Kroger, Walgreens combine forces in the name of private label

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Kroger, Walgreens combine forces in the name of private label

By Dan Ochwat - 12/11/2019
The original Kroger and Walgreens partnership included the grocer running its Simple Truth products inside select Walgreens stores.

Coming together to build out efficiencies in how they source and produce their private label products, The Kroger Co. and Walgreens Boots Alliance have formed a group purchasing organization (GPO) that essentially enables the two retailers to buy together and source jointly for their store brands products.

Through the partnership, the companies will be able to buy from private label suppliers at a higher volume and negotiate discounts. In addition, the companies can leverage resources from one another, such as Kroger's 37 manufacturing facilities (where they manufacture some of their own brands) that Walgreens can potentially use, and Walgreens' sourcing company in Hong Kong that Kroger can leverage.

"Through this unique joint venture, Walgreens and Kroger have the opportunity to use our collective resources to create efficiencies across our supply chains," said Alex Gourlay, co-chief operating officer, Walgreens Boots Alliance. "This collaboration will also enhance our ability to drive innovation for customers, including both of our private label brands, to further meet their evolving needs for value and convenience."

With these new changes, the flavor profiles and current products aren’t expected to change, as the retailers understand the risk involved in changing up a product with its loyal shoppers. The  joint venture between the retailers is being called the Retail Procurement Alliance.

Per the original pilot partnership, Walgreens curated wellness items for select Kroger stores.

This is the second collaboration between the two leading retailers. In October 2018, the two piloted a concept where a Kroger Express department, including a special call to the Simple Truth private brand, would be featured in 13 Walgreens stores in northern Kentucky. In August 2019, Walgreens and Kroger announced an expansion of the pilot at 35 Walgreens locations in Knoxville, Tenn. At the same time, and in the same area, Walgreens curated an assortment of Walgreens health and beauty products at 17 Kroger stores.

"This collaboration is an extension of the strategic collaboration announced last year to create value for customers and shareholders of both companies," said Gary Millerchip, Kroger's CFO. "Kroger and Walgreens share a commitment to finding value and efficiency improvements by increasing innovation and competition through sourcing. This concept brings together the best of two great organizations to reinvent critical components of our sourcing practices."

Cincinnati-based Kroger operates more than 2,700 retail food stores under a variety of banners, and Deerfield, Ill.-based Walgreens is one of the nation's largest drugstore chains, operating 9,277 drugstores with a presence in all 50 states, the District of Columbia, Puerto Rico and the U.S. Virgin Islands.