Kroger to Acquire Online Vitamin Retailer Vitacost
CINCINNATI and BOCA RATON, FL - Kroger is strengthening its online presence with its acquisition of Vitacost.com Inc., an online vitamin retailer. The $280 million purchase is expected to complement Kroger’s strategy to enter new markets, as well as Harris Teeter’s online order and pick up service.
Kroger CEO Rodney McMullen expressed his delight, noting that Vitacost.com’s “core focus on healthy living products is complementary to our fast-growing natural foods business, and we intend to grow Vitacost.com’s strong position in the online nutrition market. At the same time, we will build on Vitacost.com’s e-commerce platform by integrating it with our existing digital offerings to create exciting new levels of personalization and convenience for our customers.”
E-commerce is quickly becoming an area where big box retailers are looking to compete against existing online retailers, such as Amazon and FreshDirect. Wal-Mart especially has been gearing up for greater online presence with plans to expand its workforce in Silicon Valley. For more on that story, click here.
Vitacost.com’s e-commerce platform will enable Kroger to serve customers through ship-to-home orders nationwide, including 16 states that are currently not served by Kroger supermarkets, expanding the company’s reach into new U.S. markets as well as internationally, according to a press release.
According to Wall Street Journal, McMullen stated, “In terms of shipping to home, [Vitacost’s] infrastructure is incredibly strong for that. That’s one of the reasons we are really excited about the merger.”
Jeffrey Horowitz, CEO of Vitacost.com, said, “This transaction represents a significant premium for our shareholders and the company will benefit by leveraging Kroger’s scale and resources to further drive the online healthy living industry to new heights.”
In early afternoon trading, Vitacost.com shares skyrocketed approximately 27% to $7.99, while Kroger shares fell by 0.2% to $49.44. Currently, Kroger is limiting home delivery to shelf-stable groceries, Wall Street Journal reports. McMullen explains that the agreement “accelerates where we are by a few years, much faster than if we went and tried to build it on our own.”
Kroger will finance the transaction with debt. Following the close of the deal sometime in the third quarter, Vitacost.com will operate as a subsidiary of The Kroger Co. and will continue to operate its facilities in Boca Raton, Florida, Lexington, North Carolina, and Las Vegas, Nevada.
