Kroger wants to acquire Albertson. The Federal Trade Commission wants to stop them. Proper people may disagree with whether Crroger is making a good business decision – the price they will pay, about $ 25 billion, a lot of money. But everyone who is focusing on the way Americans is focusing on it should agree that the FTC suit to block the deal is ridiculous.
If it was nothing more than the story of a risky, complex merger and a clear, bombing bureaucracy, then there would be not much to say. The Cincinnati-based croger is trying to live in a low margin/high competition business. The merger and acquisition are only part of his life. Everyone knows that. FTC has been filing silly matters since 1914. Everyone knows that too.
But let’s think for a moment what this soap opera on the business page told about the amazing change in the way of living her life.
Start with the argument of FTC: Croger and Bois-based Albertson are in the business of selling groceries. In some parts of the country, their markets are overlaps. If they merge, FTC claims, less competition and shopkeepers will pay high prices.
This makes sense until you realize Kogar and Albertson that the business of selling groceries is not in the business of selling, at least the way we thought as a business selling grocery goods. This means that they do not compete so much between each other.
To describe, go to costco on Saturday and grab one of the hot dog/soda combo that sells in $ 1.50. Once you add your honor reunion, find a seat where you can see the check-out and count how many people come with a rotisari roasted chicken. You probably already know this, but many people like costco chicken.
Does Costco make money to sell chickens for $ 4.99 or are they using them to bring people to the store, next to the point. Costco, like any firm, is in the business of selling people that they need. They have come to know that people do not require just TV, courtyard furniture and toilet paper. People should be fed to their families, out of the door and with their lives. If you have got a two-hour break between your daughter’s football game and your son’s T-ball practice, the costco cafe and ready-to-eat dinner solution two major problems.
Kogar also knows this. Sure, these places still sell milk, eggs and bread. But they are growing rapidly in the business of “food solution”. This means that Crroger, and Alberton do not compete against just one other (and Walmart, and Hole Foods, and Target, and regional grocery store chains and delivery services, and… ..). They are competing against fast food locations, excluding places and having contingent food.
The interesting thing about all this is that it is not the fact that the grocery business has changed, but Why The grocery business changed. The answer depends on whom you ask. Some people say this is because Americans have become rich and lazy. Others say this is because Americans have become rich and busy.
If you disagree, this is probably because you don’t think you are rich. Some of us do. But if someone can see the way you live 50 years ago, they feel that you have made it. In 1970, after adjustment to inflation, the individual income was approximately $ 18,000. Now it is about $ 50,000. Even more notable is that we can use all the extra money that can be done to buy things that were unavailable in 1970. Smartphones and computers are clear examples, but the costco chickens were not available even 50 years ago.
You can decide for yourself whether we have become lazy or busy or not. Either way, however, if you are a specific American, you are spending less time in the kitchen than before. (A recent survey found that people were spending less than half the time in cooking than their parents.)
The result of this case is difficult to predict. (Which is another problem. Firms should not guess what is allowed and what is not.) But whatever happens is not going to change the change that has already swept away the food business. Crroger is trying to adjust. FTC is trying to obstruct.
Michael L. Davis Cox’s School of Business is a professor of economics at SMU Dallas.