(Bloomberg) — Kroger Co. hiked prices on milk and eggs more than needed to account for inflation, the company’s top pricing executive testified during a court hearing on the US government’s bid to block the grocery chain’s purchase of rival Albertsons Cos.
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In a March 2024 email to his bosses, Andy Groff, Kroger’s senior director for pricing, acknowledged that the company had raised its prices more than required to adjust for higher costs.
“On milk and eggs, retail inflation has been significantly higher than cost inflation,” Groff wrote.
Groff testified about his email as part of a federal antitrust lawsuit by the Federal Trade Commission and a group of states to block Kroger from buying the Albertsons chain. US District Judge Adrienne Nelson in Portland is expected to rule on whether to stop the $24.6 billion acquisition from moving forward.
Kroger and other grocers have benefited from periods of higher inflation as they passed down price increases to consumers. Supermarket operators raised retail prices instead of absorbing all increases, and higher food prices led to jumps in sales until shoppers pulled back on their spending.
Antitrust enforcers allege the Kroger-Albertsons deal would lead to higher consumer prices since the companies compete head-to-head in hundreds of markets across the US. The grocers say the acquisition would lead to lower prices and better position them to compete against retailers like Amazon.com Inc. and Walmart Inc.
The company’s goal is to “pass through our inflation to consumers,” Groff said in response to questions about his email.
Kroger seeks to be competitive on what it terms “everyday essentials” – five items that customers buy most: milk, eggs, sugar, bananas and iceberg lettuce, Groff said. Every week, Kroger benchmarks its prices on those items against three others: Walmart, Aldi Inc. and a traditional retailer in the market. Albertsons is the “key traditional retailer” in every market where they compete with Kroger, Groff said.
Kroger has pushed into the milk business over the years and today operates more than a dozen dairy plants. Egg prices hit record highs in early 2023 in the US due to an avian influenza that killed tens of millions of birds and curtailed supply.
–With assistance from Jaewon Kang.
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