- Kroger announced on Friday that it has launched an online portal where local and niche suppliers can pitch their products directly to company buyers, according to a press release.
- Noting that it already sources thousands of local products in stores across 35 states, Kroger stated that the new site — Kroger.com/WeAreLocal — is an effort to increase its supply of these items across the company footprint.
- “Our business has a track record of successfully blending centralized and decentralized decision making to promote local products while also enjoying economies of scale,” Mike Donnelly, Kroger’s executive vice president of merchandising and procurement, said in the release. “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.”
Kroger’s new local sourcing initiative offers a contrast to competitor Whole Foods’ decision to further centralize its purchasing. That move, numerous observers believe, will shrink the product count at the natural and organic retailer and shut out many emerging brands, despite the company’s claims to the contrary.
Kroger, it seems, is eager to play up the distinction.
“They got a lot of publicity for not doing much. It’s time to tell our story,” Mike Donnelly, Kroger executive vice president of merchandising and procurement, told The Wall Street Journal.
The nation’s largest grocer also no doubt hopes to capitalize on growing demand for local products. According to research firm Packaged Facts, local food sales grew from $5 billion in 2008 to $12 billion in 2014, and are expected to top $20 billion by 2019.
As the market for local foods has grown, grocers have tried to improve their sourcing methods to better accommodate small producers. Companies like RangeMe and FoodHub are connecting retailers with niche suppliers, while others like Forager offer technology solutions to help smooth the local sourcing process for grocers. Kroger, which already sources thousands of local products, clearly wants to improve its sourcing operations. But whether the company will be able to effectively identify unique products and offer them at competitive prices remains to be seen.
Kroger’s stock has been pummeled this year by growing competition and pricing pressure, falling 40%. The company has dropped prices and lowered its financial outlook in order to retain market share. At the same time, it’s looking for other ways to stand out from the competition. Along with the expansion of its meal kits program, prepared foods, and its acquisition of Murray’s Cheese, the local foods initiative points to Kroger’s growing ambitions as a specialty grocer.
Can the retailer keep prices low while also offering more specialty goods? Kroger certainly has the scale to do so, but its margins will be under intense pressure. The company has a top-notch executive team and a history of focusing on long-term solutions, but it will be interesting to see how it fares in the face of stiff competition.