Kroger Pursuing Israeli Grocery Chain?

Successful bid in partnership would make it first overseas retailer to enter Israeli grocery market

February 15, 2016, 04:05 pm By Jim Dudlicek, Stagnito Business Information

As discussion of The Kroger Co.’s pursuit of The Fresh Market continues, there’s word the Cincinnati-based grocery giant is also looking abroad for its next investment.

Kroger has reached an agreement with Israeli investors Yossi Sagol and Eran Meital to bid on Israel’s Mega, a 127-store supermarket chain, and become an operating partner if the alliance succeeds, Haaretz.com has reported.

Kroger, which typically does not comment on market rumors or speculation, declined to comment in its reply to PG’s query about the deal.

If successful, Kroger’s entry would be the first by an overseas player in the Israeli supermarket sector, Haaretz.com reported.

Tamir Ben Shahar, CEO of the Haifa, Israel-based retail consulting firm Czamanski & Ben Shahar, told Haaretz.com that “an overseas player could change the standards of supermarkets in Israel. Americans, in particular, are recognized as retailers of the highest caliber. They have systematic policies and very clear procedures about how to manage a chain. It has to be good for Israeli retailing.”

Haaretz.com said Sagol and Meital began pursuing Mega before the chain won court-ordered protection from its creditors last month. The investors expect to make their formal proposal in the next few days and formalize Kroger’s role in the venture, the website reported.

Still under discussion is whether Sagol, Meital and Kroger will divide control three ways or try to recruit an Israeli retailer as a fourth partner; and whether or not the chain will operate under the Kroger name.

Haaretz.com said Sagol, a scion of the family that controls Keter Plastics who has been running the company’s American operations, has been in talks with Kroger CEO Rodney McMullen in recent weeks and, in the last few days, reached an agreement in principle on bidding for the chain and operating it together.

The Sagol-Meital-Kroger group is expected to have competition for control of Mega, Haaretz.com reported; Israeli food retailers Yenot Bitan, Victory and Rami Levy are expected to make offers as well. Rami Levy is likely to meet antitrust objections, and Victory’s bid depends on talks with an unnamed European supermarket chain, the website reported.

“The Israeli market is the most competitive there is, with very low operating profits that require careful attention to the shopping behavior of the Israeli consumer, which is different than the American,” Ben Shahar told Haaretz.com, noting that Israelis are less loyal to their supermarket than American shoppers are.

If the Sagol-Meital-Kroger group moves Mega from its neighborhood-store format to discount, Ben Shahar told Haaretz.com, it will have a major impact on the supermarket business, including parallel imports and stocking shelves with Kroger private-label brands.