Home Chef is the third-largest meal-kit delivery network, behind Blue Apron and HelloFresh. Apparently, Kroger has acquired Home Chef for $200 million. It's an interesting move from Kroger, considering it is constantly playing catch-up with Amazon. Amazon continues to crush competition as it trenches and digs itself a moat around its businesses.
While I'm happy to see Kroger acquiring top-quality talent and technology, I'm left disappointed. I think meal-kits are a fad, unprofitable, and produce a lot of waste. When Kroger should be focusing on reducing food waste, they are instead attempting to boost profits from a fad. This will be a short-term gain for Kroger.
Other grocers such as Albertsons, Target, Trader Joes and even Amazon have hyper-local and metropolitan grocery delivery networks in place. Some are more impressive than others, but I think this is the space that Kroger should be focusing their efforts.
Meal-kits are expensive, and the average consumer will not see a long-term cost-benefit. I think a lot of investors are beginning to understand that too.
It's grocery delivery, not meal-kits that is the real magic — which is totally lost on a bunch of grocers today. Mastering the delivery of groceries is going to be a crown jewel achievement, and sadly Amazon is leading the way. Although, I have to give credit where credit is due — Kroger has partnered with Instacart in the past. Let's just hope that relationship doesn't sour. I believe Instacart is ripe for acquisition. If Kroger isn't first to acquire Instacart, Amazon will. Which is appropriate considering Instacart was founded by ex-Amazon employees. Kroger should've ponied up the cash for Instacart instead of Home Chef. Kroger nets $122 billion a year, so they surely have the revenue and capital to afford a company of that magnitude.
All of that being said, it's good to see grocers getting skin in the game and finally taking risks. The only real innovation grocers have had in the past century was barcodes and weekly ads — and weekly ads haven't had a profound ROI as customers continue to change their shopping habits to online-first, IRL-second.