Consolidation in the grocery retail sector directly affects not only consumers but also workers, farmers, and other producers of consumer goods. Power in this sector is increasingly concentrated in just a few companies. In 2019, the top five retailers, Walmart, Kroger, Albertson’s, Ahold-Delhaize, and Publix, commanded 46% of the American grocery market. Walmart alone commands over a quarter of grocery sales. Together, the top twenty chains take in two-thirds of all sales while smaller independent chains sell a quarter of all groceries.

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In much of the country, regional retail concentration is even greater. In 2018 Walmart sold more than half of all groceries in one out of ten cities and one out of three “micropolitan” areas. In 38 regions, Walmart captured 70% or more of grocery spending and in many small towns, a Walmart or Dollar General may be one the only grocer for miles.

The retail landscape wasn’t always so concentrated. The grocery industry was once comprised of a variety of different retailers, including corner stores, public town markets, co-operative groceries, and medium-sized regional supermarkets. As recently as 1997, American consumers bought only 20% of their groceries from the then-largest four retailers.

This landscape of locally owned stores and small regional chains was partially the result of laws passed in the 1920s and 1930s at both the state and federal level. Many states, for instance, taxed large chain stores at higher rates. In 1936, Congress passed the Robinson-Patman Act, which cracked down on loss leading and discriminatory treatment of suppliers, making it easier for smaller retailers to compete. Rigorous antitrust enforcement also prevented chains from buying one another for market power. The effects of these laws were so dramatic that in 1966 the Supreme Court blocked a merger that would have given one corporation a 7% share of a single metropolitan region’s grocery business.

But a spate of mergers in the late 1990s sharply cut the overall number of competitors in the retail sector. Fifteen of the top 20 national grocers in the 1980s either merged or were acquired by the 2000s. Just between 1996 and 1999, there were 385 mergers in the grocery industry, and the top four grocers’ market share doubled in under a decade.

The industry has steadily consolidated ever since. In 2014, Kroger bought the mid-size southeastern chain, Harris Teeter, for $2.4 billion. In 2015, Albertsons’s completed a $9.4 billion merger with Safeway. That same year the Dutch company Ahold (owner of Stop & Shop, Giant, and Peapod) and Brussels-based Delhaize (owner of Hannaford, Food Lion, and others) announced a $28 billion merger. And in 2017 e-commerce monopolist Amazon sent shock waves through the grocery industry with a $13.7 billion takeover of Whole Foods and plans to open an Amazon Fresh grocery chain.

Another critical factor in the trend towards grocery concentration was the phenomenal rise of Walmart. Sam Walton opened the first Walmart in 1962. Walmart only began to sell groceries and produce in 1990. Yet by 2000 Walmart had become the largest food retailer in the nation.

Walmart leverages its massive size to influence all corners of the grocery industry. Walmart exercise enormous ‘monopsony’ buyer power, or the ability to dictate prices and terms to many of the companies that stock its shelves. Over the years many suppliers have complained that Walmart’s decrees can be hard if not impossible to meet. In 2015, Walmart implemented new rules requiring all suppliers to pay for using Walmart’s distribution centers and warehouses. The change evoked outcry and refusal from many suppliers, who argued Walmart’s low prices were already cutting deeply into their profit margins.

Even the biggest corporations do not have the power to bargain with a goliath such as Walmart, and pursuit of this bargaining power drives even more mergers. For example, Proctor & Gamble’s 2005 acquisition of Gillette for $57 billion was widely seen as an attempt to consolidate sufficient power to resist Walmart’s relentless efforts to wring more profit out of its suppliers.

Grocery store workers also suffer from less negotiating power and benefits as non-union shops, such as Walmart and Amazon-Whole Foods, drive unionized stores out of business.

According to the Labor Department, membership in the largest grocery union, United Food and Commercial Workers, is down more than 9 percent since 2002. While part of this trend stems from right-to-work legislation and increased automation, some analysts argue that consolidation and store closures also play a role.

Research also suggests that fewer, powerful buyers can suppress workers’ wages along the supply chain. One study found that the longer a supplier depends on just one or two large buyers, the more the suppliers’ workers’ wages tend to fall over time. This big buyer squeeze contributed to an estimated 10 percent of wage stagnation since the 1970s.

Farmers also feel the squeeze of fewer big buyers. According to USDA data, in 1990 ranchers received 59% of each dollar spent on beef, and retailers received 33%. Just two decades later in 2009, after retailers dramatically consolidated, farmers received only 42% of each dollar spent on beef, while retailers received 49%.

Another way retailers control the supply chain is by charging fees to get on their shelves. Such “slotting fees” can require a supplier to pay as much as $2 million to one retailer to get a new product in front of buyers. Consequently, the slotting fee system favors very large food processors that can pay for prime shelf space, and puts small, independent producers at a disadvantage.

Further, many retailers delegate the task of choosing how much shelf space to allot to a particular product, and what price to charge for that product, to one of the dominant producers of that product. The theory behind such “category captains” is that the biggest processors in a sector – such as Colgate or Anheuser-Busch InBev – best understand how to maximize profits from sales of toothpaste and beer. In practice, these captains tend to favor their own products and those of one or two other top-tier companies and to create barriers to entry for smaller or newer competitors. In 2001, the Federal Trade Commission expressed great concern about the practice. In 2013, Clemmy’s, a small ice cream manufacturer, sued Nestle for allegedly abusing its position as a category captain to keep competitors off grocery store shelves.

But increasingly massive retailers are cutting suppliers out of the picture altogether and completely vertically integrating supply chains for staple products, such as milk and meat. Costco is getting into the chicken business, Walmart opened a beef plant, and Walmart, Kroger, and Albertson’s all own milk bottling plants. While a new buyer in a consolidated market may seem welcome, dominant retailers can use their market power to impose the same specific demands of farmers as they do of suppliers and this limits who can work with them. Competition from Big Box giants also drives existing suppliers out of business or pressures them to tighten their belts. For instance, roughly 100 dairy farmers lost milk contracts when Dean Foods lost business to Walmart’s milk plant, but only a fraction of those farmers went on to supply Walmart or find new buyers.

Grocery consolidation also leaves communities without ready access to affordable and healthy food. As major chains merged, they also closed stores, particularly in urban and rural areas. These closures exacerbated a long history of “retail redlining,” in which grocers avoided building stores in communities of color and developed the supermarket business model around white suburban families. Across U.S. metro areas, approximately 17.7% of predominantly Black neighborhoods lack supermarket access, compared to just 7.6% of white neighborhoods – and this racial disparity persists regardless of income.

Walmart and other Big Box stores also use their financial might to sell items at a loss and drive out independent competitors. This is a particular concern in rural areas, where independent grocers say Big Box stores are their biggest threat. Over the past few years, another loss leading chain, Dollar General, has dramatically expanded its footprint in urban and rural areas without full-service grocery stores. While some argue that any store is better than none, Dollar General and other discount chains offer little to no fresh foods and sometimes charge more per-ounce, albeit at a lower price tag, to exploit cash-strapped buyers. Concentrations of dollar stores also dissuade full-service grocers from setting up shop.

On occasion, Walmart has made deals with local governments to build stores in left-behind neighborhoods. But the chain has often reneged on its promises. In 2013, Walmart made a deal with the city of Washington, D.C. to build five stores in the District, three in wealthier parts of town, and two in lower-income areas. But in early 2016, Walmart backed out of the deal after completing the three stores in higher-income areas. Despite having razed local businesses to make way for the new stores, Walmart was able to walk away with no consequences.