The Kroger Co. and Walgreens Boots Alliance are ratcheting up their partnership by forming a group purchasing organization (GPO) aimed at delivering purchasing efficiencies, lower costs and combined resources "to help drive further innovation."
The new joint venture will be called Retail Procurement Alliance.
"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."
Considering the scale of the two retailers, this new deal might lead to further speculation that these companies may eventually merge.
Kroger and Walgreens initially announced an exploratory pilot in October 2018 to develop a one-stop shopping experience, which launched in December 2018 as the Kroger Express concept 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., and introduced a curated assortment of Walgreens health and beauty products at 17 Kroger stores in the same 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."
Walgreens, one of the nation's largest drugstore chains, operates 9,277 drugstores with a presence in all 50 states, the District of Columbia, Puerto Rico and the U.S. Virgin Islands.