Kroger Co. plans to spend up to $700 million to scale up its meal kit business with the acquisition of Chicago-based Home Chef.
The Cincinnati-based company said in a news release the initial transaction price is $200 million, with “future earnout payments of up to $500 million over five years … contingent on achieving certain milestones.”
Those include significant growth of in-store and online meal kit sales, according to the release.
Home Chef posted 150% growth in 2017, $250 million in revenue, and two profitable quarters, the company said.
"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," said Yael Cosset, Kroger's chief digital officer, in a news release. "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."
Kroger currently offers its Prep+Pared meal kits in 525 locations. The company said in a news release the Home Chef acquisition will complement Prep+Pared. Certain banners, like Harris Teeter in North Carolina, also offer Chef’d meal kits.
Home Chef has 1,000 employees and three distribution centers, in Chicago, Atlanta and San Bernardino, Calif., and reaches 98% of the continental U.S. 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, in the release. "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."
While growth in subscription meal kits has slowed recently, retailers are picking up with partnerships from existing brands. Costco recently started a pilot to sell New York-based Blue Apron in store, Albertsons has started rolling out Plated meal kits in-store, and Chef’d has its sights set on availability in 1,000+ stores by the end of 2018.