Kroger, Home Chef merging as meal kit popularity rises

Meal kit company to operate as subsidiary of Kroger.

May 24, 2018

3 Min Read
Kroger, Home Chef merging as meal kit popularity rises

The Kroger Co. and Home Chef, the country's largest private meal kit company, have announced a merger agreement that will significantly accelerate availability of meal kits and position the combined company to lead the way in revolutionizing how families shop for, prep and cook their meals.

The initial transaction price is $200 million, and future earn-out payments of up to $500 million over five years are contingent upon achieving certain milestones, including significant growth of in-store and online meal kit sales. The pending merger comes on the heels of Home Chef's 150% growth in 2017, plus $250 million in revenue and two profitable quarters.

"Customers want convenience, simplicity and a personalized food experience. Bringing Home Chef's innovative and exciting products and services to Kroger's customers will help make meal planning even easier and mealtime more delicious," Kroger chief digital officer Yael Cosset said. "This merger will introduce Kroger's 60 million shoppers to Home Chef, enhance our ship-to-home and subscription capabilities and contribute to Restock Kroger."

Home Chef founder and chief executive officer Pat Vihtelic, added, "We've long believed that the future of our industry is omni-channel and bigger than just meal kits sold online. We want to be where our customers are and want to help make cooking at home easier, more accessible and even more enjoyable. We're thrilled that we will be part of the Kroger family and plan to maintain our relentless focus on innovation that meets customers' evolving food needs. Kroger's expansive retail footprint will allow us to serve millions of more customers across the country with simple, convenient and enjoyable meal solutions."

Home Chef features meals that fit a variety of taste preferences and easy-to-follow recipes for every experience level. The company said it currently leads the industry with the most variety among the top meal kit companies and has gone beyond the one-size-fits-all model to bring new innovations like 5 Minute Lunches, Flexible Serving options and new easy-to-prepare meals that require minimal preparation. Home Chef's offerings complement Kroger's Prep+Pared line that is currently available in more than 525 stores.

Home Chef, headquartered in downtown Chicago, Ill., has approximately 1,000 employees and operates three distribution centers in Chicago, Atlanta, Ga., and San Bernardino, Cal., that reach 98% of all continental U.S. households within a two-day delivery window.

"As one of the fastest-growing meal kit companies in the country, Home Chef is poised for even more explosive growth," Cosset said. "We admire their focus on the customer, culture of collaboration, dynamic experimentation and demonstrated financial success. Home Chef's combination of culinary expertise and a customer data-driven decision-making process is right in line with Kroger's vision to serve America through food inspiration and uplift by providing meal solutions for every lifestyle."

After the deal closes, Home Chef will operate as a subsidiary of The Kroger Co., maintain its e-commerce business on homechef.com, and assume responsibility for Kroger's meal solutions portfolio. The company will continue to operate its offices and facilities.

Following the closing, Kroger will make Home Chef meal kits available to Kroger shoppers both in stores and online.

Kroger expects the transaction to have no effect on 2018 earnings and to be slightly accretive in 2019.

The transaction is expected to close in the second quarter, following the satisfaction of customary closing conditions, including regulatory approval.

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