Kroger's CFO talks expansion, meal kits and private label strategy

Dive Brief:

• Kroger CFO and Executive Vice President J. Michael Schlotman said in a presentation last week that in today's saturated grocery space, it’s important to look for different ways to go to market, according to Food Business News.
• Increased competition from retailers — including non-grocery stores like Staples that now feature food products in their ads — have driven Kroger to evolve. Kroger-manufactured products and Kroger-labeled products have both been strong sellers for the retailer, though Schlotman is unsure if Kroger will ever double as a CPG company. 
• “We have different size stores. We have a multitude of formats, from convenience stores all the way up to multi-department stores that are 225,000 square feet," Schlotman told Food Business News. "So we try to dissect the market and try to put the right store in the right part of the city that’s going to resonate with the customer."

Dive Insight:

In March, Kroger executives attributed its first same-store sales slip in 52 quarters to price deflation and store investments. It immediately went to work on reversing this decline.

Its first step was deciding to slow down what was set to be an aggressive expansion plan in 2017. Instead, Kroger reinvested in its own operations to stay competitive — a strategy that is being used throughout the grocery industry.  

Kroger's tactics are interesting in that it doesn't stick to one format and size when it enters a market. Earlier this month, it opened a new fresh-focused convenience store in Ohio called Fresh Eats MKT. It’s also made an investment in the natural and organic chain Lucky’s markets. This strategy allows the retailer to see which store concepts work and which don't. 

This same philosophy drove innovation in Kroger-manufactured products and Kroger-labeled products, and led to the success of its Simple Truth launch, which has grown into a $1.6 billion brand in three years. Kroger is also looking to become a major competitor in the meal kit space. The retailer recently launched a meal kit line under the name Prep+Pared that feature ethnic flavor profiles like Moroccan-inspired spring vegetables and Japanese-inspired beef bowls. 

Casting a wide innovation net seems like a savvy strategy as long as the grocer can quickly identify which investments are paying off and which aren't. If retailers don't act decisively, they could end up stretching themselves too thin and see their brands and sales suffer.