Consumers still challenged by economy; elevates store-brand appeal

Kroger CEO outlines company's planned investment

CINCINNATI — Consumer sentiment toward the economy continues to be negative, acknowledged David Dillon, Kroger chairman and CEO, a factor that may drive many consumers toward more of the value-driven store brands in which Kroger is investing.

"The sluggish economy continues to strain household budgets while increasing consumer anxiety," Dillon said. "In fact, customers tell us their expectation for the economy are more pessimistic now than at any time this year."

Corporate brands at Kroger certainly are on the rise. Kroger enjoyed 34% penetration in grocery department units sold for the second quarter ended Aug. 13, representing 27% of all grocery sales. "When you look at these trends compared to our first-quarter results, corporate brand dollars and total units each increased by 100 basis points," Kroger president and COO Rodney McMullen. "Our multibillion dollar corporate brand portfolio is a competitive advantage because it gives our customers more choices and variety and value to complement the broad assortment of national brand products we offer. This is particularly important today as many shoppers continue to watch expenses and look for quality items at affordable prices."

Inflation may be another factor forcing many consumers to take a closer look at store brands. The industry is continuing to pass along inflationary increases, including Kroger. "We will continue to pass along product cost increases from suppliers. At the same time, we will continue to invest for the future in pricing, people, products and customer shopping experience."

That means stocking that customer's marketbasket with more margin-friendly store brands has become increasingly important, McMullen said. "Customers are even more value conscious when they shop, are buying smaller baskets and are selecting some lower-cost items, including our low — our corporate brand products. This has made the value we offer our customers through lower every day prices, weekly promotions and personalized rewards to loyal households even more compelling."

During Kroger's discussion of second-quarter results with analysts last week, the Cincinnati-based grocer announced it would be expanding its selection of Big K brands soda flavors, including apple, pineapple, passion fruit, watermelon, kiwi, blackberry, citrus and mandarin.

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