Kroger has acquired meal kit retailer Home Chef for an initial price of $200 million, plus earnout payments of up to $500 million over five years based on future performance. Following the deal’s closing, Kroger will make Home Chef meal kits available to shoppers both in-store and online.
Home Chef sells a variety of meal kits that complement Kroger’s own Prep+Pared offerings. Home Chef’s distribution centers reach 98% of all continental U.S. households within a two-day delivery window, and the company delivers three million meals per month. The retailer will operate as a subsidiary of Kroger, maintaining its e-Commerce business and assuming responsibility for Kroger’s meal solutions portfolio. The deal is expected to close in Q2 following customer closing conditions.
“Customers want convenience, simplicity and a personalized food experience,” said Yael Cosset, Chief Digital Officer at Kroger in a statement. “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.”
“We’ve long believed that the future of our industry is omnichannel and bigger than just meal kits sold online,” said Home Chef Founder and CEO Pat Vihtelic in a statement. “We want to be where our customers are and want to help make cooking at home easier, more accessible and even more enjoyable.”
The acquisition follows on the heels of Kroger’s formation of a partnership with Ocado and further expands the retailer’s delivery capabilities. Kroger hopes the Ocado deal will improve its efficiency; the companies are working to identify locations for three automated warehouses in the U.S. in 2018 and up to 20 locations by 2021.
Other recent developments include the Culinary Innovation Center, which Kroger is using to accelerate product development and explore new restaurant concepts, among other initiatives. The Restock Kroger plan also includes investments in technologies to improve in-store offerings, personalize communications with customers, revamp product assortment and leverage data-driven shelf optimization.