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Kroger announced yesterday that it is expanding its test of a relationship with Walgreen that has the potential of expanding its marketing power.

The relationship allows Kroger customers to shop on the grocer’s website and then pick up their orders at selected Walgreen stores. In addition, it installs small Kroger-branded convenient food sections in those same stores, with more than 2,000 SKUs, and puts Walgreen-branded HBC items into Kroger stores.

From an initial test in Northern Kentucky, near Kroger’s Cincinnati headquarters, the program now is being expanded to 17 Kroger stores in Knoxville, Tennessee. “The pilot in Knoxville is a continuation of the test-and-learn approach, and both retailers will continue to assess customer response,” the companies said.
KC's View:
To me, this is one of the most important moves that Kroger has made … it allows it to dramatically expand its footprint.

Think of it this way. Walgreen has 820 stores in Florida, where there are no Kroger-branded stores … but where Kroger currently is building a distribution center. Walgreen has 590 stores in the six New England states, where Kroger has none. Conceivably Kroger could establish a beachhead in all these places without having to build a single bricks-and-mortar location. It has the marketing muscle to go into these places with a robust e-commerce offering, supplement that with the Walgreen footprint, and pretty quickly become an effective player.

I have to believe that Knoxville is just the beginning of the expansion of this concept, if it works.