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Kroger completes acquisition of meal-kit company

BY Marianne Wilson

Kroger shoppers will soon be able to buy Home Chef meal kits, in stores and online.

The Kroger Co. on Friday finalized its acquisition of Home Chef, the country’s largest private meal kit company. The initial transaction price is $200 million, with future “earnout” payments of up to $500 million over five years. The payments are contingent on achieving certain milestones, including significant growth of in-store and online meal kit sales.

The Chicago-based company Home Chef will operate as a subsidiary of Kroger, maintain its e-commerce business, and assume responsibility for Kroger’s meal solutions portfolio. Home Chef will continue to operate its offices and facilities.

“We’re excited to welcome Home Chef to the Kroger family of companies,” said Rodney McMullen, Kroger’s chairman and CEO. “The merging of our two innovative, data-driven, and customer-focused cultures will allow us to accelerate our reach across America, serving food inspiration and uplift.”

The deal, which was announced in May , is not Kroger’s first entry into the fast-growing meal kit market. The grocer’s Prep+Pared meal kits are now available in more than 525 stores. Kroger said the Home Chef meals would complement its own offering.

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Winners, losers in Supreme Court ruling

BY Marianne Wilson

The Supreme Court handed a victory to the nation’s brick-and-mortar retailers on Thursday, overturning ruling that e-commerce marketers only had to collect sales tax in states where they had some sort of physical presence.

Physical retailers are clearly the big winners in the Supreme Court’s decision. (It’s estimated that not collecting sales tax gives online retailers anywhere from a 5% to 9.98% advantage, depending on the state, over traditional retailers in product pricing.)

The nation’s leading retail associations are also celebrating. Both the National Retail Federation and the Retail Industry Leaders Association have long argued for a “fair and level” playing field. With this ruling, the Supreme Court has laid the groundwork for just that.

The other big winners are the states, with the prior ruling causing states to lose annual tax revenues of up to $33 billion, Justice Kennedy wrote in the majority opinion.

S&P Global Ratings believes the Wayfair decision will help stem state tax erosion in a changing economic environment, with the additional tax revenue providing a “welcome incremental addition to state coffers.”

“We anticipate local governments that levy sales and use taxes will benefit similarly, broadening a revenue source integral to operations for many municipalities,” S&P said. “The additional tax revenue may also help local retail malls avoid a competitive disadvantage, potentially supporting local government assessed values and downtown commercial cores.”

Tax and accounting firms and tech companies are also likely to profit from the ruling. With more than 10,000 taxing jurisdictions across the United States, online retailers are sure to find compliance — without guidance — difficult at best.

“Companies engaged in e-commerce may have to revise their business models, their IT systems and their internal processes for calculating their tax obligations,” said Deloitte’s national multistate tax leader Valerie Dickerson, partner, Deloitte Tax LLP. “One key question is whether they have the required customer data to determine how to properly source sales.”

Another winner — oddly enough — is Amazon. The online giant already collects a sales tax in every state that has one. But many of its pure-play competitors do not. Already challenged by Amazon’s price competitiveness and Prime appeal, they will be even more hard pressed to compete price wise given the new tax burden.

“The biggest winners are Amazon and large brick-and-mortar players,” Bryan Gildenberg, chief knowledge officer at Kantar Consulting, told Chain Store Age. “The ruling will greatly affect Amazon’s first-party competitors, such as Wayfair and Newegg.”

(Thursday’s decision did not really address how third-party sellers collect sales tax. But Gildenberg believes Amazon’s vast network should not be affected since the Supreme Court “clearly states that the law needs to have a safe harbor for small businesses.”)

But “first-party competitors” are not the only losers. Indeed, small online-only businesses and mom-and-pop e-marketers are likely to be most impacted by the ruling.

“Small businesses and Internet entrepreneurs are not well served at all by this decision,” said Karen Kerrigan, president & CEO of the Small Business & Entrepreneurship Council. “It creates uncertainty, havoc, vast new costs and unknown exposure for small businesses. The fact that small businesses must now act as tax collectors for thousands of separate state and local jurisdiction is outrageous.”

Neil Saunders, managing director of GlobalData Retail, said that the challenge for smaller players will be significant “and the concern here is that complexity could stymie innovation and entrepreneurialism.”

He held out some hope, however, that most states would exempt smaller players.

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Wayfair: No major impact from Supreme Court tax decision

BY Marianne Wilson

Online home furnishings retailer Wayfair isn’t expecting any big impact on its business about losing the case it was a party to.

Responding to the U.S. Supreme Court decision in South Dakota v. Wayfair, the company said it already collects and remits sales tax on about 80% of its U.S. orders, with the number growing as it expands its logistics footprint. Wayfair had net revenue of $5.2 billion in its last fiscal year.

“As a result, we do not expect today’s decision to have any noticeable impact on our business, as it may on other retailers who do not currently collect and remit sales tax,” the retailer stated.

In addition to its namesake brand, Wayfair also operates several other brands, including Joss & Main, AllModern, Birch Lane and Perigold. The company is based in Boston.

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