A multibillion-dollar merger between the owners of Hannaford and Stop & Shop could have one small sticking point: Massachusetts.
Shareholders were enthusiastic about the possibility of a merger involving supermarket giants Royal Ahold, the Dutch company that owns Stop & Shop, and Delhaize Group, the Belgium-based owner of Hannaford. Although the companies have not confirmed their talks, which were first reported Saturday by two European newspapers, the shares of both companies rose sharply Monday.
There is little overlap between the supermarket chains that each company owns, except in Massachusetts. Kevin Griffin, who publishes the Griffin Report on Food Marketing, said federal regulators could demand that some stores be sold to competitors as a condition of approving the deal.
Hannaford has 25 stores in Massachusetts, and Stop & Shop has 131, according to the companies.
“The antitrust issues are just too large to overcome,” Griffin said. “In plenty of places in Massachusetts, there’s a Hannaford a quarter-mile away or across the street from a Stop & Shop.”
Both Ahold and Delhaize do about 60 percent of their business in the United States. Delhaize’s biggest business is Food Lion, a 1,100-store chain with most of its locations in the Southeast, while Ahold’s business is clustered in the Northeast.
Analysts at Jeffries said that combining could save the stores about $670 million a year.
‘The antitrust issues are just too large to overcome.’
Still, analysts said, federal regulators will take a close look at competitiveness issues. Jon Orszag, an economist with Compass Lexecon, said that if the merger were to go ahead, the companies could preemptively offer to sell off some locations to appease regulators. Alternately, he said, they could try to convince the Federal Trade Commission that other Massachusetts grocery stores would prevent the combined chain from getting too powerful and raising its prices in an unfair way.
“There’s a long history of supermarket deals,” Orszag said. “The FTC is well attuned to the antitrust issues.”
If some stores are sold, Griffin said, it could give another company a toehold in New England, where operating costs are high and most good supermarket locations are already taken. Wegmans plans to expand in Massachusetts and could seize the opportunity to snap up several existing grocery stores. Kroeger, the country’s largest supermarket chain, does not have stores in Massachusetts and could also try to move in, Griffin said.
“Anything’s possible,” he said. “It’s all speculation right now.”
It is also not clear whether a merger or acquisition would result in either of the chains changing their names. But Mike Paglia, director of retail insights for the Boston market research firm Kantar Retail, said it would be risky to scrap a brand that consumers value.
There are also some differences in size and style between the two supermarkets. Stop & Shop’s stores tend to be bigger, but consumer activists said the chain also sometimes charges higher prices. Surveys by Consumers’ Checkbook, a nonprofit that rates retail services, found that a family that spends $150 per week at Stop & Shop would save more than $450 over the course of a year by shopping at Hannaford.
Edgar Dworsky, a consumer activist in Somerville who runs the website ConsumerWorld.org, said he was worried a merger would lead to higher prices at Hannaford.
“Some of the prices took my breath away, from the standpoint of being cheap,” on a visit to the Hannaford in Saugus, Dworsky said. He said he viewed the chains as serving slightly different customer bases, however, calling Hannaford “a medium-size store, maybe a little more personal,” while Stop & Shop pitched itself as “primarily a superstore chain.”
