Supermarket giant Kroger Co. is coming back to the Lowcountry, though it's taking pains to make sure shoppers barely notice its return.
Stores: 2,419 supermarkets in 31 states under 24 names, including Kroger, City Market, Dillons, Jay C, Food 4 Less, Fred Meyer, Fry's, King Soopers, QFC, Ralphs and Smith's. No operations in the Charleston area. It also has 784 convenience stores, 322 jewelry stores, 1,182 fuel centers and 37 food processing plants.
Sales: $96.8 billion
CEO: David B. Dillon
Stores: 212 supermarkets in 8 Southeast and mid-Atlantic states. 14 stores are in South Carolina; 7 are in the Charleston region.
Sales: $4.5 billion
Headquarters: Matthews, N.C.
CEO: Thomas W. Dickson
After a long absence from the local supermarket scene, the Cincinnati-based chain announced Tuesday it is buying smaller regional rival Harris Teeter in a $2.44 billion deal that will give it seven stores in the Charleston area.
“This is a financially and strategically compelling transaction and a unique opportunity for our shareholders and associates,” Kroger CEO David Dillon said in a statement.
A sale had been expected for months. Harris Teeter announced in February that it was exploring strategic alternatives, including hiring an investment bank to court potential buyers.
According to numerous media reports, other potential suitors had included Publix and a private equity firm.
After the deal closes, the 212-store Harris Teeter will become a subsidiary of Kroger and will continue to be managed by its current senior executives.
Kroger said it expects the deal to bring cost savings of $40 million to $50 million over the next several years, but it did not elaborate. No stores are being closed, and the North Carolina chain's headquarters will remain outside Charlotte.
Mike Schlotman, Kroger's chief financial officer, noted that the two chains have little in the way of overlapping locations. He called Harris Teeter ”an amazingly great fit.”
As one of the nation's largest retailers, Kroger brings to the table tremendous buying power and technological advantages not available to an independent smaller chain.
On the flip side, Schlotman noted, Harris Teeter has done an exceptional job in promoting and selling high-profit prepared and fresh foods.
“That's actually on of the things we think we can learn from them,” he said during an interview on Bloomberg TV.
He also said it's too early to speculate about post-merger details, such as whether Kroger will keep Harris Teeter's VIC Card loyalty program or make merchandise changes. Those decisions will be made later by executives of both chains.
He stressed during a conference call with financial analysts that Kroger takes “integration very seriously” when it buys a competitor.
“For now, I can say we would like to keep everything about Harris Teeter that made the company the highly success supermarket operator it is,” he said.
He also said Harris Teeter has built an “exceptional brand” and a strong name that will remain intact. Kroger has successfully acquired other grocery chains without fiddling with their corporate identities, Schlotman noted.
“Those names mean something in the market, and this deal is no different,” he said. “There's no sense disrupting what that name stands for and trying to explain to customers what a new name stands for.”
Kroger expects to expand Harris Teeter, “just as we expert to grow Kroger's franchise,” Schlotman added.
If approved by regulators and shareholders, the deal would mark Kroger's return to the Lowcountry. The chain operated a handful of grocery stores in Charleston area until the late 1980s, when it sold them to Bi-Lo. It still has three of it namesake supermarkets in South Carolina, all in Columbia, according to its website.
Harris Teeter was formed more than 50 years from the merger of the Harris and Teeter food merchants in Charlotte. It opened its first Charleston in April 1977 at Cross Creek Shopping Center on James Island.
It now vies for local food-shopping dollars with the likes of Bi-Lo, Costco, Food Lion, Piggly Wiggly, Publix and Walmart, among others.
“As part of Kroger, Harris Teeter will be well equipped to continue to provide our customers outstanding quality and customer service as well as excellent value in an increasingly competitive market,” CEO Thomas Dickson said in a written statement.
Contact John McDermott at 937-5572.