Kroger And Walgreens Cozy Up In Expanded Pilot Program

With Amazon.com (NASDAQ:AMZN) stepping up its grocery and convenience store game as it invests in its subsidiary Whole Foods and its cashier-less Amazon Go store concept, incumbents like Kroger (NYSE:KR) and Walgreens Boots Alliance (NASDAQ:WBA) have no choice but to innovate and do their best to stay at the forefront of an evolving consumer landscape. Known for its ability to disrupt retailers, Amazon's foray into the grocery and convenience store business isn't a move to be taken lightly.

This article originally appeared in the Motley Fool.

One way Kroger and Walgreens are innovating to compete with Amazon is with a new exploratory pilot program in which Kroger sells some products at a limited number of Walgreens stores. Though this pilot program began in October, the two companies announced an expansion of the program on Tuesday.

Kroger Express

Available at 13 Walgreens stores in northern Kentucky, Kroger and Walgreens' initial collaboration was simply the ability to pick up online orders from Kroger at Walgreens locations, and the availability of some of Kroger's private-label brands, including its popular organic Simple Truthbrand, at Walgreens stores.

However, Kroger said Tuesday that its partnership with these 13 Walgreens stores will now feature Kroger Express concepts, a 4,000-square-foot section that will cover about a third of an average Walgreens store's square footage. The Kroger Express store-in-a-store concept features 2,300 products, selected through customer data and insights.

"We are excited to enter the next phase of the pilot," said Kroger head of merchandising Robert Clark in a press release about the program. "The Kroger Express concept creates easy access to our most popular Our Brands products through a fill-in grocery shopping experience for Walgreens customers."

The Kroger Express concept will also include the company's Home Chef meal kits.

While the first Kroger Express concept is already operational at a Walgreens location in Florence, Kentucky, the other 12 pilot stores won't feature an Express concept until early next year.

Walgreens also said on Tuesday that it is making its Home Chef meal kits available in 65 locations in the Chicago area. "The Walgreens expansion provides more Chicagoans convenient access to a quick, simple meal," said Clark.

Staying relevant

Evident by the e-commerce giant's ongoing brick-and-mortar efforts, Amazon clearly has its eyes on Kroger's and Walgreens' markets. At Whole Foods, Amazon gives Prime members special discounts and allows customers to easily order groceries for same-day delivery in many markets. Meanwhile, the company is reportedly considering expanding its cashier-less Amazon Go concept from four locations to as many as 3,000 locations over the next few years, according to Bloomberg.

Kroger's Express format for Walgreens stores is part of a broader effort by the grocer to proactively address a shifting marketplace. Kroger refers to this plan as Restock Kroger. With Restock Kroger, the company aims to provide more personalized recommendations to customers, invest in better digital experiences, optimize space in stores, expand its private-label brands, and make strategic partnerships.

John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Daniel Sparks has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Amazon. The Motley Fool has a disclosure policy.