Kroger making advancement in E-commerce
The market still refuse to provide any credit to Kroger for strengthen its online skills.
There have been many rumors floating around Kroger about merger and acquisition lately. There were rumors of the super-giant Kroger for taking over Overstock.com and also a partnership with Alibaba but there weren’t any successful result. The company bid on Boxer which is a ecommerce company and seen as rival to Costco. Some sources also claimed that there is a possible acquisition of Kroger with Target which was also not true.
However, there is chance that Kroger have finally found the one partner that can help it becoming at the top in the online grocery retail and to maximize profit growth of the company.
Expansion by going on the other side of the world
Kroger announced it partnership with a UK-based, world’s number one and the most loyal online grocer Ocado last week. According to Kroger, through this partnership Ocado’s amazing platform will be introduces in the US for the very first time which will include services like automated fulfillment, delivering product at home and online ordering. Kroger stock increased 4% after the announcement of the partnership while Ocado’s share rocked as much as almost 50%.
A plan to build automated warehoused together and the process of choosing the site has already started between the two companies. 3 sites will be selected this year and in the next three years 20 more will be selected. Building its own automated warehouses will be beneficial for Kroger in two ways first, it will be able to expand into areas it is currently not working including Florida, Upper Midwest and Northeast and secondly, it will help Kroger into attracting new customers. Its Clicklist grocery program could also become more efficient because of such facilities by making the need for item to be picked off of a supermarket shelves way easy.
The robotics and technologies’ used by Ocado will provide a competitive edge to Kroger in term of cost by building the warehouses. Although, this partnership will not bear any fruit in just a short span of time and will definitely take years but can be an edge for Kroger in this rapidly growing delivery market out there.
Deal with Ocado
After the announcement of partnership with Ocado, Kroger announced it yet another deal this time it’s the acquisition of Home Chef, a meal-kit service for an initial price of $200 million. It will pay the remaining $500 in a time period of coming five years providing how much the company grows through in-store and online sale.
Home Chef will get obvious benefits from this deal as Kroger will be selling the meal kits to its 60 million customers by introducing it across 3000 stores. Home Chef’s in-house Prep+Pared Meal Kit will be complemented by the brand. This kit is currently offering in 525 stores.
The acquisition follows the same pattern as Albertson’s (the second best supermarket operation in the country) that purchased Plated last year. Similarly Hello which became the world’s no. 1 meal-kit service provider by beating Blue Apron, bought Green Chef. According to Kroger report Home Chef has a 150% increase in revenue last year.
Home Chef’s acquisition helps Kroger add meal-kits to its store which will be beneficial in gaining growth and attract customers that want to pick meals that they can easily cook and that is healthy.
The beginning of a journey towards success
Historically, such acquisition has been considered as “smart moves” for long-term investors. However, through experiences the company management has discovered that growth can be maximized in online sales by using its huge store base. Kroger’s position on various fronts like meal-kit delivery, online sales. Cost-efficient automation would strength from the acquisition of Home Chef and Ocado deal.
Although the moves seems dubious, and the market appear to have more of brick-and-mortal chain but Kroger is definitely moving in the path of success. The stocks are currently down for 40% which is highest of all time but there are many advantages if it bring back the profit growth.