KROGER CEO: 'Whole Foods is a great fit' for Amazon

Business Insider

When Amazon announced it would be buying Whole Foods for $13.7 billion, Kroger's stock tanked. The competing grocery store saw its shares drop more than 11% in the hours after the announcement.

Despite the losses, Kroger's CEO says business will continue like normal after Amazon official acquires Whole Foods.

"We do really focus on the long term. The long term is three to five years. We continue to grow market share. Our customers continue to tell us were doing a better job," Rodney Mullen, Kroger's Chairman and CEO, said in an interview with CNBC.

Mullen told CNBC that the retail industry is always changing and that the recent acquisition is just one blip in an ongoing timeline.

"I guess for me it wasn't as much of a surprise as it was for others. You know, you could tell that Amazon wanted to do something from a physical asset standpoint and I think Whole Foods is a great fit for them. We feel great about where we are," Mullen said.

Kroger has been working toward competing with organic and natural-food focused retailers. Mullen said that Kroger is now offering more organic products at more accessible prices. He said the organic foods business is a $16 billion category, and he hopes to take a slice of that market for Kroger.

Amazon has a large financial cushion, and Kroger investors are worried Amazon will use that cushion to lower prices at Whole Foods, making it more competitive. Mullen was questioned on how Kroger's already thin profit margins will perform after the Whole Foods deal, and he simply pointed again to the constantly changing retail landscape as a reason not to worry. Kroger assumes that competition will always be on the rise, and prices that into its financial projections.

Buying Whole Foods gives Amazon access to physical locations all across the nation. These locations could be the starting point for a national grocery distribution network for Amazon. Mullen said he sees Kroger offering its own delivery service one day, but that stores are still important.

"People still like to go visit with friends, engage and see new foods and new experiences ... What we find is for some events, the customer likes to come into the store, visit with family and friends and our store associates, and learn more about food. Other times when they're in a hurry, that's when they want to just drive through, pick something up or get it delivered to their house. So what we find is when you put all of those things together in a seamless way, that is when it really connects well with the customer," Mullen told CNBC.

Kroger is down 31.88% this year and is trading at $22.97. The company was rising on Tuesday and was up 1.72%.

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