Just Miles from Kroger’s Court Battle, a Food Desert Shows What’s at Stake

PORTLAND, Ore. — In a courthouse in Portland, Oregon, the federal government is challenging the biggest supermarket consolidation in U.S. history.

A dozen miles away, in a neighborhood called Rockwood, there is an example of what is at stake.

Twenty-five years ago, three supermarkets served Rockwood. Just one, an Albertsons, still stands. With 40,000 people and one of the highest poverty rates in the region, Rockwood has become a food desert.

Serge Mutalimba used to shop at a Safeway; now he takes a bus ride that is about twice as long to the remaining Albertsons. “Everybody else is gone,” said Mutalimba, who has lived in and around Rockwood for more than two decades. “They’re all completely gone.”

The fate of the Albertsons where Mutalimba shops could be determined by a trial that’s underway in Portland. Kroger, the country’s largest supermarket chain, has made a $24.6 billion bid to buy the Albertsons chain. While Kroger says no stores would be shut down, the Federal Trade Commission has sued to block the acquisition, saying it would mean less competition in the grocery industry. The likely result, it argues, would be higher prices and store closings.

The hearing before a federal judge to determine if the deal can go through is expected to last until Friday.

Rockwood is dotted with low-rise apartment buildings and connected to central Portland through light rail and bus lines. Racially and ethnically diverse, it was shaped by gentrification; as housing costs rose in Portland, poorer families were pushed to the outskirts of the city and places like Rockwood. About a quarter of Rockwood’s residents identify as Latino, and at a local food pantry on a recent afternoon, Spanish and Russian were spoken as much as English in the line for groceries.

In communities like Rockwood, the dearth of places to buy food is particularly acute. Almost 13% of the U.S. population lives in a food desert, defined by the Department of Agriculture as a low-income area with limited access to a large grocery store.

Food deserts and food insecurity arise when retailers pull out of poor urban areas. That happened in Rockwood in 2003 when Kroger, citing slipping sales, closed one of its Fred Meyer supermarkets. But corporate consolidation also plays a role. In 2015, the Safeway and Albertsons chains merged nationwide; the Safeway in Rockwood shut down soon after. That left only the Albertsons.

“We’re worried about disappearing stores in low-income communities,” said Amanda Starbuck, research director at the nonprofit Food and Water Watch, which opposes the merger.

Kroger has taken steps to try to allay regulators’ concerns about market concentration in areas where its stores have significant overlap with Albertsons outlets. The company said it would sell 579 of the roughly 5,000 Kroger and Albertsons stores to a third company if the merger went through. The Rockwood Albertsons is on the list of stores to be sold.

One of the issues being litigated before Judge Adrienne Nelson of U.S. District Court is whether Kroger’s plan to sell those stores would create a successful new competitor. Kroger executives testified that the company buying the stores, C&S Wholesale Grocers, based in New Hampshire, was equipped to keep the stores operating at full capacity and would provide real competition against the combined Kroger. Lauren La Bruno, a C&S spokesperson, said the company was “well prepared to successfully operate these stores for many generations to come.”

But the FTC argued that C&S appeared ill prepared for the task. The wholesaler operates just a couple of dozen retail supermarkets, and testimony from C&S executives revealed that the company was losing millions of dollars on those stores each year. One executive, in communications shown in court, referred to the stores that C&S would take over as Kroger’s “worst chains.”

The recent history of mergers in the grocery industry also raises red flags for regulators: When Albertsons acquired Safeway in 2015, it similarly sold dozens of stores to a third company, but that company went bankrupt within months.

When the local Safeway closed, the SnowCap food pantry, which serves the Rockwood area, had a 12% uptick in demand in response to a lack of alternatives, said Kirsten Wageman, the pantry’s executive director.

A handful of smaller markets that sell Mexican and Central American items and other groceries have popped up in Rockwood since the Safeway closed, serving mostly Latino residents. Wageman said these stores were “a small but meaningful part of the mix” of food options.

But as consolidation ramps up, small businesses also stand to suffer from the increasing dominance of big chains, said Stacy Mitchell, a co-executive director of the Institute for Local Self Reliance, a national nonprofit that pushes for local economic power.

“The effects on independent grocers, because of the role they play in low income and rural communities, is probably the most important impact in terms of food deserts,” Mitchell said.

The National Grocers Association, which represents independent retail and wholesale grocers, has called for scrutiny of the Kroger and Albertsons deal. Big food retailers, the association argues, can use their dominance to exert pressure on suppliers, making it difficult for smaller stores to compete on price. The Kroger purchase of Albertsons “is engineered to enhance the largest conventional grocery chain’s leverage over suppliers at the expense of smaller rivals,” the association said in a statement.

And while smaller markets that cater to their communities can be beneficial, their customers typically still rely on bigger retailers for basic items, said Ken Kolb, a sociology professor at Furman University in South Carolina who researches food access. The loss of a larger store often hits people living just above the poverty line the hardest, he said.

“People’s kitchen-table economics are still currently built around one-stop shopping,” he added.

If the FTC fails to persuade the judge and Kroger’s acquisition of Albertsons goes through, the combined company would own a Fred Meyer just outside Rockwood, and it would sell not just the Albertsons there but also two Safeway stores in the broader area.

In court, the FTC argued that without head-to-head competition between Kroger and Albertsons, shoppers in some markets would most likely see prices at their local grocery store go up. In court, the FTC presented an email from the president of Fred Meyer indicating that the chain set its egg prices based on what Albertsons charged. “We would not exceed what they are priced at,” the president wrote. Without that competition, the FTC argued, Kroger might raise prices.

Kroger and Albertsons executives testified that they competed with a wide range of other companies on price, including Walmart and Costco, and based retail prices for grocery staples on the prices at a host of competitors. Kroger’s CEO has vowed that the company would cut grocery prices by $1 billion if the merger closed.

A 2007 study found a direct link between retail consolidation and grocery prices. Consolidation from 1993 to 2003 led to higher prices, researchers found. Similarly, a 2009 study found that the merger of two large grocery retailers in Madison, Wisconsin, resulted in higher prices two years later.

Selena Zaragoza, 28, has lived in Rockwood her entire life and used to walk to Safeway. She shops at the Rockwood Albertsons at least every other day to feed her two children, ages 6 and 8. Any price increases at the store would add to the bills that she, a single mother with two jobs, is struggling to pay.

Proximity to a supermarket is also crucial, she said. And nearby options have withered away over the years.

“It’s a store that’s been there since I was born,” Zaragoza said. “It’s the closest thing we have.”

This article originally appeared in The New York Times .