Kroger, Walgreens expand retail pilot

The Kroger Co. and Walgreens Boots Alliance are broadening their retail partnership, including the launch of Walgreens health and beauty brands in Kroger stores.

Kroger and Walgreens said Monday that their expanded retail pilot, building on a test launched last October, will bring the Kroger Express curated grocery assortment and Kroger Pickup service to 35 Walgreens drugstores in the Knoxville, Tenn., market. In addition, Walgreens own-brand health and beauty products will be sold in a Walgreens-bannered section in 17 Kroger supermarkets in Knoxville.

Both of the tests in the Knoxville area are slated to begin this fall.

"We continue to redefine the grocery customer experience and partner for customer value through our Restock Kroger transformation plan. Our growing relationship with Walgreens is just one more way Kroger is making life easier and better for even more customers, because everyone deserves to have affordable, easy-to-enjoy, fresh food,” Jeff Talbot, vice president of new business development at Kroger, said in a statement. "Expanding our pilot to Knoxville demonstrates the ongoing success and future potential of bringing together the best of Kroger's food authority with Walgreens' global expertise in health and beauty.”

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The 35 Walgreens stores in Knoxville will offer the Kroger Express selection of the Cincinnati-based grocer’s Our Brands products, including its Simple Truth natural and organic brand, as well as national-brand items. Designed to provide a fill-in grocery shopping experience, the assortment will vary by store and can include fresh meat, produce and dairy, frozen foods, shelf-stable products and Home Chef meal solutions, Kroger and Walgreens said.

Most locations will feature a full Kroger Express assortment of up to 2,700 products, with other stores offering an average of 2,300 products, the companies said. Most of the Walgreens pilot stores will also offer Kroger Pickup service, which will allow shoppers to place a digital order on Kroger.com or via the Kroger app for curbside pickup at a participating store.

Meanwhile, the curated Walgreens health and beauty selection at the 17 Kroger stores in Knoxville will span the beauty care, personal care, over-the-counter medicine and wellness categories and include the Walgreens Boots Alliance brands No7 and Soap & Glory.

Last October, Kroger and Walgreens announced a pilot in which customers at 13 Walgreens stores in northern Kentucky could order Kroger groceries online and pick them up at the drugstores. Among the items available in the test were Kroger’s Simple Truth brand.

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Then in December, the retailers expanded the pilot by introducing the curated Kroger Express selection of 2,300 grocery products at the 13 Walgreens stores. Along with Simple Truth products, the offerings will included Kroger own brands and national-brand products; dairy, meat, produce and frozen items; and meal solutions, such as Home Chef meal kits. The products were curated using customer data and insights provided by 84.51°, Kroger’s data analytics arm. Kroger and Walgreens also launched Home Chef Express meal kits at 65 Walgreens stores in the Chicago area. Kroger acquired meal kit provider Home Chef in May 2018.

Kroger and Deerfield, Ill.-based Walgreens describe their ongoing pilot as “exploratory,” noting that the initiative enables them to elicit customer feedback and gain insights in a “test and learn” retail setting before they make a decision on whether to expand their efforts.

“Walgreens customers have responded very favorably to the Kroger Express pilot in northern Kentucky. As a result, we're exploring more ways to offer customers an enhanced, more convenient shopping experience," stated Richard Ashworth, president of operations for Walgreens. "Working with Kroger, we're continuing to reinvent our customer offer to meet shoppers' evolving needs, which includes offering private-label grocery and health products at a great value, through an integrated omnichannel experience."

Some food and drug retail industry analysts have speculated that the Kroger-Walgreens relationship could lead to a broader collaboration — potentially the sale of Kroger’s supermarket pharmacies to Walgreens, à la the deal between Target Corp. and CVS Health. In December 2015, Target closed a $1.9 billion agreement to sell its 1,672 pharmacies to CVS, which now operates them under the CVS Pharmacy banner inside Target discount stores.

Kroger currently operates about 2,270 pharmacies in its 2,761 stores. As of the end of its fiscal 2019 third quarter ended May 31, Walgreens Boots Alliance had 9,390 drugstores under the Walgreens and Duane Reade banners in its Retail Pharmacy USA unit. The addition of Kroger’s pharmacies would make Walgreens the largest U.S. retail pharmacy operator by locations, surpassing CVS, which has about 9,900 pharmacy locations.