Is the time right for Kroger to go hyper-local?

Discussion
Source: Kroger video
Oct 02, 2017
Tom Ryan

Kroger recently launched a new website, Kroger.Com/WeAreLocal, to more loudly broadcast its local goods and invite more local suppliers to work with the grocery giant.

The release of Kroger.Com/WeAreLocal came out on Sept. 22, one day after a Wall Street Journal article reported that Whole Foods was accelerating its shift to more centralized buying under Amazon’s ownership while also eliminating brand reps from selling floors. Whole Foods was already said to be moving toward less regional buying for efficiency reasons earlier in the year.

Kroger’s statement on the microsite launch underscored its commitment to local vendors.

“Our business has a track record of successfully blending centralized and decentralized decision making to promote local products while also enjoying economies of scale,” said Mike Donnelly, Kroger’s EVP of merchandising and procurement. “Since Kroger’s day one, we have had a longstanding, 365-day-a-year commitment to support and source from local farmers, ranchers, food producers, wineries, breweries and product makers. There are tastes and products that are unique to every region.”

Kroger.Com/WeAreLocal site includes three sections:

  • Join Our Family of Suppliers: Prospective suppliers can self-register to become a partner and view information on data, EDI and other requirements.
  • Discover local: Consumers can learn about the local farms Kroger works with as well as many of the labels, such as “Arizona Grown,” showcased in stores.
  • Sourcing Locally Helps Support Zero Hunger and Zero Waste: Kroger discusses its commitment to ending hunger in the communities in which it operates and eliminating food waste within the company by 2025. This section also talks up the sustainability benefit of reducing transportation through regional sourcing.

Taking another dig at the new attention brought to Whole Foods and perhaps to Walmart, Kroger stated that it has “led the way for over a decade” in making local, natural and organic products “more affordable and accessible” for Americans as evidenced by its successful Simple Truth brand. Said Mr. Donnelly, “There are a lot of headlines about making local, natural and organic foods more affordable. The truth is, we’ve always been affordable.”

A Whole Foods spokesperson emphasized to the Journal that local suppliers and products would remain “crucial” to its mix.

DISCUSSION QUESTIONS: What do you think of Kroger’s plan to emphasize and build on its local assortments? Is this an approach that you think will resonate more deeply with consumers in the next few years?

Braintrust
"With Whole Foods replacing local with centralized distribution centers across the U.S., game on for Kroger."
"It’s a good idea especially for grocers with national scale to pay attention to local preferences. "
"The watch-out is that if you’re a centralized procurement structure like Kroger, it’s easier said than done."

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19 Comments on "Is the time right for Kroger to go hyper-local?"

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Seth Nagle
BrainTrust

A step in the right direction. Down in Texas H-E-B is all about sourcing local and do a great job marketing it and the Texan shopper loves it from what I’ve seen. Consumers appreciate helping out neighbors and, in fact, this strategy has led to great success for startups like FreshDirect which focus on freshness and storytelling. Additionally, if done right shoppers will pay a premium for locally-sourced goods.

Phil Chang
BrainTrust

Right on. H-E-B does an amazing job of this. If Kroger can even just replicate the love Texans show for H-E-B, they’re on the right track.

Art Suriano
BrainTrust

I think Kroger emphasizing its commitment to local vendors is smart. Using local farms and vendors is nothing new for grocery chains, and there are advantages especially when providing fresh products. However, Whole Foods now controlled by Amazon wants to focus on beating the competition strictly with lower prices. So the decision is left up to the consumer who can decide if quality comes first or price. Many customers will choose to pay a little more when necessary for better quality. So Kroger, as well as other grocery chains, will be okay. And for those customers only concerned about price, they will continue to find the lowest prices possible and will care less about the quality of what they are purchasing.

Phil Chang
BrainTrust

Is that too binary? Local brands aren’t always equivalent to being expensive. You’re definitely right — consumers make choices everyday on where and what to spend their money on, but local brands have options to help keep costs down. (small batches, limited runs, locally sourced ingredients, etc.)

Mark Heckman
BrainTrust

Kroger’s long history of de-centralization, that is, giving their leaders of the KMAs (Kroger Marketing Areas) the authority to make important decisions, should lend itself to the potential success of leading on local assortments. However (and speaking from experience) finding the right local suppliers that have the scale and consistency necessary to occupy space at Kroger is no easy task. It will require another layer of merchandising and logistics that will be challenging, even for Kroger.

On the consumer side, regional brands have varying importance to shoppers. It will be key to do the upfront research to better understand which commodities and categories will have the strongest impact as well as understanding which areas of the country offering “local” products provide the best opportunity for differentiation.

Max Goldberg
BrainTrust

Kroger sees a potential opportunity is appearing. Whole Foods’s move to a more centralized buying system has created an opportunity for other retailers to go hyper-local. In order to succeed, Kroger will have to do more than post information on the web. Whole Foods empowered staff, foragers, to seek out new, local food manufacturers and almost instantly test their products in three stores. This is the kind of commitment that Kroger will need to make to succeed in billing itself as local.

Dick Seesel
BrainTrust

Whether this was a pre-existing strategy or a reaction to the Whole Foods “centralization” news, it’s a good idea especially for grocers with national scale to pay attention to local preferences. As I said last week, however, don’t assume that Amazon will ignore this issue just because it is trying to find cost savings in the Whole Foods model in order to compete.

Amazon is the leader in using data science to determine consumer preferences, and I expect this to extend to their assortment planning in individual Whole Foods stores. If Kroger intends to compete, it will want to support its “local” initiative with great execution of in-stock levels.

David Livingston
Guest
1 month 19 days ago

Grocers seem to recycle this idea as if it’s a new one. Like lowering 5,000 prices. It sounds good for the press release. However it has no meaningful impact. Probably thought up by a new executive desperate to make an impression. The bottom line is consumers want the lowest prices. Unless you have stores in Florida, Texas or California, there is only so much local produce you can put in your store.

Tony Orlando
BrainTrust

Thank you David for your honest and blunt comment on all this hoopla. Consumers always respond to lower prices and, yes, there are some foodies who will pay more, and tell their friends at a dinner party that their green beans all had a name and were hand picked by Juan Valdez. Aldi sells more produce than any other store in our county, so price for most of us is the driving factor. You want real opinions on the supermarket, talk to the store owners who know how important price is to their customers and you’ll get an earful.

Phil Chang
BrainTrust

This is a great initiative. Local brands and small brands are always good for business. The watch-out is that if you’re a centralized procurement structure like Kroger, it’s easier said than done. They’re already looking to intake local brands at a centralized site — Whole foods did this by region.

I will look forward to seeing how this pans out. It’s worth noting that many regional players compete in this space so hopefully Kroger isn’t walking into this thinking it’ll be easy. H-E-B does a great job of this in Texas, and Stu Leonard’s on the East Coast as well. (I’m sure I’ve missed some great retailers!)

Michael La Kier
BrainTrust

Local assortment only works if it is the right assortment. If combined with Kroger’s deep understanding of their shoppers, this can absolutely be a success as shoppers increasingly care about the products they buy.

Richard J. George, Ph.D.
BrainTrust

I applaud Kroger for this move. Not only does it put the focus back into its stores and its relationships with local sources, it underscores Kroger’s commitment to “ethical and sustainable practices.” This approach has the potential to reduce risk and operating costs, as well as enhance its brand image. Besides the noted advantage of such initiatives, an additional competitive benefit may be found in the recruiting of young talent out of college. Local, ethical and sustainable business practices resonate strongly with this group.

Cynthia Holcomb
BrainTrust

Very smart move in the grocery battle! It’s the reverse engineering of what made Whole Foods viable to actual human customers. Fresh, local, lively food. With Whole Foods replacing local with centralized distribution centers across the U.S., game on for Kroger.

Doug Garnett
BrainTrust

Kroger, having grown through acquisition and having kept the unique local flavors of stores like Fred Meyer and King Soopers, has already maintained this mix of national and local. So it’s good to see them embrace it — and likely a smart move against Amazon who brings us an internationally-curated blandness.

Ian Percy
BrainTrust

Kroger has it right. Nothing is more efficient than local supply for all kinds of reasons that Kroger recognized years ago. The article asks if the time is right. The answer is yes, but food retailers better get on it because “going hyper-local” is no longer ahead of the curve.

What fresh food retailers need to be looking at is the hyper growth of year-round indoor farming. I’m already talking with one county about taking over the empty half of an enclosed mall and our choice of empty warehouses.

Adrian Weidmann
BrainTrust

Shoppers want transparency in their food choices and a sense of community. Giving access and availability to local food sources provides shoppers with both. We want to support our friends and neighbors and especially our local farmers. The local farmers markets are thriving here in Minneapolis. Kroger has taken a great approach to counter the recent centralization announcements at Whole Foods. This could become a great advantage for Kroger and a strategy that may outflank Amazon.

Janet Dorenkott
BrainTrust
1 month 19 days ago
I have several reasons to applaud this move. First, Kroger has always been more decentralized than other retailers, but I don’t believe that was widely known by the consumer. Releasing a press announcement that focuses specifically on this will matter. Many people are willing to pay more to support local and organic, despite their incomes. It’s why vegan, organic, gluten free and non-processed food lines are growing. The market is changing. We are learning every day, about the negative side effects of processed foods, antibiotics, etc. That said, to assume local is always more expense is wrong. Local is often less expensive. Trends matter! Kroger is not to late to this trend as some have suggested. This is an entire generation changing their eating patterns to be more healthy. This generation is now having babies and producing a new set of parents that despite their income, will want to feed their children healthy options. Even a lot of baby boomers are focused on healthy these days. Assortment will still require non-local vendors. I don’t know of any banana growers in Ohio. But the attempt to focus on local is positive. Making it easier for local farmers to have access to… Read more »
Dave Nixon
BrainTrust

If Kroger can adapt their large-scale, very formal operational processes to accommodate then this could be a very good direction for Kroger to go. You would have to bolster all sorts of departments within the enterprise like quality, logistics, procurement, etc. to make this successful. But the trend is hyper-local, and a retailer with stores in almost every geography could do very well here. It supports Kroger’s brand messaging of “your hometown Kroger.” A smaller format Kroger store for more rural areas, anyone?

Paul Donovan
BrainTrust

The idea of attracting more local and innovative suppliers as the goal and then saying they can go look into EDI and data requirements to do business in this digital era is very ironic and probably not realistic!

wpDiscuz
Braintrust
"With Whole Foods replacing local with centralized distribution centers across the U.S., game on for Kroger."
"It’s a good idea especially for grocers with national scale to pay attention to local preferences. "
"The watch-out is that if you’re a centralized procurement structure like Kroger, it’s easier said than done."

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