Question 1: What is the value of the four-firm concentration ratio (CR4) of the grocery industry?
Question 2: Ignoring firms smaller than BJ's, what is the value of the Herfindahl Index (HI) for the grocery industry?
Question 3: If Kroger and Albertson were to merge, what is the value of the new CR4?
Question 4: If Kroger and Albertson were to merge, what is the value of the new HI?
The chart represents market share by revenue of U.S. grocery retailers in 2021:
Top US grocers by share of total dollars spent:
- Walmart: 8.0%
- Costco: 6.4%
- Albertson: 4.1%
- Ahold Delhaize: 4.3%
- Publix: 3.7%
- Sam's Club: 3.0%
- Meijer: 2.9%
- Dollar General: 2.5%
- Amazon.com: 13%
- Whole Foods: 11%
- Trader Joe's: 18%
- Dollar Tree: 4,700
- 7-Eleven: 1,400
- Aldi: 600
- Target: 400
- Safeway: 2,000
- H-E-B: 1,500
- Kroger: 600
- Publix: 1,000
- Wegmans: 2,200
- Whole Foods: 100
- Others: 16,000
- N/A: 500
- Aldi: 600
- Target: 2,400
- Safeway: 200
Number of stores is rounded to the nearest 100 for ease of reading. Include subsidiaries Stop & Shop, Giant Food, Giant/Martin's, Food Lion, and Hannaford. Whole Foods online share is included in Amazon.com. Note: the remaining 57% of the market share comprises other grocery retailers.
Kroger would like to merge with Albertson's, but the Federal Trade Commission wishes to stop the merger. Market concentration is one of many issues. There are two ways we will measure the market concentration in the grocery industry:
1. Four-firm concentration ratio (CR4): Sum the market shares of the top four firms.
2. Herfindahl Index (HI): Square the market shares of all firms and sum the squares.