Late last week Cincinnati based grocer Kroger and privately held meal kit company Home Chef announced a merger agreement that will increase the availability of meal kits. The initial transaction price is $200 million and future earnout payments of up to $500 million over five years are contingent on achieving certain milestones, including significant growth of in-store and online meal kit sales. The pending merger comes on the heels of Home Chef’s 150% growth in 2017, $250M in revenue, and two profitable quarters. The move comes less than 6 months after Bentonville-based Walmart introduced Home Chef to its customers. The move adds the home meal kit company to an already strong Kroger portfolio of private brands.
Kroger joins competitor Albertsons and its stores in the meal kit company acquisition bonanza as the later purchased Plated in late 2017.
“Customers want convenience, simplicity and a personalized food experience. 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,” said 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.”
“We’ve long believed that the future of our industry is omnichannel and bigger than just meal kits sold online. We want to be where our customers are and want to help make cooking at home easier, more accessible and even more enjoyable,” said Pat Vihtelic, Home Chef’s founder and CEO. “We’re thrilled that we will be part of the Kroger family and plan to maintain our relentless focus on innovation that meets customers’ evolving food needs. Kroger’s expansive retail footprint will allow us to serve millions of more customers across the country with simple, convenient and enjoyable meal solutions.”
Home Chef’s offerings complement Kroger’s Prep+Pared offering that is currently available in more than 525 stores.
Home Chef employs approximately 1,000 employees, is headquartered in downtown Chicago, and operates three distribution centers in Chicago, Atlanta and San Bernardino. Home Chef’s distribution centers reach 98% of all continental U.S. households within a two-day delivery window.
“As one of the fastest growing meal kit companies in the country, Home Chef is poised for even more explosive growth,” said Mr. Cosset. “We admire their focus on the customer, culture of collaboration, dynamic experimentation, and demonstrated financial success. Home Chef’s combination of culinary expertise and a customer data driven decision-making process is right in line with Kroger’s vision to serve America through food inspiration and uplift by providing meal solutions for every lifestyle.”
After the deal closes, Home Chef will operate as a subsidiary of The Kroger Co., maintain its e-commerce business on homechef.com, and assume responsibility for Kroger’s meal solutions portfolio. The company will continue to operate its offices and facilities.
Following closing, Kroger will make Home Chef meal kits available to Kroger shoppers, both in stores and online.
Kroger expects the transaction to have no effect on 2018 earnings, and to be slightly accretive in 2019.