Competition in the grocery industry is pulsating and Kroger has plans for a burnished brand identity to match an increasing consumer-experience focus across its stores and online.
The $121 billion Cincinnati-based company, the nation’s second largest food retailer next to Walmart, has hired the venerable global advertising house DDB as its creative “agency of record.” This may seem like an unusual step: In its 136 years, the company has managed to do well without a primary agency to shape its marketing.
“Consumers make 221 food-related decisions a day,” said Mandy Rassi, Kroger’s head of brand building, in a news release announcing the DDB partnership. “A standout brand and narrative will drive more customers to choose Kroger more often via any channel.”
While Kroger declined to elaborate to Fortune beyond its prepared comments, Rassi earlier this year mentioned to AdWeek the grocer wanted an agency “that can come in and push us out of our comfort zone and help us transform this iconic brand in a way that’s true to our roots, but that is extremely relevant to customers in culture today.” (The magazine said for the nine-month period January-September 2018, the grocer spent $78 million on advertising.)
Long calling itself “America’s grocer,” Kroger has roots throughout the U.S., with 2,764 supermarkets under several brands in 35 states, as well as a sizable food processing business to stock its house brands.
The grocery—ranked 20th on the Fortune 500 list and 47th on Fortune‘s Global 500—markets itself under its trademarked tagline, “Feed the Human Spirit,” which is also the overarching message behind its three-year Restock Kroger initiative, launched in 2018.
It’s all about omnichannel
As other food and merchandise retailers are doing, Restock Kroger is focused on upping its technology and merchandising game. The goal is to create a flawless omnichannel experience—a buzz phrase reflecting customers accessing the same products and service whether they’re shopping in stores or online for grocery delivery, in-store pickup, or shipment.
“Kroger will change the way people eat in America,” the company boldly says, in an outline of its Restock Kroger goals. “Redefining the grocery-customer experience uniquely positions us to win with customers by accelerating our digital and e-commerce efforts.”
At the end of 2018, Kroger reported $5 billion in digital sales, with a near-term goal for annual returns of $9 billion. Among its technology investments is a partnership with driverless car company Nuro to automate deliveries in pilot cities such as Houston, Texas and Scottsdale, Ariz.
In terms of sales, Kroger is wedged between Walmart, with $524.4 million in fiscal year and Albertsons, whose stores include Safeway, with $62.279 million. What they have in common? These companies “all poured resources into things like online shopping services, home delivery, autonomous vehicles, sophisticated shopping apps and strategic partnerships to enhance their appeal to consumers,” reports Progressive Grocer.
With its own omnichannel emphasis, grocery sales at Amazon, with its Whole Foods chain having a smaller industry footprint, is ranked tenth in sales, with $15.887 million for the last fiscal, according to Progressive Grocer.
Wooing consumers
Mass merchant retailers such as Target have shown they can recast their image through merchandising and advertising as being fun and trendy. Likewise, Walmart is shedding its big-box retail identity. Earlier this year, the chain broadcast television spots using classic movie cars like the Batmobile and the DeLorean from “Back to the Future” to tout its online grocery ordering and pick-up-in-store service. The ads were created by the creative agency Publicis Groupe-led Department W.
One of the challenges for Kroger is the company has a couple dozen grocery brands outside of its namesake brand, said Sucharita Kodali, vice president and principal analyst at Forrester Research, covering omnichannel retail, e-commerce, and online retail. Kroger’s more than a dozen store brands include Ralph’s, Fred Meyer, Mariano’s, Metro Market, and Harris Teeter.
“The Kroger brand doesn’t really stand for anything, it just stands for big-box grocery retail,” Kodali said. However, “Some of their individual brands like Harris Teeter are extremely powerful regionally, and they do stand for something, which is higher-quality, local. There’s an emotional attachment.”
Buying groceries online
“I think [Kroger] wants to poise themselves for a future where more people are ordering online,” Kodali said. “The challenge with grocery has been and will continue to be in the foreseeable future, how do you make it cost-effective? There’s a tension between making the shopping experience as inexpensive as possible and making it convenient.”
Overall, online grocery shopping is still considered a small portion of the industry. In 2018, $3 out of every $100 spent on groceries were online. For context, $25 out of every $100 were spent online in the apparel sector.
During the first quarter of 2019, Kroger reportedly saw a 42% increase in digital business leading to a 1.5% increase in existing-store sales, which translated to a combination of new customers and larger grocery hauls.
While increasing online shopping is a focus, Kodali said it’s important grocers don’t lose sight of using digital and mobile technology to improve the in-store experience. “When there is fresh produce in the store, they should be letting people know…Those are perishable goods.” she said.
Beyond ramping up email newsletters and mobile notifications, there’s an opportunity to introduce A.I. “In China, there are examples of companies where there’s a robot that will tell you how ripe or how sweet or how many days it’s been since the produce came into the store. Why aren’t U.S. grocers doing stuff like that? That’s a huge value add to shoppers,” Kodali notes.
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