Market share drives growth in tough times
When the going gets tough, the tough grab market share.
That’s certainly the case with Kroger, the nation’s largest supermarket retailer and seventh-largest prescription dispenser. In the prolonged depths of the recession of 2008-2009, Kroger eked out a modest but meaningful same-store sales gain and added to its huge base of loyal customer households, management asserted.
By exploiting its massive market clout, and innovating with new services and in-store offerings, Kroger also wrested some market share gains from its competitors amid last year’s upended economy, SVP and CFO Mike Schlotman told investment analysts last month. Citing data from ACNielsen, he said: “Kroger’s share overall rose approximately 60 basis points during fiscal 2009. This data also indicates that our share increased in 13 of the 17 marketing areas outlined by the Nielsen report, declined in three and remained unchanged in one.”
Chairman and CEO David Dillon added, “Throughout 2009, Kroger successfully achieved identical sales growth, one of the key objectives of our business model. We continue to widen the gap between Kroger’s identical sales growth trends and those of most of our competitors.”
The most daunting of those competitors remains Walmart, which a decade ago eclipsed Kroger as the nation’s top food retailer. Kroger competed with about 1,190 Walmart supercenters throughout the United States in 2009, according to the company—or roughly 60 more supercenters than existed in 2008.
Despite that competition, and the “deflation and the slow pace of the economic recovery, which continues to restrain consumer spending,” Dillon said, fiscal 2009 sales grew 0.8% to $76.7 billion, the company reported in March. Excluding fuel sales, total sales rose 2.9%, and same-store supermarket sales rose 2.1%.
“Kroger’s strategy generates value in good times and bad,” Dillon said March 9. “During a year that proved to be extremely trying, Kroger…increased the number of households loyal to Kroger stores.”
Headquarters: Cincinnati2009 sales: $76.7 billion% change vs. 2008: 0.8%No. of stores: 3,245No. of stores with Rx: 1,973Avg. store size: 44,272 sq. ft.Rx sales: $7.4 billion% of sales from Rx: 9.6%Sales per store: $23.6 million
Source: Drug Store News
If anything, Kroger has bolstered its standing as a power player in both food and drug retailing. The Cincinnati-based company operates in 31 states through two dozen local banners, including the Kroger flagship brand and such well-known names as Dillons, Food 4 Less, Fred Meyer, Fry’s, King Soopers, Ralphs and Smith’s Food and Drug. All told, its holdings comprise 2,468 supermarkets and multidepartment stores—nearly 2,000 of which include pharmacies and more than 720 of which offer drivethrough windows—along with 777 convenience stores under a variety of banners, 374 jewelry stores, 893 supermarket fuel centers and 40 food-processing plants.
In fiscal 2008—the most recent year for which full figures were available—Kroger pharmacists filled more than 131 million prescriptions, generating roughly $6.7 billion in pharmacy revenue, versus $6.5 billion the previous year. The number of supermarkets with pharmacies has grown steadily, from 1,898 in fiscal 2004 to 1,973 at the end of fiscal 2008, or nearly 80% of Kroger’s store base.
Even a handful of its convenience stores have jumped into the pharmacy business, including a Tom Thumb C-store in Florida and the Kwik Shop chain based in Hutchinson, Kan. Kwik Shop has expanded two of its convenience stores in the Wichita market to accommodate both pharmacies and a larger fresh-foods selection. The stores reportedly will reopen in May, at which time each will include a drivethrough pharmacy staffed by professionals from another division of Kroger: the Dillons supermarket chain.
Within its sprawling, 2,000-store pharmacy network, Kroger professionals continue to develop clinical and residency programs. “Special emphasis is [given to] pharmacy care programs, such as immunizations, obesity management, diabetic care, cholesterol screening, emergency contraception and more,” one company report noted.
Some of those services are offered online, including the EasyFill prescription refill system and an interactive Health Guide that provides health assessment tools, medication guides and other services for customers. Kroger also continues to provide such mobile services as diabetes screenings, immunizations and wellness education programs, often through clinical pharmacists or pharmacy residents.
“Pharmacy continues to be an important part of Kroger’s convenient, one-stop shopping strategy, and we are focusing on improving our customers’ pharmacy experience,” the company reported. To that end, the chain continues to offer a $4 generic-pricing program for 30-day supplies and a $10 price on many generics in 90-day quantities. Some 50 stores across the United States also host walk-in clinics.
Kroger’s designated prototype store is a food-drug combination store, including full prescription centers and drug store departments. Newer combos average 73,000 sq. ft., and most include not only pharmacies, but also service bakeries, delis, seafood and meat departments, floral shops, expanded general merchandise and whole health sections with organic produce and natural health-and-beauty aids, snacks and other alternative products. More than 100 Kroger combo stores go beyond that high standard with a Fresh Fare concept that emphasizes “high-quality perishables and top-notch customer service,” according to a company report.
With either format, Kroger noted, “Our combo stores have proven successful in competing against all formats, including supercenters.”
Kroger also operates a Marketplace format through four of its supermarket divisions around the United States: Kroger, Smith’s, Dillons and Fry’s. Marketplace stores “are generally smaller than our [Fred Meyer] multidepartment stores,” the company noted, and they do not include apparel. However, Kroger reported, “they do offer full-service grocery and pharmacy departments, as well as an expanded general merchandise area.”
This year, Schlotman said, “We expect to invest approximately $1.9 billion to $2.1 billion in capital projects, with a strong bias toward remodels and infrastructure projects.”
Schnucks’ O’Brien to serve on Department of Agriculture advisory committee
ST. LOUIS An executive from Schnuck Markets will serve on an advisory committee of the Department of Agriculture, Schnucks said this week.
Agriculture secretary Tom Vilsack announced that Schnucks VP produce and floral Mike O’Brien would be one of 25 people appointed to a two-year term on the USDA’s Fruit and Vegetable Industry Advisory Committee. O’Brien is also vice chairman of the Produce Marketing Association.
“I am honred to represent Schnuck Markets and the retail produce industry as a member of this committee,” O’Brien said. “I am looking forward to the opportunity to contribute and to make a difference for families across the nation.”
The committee, originally chartered in 2001, advises the secretary of agriculture on industry issues related to fruits and vegetables.
Gilead commences phase 3 trial for single-tablet HIV treatment
FOSTER CITY, Calif. Gilead Sciences has started a late-stage clinical trial of an investigational 4-in-1 treatment for HIV, the drug maker said.
Gilead announced the initiation of a phase 3 trial of its “Quad” HIV drug, a single-tablet treatment that combines elvitegravir, cobicistat, emtricitabine and tenofovir disoproxil fumarate. The study will compare the Quad regimen with the standard of care among adults with HIV-1 who have not taken antiretroviral treatments. The company is also investigating cobicistat as a standalone boosting agent for antiretroviral drugs.
“We are pleased to announce that the Quad phase 3 clinical program is underway,” Gilead EVP research and development and chief scientific officer Norbert Bischofberger said. “Efficacy and safety results from the phase 2 study suggest that the Quad may represent an important new option for patients with HIV.”