Will Harris Teeter Prosper Under Kroger Ownership?

Discussion
Jul 09, 2013

Kroger is acquiring Harris Teeter. This morning, the chains announced a definitive merger agreement under which Kroger would purchase all of Teeter’s outstanding shares. The deal means that Kroger will add another 212 stores in the Southeast and mid-Atlantic markets.

"Harris Teeter is an exceptional company with a great brand, friendly and talented associates, and attractive store formats in vibrant markets run by a first-class management team," said David B. Dillon, Kroger’s chairman and chief executive officer, in a statement. "They share our customer-centric approach to everything we do — from store format and merchandising to innovative loyalty programs. This is a financially and strategically compelling transaction and a unique opportunity for our shareholders and associates. We look forward to bringing together the best of Kroger and Harris Teeter while continuing to operate and grow the Harris Teeter brands."

Thomas Dickson, Harris Teeter’s chairman and CEO, said, "We are excited about becoming part of The Kroger Co., one of the best food retailers in the U.S. while maintaining the Harris Teeter banner, our management teams, our new store growth plan, our distribution and manufacturing facilities in North Carolina as well as our headquarters in Matthews, NC."

Kroger expects to achieve annual cost savings of up to $50 million over the next three or four years due to improved economies of scale as a result of the deal.

Harris Teeter has faced increased competition in recent years with expectations for more to come. As RetailWire reported in January, Publix has begun moving into Teeter’s territory. The chain has also been under pressure from Walmart, which is running its price comparison ads against the grocery chain.

What is your reaction to the news that Kroger is acquiring Harris Teeter and plans to continue to operate it as a standalone business? What will the acquisition mean for the competitive strength of each company?

Please practice The RetailWire Golden Rule when submitting your comments.

Join the Discussion!

19 Comments on "Will Harris Teeter Prosper Under Kroger Ownership?"


Sort by:   newest | oldest | most voted
Richard J. George, Ph.D.
Guest
8 years 10 months ago

I think it is a terrific move by both retailers. The key is to allow Harris Teeter to compete as Harris Teeter and to take advantage of the economies of scale which are invisible to the customer that Kroger can bring to the deal.

These are two well-run food retailers with strong positioning in their respective target markets. If executed properly, the only significant difference should be seen on Wall Street, not Main Street.

Tony Orlando
Guest
8 years 10 months ago

Two very high quality organizations, with great service; it’s a good thing for both companies. This will help Kroger grow, and help fight the competition without adding new stores from the ground up. I like it.

Ryan Mathews
Guest
8 years 10 months ago

There are still a few miracles that I’ve yet to witness before I shuffle off this mortal coil. One of them is the operation of an acquired company as a truly standalone business.

For one thing, it’s a little difficult to really achieve those economies of scale unless you … well … blend the operations.

So great move for Kroger and perhaps an inevitable move for Harris Teeter but—to paraphrase the old saying—”Never the twain shall meet.”

Max Goldberg
Guest
8 years 10 months ago

It’s not surprising that Kroger is acquiring Harris Teeter. Managed properly, this could be a win for both companies. Kroger has a history of buying grocers and leaving their brands intact.

The acquisition will allow Kroger to be more competitive in a growing area of the country, while giving the Harris Teeter brand the deep pockets it needs to compete.

Dr. Stephen Needel
Guest
8 years 10 months ago

It will be interesting to see what they do with H-T outside H-T’s core markets. Could be a means to combat Publix by bringing in a more upscale product. Cost savings do seem on the high side—I’d love to see how they are going to generate that much more in economy of scale.

Ron Margulis
Guest
8 years 10 months ago

The industry consistently underestimates Kroger and its management team, and this acquisition is another proof point. Other chains were considered more likely suitors, but Kroger’s offer makes the most sense for Harris Teeter. The best thing about the acquisition is that the Harris Teeter shopper should really benefit from the greater buying power of the combined company. It will be interesting to see how Ahold, Delhaize and the other chains in the region will react.

Mike Blackburn
Guest
8 years 10 months ago

Best thing HT could have done, and with a multiple of close to 7.5, not a bad price. Assuming the synergies are achievable, Kroger can reinvest the 100 basis points in savings into lower prices…making it a little more difficult for those new Publix stores to pull customers.

Gordon Arnold
Guest
8 years 10 months ago
In a stagnant economy, expectations of savings from “economies of scale” are worth little consideration for investment reasons. In a lingering depression, this justification is foolishness. When you add competition from healthy corporate adversaries known for selling price ahead of product, the forecast for future profitability is gloomy. I am not so sure this is the whole story. A look at the banks and the suppliers involved here might show justification for further investigative research disclosing that much more is at stake than a single grocery chain. The reports are in for what happens when Walmart carves into a geographic area selling groceries. They have few failures in the new market and the follow on growth numbers are even good. After the last report card showing other Walmart departments shrinking, there will be additional pressure on grocery to assist with profit taking. Not a good omen for the competition. Harris Teeter’s short term survivability will surely devour these investment dollars with the same old plans from the same old management team facing the same old… Read more »
J. Peter Deeb
Guest
8 years 10 months ago

Good move for both companies! Kroger is inexorably gobbling up prime retail geography and this is another example of that. Can the Northeast be that far behind?

Camille P. Schuster, Ph.D.
Guest
8 years 10 months ago

I have been wondering when Kroger would make a move to get back in the Southeast. The philosophies may match well but, if they match so well, why the need to run Harris Teeter as a separate business? How does that create efficiencies?

Mark Heckman
Guest
8 years 10 months ago
I am in agreement with most of the other panelists. This is good for Kroger and one of the best, if not the best available option for Harris Teeter. While Ryan Mathews is “dead on” with his comment about running acquired banners as stand-alones is unprecedented, Kroger does a much better job at allowing their KMAs and banners market to the competition than certainly Safeway or even Delhaize. I expect some bumps along the way, but lowering prices smartly, which is one of the best attributes of Kroger, is one of the first expected steps. However, Kroger should be cautious about immersing the Harris Teeter shopper in new lines of stores’ brands right out of the gate, but I would expected more private label options for Harris Teeter shoppers in the future. Because Harris Teeter operates on the “high end” of the fresh and services spectrum, Kroger will hopefully be sensitive to how important that aspect of the Harris Teeter business is to its shoppers and be cautious with luring temptation of cutting labor for… Read more »
James Tenser
Guest
8 years 10 months ago
Any time I observe a merger announcement that touts “economies of scale” as a principal benefit, my skeptic’s flag flies. I suppose the numbers are invented to mollify old-school institutional investors. Ultimately, nobody will ever verify whether the $50 million materializes. There are other, more compelling reasons to like this deal, however. It’s great value for the Harris-Teeter shareholders, who were facing the reality that their company had nowhere to go but down from its present good position. With a relatively upscale price position and Publix and Walmart edging onto their turf, life was only going to get more difficult. Kroger gains geography and top line sales in nice big chunks. It acquires a business unit that may be improved materially by the application of its dunnhumby USA shopper-data-crunching know-how and greater purchasing clout. It has the capital depth to fund some strategic responses to the Publix and Walmart threats. Will Harris Teeter remain a “separate business unit” for long? I’d look to Kroger’s history with Fred Meyer, or maybe even King Sooper as templates.… Read more »
Ed Rosenbaum
Guest
8 years 10 months ago

This will be good for both companies. They will gain economies of scale and be competitive without having to build new units. These are two excellent brands in an area where loyalty is important. They will excel and be a continuing strong influence in their geographic markets.

Warren Thayer
Guest
8 years 10 months ago

Great move for both. The “standalone business” is a myth, albeit a very nice one. But Kroger does a better job of acquiring and running businesses than Safeway has over the years, so I’m confident this will work. Doing research on Fred Meyer now for an upcoming cover story, and Fred Meyer is gaining share in almost every single market where it operates. Kroger is doing a phenomenal job, will save Harris Teeter some pain, and everyone wins.

Jerome Schindler
Guest
8 years 10 months ago

I shop at HT when visiting family in NC. Comparing to the Kroger in my home town (Columbus, OH) I’d say Kroger could learn a lot from HT. Whether they will or not is debatable—I suspect not. I echo what others have said about the “economies of scale.”

David Livingston
Guest
8 years 10 months ago

This will save Harris Teeter and allow them to exist. No better, no worse. I see this as being similar to the Smith’s acquisition, a mediocre chain that simply continues to operate.

Tom Smith
Guest
8 years 10 months ago

By keeping Harris Teeter as a standalone business, Kroger must not let the cleanliness and service levels drop to the levels we see at Kroger. If they do, there’s no positive differentiation between the two brands.

In North Carolina, Harris Teeter is more like Fresh Market and Kroger is more like Food Lion.

Mike B
Guest
Mike B
8 years 10 months ago
I don’t think HT is anything great, especially given its pricing, but a lot of customers seem to see this as an upscale chain and perception is everything. It is nice that it gets Kroger into some new markets and also gives Kroger more urban market exposure something Kroger has clearly been trying to learn and has hit some bumps on that path. Out here in Nevada, under Kroger, Smiths has gone from a poor quality, dirty, and not so great priced store to a respectful quality store with excellent pricing and improved store conditions. The Smiths I frequent struggled when it opened near a Winco in a good part of town about seven years ago and upon opening was pushing awful $2.99/lb cheap turkey and ham in the deli; today that deli is a full Boar’s Head spread, a good 20 feet long and very popular. The bakery was pushing little loaves of bread. 10/$10. Today this store has a huge glass case of various La Break and other high quality breads 15 feet… Read more »
Jay Armer
Guest
Jay Armer
8 years 10 months ago
As a grunt in the Kroger family of stores, I offer my perspective. I do not believe that HT will be able to operate as a standalone banner under the Kroger mother ship (as has been mentioned in other articles). None of its other 20 plus banners do, why would they make an exception for this one? In the past 5 years Kroger consolidated all buying to the GO in Cincinnati. I have no doubt that within a year after the ink is dry on this merger the HT buying department will be non existent. Their corporate offices will become shells of what they once were with some people moving to Ohio. The rest either taking severance or going into the stores. Kroger will also unleash its programs on HT store management, such as Key Retailing (hated by the store associates and salaried management alike) and QueVision, which requires that every associate in every department be trained to cashier. These associates are then called to assist the front no matter what the workload or customer… Read more »
wpDiscuz

Take Our Instant Poll

How much more or less competitive will Harris Teeter be after being acquired by Kroger?

View Results

Loading ... Loading ...