Kroger is thriving in a difficult market for grocery stores. The supermarket chain is expected to surpass Whole Foods Market within two years and become the nation's top seller of organic and natural food, according to a recent report by JPMorgan. Kroger's strategy of offering more specialty and organic food is helping it overtake other chains despite an industry-wide trend away from supermarkets, JPMorgan analysts write.
Traditional supermarkets have been losing market share to high-end grocers, warehouse chains, and dollar stores because customers are seeking either specialty assortments or great value, according to a recent report by the real estate investment firm JLL. "Millennials and Boomers alike are focusing more on healthy eating choices and creatively prepared meals," the analysts say. Selling more organic food will attract high-end customers and help drive profits at Kroger, according to JPMorgan.
Kroger, which has more than 2,000 locations, could also take potential customers from Whole Foods. Whole Foods has 287 locations but continues to expand into new markets. In addition to offering more organic food, Kroger is expanding into affluent markets in Baltimore and Washington DC.
Kroger’s banner brands are having a banner year. The retail chain posted double-digit growth in earnings and revenue during the third quarter, with private label products representing more than 27% of units sold and nearly 26% of sales dollars.
“In fact, corporate brands experienced its highest sales growth and total retail dollar share of any quarter in the last three years,” said Mike Ellis, president and chief operating officer, during a Dec. 4 earnings call with financial analysts. “So, clearly, our rebranded opening price point and Kroger banner brands are a hit with our customers. Simple Truth and Simple Truth Organics continued to earn double-digit unit and sales growth.”
The retail chain achieved its 44th consecutive quarter of same-store sales growth and continued to gain market share. A key driver of Kroger’s sustainable growth is innovation. Recent launches include a new line of Simple Truth lunch meats and expanded offerings in the dairy department. The company has opened a dairy processing plant in Denver that enables production of longer shelf-life products with aseptic packaging. The dairy plant is the first in the United States to use robotic technology to pack cases and palletize orders entirely by automation, Mr. Ellis said.
During the 6th Annual International Forum on Food and Nutrition, Kroger's group vice president for corporate affairs Lynn Marmer discussed the company's efforts to promote a healthy lifestyle and fight obesity. The forum, held at Bocconi University in Milan, Italy on December 3-4, was sponsored by the Barilla Center for Food & Nutrition Foundation, a think tank focused on the links between food and nutrition and other social, environmental and economic issues.
Marmer outlined the obesity challenge in the United States – where one-third of children eat "Fast Food" every day and 34% of all citizens are obese – and Kroger's efforts to promote healthy living for associates, customers and communities.
Kroger uses its economies of scale to increase access to healthy foods for more Americans, through both merchandising and food rescue efforts. "For nine consecutive years, we have lowered our costs of doing business and reinvested those savings in lower food prices that save our customers more than $3 billion every year," Marmer says. "More recently, we have invested considerably in lower retail prices on fresh fruits and vegetables in our produce department, especially, which is expanding access to healthy foods for our customers. We are equally committed to caring for our neighbors in need. Our Perishable Donations Partnership contributes millions of pounds of fresh, nutritious items annually to food banks across the country."