The Kroger Co. will buy Harris Teeter in a $2.5 billion deal, the company announced Tuesday.
Both grocery chains have a presence in Hampton Roads. Right now, Kroger executives are not saying exactly how the merger will change either grocery brand.
“We look forward to bringing together the best of Kroger and Harris Teeter while continuing to operate and grow the Harris Teeter brands,” David Dillon, Kroger’s chairman and CEO, said in a statement.
In January, reports surfaced that Harris Teeter was looking for a buyer.
The deal would be the fourth-largest supermarket acquisition in the past 10 years, according to Bloomberg. It is Kroger’s biggest takeover since it bought Fred Meyer in 1998 for $12 billion.
Kroger operates seven stores in the region, including one in York County in the Kiln Creek area. A new Kroger Marketplace, designed to offer home goods and groceries, will open in Virginia Beach on Wednesday, July 30. A second marketplace is under construction in Suffolk.
The company operates about two dozen banners under The Kroger Co. umbrella and has 2,419 stores in 31 states. The addition of Harris Teeter will add a Kroger presence to Maryland, Delaware and Florida.
There are 13 Harris Teeter stores in Hampton Roads, with locations in Williamsburg, Newport News and Suffolk. The grocery chain currently has 212 stores in eight states and the District of Columbia.
Hampton Roads is one of only four areas in which Harris Teeter and Kroger stores overlap, said Schlotman. Charlottesville, Nashville, Tenn., and Raleigh, N.C., are other areas where both brands exist. Since the deal is still pending approval from the Federal Trade Commission, it is unclear whether changes will have to be made in those markets. But current market share for both companies is relatively small in Hampton Roads, Schlotman said.
According to a market analysis by Food World, Harris Teeter ranks third in market share among traditional supermarkets in the Hampton Roads region, reporting $284 million in sales in 2013, an increase from $267 million in 2012. Its market share increased from 11 percent to 12 percent.
Kroger holds about 5 percent of the market in Hampton Roads. Other traditional grocery stores include Food Lion, Farm Fresh, Martin’s (formerly Ukrop’s), Trader Joe’s and Whole Foods. Groceries are also available at military commissaries and at the big-box retailers Target and Walmart.
Kroger headquarters will remain in Cincinnati, and Harris Teeter will keep its headquarters in Matthews, N.C. Under the merger with Harris Teeter, The Kroger Co. will operate 2,631 supermarkets in 34 states and the District of Columbia.
Kroger plans to finance the deal with debt, as well as assume about $100 million in debt from Harris Teeter, according to a written company statement.Schlotman said the company expects to achieve an annual cost savings of approximately $40 million to $50 million over the next three to four years, primarily through expanded purchasing power.
Harris Teeter brought in about $4.5 billion in revenue in the 2012 fiscal year. Kroger reported $96 billion.
Changes in store?
Schlotman would not make specific remarks about in-store changes, and a public relations spokeswoman said they could not comment at this time on any plans for the Hampton Roads area.
Traditionally, Kroger is known for keeping brands in tact after acquisitions, David Livingston, a Wisconsin-based supermarket analyst, said in a phone interview.