A natural evolution for Kroger

by Monica Watrous
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NEW YORK — Evolving with the consumer is a key strategy of The Kroger Co. The Cincinnati-based retailer credits 41 consecutive quarters of same-store sales growth to its willingness to adapt to the changing behaviors of its customers.

“Every five years, we’re a dramatically different retailer,” said Mike Schlotman, senior vice-president and chief financial officer, during an April 29 presentation at the Barclays Retail and Consumer Discretionary Conference in New York.

More recently, the chain has adapted to an increased focus on health and wellness by expanding its natural and organic food products. Kroger’s Simple Truth line of products, with clean labels and organic options, has become a major success story for the company since its 2012 launch.

“We continue to expand those offerings inside our stores, for example, and it’s a significantly different presence and approach to merchandising that product than it was five years ago and was almost an afterthought 10 years ago,” Mr. Schlotman said.

Though Kroger doesn’t track the sales of natural and organic items separately in the produce and meat departments, the company said products in the natural foods category have consistently grown by double digits for three years.

“…and we don’t really see any end to that, where we continue to steal space from other departments in different parts of the store to allow more of that product (to) get in,” he said. “We continue to struggle (with) having the right amount of linear feet allocated to yogurt, for example, and continue to rejigger things in the dairy department to try to get incremental space for yogurt.”

Sales of natural products have improved as Kroger has increased awareness of the offerings. While the dedicated organics-only consumer may not choose Kroger for such products, Mr. Schlotman said the retailer’s regular shoppers are adding more items from the category to their carts.

“I think a lot of the sales are otherwise loyal Kroger shoppers who have become more aware of our offering in natural organics and are buying more of that product from us rather than making a second shopping trip,” Mr. Schlotman said. “Five or six years ago when we were getting into it in a big way, we didn’t make it as easy for the customer to understand what we had and how good the product was, the fact that it was readily available, the fact that it was well priced. And we’re doing a much better job of explaining to the customer that we in fact have the product, I think that’s where we’re winning in those categories. I don’t think we’re getting that die hard organic person to come to our store versus some of the true players in that space, but it’s more of the mainstream customer that wants a lot of the products they eat to be organic or natural.”
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