Kroger gobbles up Home Chef in second acquisition of the week

There is no denying that Kroger (KR), the grocery store chain, has suddenly emerged as a formidable player in the retail food market, as within a week, Kroger made its second acquisition. This time it snaps up a private meal-kit company Home Chef, with an aim to boost its online business.

Just last week, Kroger entered into an exclusive partnership with a UK retail giant Ocado. This partnership allows the Cincinnati-based supermarket chain to incorporate Ocado’s technology into its grocery and food distribution business. This deal was a part of its efforts to boost its digital business.

Last year, Mikey Vu, a partner at the consultancy Bain & Company, stated that the meal kit sales generate $1.5 billion of the $800 billion grocery business. This could be a threat for several grocery store chains. Due to this companies are investing in what could be a quickly growing business.

With the latest $200 million deal, Kroger aims at catering to the needs of the shoppers who look for convenience, as Kroger plans on selling Home Chef meal kits on its grocery store shelves as well as online. This deal put pressure on Blue Apron (APRN) who has the largest share of sales in the U.S. meal-kit market.  After this deal was announced on Thursday, Blue Apron shares rose 5%.

Kroger made its second acquisition. This time it snaps up a private meal-kit company Home Chef, with an aim to boost its online business.

Home Chef, which delivers over 3 million meal kits a month, will operate as Kroger’s subsidiary once the deal completes. The $200-million deal is expected to close in a month. If certain milestones are met over the next five-years, the final purchase price could hit $500 million.

The meal-kit trend in the US is booming, no wonder why every other grocer is stepping into this industry. Kroger will have a tough time as it has to battle against Walmart (WMT) that is offerings its own meal-kits in over 2000 stores, Blue Apron that sells their meal kits at Costco (COST) and not to forget Amazon’s (AMZN) foray into meal-kit business. Whole Foods, acquired by Amazon, has also partnered with a startup Salted to sell meal kits. With so many significant players in this business, it appears that meal-kits are a new recipe for success.