Why Kroger uses ‘fresh’ in dairy as a differentiator; why you won’t see big jumps in promos; how shoppers, manufacturers and retailers are shifting inflation strategies.
“A clear differentiator for us today in fresh is dairy. We offer customers 10 days of shelf life, on milk, something nobody else in the U.S. does… The reason we can do that is we’re fully integrated on that side of the business. And we’re taking the learnings and expertise we’ve developed there and bringing that to other areas of fresh. We’ve established through a lot of customer research, the most important areas of fresh. First and foremost it’s produce, then meat, then dairy, then seafood. And within each of those we have prioritized them. And our goal is to bring more days of freshness to the consumer, an example would be within produce strawberries, we need to get strawberries to our customers as quickly as possible. We work with the farmers themselves.
‘Instead of one driver driving across the country, we have two drivers driving across the country. It gets there in half the time, getting it to the store that much faster, offering more days of freshness.’
“Instead of one driver driving across the country, we have two drivers driving across the country. It gets there in half the time, getting it to the store that much faster, offering more days of freshness. And we do that across every single aspect of our business, offering customers more days of freshness. Why is that important? Seventy percent of all consumers decide where to shop based on fresh. And so for us, this becomes critically important. And from a margin mix perspective, it’s beneficial as well.” — Stuart Aitken, chief merchant & marketing officer, Kroger, speaking to securities analyst on Sept. 20.
“We think the risk of promotions ramping up significantly over the next couple of quarters is quite low. You have to believe three things to be true in order to see a lot of promotions increase. First, you would have to think that this inflationary cycle is different than the ones we have seen before. I was running a business in the last inflationary cycle here at General Mills. There isn’t really a sharp increase in promotions coming out of an inflationary cycle. So, you have to think that the environment would be different. Second, you have to believe the disruptions in the supply chain are going to change significantly from where they are now. And third, you would have to see cost-of-goods inflation not only decelerate, but also get to absolute deflation. You need all three of those things, but we don’t see any of those things right now.” — Jeff Harmening, chairman and CEO, General Mills, discussing business conditions in a call with securities analysts.
A new report from NielsenIQ finds that while consumers intend to cut back spending in the coming year on things like holidays, restaurants, and meal deliveries, they expect to spend more on groceries. Globally, 44% of consumers say they are cooking at home more often, and 40% are consciously trying to minimize waste. Some 31% told Nielsen they will buy whatever is on sale, and 26% have stopped shopping certain categories altogether.
“Trading down or out and switching to cheaper brands or channels are all viable ways consumers are looking to save money where every dollar counts,” according to the research. There is concern that raw costs of production have risen faster than consumer prices, which will likely lead to higher prices as these costs are passed on. “We are also seeing companies narrowing their product portfolios to remove costs and sourcing cheaper local ingredients to save on supply chain and transportation costs.
“Many retailers, meanwhile, are reducing their inventories while focusing on finding cost savings in other areas of their distribution and logistical pipelines,” says Nicole Corbett, vp of Global Thought Leadership at NielsenIQ. “As inflation becomes an increasingly long-term prospect, we anticipate seeing more of these short-term adjustments convert into re-envisaged long-term business models.”
Some quotes have been edited for length and clarity.
