(May 21): Kroger Co’s new chief executive officer is looking at big price cuts in order to win back market share and take on his former employer, Walmart Inc, and other competitors.
The largest US grocery company, which owns 21 chains including City Market and Fred Meyer, is laying the groundwork for lower prices across product categories, CEO Greg Foran told Bloomberg News in his first interview since taking the role in February. Management is currently making plans to test price cuts and then phase them in.
Kroger is looking to compete more fiercely with Walmart and other companies that have gained ground in recent years at the expense of traditional grocery operators. Across food retail, businesses emphasising value are outperforming those seen as offering higher prices, Foran said, pointing to Walmart, Costco Wholesale Corp, Trader Joe’s, Aldi and Amazon.com Inc.
“I think about our business a bit like a Formula One race. There’s a lead group of cars that are doing a very good job,” Foran said. “Our objective is to get out of the midfield and start lapping faster, make up the gap on the first-group cars and then ideally pass them.”
In addition to cutting prices, Kroger is working to make service in stores friendlier and faster. It also wants to accelerate new store openings.
The company is forging a new path under its first external CEO following a failed deal with competitor Albertsons Cos and the abrupt departure a year ago of long-time leader Rodney McMullen. The company is now contending with increasingly cautious US consumers, escalating inflation worries and GLP-1 drugs that are reshaping eating habits.
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Foran, 64, said Kroger will look to trim expenses in part by importing merchandise directly and using technology more effectively, and then put savings towards price cutting. Items across the store will get cheaper, he added, while declining to quantify the investment.
‘Thousands of products’
“The reality is, the basket has to come down. And not everyone’s basket is the same,” Foran said. “It needs to be across thousands of products, and it has to be something that passes the commonsense piece with customers.”
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Retailers, especially grocery chains that operate on relatively thin margins, typically don’t disclose their tactics to lower prices for merchandise.
The focus on prices comes as pressure rises on US consumers. Inflation has accelerated with the conflict in Iran pushing up fuel prices. The tightening of government benefits has also led some households to pull back.
Consumers are “wary of what they’re seeing at the gas pump. They’re wary of some of the commentary about what might be coming down the line in terms of some increases,” Foran said. While they are not changing habits in a notable way and grocery spending has remained healthy, affordability concerns could worsen if macroeconomic challenges persist, he added.
Cincinnati roots
Kroger started as a single store that Barney Kroger opened in Cincinnati in 1883. As the company grew, it broadened its assortment and added services like in-store bakeries before acquiring various chains over the years. It now generates nearly US$150 billion annually in revenue.
Foran, a New Zealand native, has returned to the US — and the retail industry — after about five years running his home country’s national airline. Before leaving for the airline in 2020, he was credited with whipping Walmart’s US stores into shape.
At the big-box retailer, he was known for visiting stores frequently, studying their performance and asking specific, detailed questions to field staff. He made stores cleaner, friendlier and easier to shop, in addition to lowering prices and zeroing in on the fresh food assortment. During his tenure, Walmart’s US division generated three straight years of increases in quarterly same-store sales and his departure was seen as a blow to the company.
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Foran, who went to Air New Zealand to try his hand in a new industry, said he wasn’t aware of the Kroger opening when he stepped down as CEO of the airline, but he became excited about the prospect as he learned about it.
The five Fs
While price is a key component of making Kroger more competitive, Foran said it also has to offer strong service, fresh food, popular products and e-commerce to win over shoppers. Part of that effort involves staff training to improve consistency.
Internally, the company has been discussing what he said are the five Fs: fresh, fast, affordable, friendly and for you. The last item speaks to Kroger’s ambitions to offer greater personalisation and tailor its stores to their specific neighborhoods.
“Our objective is to execute what we think is a very clear, sensible plan. We want to be America’s best grocer,” he said.
Kroger is planning 70 to 80 new stores next year, double the amount being opened in 2026. While it is closing some locations as well, Kroger said its store count is positive on an overall basis, and that trend is accelerating. The new locations will play an important part of e-commerce operations that continue to expand as consumers prioritise speed.
The retailer will be thoughtful about opportunities to further grow through acquisitions, Foran said. The company sees room in the Northeast where it doesn’t have a strong presence, as well as markets with strong population growth such as Texas, the Carolinas and parts of Florida.
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