The Commercial Surveillance Marketing Storm Driving the Albertsons and Kroger DealJeffrey Chester / Dec 13, 2023
The insatiable quest to acquire more data has long been a force behind corporate mergers in the US—including the proposed combination of supermarket giants Albertsons and Kroger. Both grocery chains have amassed a powerful set of internal “Big Data” digital marketing assets, accompanied by alliances with data brokers, “identity” management firms, advertisers, streaming video networks, and social media platforms. Albertsons and Kroger are leaders in one of the fastest-growing sectors in the online surveillance economy—called “retail media.” Expected to generate $85 billion in ad spending in the US by 2026, and with the success of Amazon as a model, there is a new digital “gold rush” by retailers to cash in on all the loyalty programs, sales information, and other growing ways to target their customers.
Albertsons, Kroger, and other retailers including Walmart, CVS, Dollar General and Target find themselves in an enviable position in what’s being called the “post-cookie” era. As digital marketing abandons traditional user-tracking technologies, especially third-party cookies, in order to address privacy regulations, leading advertisers and platforms are lining up to access consumer information they believe comes with less regulatory risk. Supermarkets, drug stores, retailers and video streaming networks have massive amounts of so-called “first-party” authenticated data on consumers, which they claim comes with consent to use for online marketing. That’s why retail media networks operated by Kroger and others, as well as data harvested from streaming companies, are among the hottest commodities in today’s commercial surveillance economy. It’s not surprising that Albertsons and Kroger now have digital marketing partnerships with companies like Disney, Comcast/NBCUniversal, Google and Meta—to name just a few.
The Federal Trade Commission (FTC) is currently reviewing this deal, which is a test case of how well antitrust regulators address the dominant role that data and the affordances of digital marketing play in the marketplace. The “Big Data” digital marketing era has upended many traditional marketplace structures; consolidation is accompanied by a string of deals that further coalesces power to incumbents and their allies. What’s called “collaboration”—in which multiple parties work together to extend individual and collective data capabilities—is now a key feature operating across the broader online economy, and is central to the Kroger/Albertsons transaction. Antitrust law has thus far failed to address one of the glaring threats arising from so many mergers today—their impact on privacy, consumer protection, and diversity of media ownership. Consider all the transactions that the FTC and Department of Justice have allowed in recent years, such as the scores of Google and Facebook acquisitions, and what deleterious impact they had on competition, data protection, and other societal outcomes.
Under Chair Lina Khan, the FTC has awakened from what I have called its long “digital slumber,” moving to the forefront in challenging proposed mergers and working to develop more effective privacy safeguards. My organization told the commission that addressing the current role data-driven marketing plays in the Albertsons and Kroger merger, and how consolidating the two digital operations is really central to the two companies’ goals for the deal, must be part of its antitrust case.
Kroger has been at the forefront of understanding how the sales and marketing of groceries and other consumer products have to operate simultaneously in-store and online. It acquired a leading “retail, data science, insights and media” company in 2015—which it named 84.51° after its geo coordinates in Cincinnati. Today, 84.51° touts its capabilities to leverage “data from over 62 million households” in influencing consumer buying behavior “both in-store and online,” using “first party retail data from nearly 1 of 2 US households and more than two billion transactions.” Kroger’s retail media division—called “Precision Marketing”—draws on the prowess of 84.51° to sell a range of sophisticated data targeting opportunities for advertisers, including leading brands that stock its in-store and online shelves. For example, ads can be delivered to customers when they search for a product on the Kroger website or its app; when they view digital discount coupons; and when customers are visiting non-Kroger-owned sites.
These initiatives have created a number of opportunities for Kroger to make money from data. Last year, Precision Marketing opened its “Private Marketplace” service that enables advertisers to access Kroger customers via targeting lists of what are known as “pre-optimized audiences” (groups of consumers who have been analyzed and identified as potential customers for various products). Like other retailers, Kroger has a data and ad deal with video streaming companies, including Disney and Roku. Its alliance with Disney enables it to take advantage of that entertainment company’s major data-marketing assets, including AI tools and the ability to target consumers using its “250 million user IDs.”
Likewise, the Albertsons “Media Collective” division promises advertisers that its retail media “platform” connects them to “over 100 million consumers.” It offers similar marketing opportunities for grocery brands as Kroger, including targeting on its website, app and also when its customers are off-site. Albertsons has partnerships across the commercial surveillance advertising spectrum, including with Google, the Trade Desk, Pinterest, Criteo and Meta/Facebook. It also has a video streaming data alliance involving global advertising agency giant Omnicom that expands its reach with viewers of Comcast’s NBCUniversal division, as well as with Paramount and Warner Bros./Discovery.
Both Kroger and Albertsons partner with many of the same powerful identity-data companies, including data-marketing and cross-platform leaders LiveRamp and the Trade Desk. Through these relationships, the two grocery chains are connected to a vast network of databrokers that provide ready access to customer health, financial, and geolocation information, for example. The two grocery chains also work with the same “retail data cloud” company that further extends their marketing impact. Further compounding the negative competitive and privacy threats from this deal is its role in providing ongoing “closed-loop” consumer tracking to better perfect the ways retailers and advertisers measure the effectiveness of their marketing. They know precisely what you bought, browsed and viewed—in store and at home.
Antitrust NGOs, trade unions and state attorneys-general have sounded the alarm about the pending Albertsons/Kroger deal, including its impact on prices, worker rights and consumer access to services. As the FTC nears a decision point on this merger, it should make clear that such transactions, which undermine competition, privacy, and expand the country’s commercial surveillance apparatus, should not be permitted.