Kroger Co. on Wednesday announced it is paying $200 million to acquire Home Chef, a Chicago-based meal-kit retailer that claims to have grown its revenue to $250 million last year, while also posting two profitable quarters. Kroger is No. 86 in the Internet Retailer 2018 Top 500, Home Chef is No. 212. The deal could be worth up to $700 million if Home Chef hits performance targets.
Home Chef‘s business model is predicated on its ability to appeal to mainstream consumers. That pits it against other meal-kit retailers, such as foodie-centric Blue Apron Inc., No. 67, which generated $881.2 million in revenue last year.
Kroger aims for the deal to help it expand its offerings to consumers.
“Bringing Home Chef’s innovative and exciting products and services to Kroger’s customers will help make meal planning even easier and mealtime more delicious,” says Yael Cosset, Kroger’s chief digital officer. “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.” Restock Kroger is the retailer’s plan to leverage digital and technology to “redefine the food and customer experience.”
Home Chef, which has roughly 1,000 employees and three distribution centers, will operate as a subsidiary of Kroger, maintain its e-commerce site HomeChef.com, while also assuming responsibility for Kroger’s meal solutions portfolio, which includes the grocer’s Prep+Pared offering that is available in more than 525 stores.
“We’ve long believed that the future of our industry is omnichannel and bigger than just meal kits sold online,” says Pat Vihtelic, Home Chef’s founder and CEO. “We want to be where our customers are and want to help make cooking at home easier, more accessible and even more enjoyable.”
That offline mentality is similar to that of Blue Apron, which earlier this year said it was in “active conversations with a variety of retailers” to put its meals on store shelves in 2018. The idea, analysts said, was to find another revenue stream for the retailer, which has struggled since going public last year.
The move comes on the heels of Kroger last week agreeing to buy a stake in Ocado and license technology that helps other grocers run automated warehouses and deliver food to customers’ doors.
The moves illustrate Kroger’s desire to “win in the e-commerce space,” says Diana Sheehan, vice president of retail and shopper insights at Kantar Consulting. “[The Home Chef and Ocado deals] really set the stage for a true showdown in the online grocery wars, while continuing to reinforce the importance of the physical store,” she says. “Home Chef not only gives Kroger logistical expertise in consumable e-commerce, but also allows Kroger to bring the offer to the store and more effectively appeal to all shoppers.”