Walgreens and Kroger Team Up

Walgreens and Kroger are expanding their partnership by testing a branded Kroger Express grocery section inside the drugstore chain. The companies, which announced a partnership in October to sell some Kroger products inside 13 Walgreens locations, said Tuesday they decided to expand on the original pilot. Walgreens’ shoppers soon will be able to buy 2,300 Kroger products, including Kroger’s Home Chef meal kits and its organic brand Simple Truth, at the 13 test stores in Northern Kentucky, near Kroger’s headquarters in Cincinnati.

Decreasing sales for household products have hurt pharmacies, while grocers are looking for any edge that make them more competitive against Amazon’s Whole Foods.

Kroger and Walgreens executives wouldn’t say how the companies would share sales revenue or provide financial details of the deal. Kroger and Walgreens will supply and operate the Kroger-branded sections together, officials said.

Kroger won’t sell store-brand items that compete with Walgreens’s private-label products, but it will take over its supply for branded goods, the companies said. Deerfield, Ill.-based Walgreens has struck a number of deals recently, such as taking a minority stake in the Birchbox Inc. cosmetics company and offering parcel services at stores through FedEx Corp.

“This is consistent with our broader partnership strategy,” said Adam Holyk, Walgreens senior vice president and chief marketing officer. Grocer Albertsons Cos. and pharmacy chain Rite Aid Corp. earlier this year attempted to merge to better position both companies to fend off competitors. The deal failed after Rite Aid investors protested the share price offered, among other issues.

Kroger’s agreement with Walgreens mirrors aspects of the scrapped Albertsons deal. The arrangement would have put Albertsons’s store-brand products and its Plated meal-kits in Rite Aid stores. Private-label products are more profitable for grocers than sales of goods made by other companies.

Todd “Bubba” Horwitz