How Kroger Is Breaking Into the Meal Kit Market
Home meal kits have been growing in popularity over the last few years. Now Kroger is looking to get into the meal kit game with its most recent acquisition.
Home meal kits have grown in popularity over the past few years. Blue Apron Holdings Inc. (NYSE: APRN) was one of the main beneficiaries of this movement and actually came public. Other services are popular too, such as Freshly, Plated or Hello Fresh. Now Kroger Co. (NYSE: KR) is looking to get into the meal kit game with its most recent acquisition.
Kroger announced, late on Thursday, a merger agreement with Home Chef that will significantly accelerate the availability of its meal kits. The initial transaction price is $200 million, and future earnout payments of up to $500 million over five years are contingent on achieving certain milestones, including significant growth of in-store and online meal kit sales. The pending merger comes on the heels of Home Chef’s 150% growth in 2017, $250 million in revenue and two profitable quarters.
Home Chef currently leads the industry with the most variety among the leading meal kit companies. Home Chef’s offerings complement Kroger’s Prep+Pared offering that is currently available in more than 525 stores.
Home Chef employs roughly 1,000 employees and is headquartered in downtown Chicago. Its distribution centers reach 98% of all continental U.S. households within a two-day delivery window.
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After the deal closes, Home Chef will operate as a subsidiary of Kroger, maintain its e-commerce business and assume responsibility for Kroger’s meal solutions portfolio.
Yael Cosset, Kroger’s chief digital officer, commented:
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. 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.
Shares of Kroger closed most recently at $24.57, with a consensus analyst price target of $27.43 and a 52-week range of $19.69 to $31.45.
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Chris Lange is a financial and geopolitical writer with more than a decade of experience covering a myriad of topics. He has published thousands of articles for 24/7 Wall St., with past coverage focused heavily on stocks, IPOs, healthcare, defense, global affairs, and technology.
His work has been quoted, or referenced by a number of outlets including Business Insider, USA Today, Yahoo Finance, MSN, The Motley Fool, and many other publications. A graduate of Southwestern University, he studied business with a focus on investments and has previous experience in banking and startups.
When not reading or writing the news, he is following his passion for Lacrosse, playing chess, or building solar projects with his dad.
