Where is the Kroger/Walgreens relationship headed?

Discussion
Rendering: Kroger
Aug 21, 2019

The relationship between Kroger and Walgreens is going to the next level. The two retail giants have announced plans to expand a pilot program announced last October that places Kroger Express store-within-a-store shops inside Walgreens to 35 more locations in the Knoxville, TN market. Walgreens will also sell select health and beauty care private labels, including its Boots No7 and Soap & Glory, in 17 Kroger stores in the market.

The Kroger shops inside of Walgreens, as before, will feature select private labels such as the organic Simple Truth line from the supermarket chain. The locations will stock between 2,300 and 2,700 items from Kroger in dairy, fresh meat and produce, frozen foods and shelf-stable categories. 

Most of the pilot locations will also give customers the option of placing their orders online at kroger.com and picking up their purchases outside the stores using Kroger Pickup.

“Our growing relationship with Walgreens is just one more way Kroger is making life easier and better for even more customers — because everyone deserves to have affordable, easy-to-enjoy, fresh food,” said Jeff Talbot, Kroger’s vice president of new business development, in a statement.

The two retailers are taking a slow and steady approach to the pilot program with an eye towards future expansion.

“Expanding our pilot to Knoxville demonstrates the ongoing success and future potential of bringing together the best of Kroger’s food authority with Walgreens’ global expertise in health and beauty,” said Mr. Talbot.

“Walgreens customers have responded very favorably to the Kroger Express pilot in Northern Kentucky. As a result, we’re exploring more ways to offer customers an enhanced, more convenient shopping experience,” said Richard Ashworth, Walgreens president of operations. “Working with Kroger, we’re continuing to re-invent our customer offer to meet shoppers’ evolving needs, which includes offering private-label grocery and health products at a great value, through an integrated omnichannel experience.”

DISCUSSION QUESTIONS: Where do you see the Kroger/Walgreens pilot program going? Do you expect other food/drug store collaborations among retail chains?

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"It’s simple problem solving. The customer will appreciate the time saved."
"Strategic collaboration is a top retail trend in 2019 because the sector is evolving so fast that companies see they can’t do it all alone."
"Improving convenience while building on an organization’s core strengths will continue to delight shoppers. "

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14 Comments on "Where is the Kroger/Walgreens relationship headed?"


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Art Suriano
Guest

This is a smart idea, and it’s taking the store-within-a-store concept to the next level. Today’s world is all about the ability for customers to get what they want immediately without any inconvenience. So having a Kroger Express store that they can take advantage of while shopping Walgreens is providing major convenience. It will be successful, and most likely other retailers will experiment with similar concepts and retail partners.

Neil Saunders
BrainTrust

I don’t see the fact Kroger will be selling brands like No7 as unique; the brand is widely available and has been sold in places like Target for years. Sure, it may help elevate Kroger’s beauty proposition marginally and it will help sales volumes for Walgreens, but it’s not that interesting.

The expansion of aspects of the Kroger offer into Walgreens stores is more significant. This has the potential to improve a lackluster grocery and home essentials offering in most Walgreens stores and should help to drive a bit of customer traffic. However, Walgreens should also focus on improving its own beauty offering as this remains below par and it is losing share to the likes of Ulta and Sephora.

Jeff Sward
BrainTrust

This all makes abundant sense as long as it is done with clarity and focus. If the “within” store tries to add too much stuff without clarity of offering, then the shopper will likely move on. It’s not about selling extra stuff to the customer that they don’t need. It’s about filling a need with less hassle. It’s about saving them an extra shopping trip to another store. It’s simple problem solving. The customer will appreciate the time saved. I remember the first time I saw a dry cleaner open in a grocery store. Or the first bank branch. Light bulb moment — of course!

Lee Peterson
BrainTrust

To the center of the bell curve we go! I’ve read many things about it not being good to be in the middle and I remember one author who said, “well, someone HAS to be in the middle” — right? And this is it. The combining of two of the most mass, innocuous companies on earth, with nothing really special about either and nothing really bad at the same time. Not fun to shop, but not entirely hideous either and we can get everything we need in one spot from all the major CPG companies. A match made in mind-numbing boredom’s heaven.

So here’s to the middle of the middle! PS: Just ignore us crowing on about the other ends of the spectrum and continue to ring those 1,000 registers up front!

Lisa Goller
BrainTrust

Strategic collaboration is a top retail trend in 2019 because the sector is evolving so fast that companies see they can’t do it all alone.

By working together, Kroger and Walgreens offer consumer and business benefits like:

  • Greater convenience: Consumers gain a new one-stop-shop option that isn’t a mass retailer;
  • More traffic: Walgreens will attract more grocery shoppers to its stores, and will increase the frequency of visits for fast-moving consumer goods;
  • Increased loyalty: This partnership emphasizes the retailers’ exclusive, popular private label products;
  • Deeper data insights: Walgreens will learn more about grocery shoppers and Kroger will learn more about health and beauty shoppers.

On that note, data insights yielded from this partnership can improve assortment planning and spark new private label development for both Kroger and Walgreens.

Richard J. George, Ph.D.
BrainTrust

Apparently, the test markets have been very successful. Despite the claim that the two partners have taken a slow and steady approach to the pilot program, it makes sense to move forward at this time with the next phase, preempting competitors who plan to enter the market. There is no doubt that the continued success of Kroger/Walgreens will encourage additional collaborative efforts which will prove beneficial to customers and the respective retailers who engage in such collaboration.

Harley Feldman
BrainTrust

The Kroger/Walgreens pilot is focused on 1.) each offering complimentary products, 2.) convenience pick up for items ordered online, and 3.) shared branding in the eyes of the shopper. The program will keep going as long as it is successful to more stores and additional shared products.

There will be other food/drug store collaborations. Target is hosting CVS pharmacies. Target has food, but it also has many additional categories yet its prescription handling is now being done by CVS. The collaborations offer the shopper complementary services to enhance their shopping, delivery and pickup experiences.

Rich Kizer
BrainTrust

Neither retailer can lose. I think the results will favor the Kroger move into Walgreens. However, with many making weekly trips to Kroger, the HBA items from Walgreens will be an easy sale and easy to get used to.

Steve Montgomery
BrainTrust

This provides both companies and their customers a win. The customers get access to products from well-known retailers in locations that may be more convenient to shop. Walgreens outsourced its c-store operation to someone that truly understands the c-store customer having operated hundreds of c-stores across the country until it sold them in 2018 to the EG Group from the U.K. Kroger gains points of distribution for its products without the cost of building Kroger Express locations on what is generally prime real estate. Looking forward to visiting one when they expand the test to Chicagoland.

Dave Wendland
BrainTrust

I’m a fan of newfangled collaboration (in fact I wrote several articles in Drug Store News on this topic in the past few years). As to the direction Kroger and Walgreens are taking, it comes as no surprise. Improving convenience while building on an organization’s core strengths will continue to delight shoppers. This isn’t the only collaboration worth paying attention to in the drug store space. Look no further than Rite Aid’s deal with Amazon to recognize that the shape of retail is continuing to evolve. Or in the grocery space as Aldi and Kohl’s continue to cozy up. As the old saying go, “we ain’t seen nothing yet!”

Jeff Weidauer
BrainTrust

This appears to be a good idea for both chains, with Jewel-Osco in Chicago as an obvious comparison. American Stores’ attempt to transfer that idea into SoCal with so-called “combo” stores was not a rousing success (I opened the first such store there, and the challenges were legion).

There are many lessons to be learned, so let’s hope both teams are doing their homework as they continue a slow, deliberate expansion and not rush ahead.

Ronald Lunde
Guest
2 years 1 month ago

I think we all have to rethink our thinking about retail market strategies.

There is a far greater potential here than historical or traditional leadership and consultants thinking will perceive. The pieces of the puzzle can be arranged differently.

First, start with outside-in vs. inside-out thinking. The customer is changing, with the help of technology, faster than either brands or retailers.

Example: CVS is on the cusp of significantly redefining a wellness and healthcare model. Think of the channels they might disrupt.

And … with a little new thinking … Kroger and Walmart might just develop the model for an antidote to Amazon!

Next 5 years will probably redefine the last 100 years of retailing … probably.

What fun!

Ronald Lunde
Guest
2 years 1 month ago

I should add that the Kroger/Walgreens arrangement has interesting potential.

In Florida, Kroger is building an Ocado warehouse. But there are no Kroger banner stores in the state. There are, however, over 800 Walgreens.

Interesting!

William Passodelis
Guest

I think this is a great partnership with potential for both partners. I for one like Kroger and shop there when I am in their market territory. I like Walgreens as well, and shop them too!

I am in an area which no longer has Kroger grocery, so If I could go to Walgreens and find the great Kroger private labels — win-win!

wpDiscuz
Braintrust
"It’s simple problem solving. The customer will appreciate the time saved."
"Strategic collaboration is a top retail trend in 2019 because the sector is evolving so fast that companies see they can’t do it all alone."
"Improving convenience while building on an organization’s core strengths will continue to delight shoppers. "

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