Kroger Branches Out Into Specialty Grocery Retailing

CINCINNATI & BOULDER, Colo. — On the heels of its recent purchases of the Harris Teeter and Roundy's grocery chains, supermarket and convenience store operator The Kroger Co. has now forged a “strategic partnership” with Boulder-based specialty grocer Lucky’s Market.

The hybrid deal, terms of which were not disclosed, closed April 1 and is expected to significantly accelerate the growth of the 17-store Lucky’s banner in new and existing markets.

According to Kroger officials, the partnership is designed to further enhance the best products, practices and techniques of Lucky's Market, combining them with Cincinnati-based Kroger’s scale and experience, to generate more benefits for customers.

Founded in 2003, Lucky's Market and its affiliates employ more than 1,800 associates in 13 states throughout the Midwest and southeastern United States. Lucky's "Organic for the 99%" store format emphasizes an expansive selection of natural and organic food, including fresh produce, meat and seafood, prepared foods and baked goods, as well as wine and beer and personal care goods. 

With stores averaging about 30,000 square feet, Lucky's layout resembles an indoor farmers market, with "garage door" entrances, field bins, barrels and wooden crates. Its culinary department showcases restaurant-quality prepared foods made from recipes that include those developed by CEO and former chef Bo Sharon and his wife Trish, who together founded the Lucky’s banner, which grew from a single location in a former convenience store.

Through its "L" private label line, Lucky's provides a broad range of grocery items that have no artificial colors, flavors or preservatives. In addition, 10 percent of the profits from its private label sales are reinvested in the communities it serves.

This new alliance further demonstrates Kroger’s “deep, ongoing commitment to providing customers with affordable, fresh, organic and natural foods as a part of its Customer First strategy,” according to the company, which indicated the deal will gel well with its first-ever small-format Main & Vine concept store in Gig Harbor, Wash., which mixes local, specialty and everyday products.

“It is a very special day in our industry when our largest traditional grocer and one of our fastest-growing specialty grocers form a strategic growth partnership," Scott Moses, managing director and head of food, drug and specialty retail investment banking at New York-based Sagent Advisors LLC, told Progressive Grocer, a sister publication of Convenience Store News. Sagent acted as an advisor to Lucky's.

"Lucky’s is truly unique in its mission, its ethos and its egalitarian approach to good, healthy food. With Kroger’s help, we expect Bo and the Lucky’s team to continue their rapid growth and really make a mark in the sector over the next few years,” continued Moses. “We are honored to have played a part in helping these two great companies embark on this exciting journey together.” 

Kroger operates a total of 2,778 retail food stores under a variety of banner names in 35 states and the District of Columbia. This includes 786 convenience stores in 19 states under six banners: Kwik Shop, Loaf N' Jug, Quik Stop Markets, Tom Thumb Food Stores, Turkey Hill Minit Markets and Smith's Express.