Tesco Splits With Kroger on Dunnhumby to Form New Marketing Shop
Kroger Co. has acquired the balance of its 50-50 DunnhumbyUSA marketing partnership with Tesco, forming a new unit that will continue to handle data and promotion programs for the biggest supermarket retailer in the U.S. and its suppliers.
And if you thought that old name of Dunnhumby – a mashup of names of the firm's founders – was unusual, try the unit's new one -- 84.51°.
The new unit will employ more than 500 of DunnhumbyUSA's 700-plus U.S. employees. The remainder of Dunnhumby's U.S. business will drop the "USA" and continue to work in offices in Cincinnati, Boston, Chicago, New York and Sacramento. The company will work with old clients of the firm aside from Kroger, including Macy's.
The move comes amid Tesco's move to divest Dunnhumby globally and WPP's interest in acquiring the business. Terms of the deal weren't disclosed, but it cashes out a substantial piece of the business, which has 2,000 employees globally.
The deal, effective today, simplifies an acquisition for WPP or others, but also eliminates relationships with many consumer-packaged goods clients, even though many of the global players remain suppliers of Tesco and clients of Dunnhumby overseas.
As part of the deal, 84.51° will have a perpetual license to use Dunnhumby's analytical tools. Dunnhumby will provide service and maintenance on the systems for five years but no longer have access to Kroger customer data. Packaged-goods suppliers of Kroger and customers of Dunnhumby will be serviced by 84.51°, and Stuart Aitken, who previously led DunnhumbyUSA, will be CEO of the new company.
The new business will have a similar scope of work, covering shopper and promotion programs but also media and other areas of marketing analytics.
"This creates massive opportunities for both companies to grow," Mr. Aitken said. The split creates potential for competition with his old company, he acknowledged, "but that's not what we're looking to do out of the gate." He said his business will be free to go after clients who aren't direct competitors of Kroger.
The name 84.51° comes from the longitude of the unit's Cincinnati headquarters in newly built offices near Kroger's, Mr. Aitken said, "because we look at data longitudinally. We don't look at individual snippets and make judgments from there. So it truly speaks to our heritage from a mathematics standpoint."
He added: "It's also a name we can define ourselves. It doesn't define us. "
The biggest change is greater alignment between his firm and Kroger, which has had 45 consecutive quarters of comparable-store sales growth since starting to work with Dunnhumby in 2003, Mr. Aitken said. "Obviously Tesco has publicly said they put Dunnhumby up for sale, and Kroger wanted to make sure they protect what is so great about what they've done the past 12 years."