The second pillar of Kroger’s strategy, private brands, was a major reason that the retailer posted another strong quarter and fiscal 2022, with same-store sales up 10.1% in Our Brands, reflecting the growing importance to inflation-embattled customers of these exclusive-to-Kroger products.
“A customer on a budget can get great value with Our Brands,” McMullen affirmed. “They can save 7% to 10% by buying Our Brands versus national brand. If you look at our Home Chef and products related to that, a customer can get a meal for … one-third to one-fourth of what it costs to go out.”
Over the past 10 years, Kroger’s private-brand portfolio has picked up share during almost every year. The only exception to that was a little bit of time during the pandemic, when consumers had more money in their pockets, McMullen noted.
During its fourth quarter, Kroger celebrated the 10th anniversary of Simple Truth, a more than $3 billion brand providing customers with 1,500-plus unique natural and organic products. The milestone came after the retailer launched Smart Way, a new opening-price-point brand, as part of Kroger’s Our Brands portfolio. This line merges 16 legacy brands into a single, easy-to-find identity. Smart Way joins Kroger brand, Private Selection, Home Chef, Heritage Farm and Simple Truth in the grocer’s private-brand lineup.
“By consolidating and simplifying several brands into one, we are making it easier for customers while creating a point of differentiation across the full portfolio,” McMullen explained. “We will continue expanding Our Brands to more categories with innovative product offerings. Our goal is to help every customer find high-quality, affordable products they love, from pantry staples to fresh food to ready-to-eat restaurant-quality meals.”
During Q4, the company also opened its 1,000th Murray’s Cheese shop within Kroger stores, offering customers a highly curated cheese selection in more than 30 states across the country.
Personalization With Scale
Kroger’s third pillar, its personalization business, has also been on fire as of late.
Kroger Precision Marketing (KPM), the grocer’s retail media arm, is one of its fastest-growing alternative-profit businesses and well positioned to win within the U.S. retail media landscape, which is projected to be a $55 billion industry by 2024. Last year, Kroger’s alternative-profit businesses achieved $1.2 billion in operating profit in 2022.
In April, KPM revealed a partnership with Disney Advertising to share first-party shopper data for targeting streaming audiences — at first on Hulu, which streams shows such as “Great Expectations,” “The Bear” and “Fleishman Is in Trouble” — and measuring the results, including sales and conversions by household.
This solution is launching at a time when marketers are demanding more proof of performance through advanced targeting and measurement, and more accountability from their media investments. The connection of Disney’s premium inventory to KPM’s data science capabilities enables advertisers to reach audiences through the most impactful streaming content and ultimately measure the sales impact on the back end across Kroger stores. PepsiCo was the first advertiser to work with KPM and Disney during alpha testing.
“The collaboration with Kroger Precision Marketing and Disney provides an exciting opportunity for brands to meet consumers where they are by leveraging KPM’s first-party consumer data to reach the right shopper at the right time,” said Carol Simpson, senior director of shopper marketing at Purchase, N.Y.-based PepsiCo, when the partnership was made public. “As consumers spend more time with streaming TV, it is increasingly important for industry providers and advertisers to work together to bring innovative solutions like this to the marketplace.”
A select group of consumer packaged goods brands will participate in an exclusive beta program, and it’s slated to be available to the general market in the second half of 2023.
“Because we know our customers so well, we are able to provide recommendations to start their baskets and deliver personalized offers on the products most important to them, saving them time and money and making their lives easier,” McMullen said. “In return, our customers reward us with their trust and loyalty, consistently ranking us among the best at being able to offer personalized savings and solutions that meet their needs. In 2022, we grew loyalty as our customers more deeply engaged with personalized coupons and fuel rewards.”
As customers looked for more ways to save, digital coupon engagement at Kroger hit an all-time high during the past year. The retailer’s combined paper and digital coupons helped save customers more than $1.4 billion on products. Additionally, to provide even more value, the grocery chain launched its Boost membership program nationwide in July.
“Early results are exceeding our expectations with incremental engagement and overall household spend,” McMullen said. “We are evolving Boost with new benefits to further broaden its appeal and create additional customer value. In 2023, we will make significant investments to build out our personalization capabilities, including increasing the use of real-time data to predict customer needs, which will support sales growth during the next three years.”