Kroger: Company Description

The Kroger Co. is the largest supermarket retailer in the US and the country’s second-biggest grocery retailer after Walmart, according to Euromonitor International. Kroger operates store formats that include grocery and multi-department stores, convenience stores, and jewelry stores.

The company owns banners such as Kroger, Baker’s, City Market, Dillons, Fred Meyer, Gerbes, Ralphs, Smith’s and Metro Market. As of February 2, 2019, Kroger operated 2,764 supermarkets under local banner names; 2,270 of these had pharmacies and 1,537 had fuel centers. The company completed the sale of its convenience stores business for $2.2 billion on April 20, 2018.

Kroger owns 37 food production plants, primarily bakeries and dairies. These facilities produce about 32% of the company’s private-label units and 43% of the grocery category private-label units sold in the company’s supermarkets.

[caption id="attachment_92792" align="aligncenter" width="700"] Source: Company press releases/company reports[/caption]

Key Events Overview: 2008-2019

2017-2019: In the last two and half years, Kroger has made several strategic alliances and focused on introducing new technological innovations. Kroger announced its biggest e-commerce partnership, with British e-grocer and technology firm Ocado, in May 2018. The partnership is designed to strengthen Kroger’s delivery business with the construction of up to 20 automated warehouses over three years. Like major rivals such as Walmart, Kroger has so far focused on in-store grocery pickup, and the Ocado partnership represents a shift of focus to home delivery. It also constitutes a major expansion of Kroger’s grocery e-commerce capabilities in the face of competition from Amazon and Walmart. In November 2018, Kroger chose the Cincinnati region as the location of the first customer fulfillment center (CFC) to be built as part of the Kroger-Ocado deal. In February 2019, Kroger and Ocado announced the next two would be in central Florida and somewhere in the mid-Atlantic region.

In January 2019, Kroger worked with Microsoft to use Azure cloud technology to develop and market a retail-as-a-service (RaaS) platform, which will include a wide array of front- and back-end solutions for retailers.

Kroger plans to transform two pilot stores in Monroe, Ohio, and Redmond, Washington. The company’s focus on the RaaS platform will be to boost analytics-driven personalization, and, with the help of video analytics, to offer personalized product recommendations and advertisements based on demographics. These recommendations will appear on digital displays on shelves Kroger calls the “Enhanced Display for Grocery Environment” (EDGE) shelving system.

In October 2018, the company partnered with Walgreens to test online order pickup at 13 Walgreens stores. Kroger later extended its partnership with Walgreens through new initiatives under which Kroger offered its Kroger Express (a curated selection of 2,300 products, provided by Kroger subsidiary 84.51°) at 13 Walgreens test stores in northern Kentucky, near Kroger's Cincinnati headquarters.

Kroger has also teamed up with robotics company Nuro to introduce grocery delivery by self-driving car and began a pilot at a Fry’s store in Arizona in August 2018. In December 2018, Kroger introduced Nuro's custom unmanned vehicle known as the R1 which was completely autonomous without being accompanied by vehicle operators. In March 2019, service was launched at two Kroger stores in Houston.

In addition, in August 2018 Kroger launched a new e-commerce grocery home delivery service called Kroger Ship. Currently available in four cities, this service delivers customers’ online orders as quickly as the next day, in alliance with shippers such as the US Postal Service and FedEx. In August 2018, Kroger partnered with Chinese e-commerce company Alibaba to sell Simple Truth products on Alibaba’s Tmall Global platform. In June 2018, Kroger acquired meal kit company Home Chef for $700 million. The acquisition has given Kroger access to valuable customer data and technology that complements its own meal kit offering.

[caption id="attachment_92796" align="aligncenter" width="700"] Source: Company reports/S&P Capital IQ/Coresight Research[/caption]