Business

Grocery wars: Kroger’s battle plan and what it means for you.

Kroger expects to have ClickList online ordering available at about 1,000 stores by the end of the year, and eventually will add it to every store that can physically handle it.
Kroger expects to have ClickList online ordering available at about 1,000 stores by the end of the year, and eventually will add it to every store that can physically handle it. Herald-Leader

To arm itself against competition from the merged Whole Foods/Amazon behemoth, Kroger has reshaped its strategy to make it leaner and more accessible, moves that will have a big impact on how you shop. There are plenty of challengers who’d like a piece of your food budget, but Kroger still dominates the Lexington grocery market.

In October, the Cincinnati-based grocery chain launched Restock Kroger. “We understand that today’s marketplace is shifting rapidly,” said CEO Rodney McMullen. “We have the scale, the data, physical assets and human connections to win. Combining our food expertise and data analytics uniquely positions Kroger to create new and highly relevant customer experiences, delivered both digitally and in stores.”

So what exactly is Kroger doing and what will it mean for you?

▪  Going after Whole Foods. Kroger has redefined its target market from grocery shoppers to all eaters, which gives the company a lot more potential customers.

“More Americans identify as foodies, and customers have more food choices than ever before. In the past, we’ve defined our market as shared among traditional stores,” McMullen said last month. “Today, we’ve redefined our market as a share of stomach.”

Instead of looking to sell to people who are going home to cook or even those getting grab-and-go items for a quick meal elsewhere, Kroger now is going after diners. At a store in Union, near Florence, Kroger opened a sit-down restaurant called Kitchen 1883.

Kitchen1883-union-benedict-297-edit
Kitchen 1883, named for the year Barney Kroger opened his first store in the Cincinnati area, serves American comfort food, such as the Union Benedict made with corned beef. It’s open for brunch on Saturday and Sunday and for lunch and dinner Tuesday through Friday. Kroger

“‘Rustic Relaxation’ (if there is such a thing) may be the best way to describe the vibe inside Kitchen 1883,” according to the company. “It’s hard to argue otherwise, as you slip into a leather chair, amidst the restored hardwood interior walls, the smells of a 24-hour-slow-cooked short ribs emanating from the kitchen, just beyond the handcrafted cocktail bar.”

What? A bar in Kroger? It’s true; cocktails and craft beer on tap to go with your dinner. The menu, developed by Kroger’s Culinary Development team, is heavy on “New American comfort food.” Think chicken and waffles, roast beef, salads and wraps.

Kitchen 1883 hosted the first dinner service on Nov. 4 and is now open daily for lunch and dinner with brunch available on Saturdays and Sundays.

This should sound familiar to many Whole Foods shoppers. The new store that opened in June at The Summit at Fritz Farm has a bar and restaurant.

Look for more “foodie” options at stores, including expanded meal kit offerings, too.

▪  Going after Amazon. To compete directly with the online shopping giant, Kroger will have ClickList online grocery pickup at more than 1,000 stores by the end of year and plans eventually to add it to every store where there is space available.

One reason is to cater to the busy shopper. It’s apparently working; although Kroger wouldn’t put a dollar figure on sales, the company said last month that digital revenue driven by ClickList had more than doubled over the third quarter of last year.

Another: To collect even more data on your buying habits. Look for more targeted coupons in your Kroger loyalty card account.

And to make ClickList even more attractive, Kroger is partnering with delivery services including Shipt, Roadie, Uber and more, including testing Instacart home delivery in Southern California.

Another test program is getting a big expansion: Scan, Bag, Go — a self-checkout option that lets customers ring up their purchases as they pluck them off the shelves and completely skip checkout — will expand from the 20-store pilot program in the Cincinnati area to 400 stores in 2018. Watch for this to come to Central Kentucky soon.

▪  Going after Walmart and Costco. “We will not lose on price,” McMullen said in a recent conference call on earnings results. Expect to see Kroger move aggressively to stay ahead of whatever Whole Foods does to bring down its prices and to keep up with Walmart and Costco.

One way Kroger has stayed competitive is through its house brands, including the Simple Truth organic label and Turkey Hill Dairy, among many others. About a fourth of all Kroger grocery sales in the third quarter were house brands.

And look for Kroger to take its competitors on in non-grocery items, too. Kroger said it had its best-ever Black Friday results this year from general merchandise “led by record sales at Fred Meyer (another Kroger banner that carries more home and electronics goods.)”

In 2018, watch for Kroger to launch an apparel brand and a new floral line, Bloom Haus.

Ruler Interior
Under the Ruler banner, Kroger is testing a new footprint that mimics competitor Aldi, with fresh produce and cheaper prices, mostly store brands. Ken McClure Ruler Foods

▪  Going after Aldi. Ruler Foods, a small division of Kroger, is getting a fresh look. Two new stores in Illinois have opened with a new floor plan and logo that could become a pilot for the Ruler Foods stores, including the one in Cynthiana. Ruler has a more “value-oriented” vibe, carrying mostly Kroger store brands. The stores use a kind of shelving strategy that uses whole opened boxes rather than individually stocked items. That cuts down on stocking time. Expect to see this seeping into your regular Kroger stores, too.

Ruler stores also offer only the most popular varieties rather than an entire line, said Ken McClure, spokesman for Ruler Foods. “Instead of 18 flavors of jam, you’ll have the six best selling.” That maximizes what the store has in-stock: fewer unpopular leftover flavors.

The test stores also have a new focus on fresh produce, which is now front and center, with greater selection and pricing, McClure said. “These new stores have been moved to these new formats as a test, and determine if that’s the direction we want to take.”

Watch for the 50 or so existing stores, including Cynthiana’s, to be retro-fitted if sales take off.

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