2019 Retail Pacesetters: Kroger relentlessly grows its empire
Cincinnati-based Kroger, the leading operator of traditional grocery stores in the country, shows no signs of loosening its grip on that title.
The company continues to explore new lines of business — from e-commerce to health care — and is in the midst of a significant strategic overhaul called Restock Kroger, a multipronged effort designed to ensure that it stays relevant for years to come. The effort includes four main drivers: redefine the food and grocery customer experience, expand partnerships to create customer value, develop talent, and live Kroger’s purpose.
Kroger reported total sales of $121.2 billion for fiscal 2018, its first full year of Restock Kroger initiatives.
In a recent interview with Bloomberg, Kroger CEO Rodney McMullen said the retailer has been in talks with multiple players in the healthcare industry, eyeing possible partnerships that could create a new line of business for the company. “Health care is an area where we see a lot of opportunity,” he said.
Kroger also is ramping up its partnership with Walgreens, introducing a selection of its own grocery products inside 13 Walgreens locations. It also is offering meal kits from Home Chef meal kits, which the company acquired last year, in dozens of Walgreens locations in Chicago.
“Other than Walmart and Amazon, no one has been more aggressive than Kroger in trying to reshape their business,” said Neil Stern, senior partner at consulting firm McMillanDoolittle.
The company’s Restock Kroger investments are reflected in its expansion of omnichannel retailing, through which 91% of Kroger households have access to pickup or delivery, with 100% penetration expected by year’s end. Digital sales achieved a run rate of about $5 billion in 2018 and are expected to hit $9 billion this year.
Kroger launched a pilot program in partnership with technology firm Nuro last year to test self-driving delivery vehicles in Scottsdale, Ariz., and recently said it would expand the test to Houston.
Integral to Kroger’s relevance with consumers is the company’s balance of price and quality, perhaps nowhere better reflected than in its private-label offerings. The company said it introduced 1,022 new private-label items in 2018 and achieved private-label unit penetration of 30.5%. Its Simple Truth natural and organic label had sales growth of 15.3% in 2018 for total sales of $2.3 billion.
Kroger also is rapidly expanding the Home Chef line and is rolling out the meal kits to 500 more stores for a total of more than 700, the company said in February.
In addition to its delivery and e-commerce investments and partnerships, Kroger also continues to invest in such digital capabilities as self-scanning, and the company remains a leader in loyalty marketing, Stern said. “There’s been a lot of activity in a very short period of time to remain relevant on all fronts,” he said.
Burt Flickinger, managing director at New York-based Strategic Resource Group, said Kroger is a leader across many fronts of food and drug retailing, including with its Kroger Marketplace supercenter stores, “where a family can get all of their needs for an entire week. And in terms of promotional pulses for consumers, as well as staying competitively priced, Kroger continues to excel,” he said.
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