Groceries drive placement on the food/drug/mass merchandise list of hot retailers gaining market share in 2017. Only two of the top 23 entries don’t have a grocery presence: drug store cooperatives Good Neighbor Pharmacy, controlled by wholesaler AmerisourceBergen, and Care Pharmacies Cooperative, which operates primarily in the eastern half of the country.
Sitting atop the group is Amazon.com, not surprising since much of its market share gain resulted from its acquisition of Whole Foods Market a year ago. Amazon continues to capitalize on the combination of the two retailers. Prime members shopping in Whole Foods stores can already receive a 5 percent discount; in February, Amazon made available online thousands of Whole Foods’ products to Prime members, who could have them delivered free via Prime Now on orders over $35.
Costco’s online sales have been shooting up, thanks in major part to groceries following last year’s launch of Costco Grocery: two-day delivery on a very limited number of nonperishable items. More products have been added and by the end of this year, Costco and partner Instacart will be making two-day deliveries from all Costco stores. Costco also recently agreed to sell Blue Apron meal kits in its stores, the first time the kits have been sold in stores.
In May, Kroger said it would purchase Home Chef, the largest volume preparer and seller of home meal kits in the country. The deal could cost Kroger as little as $200 million or as much as $700 million, depending upon whether certain metrics are achieved.
The Home Chef acquisition came about a week after Kroger spent nearly $250 million to raise its stake in British grocer Ocado Group, well regarded for efficient warehouse operations and processes. Part of the deal provides Kroger with the exclusive right in this country to share Ocado’s technology, which has helped push the online-only grocery to the top ranks of ecommerce grocers worldwide.
“They’ve done an incredible job over the years continuing to improve the experience for the customers and the economics as well,” says Rodney McMullen, Kroger’s chief executive.
Kroger is building three new warehouses this year — as many as 20 over the next three years — that will be operated by Ocado, according to Michael Schlotman, Kroger’s chief financial officer. Once the robotic warehouses are up and running, continuously being optimized through artificial intelligence, Kroger will be able to pick and fill as many as 65,000 online orders a week, the company says.