Target-Kroger Merger—A Fantasy Fit for Primetime?

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NBC SUPERSTORE -- "Target" Episode 316 (Photo by: Evans Vestal Ward/NBC)

Shares of U.S. big-box retailer Target and supermarket titan Kroger surged in pre-market trading on Friday after a report by Fast Company said the chains were discussing a merger, evidently talking since last summer. CNBC quickly knocked down the report, with a source saying there’s “no truth” to the rumor of merger talks—but that there was plenty to discuss regarding Shipt, the same-day delivery specialist Target acquired in December.

A Match Made for Primetime?

The speculation for Target came as it starred in Thursday’s episode of Superstore on NBC. While Target has popped up in other series such as Jane the Virgin, RevengeModern Family and The Voice, this marked its biggest integration to date.

The episode about the goings-on at a Walmart-inspired fictional retailer known as Cloud 9 was even titled “Target,” and NBC and Target both got into the spirit of the collaboration by sharing clips and behind the scenes insights.

“To be an effective marketer, we have to be able to meet our guests where they are, and when it comes to broadcast, that can be challenging as the trend of ad-skipping increases,” stated Target EVP and chief marketing officer Rick Gomez.

“We’ve seen strong results from our custom integrations, like the one we’ve created with NBCU for Superstore. In fact, they’ve proven more effective than a traditional TV spot. This approach of math and magic—what we know about today’s consumer, coupled with compelling, authentic content—is what makes Target continue to stand out. The data validates that our guests are big fans of the show, and we think they’ll love seeing their favorite retailer as the guest star of this week’s episode.”

Different Scripts

Target and Kroger could both use some laughs as they face a general malaise in retailing these days, including rising competition in grocery sales, new discount players, increasing pressure from brands, the need to innovate with home delivery and in-store pickup as exemplified by Shipt, and not getting crushed by Amazon and its Whole Foods Markets business.

Yet they face very different goals. Kroger, for instance, has fared well in bringing in organic and other better-for-you foods that have helped establish its credibility with millennial consumers and also served to undermine Whole Foods. Target wants to grow its grocery business and last year recruited a Kroger veteran, Jeff Burt, to refresh its grocery strategy and offering.

Target CEO Brian Cornell has been upbeat this year after the chain experienced a couple of down years due to consumers’ shifting preferences and also due to its own progress in groceries.

Fourth-quarter and holiday sales boosted Target and other retailers after a dismal holiday performance in 2016. Same-store sales during the latest period rose by 3.6%, Target’s third consecutive quarter of growth, and the chain has embarked on a multi-million-dollar capital-spending initiative to remodel its stores and boost its digital capabilities.

“What a difference a year makes,” Cornell told investors earlier this month. “You don’t have to get too far into the numbers to see our strategy is working.”

Cue the Superstore episode, in which a former Cloud 9 corporate manager leaves to manage a Target store in the St. Louis area where the show is set. Target is “cleaner and more fun,” he tells the Cloud 9 employees as he tries to poach them.

Enraged, the character played by the Cloud 9 store manager storms into the Target to do some counter-poaching. He’s stunned by what surrounds him, a panorama of red and Target logos that comprise a huge placement score for the chain. “It’s really nice in here,” the Cloud 9 manager says.

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