Potential Kroger-Safeway merger could drive up Colo. grocery prices

LITTLETON, Colo. — Speculation was circulating Tuesday morning about a possible merger that could drive prices up at grocery stores across Colorado.

Industry insiders say Kroger, who owns King Sooper’s, is looking to buy out Safeway. The sale could change the way you shop, considering one company would control roughly 60 percent of the grocery market in Colorado.

In Littleton, both grocery stores are caddy-corner to each other at the intersection of Kipling and Belleview. In Colorado on the whole, there are 138 King Sooper’s locations and 124 Safeway locations.

One thing’s for sure: Safeway announced last week that the company is looking for a buyer, and Kroger is one of the strongest suitors at the moment, according to Darrin Duber-Smith, a marketing professor at Metro State.

“It would be a pretty epic merger in the grocery industry,” Duber-Smith said. “If you have one company controlling 55-60 percent of the market, they’re going to control pricing. And so the theory says the prices will go up and quality will go down.”

The U.S. Justice Department would have the final say in such a move, as a merger could spark anti-trust concerns and create a dominate franchise in Colorado.

“For shoppers in Colorado, it would probably be better that a private equity firm come in and operate (Safeway),” Duber-Smith said.

One such firm would be Cereberus Captial Management, which bought struggling Albertson’s in 2006. Safeway and Cerebus have also reportedly been in talks for months.

“Generally, the venture capitalists want to come in and say, ‘How we can organize this? How we can make this work?’” Duber-Smith said. “The other side of this is you get a company like Kroger that says ‘How can we knock out the competition?’”

Experts say a merger between Safeway and Kroger would raise red flags and fly in the face of the free market theory, which champions the fostering of competition and the avoidance of monopolies.