Recently, Market Basket (a family-owned New England chain) was rated #1 during inflationary times (https://www.supermarketnews.com/retail-financial/market-bask...). Market Basket made news a few years back because their non-union employees basically organized a strike to save management - yes, the workers were standing up for the CEO that got ousted. The chain was co-owned by two sides of a family and one side wanted to oust the CEO and co-owner - but the workers loved how he treated them and basically forced the other side of the family to sell to the CEO. Not only employees, but a lot of suppliers wanted to stand up for the ousted CEO. See: https://en.wikipedia.org/wiki/Market_Basket_protests

One of the reasons that they wanted to oust the CEO is that they wanted a dividend while the CEO instead decided to cut prices by 4% for the entire year. It was kinda amazing going grocery shopping and looking at the receipt and literally seeing 4% come off the price of every item. No, they didn't hike prices just to give the feeling of 4% off.

I bring this up because while Market Basket has economies of scale, it isn't an international company like Ahold Delhaize of the Netherlands which owns Stop & Shop, Giant, Hannaford, Food Lion, and over 2,000 stores in the US (and tons around the world); it isn't Walmart or Amazon; it isn't Albertsons with 2,250 stores or Kroger with 2,700. It has 90 stores. Yet they seem to be incredibly profitable while offering better pricing to consumers.

A friend of mine who worked in the supermarket business in Nebraska knew about Market Basket because they were such an example of how well-run a supermarket could be. No loyalty cards, no self-checkout, employees have profit-sharing, healthcare, and sick time, and instead of hiring outside execs they've tended to promote from within - people who have worked for the company for decades, sometimes starting part-time as teenagers. At the same time, this seemingly old-fashioned company is thriving.

In some ways, it makes me question a lot of what companies do to optimize things. Yes, there are all sorts of things companies can do like surge pricing, but that can leave a bad taste - and it leaves people wanting to do it back to you if they ever have the power. Sure, you can try and exploit suppliers, but that can create a hostile, unstable relationship. How much money are you burning trying to see exactly how little you can pay? Do you hire expensive execs, an army of data scientists and economists, etc. to see how you can use your power to get a little bit extra?

I do think the Kroger-Albertsons merger will be good for the companies/shareholders. Before, if you were a supplier, you'd have these two 2,000+ store chains to sell to. Now there's one less buyer and economists research this a lot (and there's been a lot of good work on monopsony/oligopsony recently). If you're a worker, there's one less supermarket employer to work for. However, those aren't economies of scale - those are just market power gains.

I do think there are still economies of scale, but they do become smaller. When you already have 2,000+ stores sharing an inventory system, its cost can be pretty small and moving to 4,000+ stores might not really change things much. Plus, there's a lot of cost and pain integrating systems to save that money and companies spend years doing it.

Still, it certainly doesn't seem like a necessary merger to remain competitive. Small chains like Market Basket (90 locations), Wegmans (109 locations), Central Market (10 locations), and Heinen’s (23 locations) get top marks from Consumer reports (https://www.consumerreports.org/products/grocery-stores-supe...) way ahead of the mega chains (many of which are near the bottom including lots of Albertson's brands, lots of Ahold Delhaize's brands, Walmart, etc).