Kroger and Walgreens Join Forces in Cincinnati-Area Pilot

In the continuing saga of strange bedfellows teaming up to combat the threat of Amazon, a Kroger/Walgreens pilot in northern Kentucky outside Cincinnati allows shoppers to pick up online Kroger orders at 13 Walgreens locations and purchase select Kroger products while there.

The news has prompted some to wonder what value this brings to shoppers who can already pick up online Kroger orders from 50 stores in the greater Cincinnati area, but again it’s all about offering more convenience and options.

The pilot of the “one-stop shopping experience” – which assumes food and pharmacy items are all anyone needs – will feature sale of Kroger’s Our Brands grocery items, including its Simple Truth organic brand.

“This innovative new concept is an opportunity to test and learn as we determine how we can best work together to further elevate our customer offering,” said Stefano Pessina, executive vice chairman and CEO of Walgreens Boots Alliance Inc. in a release. “We continue to evolve our offerings to meet the changing needs of our customers and provide a more differentiated shopping experience.”

“This exciting collaboration aligns with Kroger’s vision of serving America through food inspiration and uplift,” said Rodney McMullen, Kroger’s chairman and CEO in the release. “This concept brings together the best of two great brands to rethink convenience and redefine the way America shops for food.”

After savaging retail, Amazon is looking to do the same damage in both grocery and pharmacy, prompting defensive measures like this one. Forbes points out several such alliances including Rite-Aid’s abortive attempt to merge with Albertsons – nixed by the former’s shareholders – CVS Health’s plans to acquire Aetna and Walmart’s partnership with Anthem on prescriptions.

One analyst with Wells Fargo is even suggesting this latest partnership signals Kroger’s interest in selling its pharmacy business to Walgreens, according to the Cincinnati Business Courier, with the latter running the pharmacies in Kroger stores.

“We believe a potential next step could be the sale of its pharmacy business,” said analyst Edward Kelly in a research note. “The strategic argument is stronger than ever given structural changes in pharmacy, there looks to be an underappreciated opportunity to unlock material value and it seems highly aligned with management’s more progressive approach.”

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