Kroger Teams With China's Alibaba to Expand E-Commerce Push

(Bloomberg) -- Kroger Co. is going overseas for the first time: China, to be specific.

The grocery chain, which is the largest in the U.S. with nearly 2,800 locations, is partnering with e-commerce giant Alibaba Group Holding Ltd. on a pilot test of an online store. It’s the latest digital effort by the brick-and-mortar grocer, which has spent the last year trying to reassure investors that it can compete with giants like Amazon.com Inc. and Walmart Inc. as they pour billions into operations.

The intersection of retailing and technology is hot in China right now. Alibaba is on a mission to uproot traditional grocery and department stores with delivery services, high-tech stores and better tracking of inventory and customer data. JD.com Inc., which already operates a chain of high-tech supermarkets in Beijing, is teaming up with Walmart Inc. to combine their network of warehouses and cold storage to shorten delivery to customers. Tencent Holdings Ltd. is investing in Carrefour SA’s China unit.

Kroger will sell products from its natural and organic private label, Simple Truth, for the test in China, which will be run through Alibaba’s Tmall Global platform.

Simple Truth posted sales of more than $2 billion in the most recent fiscal year. Grocers have invested to improve the quality of their private-label goods in recent years as customers increasingly turn away from legacy brands. The products are seen as key to locking in shoppers.

Kroger’s shares rose 1.9 percent to $30.45 in New York on Tuesday. The stock has gained 11 percent this year, rebounding since it was hammered last year in the aftermath of Amazon’s acquisition of organic grocer Whole Foods.

--With assistance from Reed Stevenson.

To contact the reporter on this story: Craig Giammona in New York at cgiammona@bloomberg.net

To contact the editors responsible for this story: Anne Riley Moffat at ariley17@bloomberg.net, Jonathan Roeder, Mark Schoifet

©2018 Bloomberg L.P.