Kroger's meal kit deal reheats Blue Apron shares

By Noel Randewich

SAN FRANCISCO (Reuters) - Shares of Blue Apron <APRN.N> climbed on Thursday after Kroger said it was buying Home Chef to broaden its menu in the home meal kit market while stock of Calavo Growers, whose unit partnered with Kroger on another meal kit service, slumped.

Supermarket chain Kroger Co <KR.N> said late on Wednesday it would pay $200 million for Home Chef, and up to $500 million more if the service reaches targets for in-store and online sales of its personalized food kits.

Kroger's purchase of Home Chef sent shares of meal-kit pioneer Blue Apron Holdings 3.2 percent higher in trading on Thursday.

Speculation it could be acquired has pepped up Blue Apron's stock in the past, although the shares remain down 70 percent since the company's initial public offering last June, with Wall Street worried about competition from Amazon.com and other retail heavyweights.

Calavo Growers <CVGW.O>, an avocado distributor that through a subsidiary partnered with Kroger on another meal kit service, slumped nearly 8 percent. Prep+Pared, which Kroger launched last year in partnership with FreshRealm, a supply chain startup partly owned by Calavo Growers, could fall by the wayside following the acquisition of Home Chef, analysts said.

"This acquisition should allow Kroger to gain new customers nationally, capture share in its existing markets (approximately 60 million shoppers), leverage existing vendor relationships, and complement (or replace) its existing meal kit business, Prep+Pared," wrote Telsey Advisory Group analyst Joseph Feldman in a note to clients.

Blue Apron launched the meal-kit market, selling subscriptions for pre-portioned ingredients paired with recipes for restaurant-style meals like tilapia piccata and miso-glazed barramundi, but has faced growing numbers of competitors.

Home Chef increased its sales by 150 percent last year and offers more meal variety than competitors, according to Kroger.

In March, Walmart Inc <WMT.N> launched its own kits, priced between $8 and $15 per meal.

Kroger's stock was down 0.25 percent at $24.50.

(Reporting by Noel Randewich; editing by Jonathan Oatis and Cynthia Osterman)