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Kroger Looks to Build on 2020 Growth by Accelerating Digital, ‘Leading with Fresh’

Kroger
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Kroger outlined plans to deliver total shareholder returns of 8% to 10% in 2021 at its virtual Investor Day, held March 31, 2021. Leadership pointed to two core areas for driving that growth: the fresh food segment and digital, which was described as “a growth engine” for the supermarket retailer, one of the nation’s biggest. 

Chairman and CEO Rodney McMullen started the meeting by acknowledging two tragic events that had shaken the company in recent weeks — a shooting at a Roundy’s distribution center in Oconomowoc, Wis. on March 17, and another shooting at a King Soopers in Boulder, Colo. on March 22.

“Our community, our Kroger family, has shown strength and resilience beyond measure,” said McMullen. “They are the heart and soul of our organization and for that I am forever grateful.”

The company reported on the success of its “Restock Kroger” transformation strategy over the last three years and outlined a new strategy called “Leading with Fresh and Accelerating with Digital.” Kroger ecommerce sales have soared to top $10 billion in the most recent fiscal year, which ended Jan. 30, 2021. In 2020 alone, driven largely by COVID-19, digital sales doubled, as did the number of households using Kroger’s network of digital offerings. McMullen predicted that the trend toward ecommerce and at-home food preparation would continue even beyond the pandemic.

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“It’s true that the shift to spending more time at home and eating less at restaurants was a tailwind for our industry and that we will face tough comps as a result, but we also believe that those who are able to convert on this short-term boost into long-term competitive advantages will emerge as winners, and that’s exactly what we’ve been doing,” he said. “As society has leapt into a new digital era, so has Kroger.”

To that end, the company plans to double digital sales by the end of 2023 and, perhaps even more importantly, increase the profitability of those sales, while also growing its share of wallet through product assortment expansion. Among the initiatives designed to achieve these goals are:

  • Leveraging stores as digital assets and reducing the cost of serving digital demand from those stores by investing in store associates and technology;
  • Doubling store capacities over the next few years to make in-store, pickup and delivery options more convenient for consumers;
  • Offering pickup services in alternate venues in regions where customers don’t have immediate access to a store, through a pilot program called Hometown Pickup;
  • Continuing to ramp up its partnership with Ocado fulfillment centers to expand reach and enter new geographies;
  • Evolving its personalization platform to continue to drive loyalty. The Kroger platform’s open and redemption rates are 4X better than the industry average, according to CIO and SVP Yael Cosset;
  • Accelerating its retail media network to drive overall digital profitability;
  • Doubling down on key categories including adult beverage, plant-based products, specialty products and its meal subscription platform via Home Chef;
  • Ramping up its third-party marketplace — described by Cosset as an “asset-light, margin-rich model” — by continuing to add new categories and assortments; and
  • Expanding its meal solutions assortment of ready-to-eat dinners and meal kits.

“Today, Kroger is uniquely positioned because of the strength of our assets and our competitive moats cultivated over several years of disciplined investment and focused execution,” said McMullen in a statement. “Our go-forward strategy builds on these strengths to drive share growth, increase profitability across digital, and deliver strong and sustainable total shareholder returns.”

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