Should Kroger go after Whole Foods?

Image: Whole Foods Market

The following appears courtesy of, an online discussion forum for the retail industry.

The business press headlines blew up earlier this month over an analyst’s tweet that Kroger might be looking to acquire Whole Foods. The tweet was speculative – both companies refused to comment – as were all the articles that followed, but there are reasons that one could give to either fan the flames of this story or douse them.

Consider that Kroger has made clear its willingness to growth through acquisitions. Major deals in recent years have included Roundy’s in 2015 and Harris Teeter and in 2014.

RELATED: Amazon planning drive-up grocery store in Seattle

Kroger was reported to be among a small group of bidders for The Fresh Market, a competitor to Whole Foods, which was eventually acquired by Apollo Global Management for $1.3 billion in April. During that same month, Kroger announced it had made a strategic investment in Lucky’s Market, a 17-store specialty grocery chain with locations in 13 states. The company has regularly touted the growth of its organic private label business as a contributing factor to its solid sales performance in recent years.

RELATED: Grocery gets higher share of millennial spend

On the skeptics’ side is the reality that price deflation caused Kroger to post a decline in same-store sales during the most recent quarter. As a result, the company lowered its guidance for the balance of its fiscal year.

A Cincinnati Business Courier article points out that Whole Foods’ business has struggled in recent years as the chain has encountered increased competition from conventional grocers such as Kroger as well as others focused on the organic and specialty foods niche. Whole Foods has responded by lowering prices, emphasizing its private label and initiating a rewards/loyalty program. The grocer also launched 365 by Whole Foods, a small store concept viewed by many as a formatted response to Trader Joe’s.

RELATED: Kroger opens 'grocerant' concept

Discussion Questions: Does a Kroger acquisition of Whole Foods make strategic business sense for both (or either) companies? If it were to happen, how might Whole Foods change under Kroger?

Comments from the RetailWire BrainTrust:

I can see how this might make sense for Whole Foods, but not for Kroger. Kroger doesn’t need to buy Whole Foods to grow its organic offerings, but Whole Foods could use the deep pockets, buying power and marketing muscle of Kroger.
Max Goldberg, President, Max Goldberg & Associates

If you look up supermarket in the dictionary you should see a picture of Kroger. They are and should always be a traditional supermarket. They are smart, competitive and a lower-price leader in just about all KMAs. They do not need to spend the time and money to go after Whole Foods. They are competing with them successfully and one bad quarter in what may be 100 good quarters is not the time to panic and go shopping for Whole Foods. It is the time to do what Kroger does best, be America’s number one traditional and national supermarket!
Frank Riso, Principal, Frank Riso Associates, LLC

Kroger should concentrate on improving their own stores rather than buying out the competition. It’s good that Whole Foods is reducing prices to make it more competitive, but it is still the positive strategy of being independent and standing for a higher quality product that is environmentally focused.
Jerry Gelsomino, Principal, FutureBest

If Kroger acquires Whole Foods and it is a separate experience, I can see this working. But, for Kroger to acquire and rebrand what Kroger has been known … well that is a bit more difficult. Yes, businesses have to grow and adapt. But that’s completely different than changing lanes.

If Kroger acquires Whole Foods and keeps them separate, will they leave management in place? Think about what happened when Amazon acquired Zappos. They let them stay Zappos and operate independently. Some of the most successful acquisitions of businesses were when the acquirer let the acquired remain autonomous.
Shep Hyken, Chief Amazement Officer, Shepard Presentations, LLC

Read the entire RetailWire discussion...