Kroger Expands its Reach

WM Circle Logo

By: Wise Marketer Staff |

Posted on May 28, 2018

Kroger, the largest grocer in the U.S., has reached an agreement to acquire Home Chef, the largest privately-owned meal kit company in the U.S.

By Wise Marketer Staff

The deal price was reported at US$200 million with additional payments of up to $500 million over the next five years if Home Chef achieves agreed-upon metrics. Home Chef, which saw its sales grow 150 percent last year to US$250 million, has also posted two consecutive profitable quarters. The company, which was founded in 2013 and delivers around three million meal kits a month, will become a subsidiary of Kroger following the close of the deal.

Kroger has an existing meal kit line branded Prep + Pared and sold within more than 525 of its stores. That franchise will fold into Home Chef, with announced plans to expand distribution into many of Kroger’s 2,800 stores in addition to the traditional e-commerce website. Home Chef operates three distribution centers in Atlanta, Chicago and San Bernardino, CA, putting product within a two-day delivery window of 98 percent of the country’s population.

The market for meal kits, according to Pentallect, reached US$2.2 billion last year, with annual sales expected to grow between 25 percent and 30 percent over the next five years.

The key quote comes from Yael Cosset, Kroger’s chief digital officer, who said in a statement:

“Home Chef’s combination of culinary expertise and a customer data driven decision-making process is right in line with Kroger’s vision to serve America through food inspiration and uplift by providing meal solutions for every lifestyle.”

Two thoughts circulated around this announcement in the Wise Marketer press room:

  • Will Kroger include Home Chef sales as part of their Kroger Plus loyalty program? Will inclusion be cross-channel? Kroger Plus members enjoy benefits associated with two-tier pricing on specific grocery products and Fuel Points which can be used to offset the cost per gallon on gasoline sold at specific petrol stations.  With rising fuel prices in the US at present, the discount on gasoline is becoming more attractive.
  • Kroger realizes that “share of food” is becoming a much more valuable performance indicator than grocery “share of market.” They have opened restaurants in some of the newer stores and now expand their meal kit business by a huge margin.  They also have an online order service for goods sold in their grocery stores with curb-side pick-up. All US households needs food and they can get it in more ways than ever before.  Kroger wants to insure they maintain and/or grow their share of the food market – regardless of where/how bought and how consumed.