Kroger outlines 13-part ‘Restock’ transformation plan
CINCINNATI — The supermarket shopping experience at Kroger is about to undergo a significant digitally-driven transformation even as the grocery store operator seeks to exit the c-store and gas arena.
The digital transformation is being called Restock Kroger and is expected to redefine the food and grocery customer experience in America, the company stated.
"We know that when we serve America through food inspiration and uplift, we create value for our shareholders, customers and associates," said Rodney McMullen, Kroger's chairman and CEO. "We understand that today's marketplace is shifting rapidly," he said. "Combining our food expertise and data analytics uniquely positions Kroger to create new and highly-relevant customer experiences, delivered both digitally and in stores. 'Restock Kroger' builds on our strengths and strategically repositions Kroger to accelerate our customer-centered efforts in order to create shareholder value."
The Restock Kroger plan is expected to generate $400 million in incremental operating margin by 2020. "Our goal is to continue generating shareholder value even as we make strategic investments to grow our business," stated Mike Schlotman, Kroger's EVP and CFO.
The Plan has four main drivers: Redefine the Food and Grocery Customer Experience, Expand Partnerships to Create Customer Value, Develop Talent and Live Kroger's Purpose. Kroger outlined 13 components.
Redefine the Food and Grocery Customer Experience: Kroger outlined how it is uniquely positioned to win with customers by accelerating its digital and ecommerce efforts, applying its customer data and personalization expertise through 84.51 to even more aspects of the business, and building on the outstanding growth of the company's Our Brands portfolio.
Data & Personalization: Kroger already delivers more than 3 billion personalized recommendations to customers annually. Going forward, Kroger will update investors on how it is using shopper data to create different experiences for customers.
Digital: Kroger is optimizing the digital experience by placing the customer at the center of everything the company does, providing not only functional information but also inspiration and personalized discovery through recipes and product content.
Space Optimization: Kroger intends to leverage customer science to make space-planning decisions to disrupt shelf, optimize assortment and improve in-stocks.
Our Brands: Building on the company's own brands strong 37% growth from 2011 to 2017 (from $15 billion to $20.5 billion in annual sales), Kroger will continue investing to grow its most popular brands.
Smart Pricing: Kroger will continue investing to avoid losing customers because of price. The company has invested more than $4 billion in price since 2001.
Expand Partnerships to Create Customer Value: The company will discuss its plans to utilize more of its capital to fund technology and infrastructure upgrades, and its intention to create alternative revenue streams.
Front End Transformation: Redesign front-end to maximize stores for self-checkout, include expanding currently 20-store Scan, Bag, Go pilot to 400 stores in 2018.
Technology Innovation: Kroger will continue building its Internet of Things sensor network, video analytics and machine learning networks and complement those innovations with robotics and artificial intelligence to transform the customer experience.
Alternative Revenue Streams: Kroger intends to create shareholder value by expanding its alternative revenue streams, including driving media and advertising revenue.
Develop Talent: Kroger will discuss how it is accelerating its high-performance leadership culture through future talent development, training and a rebalancing of pay and benefits.
Investing in Store Associates: Kroger plans to invest an incremental $500 million in human capital over the next three years. This will be in addition to the company's continued efforts to rebalance pay and benefits while also focusing on certifications and performance incentives, career opportunities and training.
Live Kroger Purpose through Social Impact: The company successfully launched its Zero Hunger | Zero Waste Plan in September, which aims to end hunger in the communities Kroger calls home and eliminate waste in the company by 2025.
In addition, Kroger on Wednesday announced its intention to explore strategic alternatives for its convenience store business, including a potential sale. This is the result of a review of assets that are potentially of more value outside of the company than as part of Kroger.
"Our convenience stores are strong, successful and growing with the potential to grow even more," Schlotman said. "We want to look at all options to ensure this part of the business is meeting its full potential. Considering the current premium multiples for convenience stores, we feel it is our obligation as a management team to undertake this review."
Kroger's convenience store business includes 784 convenience stores located across 18 states. It includes 68 franchise operations. The stores employ 11,000 associates and operate under the following banner names: Turkey Hill Minit Markets, Loaf 'N Jug, KwikShop, Tom Thumb and QuickStop. Kroger's convenience store business generated revenue of $4 billion and sold 1.2 billion gallons of fuel in 2016.
The business unit has delivered 62 consecutive quarters of identical store sales growth.
The company has hired Goldman Sachs & Co. to identify, review and evaluate the options.
L2 encapsulates the power of digital at Emerson Group’s Industry Day
PHILADELPHIA — Yesterday we learned how digital is transforming the platform of commerce from value to efficiency, where people no longer make purchase decisions based on price but rather on how much time they save.
Today, we learn how digital is disrupting everything else marketers and merchandisers hold dear.
"Digital is not just impacting what's happening online, it's impacting what's happening off-line. It's fundamentally changing the way people are interacting with brands," opened Evan Neufield, VP intelligence, L2 Inc., a subscription-based business intelligence service that benchmarks the digital competence of brands. "A lot of the notions on how we interact with customers are actually being turned on their head by digital," Neufield shared with attendees of Emerson Group’s 10th annual Retail Industry Day held here late last month.
For example, advertising in today's digital market isn't what it was cracked up to be in yesterday's analog market. "The way you reach customers has fundamentally changed. TV advertising, print advertising, all of these things are seeing retrenchment as digital becomes a more effective means in reaching consumers," he said. "[Digital] is especially effective in reaching the all-important millennial generation," Neufield added, important because they recently eclipsed baby boomers as the largest demographic with the greatest buying power.
Not only is digital supplanting traditional media, the platform has created an entirely new venue through which brand marketers can reach consumers – influencers. "Increasingly, consumers are looking for help to sort out what they should pay attention to and what they shouldn't pay attention to," Neufield said. "Online, people are turning to influencers as the ones who add that personal touch to the transaction process."
Digital is also a platform that supports greater personalization, which is what consumers have come to expect. "What consumers want is what Amazon gives them," Neufield said. "Amazon is really a personalization engine. … Every person who goes to an Amazon page sees a different page based on what they've bought in the past [or] based on their search behavior," he said. "When we looked at over 100 brands across several retail categories, we saw that only 13% of brands are actually personalizing their site's homepage."
And with digital, communication goes both ways. Marketers can learn as much about their consumer's wants and needs based on search terms and browser activity as their consumer can about their products. "How traditional marketing worked in product development, if you wanted to know what the consumer was interested in, you had to ask them," noted Jane Fisher, associated director, client strategy, beauty sector, L2 Inc. "If you think about how this works today, every day consumers are already telling you what they're interested in. They're voting with their browsers."
"Your consumers are coming to you everyday and telling you all about themselves," Neufield added. "Are you mining that data to get a competitive advantage?" he asked.
The presentation from L2 Inc. was part of the Emerson Group’s 10th annual Retail Industry Day, hosted in late September to a packed room of hundreds of merchants eager to discover how to better proposition their products for tomorrow's ever-evolving consumer.
This week Drug Store News will be featuring content connected to the Emerson Group's 10th Annual Retail Industry Day.
The first presentation emphasized the importance behind connecting with people, including employees, colleagues and consumers, in an effort to get at the heart of business with CNBC's Marcus Lemonis.
After Lemonis, marketer Colleen DeCourcy, chief creative officer for Wieden+Kennedy, took the stage. She discussed how to keep catching the kind of lightning in a bottle that makes brands spark.
Yesterday, DSN summarized the presentation of Musab Balbale, VP and general manager for Walmart e-commerce, who sees how digital will transform the shopping experience from an exchange of goods for money to a shopping experience defined by time-saving efficiencies.
Following L2 Inc. was Michael Dart, a private equity partner with global management consulting firm A.T. Kearney and co-author of "The New Rules of Retail," a guide to succeeding in the modern retail environment.
With CoverGirl overhaul, Coty brand focuses on makeup as self-expression
NEW YORK — Coty has unveiled the reinvention of one of its flagship brands. The company has retooled CoverGirl, starting with a new expression of its purpose, “I Am What I Make Up.”
The brand’s aim is to inspire consumers to embrace their identities and create the version of themselves they want to be with makeup by celebrating authenticity, diversity and expressiveness. It also will eschew unrealistic and idealized standards often seen in the beauty category, the company said.
“In leading the relaunch, we started with the insight that people no longer strive for a singular standard of beauty, but use makeup as a tool for self-expression and personal transformation,” Coty SVP CoverGirl Ukonwa Ojo said. “CoverGirl has always been inclusive and is known for pushing the boundaries of what it means to be beautiful, which means we have a responsibility to elevate how we connect and communicate with people. This is bigger than a new campaign or a tagline. We hope to spark a provocative dialogue that shifts cultural assumptions about when, where, how and why people wear makeup.”
The brand is starting its conversation with its consumers with a long-form film, “Made in the Mirror,” which features six of its CoverGirls, several of whom were recently announced, including writer and creator of HBO’s “Insecure” Issa Rae, Katy Perry, personal trainer Massy Arias and TV personality and chef Ayesha Curry. The film highlights the accomplishments of the CoverGirls and their abilities to empower and inspire as representatives of the brand’s vision.
“The new CoverGirl positioning is an important example of Coty’s purpose to celebrate and liberate the diversity of beauty,” Coty Consumer Beauty president Laurent Kleitman said. “Beauty should make people happy, and when we champion individuality and self-expression, that’s when we see its true power.”