Commentary

Kroger Launches Local-Sourcing Site, Pursues Foodies, Battles Hunger

Kroger, which has seen a lot of competition come and go since its founding in 1883, launched a program Friday that directly hits at the latest challenger for the palates of mid-America, Amazon’s recently acquired Whole Foods. The Kroger.com/We Are Local website targets local and emerging brands that wish to partner with the Cincinnati-based supermarket chain, which claims nearly 2,800 stores in 35 states under two dozen banners and annual sales of more than $115.3 billion.

The site comes on the heels of Whole Foods announcing that it is “backing away from its traditional small brand buying tactics into a more centralized strategy,” as Jordan Okumura puts it for AndNowUKnow.

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“Kroger said in a press release that it recognizes the importance of carrying local and regional brands that are meaningful to the nearly nine million customers served in its family of stores daily, adding that it currently sources from thousands of local suppliers,” Okumura writes.

“Whole Foods is centralizing its purchasing to become more efficient and profitable. The effort was under way before Amazon bought the country’s largest natural and organic grocer, but the deal has presented a catalyst as the e-commerce giant helps to standardize prices and other practices,” reports Heather Haddon for the Wall Street Journal.

“Local suppliers have worried about being able to continue displaying their products on Whole Foods shelves as they have fewer opportunities to pitch their products to individual stores or regions,” Haddon continues.

“Kroger has always had a commitment to supporting small-business owners and local vendors,” Mike Donnelly, Kroger’s executive vice president of merchandising and procurement says in the release announcing We Are Local. “… 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.”

Last Tuesday, the company unveiled its Zero Hunger | Zero Waste “moonshot” initiative, which it bills as a “national effort aimed at ending hunger in the communities Kroger calls home and eliminating waste across the company by 2025,” according to the news release.

“The effort includes establishing a $10 million innovation fund through the Kroger Co. Foundation to address food waste and hunger; accelerating food donations; improving the quality of donated meals; and advocating for public policy solutions to address hunger,” reports Jon Springer for Supermarket News.

“In addition, Kroger pledged to meet its internal waste reduction goals while working to eliminate food waste entirely by 2025 through prevention, donation and diversion efforts. Kroger will also work with new and existing partners, including the food bank network Feeding America and the World Wildlife Fund, to identify opportunities to achieve its goals,” Springer continues.

The company is crowdsourcing for additional ideas, feedback and best practices, it says. 

“More than 40% of the food produced in the U.S. each year goes unconsumed, while one in eight people struggle with hunger. That just doesn't make sense,” points out Kroger chairman and CEO Rodney McMullen. 

Before either of these initiative were announced, a contributor writing under the Value Stock Financials byline for Seeking Alpha  last week compiled several other initiatives that add up to good case for going long on Kroger, whose stock has been battered of late “due to a perception that life after Amazon will result in a much reduced (if even existing) grocer. 

“Kroger bulls and bears have been pretty passionate on the topic (see the comment section of any recent article), with the primary ground for debate centering around how Amazon (and Aldi, Lidl, etc.) will simply undercut Kroger to the point of no return,” according to this analysis.

(For a comprehensive look at “How Grocery Giant Aldi Plans to Conquer America: Limit Choice,” see Zeke Turner’s piece out of Mülheim an der Ruhr, Germany, in Friday’s Wall Street Journal.)

But, among other things, Kroger has a strategy to “reach foodies” — a market McMullen sees as continuing to expand — with healthier, non brand-name products that also happen to carry higher margins than those that are nationally advertised.

It is pushing recipes to said foodies, which not only attracts them but also often contain ingredients you don’t see in the average fridge. It’s also pushing private label goods that “aren’t just ‘knock offs.’” And it’s getting into the comfort-food restaurant business with “a new restaurant concept, Kitchen 1883” — although the jury will be out for some time on how that fares.

All in all, it’s shaping up to be an intriguing battle.

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