete.

On the stand, Alona Florenz , a senior vice president at C&S Wholesale, was asked about texts between her and a colleague who appeared to be mocking the financial health of stores their company was acquiring in a planned 2021 merger between two New York grocers, Tops Markets and Price Chopper .

“Right now, I think we should buy all the Tops stores LOL,” Florenz wrote. “If we do, they are happy and you can spend a year finding other buyers.”

Her colleague replied: “There are no buyers – they are all dogs.”

The two continued to joke that another colleague should be put in charge because “he thinks he can run retail,” while they later noted the company could “make out” on the wholesale part of the transaction.

The apparent cynicism of the texts evokes the worst fears about C&S Wholesale’s role in the deal.

Regulators at the Federal Trade Commission , who have sued to kill the merger, have raised doubts in their case that C&S Wholesale is either strong enough or experienced enough to handle all the stores. The company has also bought supermarkets in the past and sold them after securing long-term distribution deals with buyers.

“C&S is insufficient … it has a poor record of operating supermarkets,” Laura Hall , the FTC’s senior trial counsel said Monday during opening statements, adding the company had never operated more than 110 stores. On Thursday, lawyers for the FTC also noted that C&S Wholesale was acquiring the stores for a relatively low price of $2.9 billion, not much more than the underlying value of the real estate.

A private company, C&S Wholesale is one of the nation’s largest supermarket suppliers, but it only has a modest retail footprint. It owns 25 supermarkets: about a dozen Piggly Wiggly stores in Wisconsin and 11 Grand Union stores in upstate New York – the latter acquired from divested locations in the Tops-Price Chopper merger.

The texts came up in court after C&S Wholesale’s president of retail operations, Mark McGowan , spent two hours testifying about how the company was transforming its business model from mostly wholesale to also becoming a major supermarket operator. During that testimony, he admitted the New York stores acquired from the previous divestiture were losing an average of $1 million to $3 million annually but said the company was committed to turning them around.

“Grand Union is not achieving our expectations, though improving,” McGowan said.

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This article originally appeared on Cincinnati Enquirer: 'They are all dogs.' Texts by execs could haunt Kroger merger with Albertsons