Kroger is still the US's largest traditional grocer, despite Wal-Mart overtaking the chain as the nation's largest seller of groceries years ago. It operates some 3,900 stores, including 2,780-plus supermarkets and multi-department stores, under two dozen banners across 35 states. It also runs 780-plus convenience stores (under the Quik Stop, Kwik Shop, and other brands), around 320 jewelry stores, and nearly 40 food processing plants in the US. Kroger's Fred Meyer Stores subsidiary operates around 130 supercenters that offer groceries, merchandise, and jewelry in the western US. While Kroger has added other amenities to its mix, groceries still make up more than 84% of its sales, while fuel sales make up another 13%.
Kroger (either directly or through its subsidiaries) operates a wide variety of store formats and banners that divvy up the retail market by size, price point, and geography. Roughly 50% of its supermarket and multi-department stores have a fuel center. Its combination-food-and-drug stores account for 85% of its stores base, followed by price-impact warehouse stores (5%), large multi-department stores (5%), and Marketplace stores (less than 5%).
The company's 98 Marketplace stores, which trade under the Dillon's, Fry's, Kroger, and Smith's banners, capitalize on Fred Meyer's general merchandise expertise. While similar to multi-department stores, Marketplace stores are generally smaller and don't stock apparel. Kroger's 131 price-impact warehouse-style stores operate under the Food 4 Less and Foods Co. banners and cater to the thrifty with no-frills, low-cost shopping for grocery and health and beauty care items.
Kroger's 780-plus convenience stores (C-Stores) generate around 20% of its revenue, and operate under five main banners, including Kwik Shop, Loaf ‘N Jug, Quik Stop, Tom Thumb, and Turkey Hill Minit Markets. The company operates nearly 40 manufacturing plants, including 17 dairies and a pair of ice cream plants, which supply its stores with breads and baked goods, dairy products, meat, and thousands of other grocery items, including organic foods. Kroger's supermarkets typically stock more than 14,000 of its own-brand products (under the Kroger, Ralphs, Fred Meyer, King Soopers, and other brands), about 40% of which the company manufactures. Kroger is also a major pharmacy operator in the US (most of its stores have one), though its pharmacy products and services contribute just under 10% of its revenue.
Kroger operates supermarkets in about 35 US states from coast to coast. Key markets include California, Ohio, Texas, and Georgia, which combined are home to more than a third of its supermarkets. Its Fred Meyer subsidiary does business in the Pacific Northwest and Alaska. All of Kroger's sales are rung up in the US.
Sales and Marketing
Kroger has been devoting more dollars toward advertising in recent years. The retailer spent $679 million on advertising in 2016 (ended January), up from the $648 million and $587 million it spent in 2015 and 2014, respectively.
Kroger's revenues and profits have been rising over the past several years thanks to new store openings and acquisitions and a steady increase in same-store sales revenue.
The retailer’s revenue growth slowed to 1% in 2016 (ended January) from 2015, compared to the 10% jump in 2015 from 2014. Overall revenue was nearly $110 billion in 2016. Kroger's reported higher same-store sales in 2016 with an increase on the number of households shopping and more spending per household. The 2016 numbers also included results from Roundy's, which Kroger acquired during the year.
Kroger’s net income rose 18% to $2 billion in 2016 from 2015. The retailer's operating cash levels spiked 16% to $4.8 billion in 2016 from 2015.
Kroger looks to boost existing store sales with remodels, promote organic growth through store openings in under-served markets, and expand its revenue and geographic reach through select store and brand acquisitions. In late 2015, the grocery operator expanded in the Dallas-Fort Worth market after spending $150 million to open five Marketplace stores and increase the size of three existing locations. During 2016, Kroger remodeled 220 stores. During its year that ends in January 2017, Kroger's reported its 50th straight quarter of rising same-store sales.
In 2016, Kroger's invested in Lucky, a Colorado-based chain that offers organic foods. The company's store are mostly in college towns in the Midwest and Southeast US.
To continue boosting same-store sales (the company noted in 2015 that its same-store sales have grown annually for more than a decade), Kroger has begun experimenting with new store concepts. In late 2015, it opened a new concept store near Cincinnati (it's second-largest store ever) that included a wide variety of amenities including gourmet food, clothing, and housewares. Pushing more organic food, the company was also expected to soon surpass Whole Foods Market as the nation's largest seller of organic and natural foods.
Increasing its market share is an important part of the company's long-term strategy. In recent years, Kroger has continued to improve its loyalty program that offers discounts to customers based on their past purchases. Thanks to its QueVision predictive analytics technology (which it originally began using in 2012), the retailer has also whittled the wait time at the checkout stand to an average of about 30 seconds, from as long as four minutes in the past. Private-label products, which help to differentiate supermarket chains from their competitors and foster customer loyalty, are a pillar of Kroger's merchandising strategy; the grocer's 14,000 private-label products account for more than 25% of its grocery sales.
Mergers and Acquisitions
In July 2016 Kroger's subisidary Axium Pharmacy Holdings acquired Modern HC Holdings, a leading specialty pharmacy. The purchase created a combined specialty pharmacy that operate as a wholly-owned subsidiary of Kroger's.
In December 2015, the retailer closed its purchase of buy Milwaukee-based grocer Roundy's for $178 million. The deal would expand Kroger's reach into the Midwest, adding 151 Copps, Mariano's, Metro Market, and Pick 'n Save stores in Wisconsin and Illinois.
In January, Kroger acquired Harris Teeter Supermarkets, a regional chain of some 225 stores with a big presence in the Carolinas, where Kroger did not have significant heft. Kroger paid about $2.5 billion for the regional grocery chain, which rang up $4.7 billion in sales in fiscal 2013.