CHICAGO-Kroger Co., the largest supermarket chain in the U.S., is paying $200 million to acquire Chicago-based meal kit company Home Chef in a deal the companies say will bring the kits to more customers and help redefine shopping habits.
"We know our customers would love to see more Home Chef meal kits on grocery store shelves," said Pat Vihtelic, Home Chef's founder and CEO. "What this allows us to do is to be everywhere our customers are."
The deal, which is expected to close in about a month, includes future "earn-out" payments of up to $500 million over five years, contingent on achieveing milestones such as meal kit sales growth.
Founded in 2013, Home Chef develops meals and delivers the ingredients and preparation instructions to its customers. The company said it delivers about 3 million meals a month. Last year, it made $250 million in revenue. It also receives more than 100,000 reviews every month, giving it insight into consumers' needs and desires that Kroger likely can learn from, said Yael Cosset, chief digital officer for Kroger.
The deal will open each company up to the other's customer base and help change the way those buyers shop and order their groceries, Cosset said. Kroger has 2,800 stores around the country under multiple names, including Mariano's in the Chicago area. More than 10 million shoppers visit Kroger in store and online daily, he said.
"Our real objective with Home Chef is to bring our assets to the table and help them make simpler, easier, better meal solutions available to every family in America," Cosset said. "Every community will have access either through their store or online access to the service."
Kroger plans to make Home Chef's meal kits available online as soon as the deal closes, Cosset said. He said the two companies will use consumer data to figure out which stores to sell the kits at initially, adding that Mariano's locations will be a priority. Kroger acquired that chain's parent company, Roundy's, in 2015.
Once the deal closes, Home Chef will operate as a subsidiary of Kroger and maintain its e-commerce business on its website. Vihtelic will remain CEO.
Home Chef, which employs more than 1,000 people, plans to add employees to help with the rollout, but Vihtelic said there are no set plans for hiring at this time.
The deal isn't Kroger's first foray into meal kits. The Cincinnati-based supermarket chain has been rolling out Prep+Pared meal kits to its stores since May 2017. Other retailers are getting into the business as well, including Walmart and Amazon. Albertsons, the parent company of Jewel-Osco, acquired meal kit startup Plated last year.
"We are not making the choice for our customers whether they can buy it in the store or buy it online for pickup or delivery," Cosset said. "We want to create a cohesive experience across all the channels."
Working with Home Chef also could help Kroger enhance its ship-to-home and subscription capabilities, he said.
Most of Home Chef's dinner meals are $9.95 per serving, and the company offers lunch options and additional offerings such as smoothies and fruit baskets. Besides its headquarters in Chicago, it also operates distribution centers in Chicago, Atlanta and San Bernardino, Calif.