Kroger, the largest operator of supermarket chains in the U.S., has announced a definitive agreement to purchase Vitacost.com, an e-tailer of healthy living products, for roughly $280 million.
Vitacost.com, according to a press release announcing the deal, has more than 2.3 million active customers supplied by distribution centers in Lexington, NC and Las Vegas. The company, which is number 89 on the Internet Retailer Top 500 list, also operates a customer service in Lexington.
"This merger is in line with our growth strategy to enter new markets and new channels, and — along with Harris Teeter's online order and pick up service — accelerates our efforts to provide customers with even more ways to shop," said Rodney McMullen, Kroger's chief executive officer, in a statement. "Vitacost.com's core focus on healthy living products is complementary to our fast-growing natural foods business, and we intend to grow Vitacost.com's strong position in the online nutrition market. At the same time, we will build on Vitacost.com's eCommerce platform by integrating it with our existing digital offerings to create exciting new levels of personalization and convenience for our customers."
Kroger is looking for the merger to provide impetus to its omni-channel strategy. The company presently offers a cloud-based shopping list online and through mobile apps and two divisions, King Soopers and Harris Teeter, have online ordering. King Soopers has a home delivery service while Teeter offers in-store pickup.
"Vitacost provides Kroger with an excellent vehicle to greatly expand sales of Kroger's successful private label natural/organic Simple Truth brand," Deutsche Bank analyst Karen Short said in a StreetInsider.com. "On the flipside, Kroger will leverage its relationship with dunnhumby to accelerate sales with the combined Kroger and Vitacost customer base."
Ms. Short said the acquisition made sense, in part, because she expects AmazonFresh to expand its presence, which could disrupt the U.S. grocery business. The acquisition of Vitacost will provide Kroger with a competitive advantage as it expands its online operations.
What grade would you give Kroger for its deal to acquire Vitacost.com?