Kroger's jumps into sizzling meal-kit market, looking for flexibility
The Kroger Co. is seeking to better compete in the meal kits and grocery delivery markets with its acquisition of Home Chef, the largest private meal kit company in the United States.
The Cincinnati, Ohio, U.S.A.-based grocery chain announced on 23 May it will pay USD 200 million (EUR 171 million) to purchase Home Chef – in addition to future earnings payments of up to USD 500 million (EUR 426 million) over five years, contingent upon achieving certain milestones, including significant growth of in-store and online meal kit sales.
Home Chef reported 150 percent growth to USD 250 million (EUR 213 million) in revenue in 2017. After the deal closes, Home Chef will operate as a subsidiary of The Kroger Co., maintain its e-commerce business on HomeChef.com, and assume responsibility for Kroger's meal solutions portfolio.
"Customers want convenience, simplicity and a personalized food experience. Bringing Home Chef's innovative and exciting products and services to Kroger's customers will help make meal planning even easier and mealtime more delicious," Kroger Chief Digital Officer Yael Cosset said. "This merger will introduce Kroger's 60 million shoppers to Home Chef, enhance our ship-to-home and subscription capabilities, and contribute to Restock Kroger."
David Bishop, partner of grocery consultancy Bricks Meets Clicks, told SeafoodSource the Home Chef deal is a good complement to its existing offerings.
“This deal [with Home Chef] will strengthen Kroger's ability to capture a larger share of a segment of grocery that currently has a lot of consumer interest. It complements Kroger's current meal-kit offering, Prep + Pared, which it introduced in 2017 and allows it to leverage the brand equity and culinary skills of Home Chef.”
Prep + Pared meal kits are currently available in more than 525 Kroger stores.
Kroger also recently bought a five percent stake in United Kingdom-based Ocado, which wll help the 2,000-store retailer compete against Amazon, Walmart, and other major players in the grocery delivery space.
The Ocado acquisition gives Kroger more ways to sell meal kits, whether that is direct-to-consumer via Home Chef's website or integrating the solutions into its online grocery platforms, Bishop noted.
“Kroger could also help evolve Home Chef's product offering to include packaged, prepared meals much like Albertsons has done with Plated in their stores,” Bishop said, noting that Plated doesn't use a subscription model.
Kroger will become a bigger player in the both grocery delivery and the rapidly expanding meal kits market, Steven Johnson, grocerant guru at consultancy Foodservice Solutions, agreed. Fifty-six percent of U.S. millennials will use a grocery delivery service and 44 percent will use meal kit services by 2026, he said.
“Kroger had no choice but to get into the game,” Johnson said.
Home Chef’s platform will give Kroger’s 18 different retail brands to create “local” meals under each banner’s name, which will allow the retailer to provide a point of differentiation in each market, according to Johnson. Home Chef’s platform allows retailers to utilize their own proteins, giving Kroger stores the ability to feature local and seasons fish in region-specific meal kits, Johnson said.