Commercial grocery giant Kroger has announced plans to buy the online vitamin retailer Vitacost for $280 million.
Kroger is currently the largest supermarket chain in the United States. The chain has agreed to buy Vitacost.com Inc to the tune of $280 million. Kroger will be paying about eight dollars a share in cash to purchase the company, which is a 27% increase on the Tuesday’s closing stock price for the company. The eight dollar price is also 51% above what the company was trading at before the company was asked by a major shareholder to consider strategic alternatives back in February.
The purchase means the addition of an entirely new channel of nutrition-based and health and wellness products to their lineup. Vitacost shared in a statement that the deal was approved by the boards of both companies as well as the shareholders of just over a quarter of Vitacost’s shares. The move may not be so surprising to analysts, as the Cincinnati-based grocery chain has seen an increase on revenue thanks to its sales of organic and natural food. The “Simple Truth” label has done so well for Kroger that their move to acquire more natural-living brands has not raised any eyebrows.
Who Is Vitacost?
It’s true that the move is a natural step for Kroger, and the deal may make even more sense when you consider that Vitacost.com Inc generated nearly $400 million in revenue last year, clocking in $382.7 million in total from selling not only vitamins but minerals, herbs, and products based around health and nutrition. The deal also comes at a good time, as revenue from organic and natural health food and products is virtually rolling in for retailers thanks to a national trend of health awareness, self care, natural products, and holistic, chemical-free living.
The deal will officially make Vitacost.com the latest addition to the Kroger family and will expand the company’s assets and reach. In the digital age, economists could argue that the acquisition of a solid health-based e-commerce store could be the online outlet that the company needs. Kroger also acquired the Harris Teeter supermarket chain in January for $2.5 billion and appears to be making calculated, smart company decisions based on data, information, and what the company needs to grow and thrive in the market. Kroger has already seen revenue grow 10% from purchasing Harris Teeter and carrying more organic produce and products and will likely see a return on their Vitacost.com Inc. purchase as well.
Expanding With New Vitacost Coupons
The deal is part of Kroger’s goal to expand their selection of healthy living products and add to an already quick-growing natural foods business, according to Kroger Chief Executive Rodney McMullen. Vitacost.com will be adding not only diversity to Kroger but a chance to have a platform that is high-tech and can ship to home, meaning that it has a national and international reach. This is in stark contrast to Kroger’s other titles, which reach only 34 states and Washington D.C. For its part, Vitacost has continued to grow at a rapid pace and has many repeat customers. Vitacost.com sells over 45,000 vitamins as well as supplements and health and wellness products, two U.S. distribution centers, and 800 associates. Apart from that client’s base has been largetly expanded lately due to the new vitacost promotion coupons available to consumers.