Should Kroger go after Whole Foods?
The business press headlines blew up last week over an analyst’s tweet that Kroger might be looking to acquire Whole Foods. The tweet was speculative — both companies refused to comment — as were all the articles that followed, but there are reasons that one could give to either fan the flames of this story or douse them.
Consider that Kroger has made clear its willingness to growth through acquisitions. Major deals in recent years have included Roundy’s in 2015 and Harris Teeter and Vitacost.com in 2014.
Kroger was reported to be among a small group of bidders for The Fresh Market, a competitor to Whole Foods, which was eventually acquired by Apollo Global Management for $1.3 billion in April. During that same month, Kroger announced it had made a strategic investment in Lucky’s Market, a 17-store specialty grocery chain with locations in 13 states. The company has regularly touted the growth of its organic private label business as a contributing factor to its solid sales performance in recent years.
On the skeptics side is the reality that price deflation caused Kroger to post a decline in same-store sales during the most recent quarter. As a result, the company lowered its guidance for the balance of its fiscal year.
A Cincinnati Business Courier article points out that Whole Foods’ business has struggled in recent years as the chain has encountered increased competition from conventional grocers such as Kroger as well as others focused on the organic and specialty foods niche. Whole Foods has responded by lowering prices, emphasizing its private label and initiating a rewards/loyalty program. The grocer also launched 365 by Whole Foods, a small store concept viewed by many as formatted response to Trader Joe’s.
- Can Kroger buy out Whole Foods? – The Cincinnati Enquirer/USA Today
- Could a Kroger/Whole Foods deal happen? Analysts weigh in – Cincinnati Business Courier
- Will Kroger get lucky with its latest investment? – RetailWire
- What will Roundy’s acquisition mean for Kroger and Mariano’s? – RetailWire
- Kroger buys Vitacost.com – RetailWire
- Will Harris Teeter prosper under Kroger ownership? – RetailWire
- Will 365 concept prove to be the future of Whole Foods? – RetailWire
- Will 25¢ coffee help Whole Foods shed its ‘Whole Paycheck’ tag? – RetailWire
- Should Whole Foods be worried? – RetailWire
DISCUSSION QUESTIONS: Does a Kroger acquisition of Whole Foods make strategic business sense for both (or either) companies? If it were to happen, how might Whole Foods change under Kroger?