Kroger buys dunnhumbyUSA assets, launches new data company

Kroger (NYSE: KR) is acquiring assets from dunnhumbyUSA and forming a new consumer insights company to be called 84.51° that will operate with those assets as a foundation. The deal is effective immediately.

Kroger will retain more than 500 employees of dunnhumbyUSA, while the British data company will be able to expand its U.S. retailer customer base, retaining its existing clients other than Kroger. Financial terms were not disclosed.

"Kroger wanted and needs what we offer," 84.51° CEO Stuart Aitken told the Cincinnati Enquirer. Aitken has been named to the new position after running dunnhumbyUSA. "Now that we're aligned with Kroger, we will continue to offer them understanding of customers."

This is the third technology acquisition by Kroger in the past 15 months. It purchased e-commerce firm Vitacost.com, a seller of nutrition and healthy living products, last August, and bought You Technology Brand Services, a digital coupon and promotions company, in February of last year.

Technology also played a role in Kroger's purchase of Harris Teeter, a smaller supermarket chain in the Southeast. Kroger was interested in Harris Teeter's "click and collect" online shopping service, and is testing a similar program in its own stores now. Kroger is the second largest retailer in the U.S., following Walmart.

Kroger's alliance with dunnhumby, a subsidiary of U.K. retailer Tesco, dates to 2003. The dunnhumbyUSA operation collects and analyzes Kroger loyalty card data to determine coupons to offer consumers and even where products should be displayed in stores.

"Kroger and Dunnhumby revolutionized retailing in the U.S. by focusing on the customer, and we intend to do it again with 84.51°...The ability to combine what we already know with other partners is exciting and will speed up innovation. We expect these innovations to grow our business and deliver a world-class customer experience," said Kroger CEO Rodney McMullen in a press release.

"The opportunity to deliver greater value is enormous," Aitken told the Cincinnati Business Courier. "Our goal is to turn this into an even greater competitive advantage than it is today. We'll have our monomaniacal focus on the customer, delivering value and making their lives easier. That's going to be easier now because we'll have true alignment with Kroger's customer first strategy. If anything they should start to see greater value."

Dunnhumby will now have the ability to use its insight products and data expertise to capture the previously unavailable potential of the North American market through working with new retailers, consumer brands and media partners, the company said as reported by Supermarket News.

The sale of dunnhumbyUSA to Kroger could mean that Tesco, which is struggling to turnaround its floundering sales, is closer to selling the rest of Dunnhumby, Bloomberg Business reported. "This removes a stumbling block to selling Dunnhumby, and also adds a potential additional revenue stream," said John Kershaw, an analyst at Exane BNP Paribas. "The opening up of the North American market looks appealing and should help bolster the price bidders may be willing to pay."

For more:
-See this Kroger press release
-See this Cincinnati Enquirer article
-See this Cincinnati Business Courier article
-See this Supermarket News article
-See this Bloomberg Business article

Related stories:
Kroger logs 45th consecutive quarter of growth
Kroger to add an additional market, focus on urban-format stores
Kroger buys digital coupon provider You Tech
Kroger investing $100M in Michigan market
Kroger earnings rise on consumer confidence bump

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