Source: Kroger video
Is the time right for Kroger to go hyper-local?
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.
- Kroger Launches Kroger.Com/WeAreLocal, Invites Local Suppliers to Join the Kroger Family of Companies – Kroger
- New Kroger site highlights local and emerging brands – “We Are Local” initiative seeks new suppliers – Supermarket News
- As Amazon takes Whole Foods national, Kroger thinks local – CNBC
- Will centralized buying make Whole Foods a more formidable competitor? – RetailWire
- Amazon Puts Whole Foods on Fast Track to Conventional Supermarket – The Wall Street Journal
Discussion Questions
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?
Poll
BrainTrust
Cynthia Holcomb
Founder | CEO, Female Brain Ai & Prefeye - Preference Science Technologies Inc.
Dick Seesel
Principal, Retailing In Focus LLC
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.
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.
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.
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.)
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.
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.
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.
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.
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.
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!)
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.
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.
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.
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.
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.
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.
I have several reasons to applaud this move.
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?
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!