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The $13.7 billion merger between Whole Foods and Amazon was an earthquake that rattled the grocery industry — and nine months after that deal was announced, its aftershocks have not abated. According to a new report, two of the biggest names in food retailing, Target TGT -0.06% andKroger KR +1.71%, are considering a merger that would bolster their position against the growing threat of Amazon.
Fast Company reported Friday morning that Target and Kroger started talking “last summer” about “a partnership” that would help Target’s grocery business and Kroger’s e-commerce capabilities. The story goes on to say that these talks continued into the fall and are “ongoing” this year.
A spokeswoman for Kroger told Forbes Friday that the company generally does not comment on rumors or speculations. Target did not immediately reply to a request for comment. Meanwhile, CNBC and Reuters both reported that an unnamed source said there was “no truth” to the merger rumor.
Whether the two retail giants merge or not, the threat that Amazon poses is clear. According to data from FMI and Nielsen NLSN +0.03%, within seven years 70% of consumers will shop for groceries online (and, in the process, spend $100 billion per year). Meanwhile, a separate study from digital intelligence firm L2 found that 58% of the grocers analyzed — a list that includes Target, Kroger, H.E.B, Publix and more — have partnered with Instacart to compete on the e-commerce front.
Kroger is part of that 58% and, just last week, announced that it is expanding its own partnership with Instacart. The company currently delivers from about 872 stores and offers curbside pickup at more than 1,000 stores; throughout this year, Kroger said, it wants to add another 500 stores to this program.
“Having grown our digital sales in 2017 by 90%, we continue to accelerate our digital roadmap in 2018 to make shopping with Kroger simpler and more personalized,” Yael Cosset, Kroger’s chief digital officer, said in a statement at the time. The announcement is part of Kroger’s “Restock Kroger” program, an initiative the company announced in October and which aims to improve its digital offerings and use data to better understand its customer base.
Target, too, has been beefing up its delivery capabilities. In December, the retailer acquired Shipt, a same-day delivery platform, for $550 million. At the time, Target said that same-day delivery would be available at half of its stores by early 2018.
A combined Target and Kroger would be a nearly $200 billion enterprise; in 2017, Target recorded $71.9 billion in revenue and Kroger reported $122.7 billion in sales. Investors, therefore, liked the Fast Company report, sending both stocks for gains in early Friday trading. By mid-morning Friday, however, those gains had moderated, with Kroger up about 1.4% and Target trading for a 0.1% decline.
Read this article in its original format at Forbes.com
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