Amazon.com Inc.’s $13.7 billion acquisition of Whole Foods Market Inc. continues to reverberate through the food industry.
Albertsons Cos., No. 157 in the Internet Retailer 2017 Top 500, acquired meal-kit delivery company Plated in the culmination of swift deal talks that were sparked by the Amazon-Whole Foods tie-up, said a person familiar with the matter who asked not to be identified because the matter is private.
The transaction announced Wednesday gives Albertsons a much-needed vehicle for reaching younger consumers attracted to the convenience of having their meals delivered. With same-store sales in a slump beginning in 2016, Albertsons also picks up a key selling point for investors as it reignites once-stalled plans for an initial public offering—now targeted for 2018, the person said.
The deal allows Plated, No. 526 in the Internet Retailer 2017 Top 1000 with Internet Retailer-estimated 2016 web sales of $32.2 million, and its backers to secure an exit, one that looked to be elusive after the flame-out of competitor Blue Apron Holdings Inc.’s IPO. Blue Apron (No. 197), whose June 29 trading debut followed the Amazon’s Whole Foods deal by 13 days, has seen its stock tumble 48% since then.
The Albertsons-Plated transaction is expected to close this month, the companies said Wednesday in a statement. Financial terms weren’t disclosed. A spokeswoman for Albertsons didn’t immediately respond to a request for comment.
The deal for Plated illustrates how grocery retailers must evolve their offerings into more of a service model that aligns with the on-demand culture, says Matt Sargent, senior vice president of retail at consultancy Magid Associates. “Albertsons is leveraging a much better/well-established brand that has a great following, which should help the company expand its national reach in the grocery space,” he says.
Magid Retail Pulse data has found that 41% of millennials have purchased groceries online, with 23% shopping online exclusively. “Albertsons recognized that this group will soon be the largest shopping group in the U.S., and this deal plays right into their desires for the convenience and ease of online grocery shopping,” Sargent says.
Amazon (No. 1) stepping into food delivery has roiled grocery stocks and complicated Albertsons’s listing plans. Albertsons put its IPO on hold, people familiar with the matter told Bloomberg in July. The Boise, Idaho-based grocer had also explored a tie-up with other companies including Whole Foods and the organic grocer Sprouts Farmers Market Inc., people familiar with those matter have said, though a deal didn’t materialize.
The Albertsons-Plated deal echoes Amazon’s strategy in adding health-food retailer Whole Foods to its e-commerce empire. A month after that acquisition, Amazon filed a meal-kit trademark application for prepared food kits.
Kroger Co. (No. 88) and other grocers have had some initial success with selling meal kits. For Albertsons, the deal signals an attempt to boost sales as the intense competition in the grocery industry heats up, said Jennifer Bartashus, an analyst at Bloomberg Intelligence.
“They’re on a scale where they compete with Kroger and Walmart—they have to stay relevant,” Bartashus said of Albertsons.
After Blue Apron’s tumultuous first weeks as a public company, some have questioned whether a meal-kit maker should exist as a standalone company, Bartashus said. Albertsons’s acquisition of New York-based Plated may have sparked the imagination of some Blue Apron investors, who sent the stock up as much as 5% in after-market trading after Wednesday’s announcement.
“It may be wishful thinking, but there’s likely some anticipation they get acquired,” Bartashus said of New York-based Blue Apron.Favorite