Dollar Tree announced today that it is buying Family Dollar.
Together, the dollar stores will be bigger than current industry leader Dollar General.
But the merger could “exert pressures on major food, household goods, and drink suppliers, including Pepsi, Hershey, and Clorox,” Brian Sozzi, chief equities strategist at Belus Capital Advisors, writes in an op-ed for CNBC.
Proctor & Gamble, Coca-Cola, and Unilever could also be affected, he says.
The acquisition means the chain has 13,000 stores, putting Dollar Tree in a great position to negotiate with suppliers on price, Sozzi writes.
That could have a domino effect on the industry. If Dollar Tree offers even lower prices, then Wal-Mart will become even more aggressive.
Wal-Mart is already more expensive than dollar stores, Sterne Agee analysts wrote earlier this year. Sales at the retailer have fallen for the past five quarters.
“Wal-Mart has conceded the ‘price leader’ crown to Family Dollar,” the analysts said.
Dollar chains have also stepped up their grocery offerings in recent years, making them an even bigger threat to Wal-Mart.
If Wal-Mart decides to become more aggressive on price, then that could cut into profits for big consumer companies who supply the mega-chain.
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