Kroger to Buy Vitacost for $280 Million

Cincinnati, OH—Kroger Co., the largest supermarket chain in the United States, plans to buy online retailer Inc. for $280 million, giving the grocery giant a new inlet into the healthy-living channel. This merger comes on the heels of its purchase of the Harris Teeter supermarket chain for $2.5 billion this past January.

Board members from both firms and 26% of Vitacost shareholders approved the $8-a-share deal. Vitacost's 2013 sales were $382.7 million.
Kroger has been active in the organic and natural foods market with its Simple Truth private label, which has been giving the chain additional revenue. The Vitacost acquisition will give Kroger even more room to grow in the health and wellness sector.

“For Kroger, this is a perfect opportunistic play,” said Jay Jacobowitz, merchandising editor at WholeFoods Magazine, and founder/president of Retail Insights. “Kroger only has online capabilities for shipping and home delivery through its Harris Teeter acquisition and King Soopers. This gives them 50 states online coverage with something like 40,000-45,000 SKUs, most of which they don’t currently carry.”

Kroger will also be able to take advantage of Vitacost's existing infrastructure for fulfillment and for mobile online customer service, already tailored for the health wellness market. This gives Kroger "a major shot across the bow at brick-and-mortar-only supernaturals that have just been dipping a toe in the water of online services."
Kroger sales were up 10% in the last quarter, which some analysts attribute to the Harris Teeter acquisition. “Vitacost has been losing money, and Kroger has been very profitable,” says Jacobowitz.
Overall, Jacobowitz feels the acquisition is a smart move: "From every aspect, this looks like a brilliant play."


Published in WholeFoods Magazine, August 2014 (online 7/7/14)