Wal-Mart Stores, Inc. (NYSE:WMT) is setting up both Supercenters and also smaller stores aimed to take on regional grocers. We also have Target which is increasing its presence, and Whole Foods Market, Inc. (NASDAQ:WFM) has just opened its first store. In terms of regional players, Food Lion has a big presence and third largest market share at 17.4% and Publix Super Markets is planning to get aggressive.
So, it was very important for Kroger, which did not operate in Charlotte earlier, to enter this strategic market. On the other hand it also made sense for Harris Teeter to sell out as competitive pressures were mounting on it. Now, with Kroger’s scale and Harris Teeter’s popularity the merged entity will be a force to reckon.
The Wal-Mart factor
Kroger’s biggest rival is Wal-Mart Stores, Inc. (NYSE:WMT). In fact, the latter is a formidable opponent to most retailers with its unmatched scale. Unluckily for Kroger, Wal-Mart Stores, Inc. (NYSE:WMT) has been focusing on groceries and has grown this business to account for 55% of its $274.5 billion annual revenue in 2012.
And this push still continues. Wal-Mart Stores, Inc. (NYSE:WMT) has a huge advantage over other retailers on account of its superior infrastructure. So, it is using its distribution centers and own trucks to get produce directly from the farmers into its stores with minimal transit time. This is helping in getting far better quality and freshness for the fruits and vegetables. The company is targeting to double its sales from locally grown produce within 2015.
Thus armed, Wal-Mart Stores, Inc. (NYSE:WMT) has just announced that it will provide money-back guarantee on fruits and vegetables at its domestic stores. It has also started training 70,000 of its employees on the ways to handle fresh produce.
With Wal-Mart being this aggressive in groceries, Kroger would need to consolidate its strengths. The Harris Teeter acquisition fills some important gaps in geographic reach as well range of merchandise.
Last word
The Harris Teeter acquisition has been very strategic for Kroger. The company already has a reputation for managing multiple banners without diluting their individual flavors. The acquisition fortifies Kroger’s position against both retail giants like Wal-Mart as well as niche players like Whole Foods Market, Inc. (NASDAQ:WFM). This will go a long way towards the company’s creating more shareholder wealth in the times to come.
Eshna De has no position in any stocks mentioned. The Motley Fool recommends Whole Foods Market (NASDAQ:WFM). The Motley Fool owns shares of Whole Foods Market. Eshna is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
The article This Giant Grocer Got Even Bigger originally appeared on Fool.com is written by Eshna De.
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