Analysis: Politicians to blame for grocery store closures

Grocery stores are closing, workers are losing their jobs, families are losing places to shop, and politicians are warning darkly about the emergence of “food deserts.”

Fortunately, the people who helped create this mess have come up with a solution: government should build grocery stores of its own, potentially at four times the cost of the private-sector stores it would replace.

You really can't make this stuff up.

Across the country, traditional grocery chains are shrinking their footprints as they struggle with rising costs, razor-thin margins and fierce competition. Kroger has announced plans to close roughly 60 underperforming stores nationwide, including Fred Meyer and QFC locations in Washington. Now Albertsons, the parent company of Safeway, is doing the same thing.

Albertsons closed 35 stores in its most recent fiscal year, compared with 10 the year before and just eight two years earlier. Apparently, grocery stores don't become profitable simply because politicians hold a press conference declaring them essential to the community.

But don't worry. Government is here to rescue us from the consequences of government's own economic genius.

New York City has pursued plans for publicly supported grocery stores that could cost more than $3,000 per square foot to build, roughly four times what private grocery companies spend. Seattle politicians are flirting with government-run grocery stores, too, while Washington lawmakers have considered legislation allowing cities to get into the supermarket business themselves.

Because when experienced companies like Kroger and Albertsons struggle to make the economics of a grocery store work, the obvious answer is to hand the job to City Hall.

The whole thing would be hilarious if taxpayers weren't expected to pick up the tab.

To understand how we arrived at this point, go back to 2022, when Kroger and Albertsons announced plans to merge. The companies argued that they needed greater scale to compete in a grocery business increasingly dominated by enormous competitors such as Walmart, Costco and Amazon. Combining would give them greater purchasing power, more efficient distribution networks and additional resources to invest in technology and compete in a rapidly changing marketplace.

Politicians, naturally, decided they knew better.

Washington politicians and regulators across the country warned that allowing Kroger and Albertsons to combine would threaten workers, hurt consumers and reduce competition. Washington state spent heavily fighting the merger, lawsuits followed, and government officials repeatedly assured the public that stopping the deal was necessary to protect neighborhood grocery stores and the people who depended on them.

Eventually, they got their way. The merger died, the victory statements went out, and politicians congratulated themselves for protecting workers, consumers and competition.

There was just one tiny problem: they hadn't repealed economics.

Walmart didn't disappear when the merger was blocked. Amazon didn't stop delivering groceries. Costco didn't suddenly lose its extraordinary scale. Labor and operating costs didn't collapse, and the famously thin profit margins in the grocery business didn't magically expand because politicians had successfully protected us from the horrors of corporate efficiency.

Every competitive pressure Kroger and Albertsons were trying to address remained firmly in place. Government had simply taken one possible response to those pressures off the table.

So the companies found another response. They're closing stores.

Kroger is doing it, and now Albertsons is doing it. The companies were prevented from adapting through consolidation, so they're adapting through contraction. Politicians can congratulate themselves on keeping the corporate logos separate, but families who lose their neighborhood grocery store may have a different definition of success.

Remember, all of this government intervention was supposedly about protecting competition. It would therefore be fascinating to hear someone explain how an empty Fred Meyer increases competition, or how a shuttered Safeway gives consumers more choices. Perhaps there is some sophisticated economic theory under which a locked door and an empty parking lot put downward pressure on grocery prices. If so, I'm sure someone in government is already preparing a taxpayer-funded study about it.

The rest of us can grasp something much simpler: a closed grocery store has a market share of zero. It employs no workers, serves no customers and provides absolutely no competition to Walmart, Costco or Amazon.

None of this was particularly difficult to see coming.

I wrote in 2023, while politicians were gearing up to fight the merger, that they were analyzing grocery competition as though Americans still bought virtually everything from the traditional supermarket down the street. That world is gone.

Safeway isn't merely competing against Fred Meyer, and Albertsons isn't merely competing against Kroger. They are competing for the same household grocery dollars being spent at Walmart and Costco, along with the growing share of purchases being made online and delivered directly to consumers' homes.

Those competitors operate at extraordinary scale. Walmart possesses enormous purchasing power. Costco has built its entire business around scale and efficiency. Amazon has created a logistics network capable of putting groceries on a customer's doorstep without that customer ever setting foot in a supermarket.

Kroger and Albertsons wanted greater scale of their own. Politicians told them no.

Fine. They stayed separate.

Now they're separately closing stores.

That would be ironic enough on its own, but this story has now graduated from misguided economic intervention into something approaching parody. After politicians spent years fighting private grocery companies that were trying to restructure themselves, government officials are increasingly alarmed that some communities don't have enough grocery stores.

Their proposed solution is to have government run the stores itself.

Consider the logic. Private grocery companies said they needed to change their business model to remain competitive. Government stopped them. Stores became uneconomic and closed. Government officials then warned about declining grocery access and “food deserts.” Now government wants taxpayers to finance new grocery stores to replace some of the private-sector capacity that is disappearing, potentially at several times the private-sector cost.

Only government could follow that sequence of events and call the final step a solution.

Perhaps the most remarkable part is the confidence required to believe that politicians and bureaucrats can operate grocery stores more effectively than companies that have spent generations figuring out how to move milk, meat and bananas from suppliers to shelves at margins often measured in pennies on the dollar.

If Safeway can't make a particular location work financially, we're apparently supposed to believe City Hall will crack the code. Government will deal with the same labor costs, utility bills, construction expenses, theft, spoilage, logistics and inventory challenges, except it will do so without owners whose own money is at risk.

What could possibly go wrong?

To be fair, nobody can prove that every Fred Meyer or Safeway closing today would have remained open had the merger been approved - although Kroger had pledged zero store closures.

But markets change, consumer habits shift and businesses routinely eliminate operations that no longer make economic sense.

But politicians don't get to use that uncertainty as an escape hatch, because they told us exactly what their intervention was supposed to accomplish.

They said stopping the merger would protect workers. Now workers are losing their jobs.

They said it would protect consumers. Now consumers are losing stores.

They said it would preserve competition. Now competitors are closing locations.

And after assuring everyone that government intervention was necessary to protect grocery access, some politicians now want taxpayers to finance government grocery stores because grocery access is disappearing.

At some point, even the people responsible for public policy should be expected to notice the pattern.

The politicians didn't outsmart Kroger or Albertsons, and they certainly didn't outsmart Walmart, Costco or Amazon. They prevented two traditional grocery companies from pursuing the strategy those companies believed would make them more competitive against much larger rivals.

The result isn't the static grocery marketplace politicians apparently imagined they could preserve by government decree. Markets don't work that way. Businesses respond to competition, costs and changing consumer behavior whether politicians approve of those responses or not.

Government can block a merger. It can file lawsuits. It can issue press releases celebrating the result. What it cannot do is order the underlying economics to disappear.

Kroger and Albertsons tried consolidation. Politicians stopped them. Now we're getting contraction instead, complete with fewer stores, lost jobs and reduced choices in some communities. And having helped produce that outcome, government is preparing to ride to the rescue with your checkbook.

Congratulations, everyone. The politicians saved the grocery stores.

Except, of course, for the ones that are closing.