In its bid to acquire Boise-based Albertsons Companies, Kroger said it would invest $500 million in lower prices for shoppers. Kroger CEO Rodney McMullen repeated the talking point several times during a hearing in front of a US Senate panel this week.
Under questioning, McMullen said the investment would roll out over a period of four years – which works out to $125 million per year, on average.
What does it really mean?
Taking those data points and adding a bit more – with a layer of math, shows the impact of that half-billion investment.
According to data from Placer.ai, Kroger’s stores see 160 million visitors across its 2,726 stores each week. Albertsons stores net a total of 109 million visits to its 2,253 stores. That means the two chains combined see an average of 54,026 visitors per store per week.
Kroger and Albertsons said that as part of the transaction, they might spin off up to 375 stores in a newly-formed SpinCo. That would leave the combined retailer with 4,604 stores. If each remaining store has 54,026 visits per week, that’s 248.7 million shopper trips per week — a lot!
Now, take the $125-million yearly figure and divide by 52 weeks. That’s a total of $2.4 million in price reductions per week, on average.
When you divide $2.4 million weekly savings by the 248.7 million weekly shopping trips, it shows the true impact to consumers of the investment.
The average shopping trip would save $0.0096 cents. That’s just less than a penny per shopping trip.
$500 million Total investment / 4 Number of years of investment = $125 million Investment per year / 52 Weeks in a year = $2.4 million Investment per week / 248.7 million Average shopping trips per week
(Kroger & Albertsons combined, minus 375 SpinCo stores)
= $0.00966 Average savings per average shopping trip
We reached out to Kroger to clarify if the $500 million would go just to the current Albertsons-owned stores, or all the combined locations. A spokesperson did not respond by the deadline for this story.
If the money only went toward the acquired stores (subtracting the 375 or so that would go to the new SpinCo), that wouldn’t make a big change to the math. The average trip to those 1,878 acquired stores would see a savings of about 2.6 cents per trip.