The Main Takeaways of Kroger’s Changes
There are big things happening for Kroger right now. After they experienced a tremendous earnings report, top-line sales, and a recent overhaul to their merchandising structure, perhaps the biggest change revolves around a newfound focus on capturing market share.
Even in the face of rapidly evolving consumer shopping habits, Kroger CEO Rodney McMullen mentioned that Kroger experienced its strongest market share performance in the past 10 years during 2020 (1).
This begs the question: What changes in strategy are needed to meet these transforming consumer habits?
Kroger just finished the reinvention of their merchandising team both from an operations standpoint and an information systems standpoint. Additionally, this overhaul included new Category Managers in most categories. Kroger’s CFO Gary Millerchip shared in the Investor Day Recap that Kroger has created over $1b of cost savings over the last two years and is on track to do the same in 2020 with potential for incremental cost savings in 2021 (2).
Based on the needs of clients, Kroger has stated a new emphasis on the following:
- Winning market share versus key competitors in all divisions
- A look at the price and promoted price versus key competitors in that market
- Being able to deliver groceries to anyone, anywhere via in-store and digital commerce
These newly targeted goals are changing the game for Kroger. McMullen conveyed that Kroger’s 2021 projections are extremely strong (3).
A Renewed Focus on Market Share
While Kroger was once more focused on growing their category sales and same-store-sales, there has been a shift in emphasis on winning market share versus competition.
Kroger is looking at a market share at a divisional-specific level. As brands think about their go-to-market strategy, they are starting to truly evaluate those divisions and understand how they are doing compared to competitors in key markets.
A Look at Price and Key Competitors
Kroger’s newly expanded pricing and promotion team is creating new tools to evaluate the effectiveness of pricing and promotion, and they are comparing promoted prices on key items versus core competition.
This shift will encourage manufacturers to invest beyond in-store TPRs and move to a full omnichannel promotional strategy via the usage of key levers from 84.51 and KPM. As brands develop their go-to-market strategy and evaluate their price points, it will be very important that they do the following when working with Kroger: assess, re-assess, and pursue the right promotional strategy.
Another Gamechanger: Automated Warehouses
Automated warehouses are opening across the country. Kroger announced that in Q1 of 2021, they’ll begin the effort to bring online the Ocado warehouses they have been building throughout the country.
For about two years, Kroger has worked on an investment in Ocado. Dependent on the distance to the facility, Ocado will be able to deliver the same day if within the trade area (4). There are between 12 and 15 warehouses going in locations without brick-and-mortar stores.
To recap, the three key takeaways here are: 1.) A renewed focus on market share, 2.) The evaluation of competitive price point analysis on a brand by item, and 3.) A look towards 2021 as Kroger brings on the Ocado automated warehouses. There will be more information regarding how to think about Ocado at investor day next spring (5).
Kroger’s eye is on the prize, which seems to be alternative profit streams down the road (6). With all the changes, the one thing that does remain is Kroger’s dedication to their customer. Kroger will invest in value, ensuring shoppers begin and end their weekly shopping trip at Kroger.
2020 has certainly taken businesses for a ride, but Kroger, along with many others, continues to adapt to the given conditions and cultivate success. To learn more about how your brand can evolve during this time, feel free to contact us at Harvest Group.
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