Kroger to acquire Home Chef for $200 million; final deal could be worth as much as $700 million

Supermarket giant Kroger has agreed to acquire Home Chef, a Chicago-based meal kit delivery company. The initial transaction price is $200 million, and future earnout payments of up to $500 million over five years are contingent on achieving milestones, including growth of in-store and online meal kit sales, Kroger said. As part of the deal, Kroger will make Home Chef meal kits available both on its web site and in its stores. The pending merger comes on the heels of Home Chef’s 150% growth in 2017, $250M in revenue, and two profitable quarters.

The acquisition agreement is expected to 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. “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. “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.”

“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,” said Pat Vihtelic, Home Chef’s founder and CEO. “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 delicious and approachable meals that fit every taste preference and easy-to-follow recipes for every experience level. They currently lead the industry with the most variety among the leading meal kit companies and have 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 prep. Home Chef’s offerings complement Kroger’s Prep+Pared offering that is currently available in more than 525 stores.

Home Chef employs approximately 1,000 employees, is headquartered in downtown Chicago, and operates three distribution centers in Chicago, Atlanta and San Bernardino. Home Chef’s distribution centers 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,” said Mr. Cosset. “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 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.