Founded in 1883 and incorporated in 1902, the Kroger Company is among the leading retail brands in the world. Kroger operates 2,757 supermarkets under various banners in 35 States of the US as well as the District of Columbia. Of all the supermarkets that Kroger operates 2,270 have pharmacies and 1,567 have fuel centers. The company also operates an online retail brand and provides pickup services from 1,989 supermarkets. Kroger has established itself as a leading US retail brand and its position is especially very strong in grocery sales. The company also sells a large range of private label grocery brands and operates 35 food production plants that are mainly bakeries and dairies.
In fiscal 2019 that ends on February 01, 2020, the company generated $122.3 billion in net revenue. To find faster growth and strengthen its competitive position, the company invests in personalizing services, data, and digital technology. The company sells many private-label grocery brands, which all fall under the umbrella of “Our Brands.” The company focuses heavily on the quality of the food products it sells. It produces a large part of the grocery products it sells and has outsourced the rest to external manufacturers that produce the grocery products to the strict specifications of the company.
Target Market of the Kroger Company:
Like the other retail companies in the US, Kroger’s customers are also mainly in the 18-44 age group and the middle class. Middle-class and upper-middle-class consumers, including individuals and families, are among the core customer group of Kroger’s. However, the company’s focus on organic grocery products has helped it grow its appeal among affluent shoppers in the US. Investing in digital technology has helped Kroger’s grow its appeal among the young tech-savvy consumers in the 18-30 age group.
Learn more about the Kroger company from this marketing mix that includes the seven P’s.
Seven P’s of Kroger’s Marketing Mix
The retail operations of Kroger represent nearly 97% of its sales. It is the only reportable segment of the company. The primary business of Kroger Company is its food stores that account for nearly 94% of its revenue. The rest of the net sales of Kroger Company is derived from jewelry stores and manufacturing facilities. Apart from its supermarkets, the company also sells from digital channels and price impact warehouse stores and department stores. The multi-department stores of the company are similar to supercenters. However, they offer a large variety of national brand apparel and general merchandise.
Kroger sells a large range of private label products under its Own Brands segment. The Our Brands portfolio of Krogers is also a way for the company to demonstrate its passion for good quality food. It is also the real differentiator for Krogers since its products under Our Brands, compete not only with other private label food brands but also with the leading national brands. In 2019 which was the best year for Kroger’s Our Brands, total sales in this segment exceeded $23.1 billion. The company added a net 758 new items in this segment.
A list of the Kroger family of companies:
Kroger, Ralphs, King Soopers, Owens, City Market, Dillons, Smith’s, Jay C Food Stores, Fry’s Food Store, QFC (Quality Food Centers), Baker’s, Pay Less Supermarkets, Gerbes Super Markets, Copps, Harris Teeter Neighborhood Food & Pharmacy, Mariano’s, Metro Market, Pick n Save.
Price Impact Stores:
Food 4 less, Foods Co, Ruler Foods,
Multi Department Stores:
Fred Meyer, Fry’s Food Stores Market place, Smith’s Marketplace, Kroger Marketplace, Dillon’s Marketplace, King Soopers Marketplace
Fred Meyer Jewellers, Littman Jewelers.
Home Chef, Vitacost, Murray’s
Kroger Personal Finance, The Little Clinic, Kroger Specialty Pharmacy, 84.51°
Kroger operates nearly 2800 grocery stores, 35 food manufacturing plants as well as 44 distribution centers. The company has its headquarters at Cincinnati, Ohio, United States. The company uses both online and offline channels for sales. It operates its stores directly or through subsidiaries throughout the United States. As of February 1, 2020, the company operated a total of 2,757 stores under various local banners. 2,257 of these stores had pharmacies and 1,567 had fuel centers. Apart from online ordering and pickup from Kroger Stores, the company also offers home delivery services to 97% of Kroger households. The company operates around 54% of its stores in the company-owned facilities. Moreover, it is following a strategy of self-development and ownership of the real estate.
The Kroger stores operate under a variety of banners that enjoy strong local recognition. The Kroger supermarkets are operated under one of the following four formats including combination food and drug stores, multi-department stores, market place stores, or price impact warehouses. The primary food store format used by the Kroger Company is the Combo store. These stores generally draw customers from 2 to 2.5 miles radius. They are among the large format stores of the Kroger Company that are highly successful since customers can find a large assortment of products under a single roof and their sufficiently large size also attracts customers in larger numbers. The Krogers Multi department stores are also significantly larger in size than the combo stores.
The above graph shows the net revenue of Kroger Company from 2015 to 2019 in Billions of US Dollars.
Kroger’s pricing strategy is focused on winning market share in the retail industry. The company has continued to focus on gaining a larger customer base through penetrative pricing. Apart from selling a large range of products and mainly in the grocery segment, the company also focuses on gaining customers through pricing its products lower than competitors. The company runs a special format of stores whose main focus is on pricing the products lower than competitors. These stores are known as price impact warehouse stores. These stores offer a no-frills low-cost warehouse format. They feature everyday lower prices as well as promotions for grocery as well as health and beauty care items. The company has continued to deepen its focus on pricing in order to gain market share. Over the last few years, the company has also kept gaining market share and customer base.
The retail industry is marked by heavy competition and pricing is one of the leading sources of competitive advantage for retail brands. Walmart is the leading player in the US retail industry and in order to remain in a strong competitive position, other brands including Kroger are focusing on price cuts to grow their popularity and market share.
There is intense competition in the US physical retail industry. To overcome the competitive pressure, apart from product range, product quality, and customer experience, retail companies also focus on advertising and promotions to gain market share and grow their customer base. Retail brands including Kroger have grown their investment in technology to offer their customers omnichannel shopping experience. Digital marketing trends in the retail industry are also growing as retailers continue to make use of paid digital promotions, social media, and email marketing for promotions and customer engagement.
The Kroger company has also continued to grow its investment in advertising to increase demand and sales. In 2019, the company grew its advertising expenses to $854 million from $752 million in 2018. The company is also obsessed with building long term customer loyalty for which it has kept making strategic investments in loyalty programs that drive higher customer loyalty and grow customer engagement. The company has also started a program called ‘Fresh’ that drives the competitive moat of Kroger. As a part of this program, the company offers fresh and tasty food to its customers through the United States. In 2019, the company launched its “Fresh for Everyone” brand transformation campaign. The campaign has been well received by its customers and has proved effective in terms of marketing. The company also offers coupons, discounts, and rewards (including weekly and daily coupons), to grow sales and customer loyalty. Another area, where the company is effectively growing its influence is customer experience. Through the use of data and personalization, the company is investing in delivering superior customer experience. Data and personalization are now a core part of everyday operations at the Kroger company and apart from digital shopping, the company also uses it effectively in its physical operations. It is also a source of competitive advantage for the brand.
As a retail brand, Kroger also focuses heavily on managing its human capital strategically so that the employees work with full motivation and are able to deliver their best performance. For the retail brands, their human capital can be a leading source of a competitive advantage given the company has established a strong work culture and a safe work environment.
As of 2019, the company had 4,53,000 employees. The executive compensation philosophy of the company focuses on attracting and retaining the best talent and motivates the employees to achieve the company’s financial and business goals. The incentive plans of the company are designed to reward actions that lead to long term value creation.
The company has focused on customer experience and designed business processes in a manner that creates the highest value for the customers and other stakeholders. Throughout its business operations, the company uses technology to make business processes more efficient and effective. It offers its customers an omnichannel experience and also provides pickup and delivery services.
The company has also implemented technologies that enable higher customer convenience through personalization. Moreover, it uses data and technology to provide its customers to offer best in class shopping experience.
In the retail industry, apart from the physical infrastructure, there is a lot that counts as physical evidence. The company stores as well as merchandise carrying the company logo, all provide the physical evidence for the business. The distribution chain of the company throughout the United States also extends its physical presence.
Data sources: Kroger Form 10K 2019.