Kroger to Sell Groceries In Walgreens Stores -- WSJ
December 05 2018 - 3:02AM
Dow Jones News
By Heather Haddon
This article is being republished as part of our daily
reproduction of WSJ.com articles that also appeared in the U.S.
print edition of The Wall Street Journal (December 5, 2018).
Kroger Co. plans to sell groceries in branded sections of
Walgreens Boots Alliance Inc. stores, as both retailers look for
ways to keep customers loyal to their products.
The first "Kroger Express" sections will open by early next year
in 13 Walgreens stores near the grocer's Cincinnati headquarters.
The companies said they would add more of the 4,000-square-foot
displays of produce, Home Chef meal kits and other products if
customers take to them. They will account for roughly a third of an
average Walgreens selling space.
Like most traditional retailers, Kroger and Walgreens are also
racing to reach new customers and reshape their businesses to
account for the rise of e-commerce. Amazon.com Inc.'s 2017 purchase
of Whole Foods and its $1 billion bid in June for online pharmacy
PillPack Inc. have raised pressure on supermarkets and pharmacies
to change their businesses.
CVS Health Corp. last month completed a nearly $70 billion
merger with insurer Aetna Inc. Walgreens and health-insurance
provider Humana Inc. are in talks to take equity stakes in each
other, The Wall Street Journal reported last month.
Supermarkets are also under pressure as consumers buy more of
their food outside big food stores. Chains of smaller stores like
Aldi have lured away customers with low prices on a narrower
selection of goods.
Grocery stores that sell a more limited range of items saw their
sales grow about 7% last year, according to Inmar Analytics, while
sales at traditional supermarkets were up about 1%.
"We are definitely seeing that customers are changing and
looking for different options," Gary Millerchip, a Kroger executive
leading corporate partnerships, said in an interview.
Kroger and Walgreens executives wouldn't say how the companies
would share sales revenue or provide financial details of the deal.
Kroger and Walgreens will supply and operate the Kroger-branded
sections together, officials said.
Kroger won't sell store-brand items that compete with
Walgreens's private-label products, but it will take over its
supply for branded goods, the companies said. Deerfield, Ill.-based
Walgreens has struck a number of deals recently, such as taking a
minority stake in the Birchbox Inc. cosmetics company and offering
parcel services at stores through FedEx Corp.
"This is consistent with our broader partnership strategy," said
Adam Holyk, Walgreens senior vice president and chief marketing
officer.
Grocer Albertsons Cos. and pharmacy chain Rite Aid Corp. earlier
this year attempted to merge to better position both companies to
fend off competitors. The deal failed after Rite Aid investors
protested the share price offered, among other issues.
Kroger's agreement with Walgreens mirrors aspects of the
scrapped Albertsons deal. The arrangement would have put
Albertsons's store-brand products and its Plated meal-kits in Rite
Aid stores. Private-label products are more profitable for grocers
than sales of goods made by other companies.
Kroger has made six deals this year to broaden its reach and
revenue streams, ranging from building warehouses where robots will
pack groceries to selling its goods online in China through Alibaba
Group Holding Ltd.
In October, Kroger added some Walgreens stores to the list of
locations where its customers can pick up groceries ordered online.
Kroger said it also would sell Home Chef meal kits at 65 Walgreens
pharmacies in Chicago.
Meal-kit companies are looking for more sales in stores as
subscription sales of the pre-apportioned packages have stalled.
Kroger acquired Home Chef in May.
Kroger is scheduled to report third-quarter earnings on
Thursday.
Write to Heather Haddon at heather.haddon@wsj.com
(END) Dow Jones Newswires
December 05, 2018 02:47 ET (07:47 GMT)
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