Kroger (NYSE:KR) announced the acquisition of Vitacost.com, an online retailer of healthy living products. Under the agreement, Kroger will purchase all outstanding shares of Vitacost.com for about $280 million.
The deal will bolster Kroger's position online due to Vitacost.com's strong experience in the e-commerce platform, 2.3 million active customers, not to mention its stronghold in the nutrition and healthy living market, offering more than 45,000 products from vitamins to organic foods. The e-retailer's platform includes technology and ship-to-home fulfillment centers to serve customers in the United States and internationally.
"Vitacost.com's talented team had built an exceptional online retail destination in the growing nutrition and wellness market, with an enviable technology and fulfillment infrastructure," said Rodney McMullen, CEO, Kroger. "This merger is in line with our growth strategy to enter new markets and new channels, and – along with Harris Teeter's online order and pick up service – accelerates our efforts to provide customers with even more ways to shop."
The agreement is yet another move in Kroger's recent strategy to beef up its online presence and home delivery services. The retailer recently announced a partnership with Instacart to provide groceries for delivery in the Seattle area, Amazon's home market where the online retailer has operated its Amazon Fresh grocery delivery service there since 2007.
U.S. retailers are quickly ramping up efforts to provide home delivery. Amazon Fresh will operate in 20 urban areas by the end of 2014, Instacart is growing by leaps and bounds – Target recently began testing the crowd-sourced delivery service in Boston, Miami and the Twin Cities – and Walmart's new Walmart to Go test in Denver inches the world's largest retailer closer to closing that last mile in grocery delivery.
But delivery is just half this story: Kroger must expand its presence in health and wellness to remain competitive. Supermarkets, discounters and drug chains alike are all making investments in the category. Most notably, Safeway recently began relocating its pharmacy departments to center store, ringing it with health and wellness products and making it easier for pharmacists to move about the area and consult with shoppers.
-See this Kroger press release
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