Kroger and Walgreens are expanding their partnership to create a new group purchasing organization (GPO) called the Retail Procurement Alliance, which will pool resources to cut costs and advance innovation, the companies said in a press release on Wednesday (Dec. 11).
"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, chief financial officer for Kroger.
He added that the two companies are committed to building efficiency by “increasing innovation and competition through sourcing. … and reinvent critical components of our sourcing practices."
Kroger and Walgreens launched a pilot last year in 13 Northern Kentucky Walgreens stores to test Kroger Express, a one-stop-shopping concept. In August, they expanded the pilot to 35 Knoxville, Tennessee Walgreens locations. The companies also launched a curated collection of Walgreens health and beauty products at 17 Kroger stores in the Knoxville area.
"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."
Aside from partnering with Walgreens, Kroger is also collaborating with Microsoft, food retailer Ocado and robotics startup Nuro to enhance the customer experience and accomplish tasks that it cannot do alone.
Kroger has generated more than $1 billion in cost savings in each of the last two years and expects to do the same next year.
The food industry is a $1.5 trillion market. “It is big enough for different models to coexist, and ours will be one of them because Kroger is uniquely good at food,” Kroger Chairman and CEO Rodney McMullen said last month.