Although the rumor turned out to be just speculation, not an actual report, a recent tweet by an analyst got grocery retail circles buzzing, when it proposed that Kroger might seek to acquire Whole Foods. The rationale went that Kroger has a long-established tradition of acquiring competitors to sustain its own growth, such as the Roundy’s and Harris Teeter chains, as well as Vitacost.com. Furthermore, Kroger reportedly attempted (ultimately unsuccessfully) to acquire The Fresh Markets, and it has invested substantially in a 17-store organic and specialty grocery chain called Lucky’s Market. The acquisition also seemingly could benefit Whole Foods, which has struggled with increasing competition from conventional grocers that continue to expand their organic offerings. Access to Kroger’s deep pockets and vast reach might enable Whole Foods to improve its own performance. But on the flipside, the thought experiment also suggests some issues. The two chains have widely divergent images, and linking a distinctive brand like Whole Foods with the conventional brand represented by Kroger might minimize its appeal. Furthermore, Kroger has spent a lot on acquisitions recently, and its same-store sales declined in the most recent quarter, so it might lack the resources to be able to undertake such a merger. But when it comes to hypotheticals, the more interesting question is not whether Kroger can buy Whole Foods, but rather, should it?
Source: George Anderson, Retail Wire, October 14, 2016