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Not all food company mergers are equal

Annie Baxter Jun 24, 2015
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Not all food company mergers are equal

Annie Baxter Jun 24, 2015
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A federal judge has put the brakes on Sysco’s planned acquisition of US Foods, which the Federal Trade Commission challenged for anti-trust reasons. Analysts don’t expect that regulators will get as worked up over a merger between the European grocery chains Ahold and Delhaize, which both generate a big chunk of their sales in the U.S. 

If Sysco and US Foods teamed up, critics feared that restaurants, hotels and hospitals would have a harder time price shopping for supplies. The combined firm would dominate more than half of the food distribution market, according to Brian Buhr, a professor of applied economics at the University of Minnesota. Buhr says Sysco and US Foods are already dominant market players, operating far more distribution centers than their competitors, but it’s a very different picture with grocery chains. 

“There are more of them and they are equally sized,” he says. 

Ahold operates the Stop & Shop and Giant chains in the U.S., along with the online grocer Peapod. Delhaize runs Food Lion and Hannaford. Mike Paglia, director of retail insights with Kantar Retail, says the Ahold/Delhaize tie-up will likely boost profitability through cost-cutting. But he doubts the combined firm will have any greater success differentiating itself in a competitive marketplace. 

“One of the defining characteristics of the food landscape in the U.S. is this enormous level of fragmentation,” he says. “Ahold and Delhaize and their banners don’t do anything remarkable to stand out.”

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