BABA Alibaba Group Holding Limited

By Liza Lin and Heather Haddon 

Kroger Co. will sell its products in China on an e-commerce site owned by Alibaba Group Holding Ltd., the grocer's first foray into foreign sales amid a broader push into online retail.

The U.S. supermarket chain on Tuesday said it plans to open an online storefront on Alibaba's Tmall Global site, the Chinese internet titan's platform for international brands. Kroger said the site will launch Wednesday with an initial product offering that includes dietary supplements and private-label products, much of it natural and organic goods.

"Growing into the Chinese market is a huge opportunity for Kroger and we are really excited," said Yael Cosset, Kroger's chief digital officer, in an interview.

An Alibaba spokeswoman said the company was "pleased to work with Kroger" on bring its products to the Chinese market, particularly the grocer's Simple Truth line of natural and organic goods.

Kroger stock spiked 2.8% after The Wall Street Journal reported about the partnership.

Kroger executives said they have been negotiating their first overseas sales push for months.

Mr. Cosset declined to discuss the terms of the financial arrangement with Alibaba. He said the grocer looked at several other companies for its first overseas selling deal before deciding on the Chinese site.

Tougher competition in the U.S. is prompting big retailers to strike deals abroad. Walmart Inc. in May took a majority stake in Indian e-commerce giant Flipkart Group.

The new sales push in China is Kroger's fifth e-commerce initiative in three months. The largest U.S. supermarket chain by sales and stores is trying to fend off stiffer competition from Amazon.com Inc., the Whole Foods grocery stores it owns, and other food sellers.

Kroger increasingly sees its Simple Truth line as a way to attract new customers domestically and abroad. The goods reached $2 billion in sales earlier this year, Kroger said.

Kroger currently sells those items online in the U.S. through Vitacost.com Inc., an e-commerce site it acquired in 2014. The grocer has generated strong sales of its natural and organic products on the site, including in parts of the U.S. where it doesn't have grocery stores, Kroger said.

Kroger selected the initial line of products to sell in China through consumer surveys, and they will be further expanded, Mr. Cosset said.

Earlier this month, Kroger started delivering directly to homes and businesses through third-party carriers. In May, Kroger took a stake in British online grocer Ocado Group PLC to run automated delivery warehouses for digital orders. It also acquired Home Chef to sell its meal kits in stores and online, and is working with electric-vehicle startup Nuro Inc. to test driverless grocery deliveries.

After focusing for years on sales at their 2,800 U.S. stores, Kroger executives have also visited India, China, Japan and Europe recently to study the habits of foreign consumers and search for technologies to use in the U.S.

"You should continue to see us doing partnerships and relationships with multiple people across the world," Chief Executive Rodney McMullen said in an interview earlier this year.

For Alibaba, owner of China's two most popular e-commerce websites, Kroger's products could provide a leg up in the nation's fiercely competitive online grocery market. Walmart owns a 12% stake in JD.com Inc., Alibaba's biggest rival in China.

Signing a deal with Kroger also adds to the list of U.S. merchants Alibaba has been seeking to woo over the past years as consumers there are increasingly shifting their purchases from brick and mortar stores online.

In 2015, Hangzhou-based Alibaba signed an exclusive deal to help Cincinnati-based department store Macy's Inc. operate its online sales website in China.

Since then, the Chinese company has attracted retailers such as Costco Wholesale Corp., Gap Inc. and most recently Starbucks Corp., to sell their products on its e-commerce platforms. Alibaba Chairman Jack Ma traveled to Detroit last year to urge small businesses to use its platforms to reach Chinese consumers hungry for U.S. brands.

Write to Liza Lin at Liza.Lin@wsj.com and Heather Haddon at heather.haddon@wsj.com

(END) Dow Jones Newswires

August 14, 2018 20:29 ET (00:29 GMT)

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