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Embracing Change

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CINCINNATI — Kroger Co. is rolling out a new merchandising vehicle to highlight its highly successful private brands, chairman and chief executive officer Rodney McMullen revealed at the grocer’s recent annual meeting here. The concept, dubbed Treasure EmporiYum, will present a curated collection of trend-inspired private label (which Kroger terms Our Brands) items in almost 200 of its Marketplace format stores under various banners across the country.

The center-store fixture has been designed to spark customer interest and excitement in new flavors and “one-of-a-kind finds.” Kroger carries the treasure hunt experience further by using shelf tags throughout the store that signal the presence of Treasure EmporiYum items with “X Marks the Spot.”

The merchandising program is further supported by its own website and a print and digital magazine that explains how the products were developed and provides recipes for their use, as well as other content.

The success of Kroger’s own brands is an example, McMullen said, of the company’s dedication to customer-focused innovation. Last year Kroger introduced more than 1,000 Our Brand products, followed by more than 200 in the first quarter of 2019.

McMullen singled out the blockbuster success of the company’s natural and organics brand, Simple Truth. “Six years ago Simple Truth did not exist,” he pointed out. “Now, it is the largest natural and organic brand in the country, reaching more than $2.3 billion in sales ­annually.”

That focus on innovation is Kroger’s response to the constant change that is impacting the grocery business, as well as the entire retail industry. It is the mainspring of Restock Kroger, the program management launched in 2017 to create an organization that can deliver continued financial growth. It is, McMullen said, “our blueprint for ­transformation.”

“Restock Kroger starts with customer obsession at every level of our organization,” he elaborated. “That’s why we’re building an omnichannel platform to serve customers with anything, anytime, anywhere. That is why we’re joining with exciting partners both large and small who share our passion for using technology to create innovative customer experiences and additional value. That is why we are developing leaders who are passionate about people and food.”

McMullen pointed to the skyrocketing growth of Kroger’s online business, which has swelled from zero sales in 2014 to approximately $5 billion in digital sales last year. Kroger, he said, is creating a new model for the grocery retail industry, one that will be driven by technology.

“Kroger is transitioning from a grocery company to a growth company, from physical to omnichannel, and we are partnering with the world’s best innovators to accelerate this transformation,” he told investors.

An example of how Kroger is harnessing change to drive its own growth is its partnership with Ocado, a dedicated online grocer based in the United Kingdom. Kroger recently broke ground in the Cincinnati area on what will be America’s first high-tech customer fulfillment center powered by Ocado. According to McMullen, the facility brings first-of-its-kind technology to the United States and will help Kroger transform the cost model for its digital business and accelerate its profitability growth. Plans call for the construction of nearly two dozen such fulfillment centers across the country, with sites already identified in central Florida and the Mid-Atlantic.

Kroger has also apparently had success with its driverless on-road delivery vehicle, Nuro, which uses robotics and machine learning to transport products quickly, affordably and — so far — safely. The vehicles are currently being deployed in Scottsdale, Ariz., and Houston.

These and other partnerships with such companies as Microsoft Corp.; Home Chef, a meal kit and home delivery service; and Walgreens Boots Alliance are all intended to improve the experience of Kroger customers.

The transformation of Kroger, McMullen noted, requires more than investments in technology and the development of new business models. It is investing as well in its employees, including more than half a billion dollars in wage increases, enhanced training programs and leadership development. The company’s Feed Your Future program has thus far funded educational assistance to more than 2,500 associates.


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