Coverage: Kroger will start selling groceries in Walgreens

Walgreens and Kroger are expanding their partnership by testing a branded Kroger Express grocery section inside the drugstore chain.

Amelie Lucas of CNBC.com had the news:

The companies, which announced a partnership in October to sell some Kroger products inside 13 Walgreens locations, said Tuesday they decided to expand on the original pilot. Walgreens’ shoppers soon will be able to buy 2,300 Kroger products, including Kroger’s Home Chef meal kits and its organic brand Simple Truth, at the 13 test stores in Northern Kentucky, near Kroger’s headquarters in Cincinnati.

Decreasing sales for household products have hurt pharmacies, while grocers are looking for any edge that make them more competitive against Amazon’s Whole Foods.

A Kroger Express is already operating in Florence, Kentucky, and the remaining 12 stores will be operational “early next year,” the companies said.

In addition to selling Kroger-branded products in stores, Walgreens will also allow customers to order online from the grocer and pick up the items at the pharmacy chain. The two companies originally announced the online order pickup in October.

Brian Sozzi of Yahoo Finance reports the effort is an attempt to thwart Amazon:

It’s not unlike efforts by Walgreen’s rival CVS Health, which has expanded sections in its stores to include frozen food and fresh groceries. The drugstores are seeking to become a one-stop shopping destination as Amazon expands its food offerings online and brings the benefits of Prime to Whole Foods. Further by offering food, Walgreens and CVS Health become traffic-driving destinations that aren’t only visited to reload on deodorant.

“We’re pleased to continue working together to explore new concepts that expand product selection to provide a better shopping experience and greater value for our customers,” said Richard Ashworth, Walgreens president of operations.

Indeed the creativity is flowing all around in retail.

Discount retailer Target in 2017 took a reported $75 million stake in online mattress company Casper. With online purchases of bedding on the rise thanks to the likes of Casper, Target hopped on the opportunity to get involved. Casper mattresses could now be found in many Target stores.

Jeff Wells of Retail Dive reports that drug stores have become grocery store competitors in recent years:

Building on its click-and-collect partnership with Walgreens unveiled back in October, Kroger is collaborating with a competitor in a move that, if successful, could spotlight a new revenue opportunity for under-pressure conventional supermarkets.

Drug stores have emerged as supermarket foes in recent years as they’ve added more food and beverages to their assortments. Walgreens had recently begun trialing options through Chef’d before the meal kit company went under and then found a new buyer, while other drug stores offer fresh produce, prepared meals and more.

Kroger Express outlets expand that food and beverage assortment for Walgreens in ways the pharmacy retailer couldn’t do on its own. The deal could draw more customers to stores, boosting revenue for both Walgreens and Kroger. For Kroger, the deal also puts its high-value private brands, including the $2 billion Simple Truth, in front of more shoppers. Kroger also offers Simple Truth to consumers in China through listings on Alibaba’s TMall online marketplace.

Widespread expansion of Kroger Express is anything but assured. Kroger is making calculated bets, but it’s also adopting more of an experimental mindset as it navigates industry pressures. In order for this partnership to be a success, Kroger will want to see not just healthy grocery sales in Walgreens stores, but greater engagement with its brands and with its online shopping platform that pushes shoppers into its supermarkets.