Boxed: Will Kroger Acquire the Online Wholesaler?

Kroger might buy Boxed

According to a recent report by Forbes, America’s largest supermarket chain Kroger (KR) is reportedly in talks to buy Boxed—an online bulk order wholesaler. The potential deal could value Boxed somewhere between $325 million and $500 million. However, Kroger isn’t the only one in the race. Costco (COST), Target (TGT), and German-based Aldi are some of the other companies that have reportedly shown interest in Boxed.

Boxed: Will Kroger Acquire the Online Wholesaler?

Why is Kroger interested?

Since more customers prefer to shop online, retailers are busy strengthening their online platforms. Kroger acquired Harris Teeter and in 2015.

Retailers have felt immense pressure due to Amazon’s (AMZN) entry into the food retailing space. Companies have been entering into partnerships and acquisitions to counter the competition from Amazon. Recently, Target acquired Shipt, a same-day delivery platform, for $550 million.

Acquiring Boxed would strengthen Kroger’s online presence and enable it to enter a new channel—bulk sales. Boxed offers ~1,600 bulk goods ranging from paper towels and pet food to potato chips. Founded five years ago, Boxed has evolved as a successful online alternative to Costco, BJ’s, and Sam’s Club.

Boxed also has a business-facing unit that accounts for ~20% of its $100 million sales. The segment has shown solid momentum by growing at a triple-digit rate. The segment makes Boxed an attractive acquisition.

Supply chain consultant Brittain Ladd carried out a study in June 2017. He argued that acquiring Boxed would be a good strategy for Kroger and its competitors.

Ladd said, “I firmly believe Kroger can take significant market share from Costco and Sam’s Club if they acquire and integrate Boxed into the Kroger ecosystem.”