Kroger seeks to ghost up take-home and meal delivery sales with dark kitchens

Discussion
Source: The Kroger Co./Kitchen United
Aug 05, 2021

Kroger wants to be the place Americans think of when they order restaurant food for takeout or delivery.

The country’s largest supermarket operator, announced yesterday a partnership with Kitchen United, an operator of ghost kitchens, to offer freshly prepared foods on-demand from its stores.

“Our customers’ appetite for fresh, on-demand meals continues to accelerate, and we remain focused on offering new and innovative products that provide anything, anytime, anywhere,” Dan De La Rosa, Kroger’s group vice president of fresh merchandising, said in a statement. “Our partnership with Kitchen United taps into restaurants’ growing use of off-premise kitchen space to increase customers’ access to their favorite foods.”

Kroger will vary the menu of food selections by location with each featuring up to six popular local, regional or national brands. Customers will place orders via the Kitchen United website or app or on-site at Kroger using ordering kiosks. Orders can be placed for one or multiple restaurants with ghost kitchen staff preparing meals to be picked up at Kroger or delivered for a fee by third-party providers.

Craig Gauden, Kroger’s director of partnership development, said the deal will build on the grocer’s goal of becoming a food destination.

“This collaboration creates another seamless way for our customers to order lunch or dinner for pick up while they shop for groceries or for delivery to their location of choice,” he said.

A Ralphs store in Los Angeles is expected to be the first to host one of the ghost kitchens. Expected in the fall, the opening will be followed by other locations later in the year. Kroger has not specified where those will be located.

This is not the first time Kroger has worked with ghost kitchens. The retailer announced in 2019 that it was piloting the use of so-called dark kitchens to enable faster food delivery through an initiative called Kroger Delivery Kitchen. The program, which launched in three urban and suburban markets in 2020, included a partnership with ClusterTruck, which created meals from its own menu for delivery within a half-hour of being ordered.

DISCUSSION QUESTIONS: Do you think Kroger’s partnership with Kitchen United will succeed in its goal of furthering the grocer as a food destination for consumers in the markets served by its stores? Do you see this concept as scalable to the point of Kroger opening large numbers of ghost kitchens in its chain stores across the country?

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"Where and how Kroger rolls this out will be key to the conversation here."
"This is a smart, on-trend, revenue extension for Kroger that will be a long-term winner, especially in poorly served markets..."
"This is a real opportunity for Kroger to gain in the share of stomach battle against restaurants."

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22 Comments on "Kroger seeks to ghost up take-home and meal delivery sales with dark kitchens"


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Dave Wendland
BrainTrust

It’s my belief that demand for on-demand food and convenience is going to continue to accelerate. That said, Kroger’s new partnership with Kitchen United positions them squarely in the intersection. I believe it is a scalable concept that not only meets the growing interest in freshly-prepared meals, but gives shoppers another reason to remain loyal. This is a true win-win for consumers and for Kroger.

Neil Saunders
BrainTrust

The market for takeout and delivery meals remains very elevated over the pre-pandemic period and, given the current spread of the virus, I don’t expect it will shrink any time soon. A lot of traditional restaurants have pivoted to offer these services and, to some extent, there is a battle for “calorie market share” between them and the grocers. It is smart of Kroger to tap into this trend for convenience and prepared meals and to think beyond traditional grocery. This may not work at every store and in every location, but in many it will be a good addition – especially as Kroger has an enormous number of existing customers and tons of customer data it can use to market this.

Ken Morris
BrainTrust

This goes along with Kroger’s push for CFCs (Customer Fulfillment Center with Ocado) and MFCs by augmenting what I would consider their dark store concept with ghost or dark kitchens. This will compete and win with subscription services. I think this concept will spread and be adopted by their competitors. It is a natural progression from prepared foods to this model.

Heidi Sax
BrainTrust

Where and how Kroger rolls this out will be key to the conversation here. I could see this getting traction in markets where there are fewer convenient fresh food options. In other markets, I think it will be pretty dependent on what’s being offered and how accessible/seamless it is.

Jenn McMillen
BrainTrust

This move feels like a win for convenience, but a blow to gustatory pleasure. When you’re perusing the options for Friday night takeout, I have high doubts that anyone in your family is going to say, “Yeah! Let’s order from Kroger!”

DeAnn Campbell
BrainTrust

I’m with you, but I’ve seen where this does work. Whole Foods has a regional store near me with an upper level dining area that’s always packed, and Loblaws in Canada is a hot in-store dining spot in their urban Toronto stores. And for take-out, not many QSRs can offer the same range of options as a grocery store to suit every individual taste from one location. If grocers could improve their dining area experience, and expand their take-out offerings to include grocery store items (a side of cake, or a bucket of ice cream perhaps??) they might actually have a shot at unseating QSR in some locations.

David Naumann
BrainTrust

Similar to Instacart’s micro-fulfillment center model for grocery delivery, third-party ghost kitchens offer retailers another option to improve the efficiency and cost effectiveness of food delivery. A ghost kitchen that leverages multiple restaurant brands and accepts orders from multiple grocers may be a successful model. Kroger’s goal of being a “food destination” for consumers is a smart strategy — offering consumers multiple options to achieve their food needs whether they do their own shopping or want it delivered.

Michael La Kier
BrainTrust

Is it a ghost kitchen if there’s an actual kitchen and storefront? Convenience is king and if Kroger can up the game on their prepared meals it will only benefit them. Trial will be a significant barrier, but if people can pick up their groceries and food in one location it is an enticing proposition — as long as the food is good.

Venky Ramesh
BrainTrust

Ever since it has been tracked (perhaps since the 1960s) with the exception of 2020, away-from-home consumption has been steadily climbing, while consumption at home has been on a steady decline. In 2008, it converged at 50/50, with roughly $1 spent on food away from home for every $1 spent for food at home. Since then food away from home continued to grow even further. For the first time in decades, in 2020, the trend reversed due to obvious reasons. While restaurants and the food services distributors lost their business, grocers gained from it due to demand for fresh food. However with the rise in vaccinations, people have again started eating out. Can grocers let go of the additional revenues they gained during COVID-19? Or will they find new ways to keep them? That is why they need to get into the away-from-home business in a strategic sense.

DeAnn Campbell
BrainTrust

Right on target as usual Venky! Just like the work from home/back to office discussion, Americans are learning there is a third way — a balance between at home comfort and out-of-home socialization, so while the away-from-home dining numbers will continue to fluctuate for the next year around COVID-19, I believe it will settle into middle ground, but with consumers taking advantage of ghost kitchen options for better and more varied meal choices.

Zel Bianco
BrainTrust

I think this concept has a very good chance of succeeding in certain markets. It will certainly have a significant impact towards the goal of Kroger becoming a food destination.
Grocers should always work to achieve an inviting atmosphere where shoppers want to visit on a more frequent basis. It’s a step closer to how shoppers interact in many European villages. Shoppers tend to interact with their local merchants on an almost daily basis and it makes for a more pleasant experience.

Raj B. Shroff
BrainTrust

It definitely helps Kroger’s goal of furthering itself as a food destination. For many families, a Kroger meal would be a big hit and time-saver, especially during the week. If Kroger can replace one mundane home cooked meal with theirs, what a win.

The concept does seem scalable because Kroger has the ingredient supply and footprint. They can flex their menu based on region with no impact on their supply logistics, offer more options than any restaurant chain. United Kitchen has the operational expertise. Seems like a winning combo.

Richard J. George, Ph.D.
BrainTrust

This is a real opportunity for Kroger to gain in the share of stomach battle against restaurants. Conversely, this is a real threat to traditional restaurants. If executed properly, ghost kitchens have a real chance of success. The pandemic elevated the need for food prepared elsewhere but eaten at home. While consumers have returned to in-restaurant dining options, there exists an ongoing demand for ghost kitchen meals. Plus, the Delta variant will cause consumers to hit the “pause” button on dining out.

Gary Sankary
BrainTrust

On the one hand Kroger (and most every other grocer) has really put a lot of effort into grab and go meals. This is partially to compete with the Blue Aprons of the world and also because their customers have been interested in quick solutions, especially in urban markets. From a convenience standpoint it’s a win. And if the demand is there to support dark kitchens, even better. Kroger is a brilliant retailer, they will adjust their production plans as local demand dictates.

Now if they can figure out how to make the experience of picking up those meals easier, like I don’t have to find a parking place in the massive lot, walk the store and find my meal, checkout and go back to my car — then I think this category would seriously explode for them.

Joel Rubinson
BrainTrust

The world of food splits pretty much evenly between on-premises and off-premises. The other half of the market has always been the big target. This seems like a very well thought out attempt to take a few bites from that other apple.

Lee Peterson
BrainTrust

Kroger is starting to remind me of Macy’s a few years back: a new, forward thinking PR release about every month or so. And what happened with all those cool Macy’s in-store tech efforts like beacons and discounts on your phone? We got a discount store that had nothing to do with that. Same with Kroger. Hey, where’s that c-store you made a big deal of? How’s that BOPIS/delivery going? MFCs? Now dark kitchens. But in reality, it’s thousands of outdated, center of the bell curve traditional grocery stores that will always just be that. Which, I guess, is OK, until Amazon and many others (Whole Foods, H-E-B) really nail online delivery. Then Kroger will really have a lot in common with Macy’s. Long winded point: Kroger is too big of a hairball to actually SCALE innovation. Thems the cold hard facts, ma’am.

storewanderer
Guest
4 months 3 days ago

They could innovate if they gave more control back to the local divisions. In their current form, I’m not going to say they can’t innovate, but their efforts seem half baked and execution is poor.

They can’t even figure out how to get Apple Pay working outside the QFC Division. Actually it seems as if they are actively blocking it in the rest of their stores as they want people to use “Kroger Pay.”

Ananda Chakravarty
BrainTrust

Kroger’s decision and focus on food is like an apparel retailer selling not just the apparel but the services tied to tailoring and curation to finish the customer’s wardrobe. It’s about moving upstream in the supply chain to a more final product for the consumer. There is no doubt that this will be a win for Kroger – with added service (and finished foods) they will be ever closer to customer needs and if supplies are internal to their chain, efficiencies as well. Grocers like Wegmans have already proven the food destination model and successfully drives over $10 billion across only 106 stores! This can be a major growth opportunity if Kroger does this correctly and is able to maintain scalability across its 3,000 store chain.

Joe Skorupa
BrainTrust

This is a smart, on-trend, revenue extension for Kroger that will be a long-term winner, especially in poorly served markets that currently rely on convenience and dollar stores for take-out meals.

Jeff Hall
BrainTrust

This is a solid strategic move for Kroger. After acquiring Home Chef three years ago, the demand for fresh prepared meals has only increased, with this ghost kitchen partnership perhaps signaling customer preferences are quickly evolving from “I’ll prepare this kit at home” to “make my life that much easier by making the meal for me.” In either case, this is a nice broadening of meal choices for the Kroger shopper, in turn strengthening customer loyalty and spend.

storewanderer
Guest
4 months 3 days ago
Kroger and prepared foods … something that never gets a clear program. Kroger got solid prepared foods programs from Mariano’s and pretty good prepared foods programs from Harris Teeter. They need to just roll those out chainwide. The programs Kroger has come up with on its own at the Kroger level are terrible. What happened to the in-store restaurants they were talking up a few years ago? Are those still there? Kroger had some stores in my area where they spent a lot of money to retrofit the deli and put in a counter with BBQ food and Mexican street food (Chipotle type thing). The food was terrible, the prices were too high, hours of operation were poor and the menus were set up poorly. Want to buy a pound of brisket? Nope. You have to buy a “plate” with side items. Want 1 taco? Nope — have to buy 3 tacos in a “plate.” Horrible program out of their corporate office. They since ripped the whole thing out. Another location got a new fried… Read more »
Matt Krepsik
Guest

Grocery stores have always toyed with the concept of how they get closer to the family meal. The growth in meal solutions and pre-packaged services, like a Blue Apron, hold more promise than the ghost kitchen. Throughout the pandemic we saw restaurants do a really good job at package meal kits—making innovative recipes and restaurant menus more accessible at home. For grocery retailers, this might be a step too far on their own. The value of a restaurant brand could certainly carry them much further.

wpDiscuz
Braintrust
"Where and how Kroger rolls this out will be key to the conversation here."
"This is a smart, on-trend, revenue extension for Kroger that will be a long-term winner, especially in poorly served markets..."
"This is a real opportunity for Kroger to gain in the share of stomach battle against restaurants."

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