As Kroger seeks to lure back cash-strapped shoppers, the supermarket giant has a not-so-secret weapon: its house-branded goods.
Last year, Kroger barely grew its sales 0.3% tojust under $148 billionas inflation and economic uncertainty forced consumers to pinch every penny. Beneath that flat sales figure, Kroger shoppers revealed something else about their new spending habits: the grocer’s house-branded goods saw sales surge 28% to $39 billion, up from $32 billion in the previous year.
That means legions of customers abandoned name brands. They bought Kroger ketchup instead of Heinz. They bought Big Ksoda pop instead of Coke or Pepsi. They drank Private Selectioncoffee instead ofStarbucks. They switched from McCormick spices to Smart Way.
All these
moves shifted $7 billion worth of Kroger sales to its house-branded business, which now generates more than $1 of every $4 dollars of sales at the Cincinnati-based retailer. And they’re poised to grow bigger: On Sept. 11, Kroger’s CEO Greg Foran, who has pledged to make the grocer more affordable, announced the Smart Way brand will expand in the next year from 130 items to 1,000.
“Value continues to matter and it matters more when budgets are tight. Our customer value plan is underway and progressing well,” Foran told Wall Street analysts on a conference call.
Kroger’s privately owned branded business has grown so large it would easily be a Fortune 500 company in its own right – generating more revenue than No. 113-ranked Oreo cookie and Ritz cracker maker Mondelez International.
While offering customers lower-priced alternatives, they give Kroger leverage
Kroger’s not just using private label goods to offer customers less-expensive options; they are starring in the grocer’s bigger plan to lower prices overall.
Foran, who ran Walmart’s U.S. store operations from 2014 to 2019, has indicated he will backfill store shelves in stores when he can’t get an acceptable price from suppliers. Walmart is notorious for using its own size coupled with private label brands of its own to pressure major food companies to sell at lower prices that it passes on to consumers, which helps drive overall Walmart sales. On the conference call with analysts, Foran said he wouldn’t tolerate vendors “using inflation” to boost their sales when customers were clearly "under pressure."
“What we don't want to get in is a situation where people can just turn up and put prices up and not have full justification for that sort of increase. I'm not in the game of using inflation as a way of generating extra sales,” Foran told analysts.
In recent weeks, Kroger has stopped selling Boar’s Head deli productsin some stores in what industry observers believe is a pricing dispute. If a vendor wants to raise prices or won’t lower them, a retailer might buy less product or stop restocking altogether.
House brands run gamut from basic to premium products
So, where exactly do retailers get house brands? They are products sold by retailers that they either make or have a vendor manufacture for sale in their stores alongside nationally recognized branded products.
Because they are not supported by mega-million-dollar advertising campaigns, they tend to be cheaper. Once called generics, house brands are also called private label goods (and Kroger calls their's “Our Brands”).
Once upon a time, cheap was the whole point: a basic product in a starkly labeled bag or can. But over the decades, grocers have developed tiers of private label products.
Kroger’s Smart Way, for example, is intended to be a no-frills value offering. Meanwhile, Kroger’s Private Selection is a premium offering with its coffee intended to compare to Starbucks, its ice cream to Cincinnati favorite Graeter’s or Ben & Jerry’s and its lunchmeat to Boar’s Head.
Kroger produces a lot of its own products (20% of the house brands) through a network of 33 manufacturing plants across the country:
- 14 dairies, which produce milk, juices, tea, water, yogurt, sour cream.
- 9 deli or bakery plants, which produce bread, muffins, donuts, buns, cakes, cookies, tortillas, deli salads and soups.
- 5 grocery product plants, which produce coffee, dry pet food, condiments, sauces, nuts and snacks.
- 2 beverage plants, which produce soft drinks and bottled water.
- 2 cheese plants, which produce processed, natural and organic products.
- 1 one meat plant, which produces deli salads and soups.
Two of those plants are in Greater Cincinnati: an ice cream and beverage facility in the northern suburb of Springdale, and a sauce, spice, broth and condiment factory in Cincinnati’s Lower Price Hill neighborhood, which churns out salad dressing, pasta sauce, ketchup, spices, jellies and jams. Between the two, Kroger’s manufacturing operations employ more than 600 workers locally and more than 7,500 nationwide.
Kroger’s other house-branded products are produced by third-party manufacturers. All in all, out of the 60,000 typical items in a Kroger store, 13,000 are one of Kroger’s private-branded items.
Kroger is a big company and a major employer
A Fortune 500 company based in downtown Cincinnati, Kroger operates nearly 2,700 stores in 35 states and the District of Columbia, including 77 in Greater Cincinnati. The company employs 403,000 workers, including nearly 20,000 in the Greater Cincinnati region.
The retailer operates stores under the Kroger banner name as well as Fred Meyer, Ralphs, Harris Teeter, Pick ‘n Save, Dillons, King Soopers, Mariano’s, Fry’s, QFC and others.
House brands? Kroger's big four across the store
- Kroger – the grocer’s namesake house brand is also its largest on thousands of items from pasta and sauce to frozen waffles and syrup.
- Simple Truth – the grocer’s premium natural and organic brand with more than 4,000 items. The label is from artificial flavors, colors, sweeteners, preservatives, synthetic dyes and fragrances.
- Private Selection – the retailer’s premium brand with more than 3,000 items.
- Smart Way – the grocer’s budget house brand, which is expanding in the next year from 130 items to 1,000.
Kroger's house brand in your favorite section (wherever that is)
- Bloom Haus – Kroger’s premium floral brand in its florist section, offering fresh-cut flowers, plants and bouquets.
- Murray’s Cheese – the grocer’s premium artisanal cheese and gourmet brand.
- Field & Vine – the retailer’s produce brand featuring locally-sourced berries and cherries.
- Heritage Farm – quality fresh chicken products in the meat department.
- Bakery Fresh - breads, pastries, and desserts.
- ABOUND, Pet Pride and Nature’s song – pet food and supplies.
- HD Designs, Holiday Home, WOW Office Works, Everyday Living, and Dash of That – home and office supplies.
- Dip – active wear brand.
- Comforts – diapers and baby products.
- Fireside Supreme, Glacier's Edge, MotoTech, Turf King and The Joy of Gardening – outdoor, vehicle maintenance and gardening brands.
This article originally appeared on Cincinnati Enquirer: Why you'll see more house brands at your Kroger
