We highlight five themes that have emerged from Kroger's annual investor day.
Steady progress made with Restock Kroger
Kroger's strategic plan, Restock Kroger is nearing the end of its second year of the three year plan. The retailer remains committed to the plan and the results so far have been mostly in line with its forecast. Kroger has reconfirmed its 2019 guidance of 2-2.5% same store sales growth and is forecasting at least 2.25% growth for 2020. This year has seen a renewed focus on fundamentals, as it puts in place the foundations for continued momentum in 2020. Reflecting on 2018, Kroger has recognized that certain elements of the initial plan caused too much disruption and has refocused its efforts on the fundamentals in order to stay on track with its success.
Relaunching the brand
Kroger is launching a new brand initiative under the tagline 'Fresh for everyone'. This is being coordinated across its advertising and in stores. Animation is being used to bring the brand to life, with a focus on being fun and welcoming. This will be highlighted in a television launch, advertising the new brand along with the promotion that Kroger will be running for the holidays, offering free Pickup in select markets. With Amazon recently announcing that they would be eliminating the monthly fee charged for grocery delivery, this will help Kroger to stay competitive over the busy holiday season.
Kroger is framing its online efforts through three pillars: available, accessible and relevant. Available means utilizing the scale of its physical footprint and expanding its fulfillment network, which it is doing in partnership with Ocado. Accessible includes having the right technology and expanding its portfolio of solutions to engage with shoppers whenever and however they want. Relevant means understanding who its customers are and using that data to anticipate their needs and missions. Together these anchor the foundations for creating a seamless experience that resonates with shoppers.
Kroger is leveraging its partnership with Ocado and is looking to recreate the high standards that Ocado achieves in its UK business, such as its 99.8% fill rates and 0.7% level of shrink. By maintaining a focus on the customer experience and operational excellence, Kroger is positioning its online business for future growth in this competitive space.
Innovation and personalization
In fresh, continued innovation is bringing new trials to market, including a partnership with Berlin company Infarm which has introduced the ability to grow fresh produce in-store and is being trialled in two stores in Seattle. The development of its restaurant concepts are another area where innovation is playing a key role in determining the future direction of the business.
With 75% of the items purchased online impacted by personalization, Kroger is undertaking a number of initiatives aimed at improving its abilities in this area. It is testing and learning through programs such as Rush delivery and its fuel VIP initiative. Through its insight business, 84.51°, Kroger knows that of the 11 million households that shop with it each day, 30% are loyal customers and these loyal customers account for 70% of its sales and are eight times more valuable than non loyal customers. Using its data to create personalized advertising and rewards for its customers helps drive sales and retain shoppers.
Alternative profit streams
To help drive its profit growth, Kroger has been investing in a number of alternative profit streams which are asset light and margin rich. Kroger expects to see an increase of $100m in incremental operating profit in 2019 and $125-150m in 2020. It has classified the profit streams under the following pillars: Kroger personal finance, Kroger precision marketing, customer data insights, ventures and future innovation. One of the initiatives highlighted was the creation of Pearl Rock, a platform which uses insights from 84.51° to identify and invest in promising new CPG brands.
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