Kroger buys most of dunnhumbyUSA

The Kroger Co. said Monday it will buy much of dunnhumbyUSA from the United Kingdom-based analytics firm and create a new consumer insights subsidiary called 84.51°, effective immediately. The number is a reference to the longitude of the new subsidiary's location.

About 500 former dunnhumbyUSA workers – including more than 450 locally – will become employees of the independently operated Kroger unit and the retailer will occupy its newly constructed headquarters at Fifth and Race streets in Downtown.

Newly named 84.51 CEO Stuart Aitken said he hopes the new consumer insights arm of Kroger will continue to grow at the same rate or that it will speed up.

"Kroger wanted and needs what we offer," Aitken told The Enquirer. "Now that we're aligned with Kroger, we will continue to offer them understanding of customers."

dunnhumby Ltd. will retain dozens of local employees, who will remain at dunnhumbyUSA's current Downtown headquarters at 444 W. Third St. and offices across the U.S.

Financial terms were not disclosed. There are no anticipated job reductions as a result of the new arrangements, Kroger said.

The transaction is the third technology-driven acquisition by Kroger in the last 15 months. In August, Kroger spent $280 million to buy a Florida ecommerce player, Vitacost.com, which sells nutrition and healthy living products. In February 2014, Kroger also acquired for an undisclosed sum San Francisco based You Technology Brand Services, which is a digital coupon and promotions leader.

Technology was also a factor in Kroger's $2.5 billion decision to acquire North Carolina-based Harris Teeter last year. While the chain gave Kroger an added 200 stores in the Southeast, Kroger was also enchanted by its "click and collect" online shopping service available at 150 stores. Kroger is testing a similar service in Liberty Township.

The deal comes amid financial struggles of dunnhumby Ltd.'s parent company, Tesco PLC, which announced in January that it was considering selling off the consumer insights operation.

Tesco has lost $9.3 billion on sales of $101.3 billion in the last 12 months, according to Bloomberg.

Kroger's alliance with dunnhumby is credited with giving it an edge in courting consumers. The nation's largest supermarket chain analyzes reams of data collected from loyalty card transactions to decide everything from what coupons to offer customers to where certain products should be displayed in stores.

Founded in 2003 as a joint venture between Kroger. and London-based dunnhumby Ltd., dunnhumbyUSA compiles customer data such as transaction and loyalty card history, as well as consumer research and online data, to help guide companies' decisions and strategies.

"Kroger and dunnhumby revolutionized retailing in the U.S. by focusing on the customer, and we intend to do it again with 84.51°...The ability to combine what we already know with other partners is exciting and will speed up innovation. We expect these innovations to grow our business and deliver a world-class customer experience," said Kroger CEO Rodney McMullen in a news release Monday about the new subsidiary.

dunnhumbyUSA has grown from three to 520 local employees and more than 730 nationwide. It had projected to double its workforce over the next two years. The company's annual billings are now estimated at $275 million, with clients including Procter & Gamble, Coca-Cola and Kellogg's.

Kroger recently notched its 45th straight quarter of increasing identical store sales growth – meaning more than 11 years of uninterrupted market share growth for the supermarket chain.

Shares in Kroger closed Monday at $70.55, down $1.15 or 1.6 percent.

Aitken said he was confident 84.51 would maintain its independence within Kroger. He will report to Kroger chief operating officer Mike Ellis.

"We have the ability to push back," Aitken said. "That's part of our success over the last 12 years. We look at customers differently."

Preserving consumer insights jobs in Downtown amid Tesco's financial uncertainty is a major win for the region. Local dunnhumby jobs have been a critical part of a growing cluster of talent related to Greater Cincinnati's branding industry.

While New York is the hub of the traditional advertising industry, Cincinnati is home to dozens of specialized firms that help companies position themselves to customers before any advertising copy is ever drafted.

Greater Cincinnati employs some 60,000 people in 250 firms that specialize in design, branding, consumer research, advertising, architecture and related fields, according to the Cincinnati USA Regional Chamber.

Mayor John Cranley praised the deal for preserving job growth Downtown.

"This deal ensures that Dunnhumby's employees will remain in Cincinnati," Cranley said. "That's great news because it's a fast-growing company that adds value to our city. I want to thank Kroger for its commitment to our community."