The Kroger Company (US)

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The Kroger Company is America's biggest traditional supermarket group, but was displaced as the country's leading food retailer overall by Walmart in 2002. In fact the Kroger retail brand accounts for only a small proportion of revenues. Instead the group is the umbrella for a substantial portfolio of over 3,700 outlets operating under almost 25 different banners, including Fred Meyer, Ralphs, Dillons, Smith's, King Soopers, Tom Thumb and Fry's. In an attempt to meet Walmart halfway, Kroger has boosted its range of non-food products in what it calls multi-department stores. After a difficult period in 2003 and 2004 as a result of labour disputes, Kroger appeared to regain its momentum and has demonstrated solid performance since 2006, partly as a result of the launch of a very successful loyalty card program. In 2013 it expanded its national reach with the purchase of regional competitor Harris Teeter for $2.5bn, and has continued to widen its footprint with at least one additional acquisition each year.

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Brands

Ralphs Dillons
Smith's King Soopers
Fry's QFC Quality Food Centers
City Market Hilander
Owen's Cala Foods / Bell Markets
Food 4 Less Pay Less Super Markets
Fred Meyer Baker's
Littman Jewelers Gerbes
Barclay Jewelers Foods Co

Recent stories from Adbrands Weekly Update:

Adbrands Weekly Update 12th October 2017: M&A rumours should often be taken with a pinch of salt, but some are more exciting than others, so it's always worth hearing about them. One such is the report that US supermarket giant Kroger - the #2 in food retail after Walmart - is exploring the possibility of a merger with newly minted Benelux-based group Ahold Delhaize, which now ranks #5 in the US. Presumably, Kroger's main interest in its Ahold's local operations - Stop & Shop, Giant Foods, Food Lion and others - as a counter to further expansion by Walmart and German discounters Aldi and Lidl, as well as the new threat from Amazon's Whole Foods. The heritage business in the Netherlands and Belgium would no doubt be spun off. Kroger and Ahold responded to media inquiries with a no comment rather than a denial. What Kroger has, however, confirmed is that it is also considering a plan to spin off its convenience store division, with annual revenues of around $1.4bn, as part of a general "strategy reset". A sale could raise as much as $4bn which would be reinvested into the larger stores - self-serve checkouts, staff training - to counter the threat from rival chains.

Adbrands Weekly Update 9th Mar 2017: Kroger, still the leading traditional supermarket but #2 in food behind Walmart, reported a generally solid year, but same-store sales excluding fuel fell 0.7% in the final quarter. That was Kroger's first such decline in 13 years, and also the second consecutive quarter it which its same-store comps were behind Walmart. Fierce competition in the sector, especially on pricing, was to blame. Sales were up 5% to $115.3bn; earnings slipped back just below $2bn as a result of pension adjustments.

Adbrands Weekly Update 12th Nov 2015: US groceries giant Kroger expanded its already extensive footprint with a deal to acquire smaller rival Roundy's Supermarkets for $800m. Both groups already control multiple different regional banners. In addition to its own eponymous stores, Kroger operates more than 20 other banners including Ralphs, Dillons, Smith's, King Soopers, Tom Thumb and Fry's. Roundy's will add four more: it is probably best-known for its Mariano's chain in Chicago, but also controls Pick 'n Save and two other chains in Wisconsin.

Adbrands Weekly Update 10th Jul 2014: US supermarket giant Kroger agreed to acquire Vitacost, an online retailer of vitamins and other shelf-stable healthcare products, for $280m. It plans to keep the business separate from its existing bricks and mortar outlets. The group has a very low-key online presence. Despite being the country's biggest traditional supermarket group, and #2 food retailer after Walmart, Kroger currently has virtually no ecommerce business (other than in the city of Denver), though the recently acquired Harris Teeter estate offers online oredering for instore collection.

Adbrands Weekly Update 11th Jul 2013: America's biggest traditional supermarket group Kroger announced plans to acquire regional rival Harris Teeter for $2.5bn. The purchase will add around 210 additional supermarkets to Kroger's existing portfolio of 2,420 grocery stores, and expand its coverage to 34 states. The deal is subject to regulatory approval and could yet be derailed by a rival offer. If completed, the Harris Teeter stores will continue to operate under their current name. Kroger already manages a collection of different banner brands including Ralph's, Dillons, Fry's and Smith's. It is the country's largest traditional grocery retailer, second only to Walmart in combined sales. These are expected to top $100bn in the current year.


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Background

Free for all users | see full profile for current activities: The son of German immigrants, Bernhard "Barney" Kroger opened his first grocery store in Cincinnati, Ohio in 1883. Realizing that he could buy from suppliers more cheaply in bulk, he quickly opened more stores, selling goods to customers at as low a margin as he could afford. At the turn of the century, he was the first grocer to add instore bakeries in several of his shops. By 1902, there were more than 40 stores in all, and Kroger incorporated the business as The Kroger Grocery & Baking Company. Soon afterwards he bought a local meat packer and retail chain, combining meat and groceries under one roof, another first. Other stores joined the fold in an unprecedented period of expansion and acquisition over the first 30 years of the 20th century. As a result of purchases including the Piggly Wiggly retail chain, the empire had spread to a staggering 5,575 stores nationwide by 1928. Kroger retired from the business, selling all his stock for $28m a year before the Wall Street Crash. He survived the Depression with his fortune intact, and later reacquired a third of the company he founded before he died in 1938.

Meanwhile the group continued to prosper, although store numbers were slashed during the 1930s. Kroger later established its own buying arm, as well as a dedicated scientific testing division. In 1946, the company changed its name to The Kroger Company, and by the early 1950s, sales had climbed to more than $1bn. In 1957, Kroger was one of seven retailers who joined forces to found incentive promotion scheme Top Value Stamps. As sales continues to soar, hitting $10bn by 1978, Kroger became the nation's second-largest food retailing company, overtaking Safeway. The 1980s saw a new period of growth as the group launched a series of acquisitions, including Dillons in Arkansas, Tom Thumb convenience stores in Florida and M&M Supermarkets in Georgia. In 1999, the group merged with Fred Meyer Inc to create the country's #1 supermarket operator. Fred Meyer had opened America's first self-service drugstore in 1930, and assembled a similarly diverse group over the next 70 years including Ralphs, Smith's and QFC supermarkets just a year before the Kroger deal.

However the group was also facing a new competitor in Wal-Mart, which had begun to expand into groceries in the late 1980s. During the 1990s, Wal-Mart systematically established Supercenter outlets in many of Kroger's main markets, and finally overtook the smaller company in grocery sales in 2002. A key factor was Wal-Mart's refusal to allow union representation for its workforce. As a result it was able to pay employees less than half the wages and benefits paid by unionised competitors such as Kroger, and used those savings to cut prices on its range of products instead.

In a bid to compete against Wal-Mart's awesome profit margins, Kroger and other supermarket operators began cutting pay and health benefits in order to reduce their costs. However this led to a damaging five-month strike in southern California, lasting from October 2003 into February 2004, the chief result of which was that many shoppers bypassed the stores affected altogether in order to avoid crossing picket lines. A similar dispute in West Virginia led to the temporary closure of more than 40 stores in that state for two months. Both disputes caused a severe impact to profitability for the financial year, and negotiations with unions over more flexible terms were still rumbling on two year later, before finally being resolved towards the end of 2005. At the end of that year, the Ralphs chain in California was indicted by a grand jury because some local store managers secretly rehired striking workers and allowed them to work under false names and in some case false Social Security numbers. See full profile for current activities


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