Kroger follows Aldi's game plan with new Ruler Foods locations
- As part of a multi-pronged approach to battle grocery competitors, Kroger has opened two Ruler Foods stores that feature a new look for the discount brand. According to the Lexington Herald Leader, the two locations, both in Illinois, have a new floor plan, logo and re-branding focus.
- As part of the rebranding, the stores will emphasize the quality of its foods. The new tagline — “Simple. Smart. Fresh. For less.” — replaces “Measure your savings.” If the program is successful, Kroger may retrofit all of its stores with the new design.
- Ruler Foods is Kroger’s value-oriented division, and carries 80% Kroger store brands. Headquartered in Seymour, Indiana, Ruler Foods has 50 locations in Illinois, Indiana, Kentucky, Missouri, Ohio and Tennessee.
Less can be more. That’s what Kroger hopes as it restructures its discount Ruler Foods stores to emulate Aldi, the German based discount supermarket. Like Aldi, Ruler Foods offers a no-frills shopping experience. Stores offer a limited variety of categories and products, and customers bag their own groceries. Items are often displayed on shelves in open boxes. And shopping carts cost 25 cents to use — a nominal fee that gets refunded when the cart is returned.
Cutting back on the extras enables stores like Aldi and Ruler Foods to focus on spending more money where it counts — offering good-quality, low-price foods, including a growing assortment of fresh choices. Ruler Foods’ new tagline even mimics Aldi’s “Simply Smarter Shopping,” by slightly de-emphasizing price savings in order to promote the store’s overall benefits.
Increasingly, Ruler Foods emphasizes brands manufactured by its parent company, including Private Selection and Simple Truth, Kroger's natural and organic line. This is a smart move, considering the explosive growth Kroger has seen in private label. Between 2011 and this year, Kroger’s store brands have increased sales by 37%, to $20.5 billion, according to the company.
In a crowded grocery industry, hard discounters like Aldi, Ruler Foods and new entrant to the U.S., German grocer Lidl, hope to carve out their niche by providing quality foods at low prices. As it updates its stores and opens new ones, Aldi has chipped away at grocers' market share in key markets. Its prices are 21% cheaper than its competitors, including Wal-Mart. But even though its 2016 sales increased 13.5% worldwide, operating profits dropped 17%, a casualty of the price war.
Unlike Aldi, Lidl is experiencing a bumpier road. It launched in the U.S. market in June with plans to open 100 stores by the end of 2018. But construction plans in certain markets have stalled, according to reports, as Lidl’s store traffic has declined and the company's signature features — including an expansive nonfoods department — have failed to gain traction with shoppers. Lidl was smart to focus on price as well as quality, but it seems to have underestimated customers' loyalty to chains like Kroger, Wal-Mart and Aldi — chains that are well-known in the market, and have the deep pockets to sustain a price war.
Ruler Foods could learn from Lidl’s mistakes and continue to stay lean while also building on strengths that will draw customers in for more than just a deep discount, such as customer service, the quality of its fresh produce and differentiating specialty products. With this formula, Ruler Foods and other hard discounters could siphon off customers from larger competitors while also forcing those competitors to change up their operations.
- Lexington Herald Leader Grocery wars: Kroger's battle plan and what it means for you.
- Cincinnati Business Courier Kroger rolling out more Ruler Foods shops
- Winsight Grocery Business Kroger Revamps Its Discount Format