Kroger couldn’t have Albertsons, but it’ll settle for Giant Eagle.
A year and a half after abandoning its planned merger with Albertsons, Kroger has made another move – this one, to purchase the Pittsburgh area-based Giant Eagle grocery chain for $1.65 billion.
In an early morning announcement today, Kroger said the transaction was consistent with its “disciplined approach to capital allocation and its focus on acquisitions where the company can create clear value for customers, associates and shareholders.”
Giant Eagle has 197 grocery stores and 11 standalone pharmacies, most in western Pennsylvania, northeastern and central Ohio, and a scattered few in West Virginia, Maryland and Indiana. Geographically, the move appears to make sense for Kroger – Giant Eagle stores are mostly adjacent to where Kroger already operates. Kroger has no stores in Giant Eagle’s home state of Pennsylvania, or in western Maryland, where Giant Eagle operates a couple of stores. And Kroger stores in its home state of Ohio are mostly west of Giant Eagle’s cluster in the northeastern part of the state.
The only real areas of overlap are in the Columbus, Ohio area, where both grocery chains have multiple stores, and Carmel, Indiana, where each operates a single store. Without naming any specific stores just yet, Kroger said in order to get regulatory approval for the transaction, “Kroger and Giant Eagle expect to make limited Giant Eagle store divestitures.”
Giant Eagle confirmed it will retain its name and loyalty program, and operate as a division of Kroger, which would be consistent with most of Kroger’s previous acquisitions.
Kroger has grown into the country’s largest grocery chain through a series of acquisitions over the years. But its Giant Eagle purchase is its first major acquisition in more than a decade, since it purchased Wisconsin-based Roundy’s back in 2015. And it’s the first under Kroger’s new CEO Greg Foran, who came in earlier this year promising to shake things up.
“Giant Eagle is a well-run, high-quality regional grocer with a strong reputation for fresh products, pharmacy, private label and customer loyalty,” Foran said in a statement. “We evaluated the opportunity carefully, and the strategic fit is clear. Giant Eagle expands our reach into attractive adjacent markets, allowing us to do what we do best: Run outstanding stores, deliver fresh foods and convenient meal solutions at affordable prices, and take care of our customers and associates every single day.”
Giant Eagle is already heavily promotional like Kroger, and it already got rid of perks like double coupons at about the time Kroger stores started doing the same. Foran recently pledged to simplify Kroger’s complicated, sometimes confusing, overlapping promotional prices. Under Kroger, it remains to be seen whether Giant Eagle will do the same.
Separately, Foran also observed last month that “we have not been opening enough stores.” If the Giant Eagle acquisition is approved by federal regulators, Kroger will succeed in adding about 200 stores to its portfolio in one fell swoop.
Giant Eagle’s boss is publicly praising the transaction. “Today’s announcement marks an exciting next chapter for our Team Members, customers, vendors and community partners,” Giant Eagle CEO Bill Artman said in a statement. “Together with Kroger, we will be well-positioned to advance our strategy and deliver better quality and service, better everyday value, and a better shopping experience for our customers, while providing greater growth opportunities for our dedicated Team Members.”
Early reaction from shoppers and employees is mixed. “Expectation: lower prices! More choice! Reality: higher prices, layoffs,” one Reddit user wrote on a Pittsburgh-area subreddit. “What we need is competition in this area, not sure if changing a store from one local dominator to another will be enough to lower prices,” another wrote.
Others are more optimistic. “Kroger is better than Giant Eagle. This is a win,” one shopper commented. “I grew up with Kroger. Giant Eagle has been such a huge disappointment in comparison,” another agreed. “If nothing changes in how they operate, prices will be lower,” a third commenter predicted. “Kroger store brand is consistently cheaper. Kroger runs better sales.”
After all, the most recent American Customer Satisfaction Index survey ranked Kroger near the middle of the pack, while Giant Eagle was dead last for the second year in a row.
So Kroger is optimistic it can improve things. The retailer said purchasing Giant Eagle offers “significant opportunity to accelerate growth both in-store and online, enhance the customer experience and create long-term value for shareholders.” The sale is expected to close sometime next year.
Giant Eagle traces its roots back to 1918, when three Pittsburgh-area families started Eagle Grocery, expanded it into a 125-store chain – and then sold it to Kroger. A few years later, they started over by partnering with two other families to launch Giant Eagle.
So with Giant Eagle’s owners selling the chain to Kroger again a century later, today’s transaction looks like history repeating itself. It will ultimately be up to shoppers to decide whether it’s better the second time around.
Image sources: Kroger/Giant Eagle
One correction: Kroger does operate stores in Maryland under the Harris Teeter banner.
Thank you! My oversight. Still no overlap in Maryland between GE and HT, but I’ve corrected the reference in the article.