European deal creates US grocery giant

The owner of Stop & Shop and Giant will merge with the parent company of Food Lion, creating a $29 billion grocer that will be in a stronger position to compete with Wal-Mart and other discount retailers.

The deal, which would create the fourth largest grocer in the U.S., is the latest in a series of buyouts and mergers that has major players bulking up to carve out market share in an industry that has grown intensely competitive.

Shoppers may be the biggest winners as the bargaining power of grocers grows along with their size, said Euromonitor retail analyst Tim Barrett.

The latest merger is between the Dutch retailer Royal Ahold NV and its rival, Belgium’s Delhaize Group. Yet the combined company, to be called Ahold Delhaize, will generate about 61 percent of its revenue in the U.S. Together, Ahold Delhaize, will have more than 6,500 stores around the world and it would cater to 50 million customers a week in the U.S. and Europe.

Though grocers have grown larger, the grocery sector has become fragmented, with stores like Whole Foods hitting the high end, and Wal-Mart and Dollar General coming in low.

That has left more traditional grocers fighting for the massive customer base that lies in between. As those grocers grow and their leverage increases, they can demand more from food and beverage supplies, said Euromonitor’s Barrett. They are likely to pass on the savings to customers in a bid to take back market share from Wal-Mart, dollar stores and other discount retailers, he said.

This story was originally published June 24, 2015 at 11:39 PM with the headline "European deal creates US grocery giant."