Addressing Kroger’s investors’ conference in October, its finance boss emphasised the grocer’s focus on ensuring the worth of its proposition.
“It’s more about quality than quantity,” said chief financial officer Mike Schlotman.
The US chain’s third-quarter results would seem to attest to the merits of such an approach.
Kroger unveiled its 48th consecutive quarter of comp store sales growth, which grew 5.4% in its third quarter, excluding fuel centres. Total sales - when stripping out fuel - rose 5.5%.
With sales growing and costs coming out of the business, Kroger has been able to ensure the long-term success of its operations - the biggest news of the past quarter being the acquisition of Chicago-area grocer Roundy’s last month, owner of Mariano’s Fresh Market stores.
This $800m (£530.96m) deal enabled Kroger to continue its push into Greater Illinois and Wisconsin. This sits well with Kroger’s strategy of growth via filling in already established markets, rather than making grabs for uncharted territory.
The high-end urban Mariano’s Fresh Market stores will be of particular interest given Kroger’s fast-developing passion for organic and artisan.
The urban format of Mariano’s Fresh Market is also reported to have been a driver behind the acquisition of Roundy’s. Kroger is effectively buying in the company’s expertise in the operation of smaller urban formats - an area where its own is lacking.
Ahead of the curve on organic
One of its most astute moves in recent years was getting ahead of the curve on rising American consumer appetite for organic and fresh offerings. Given its high dependency on private label, such a sizeable and early commitment to the segment – via its Simple Truth and Simple Truth Organic brands – could have proved costly.
As it is, the company recently revealed organic and natural food lines represented $11bn of sales in the past year, with Simple Truth now the biggest natural food brand in the US.
We await with interest early performance indications for its international HemisFares premium own brand, rolled out in early October. The brand shows Kroger’s skill at upscaling its proposition without straying too far beyond price expectations of its core shopper.
It is this focus on constantly enhancing its offer, based upon a solid foundation of innovation, technology and customer focus, which lies at the heart of Kroger’s unmatched ascendancy in US grocery.
Kroger appears to be sailing serenely on, with seemingly nothing to impede its progress.
A resurgent Walmart; the US arrival of Lidl, or another sharp economic downturn could potentially throw it off course, but Kroger appears to be equipped to weather all but the most perfect of storms.
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