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If some industry observers are correct, shoppers of the Kroger Co. may one day be redeeming their fuel points by the liter as well as by the gallon.
That could be the case if the American market tightens up any further. As the Cincinnati-based supermarket chain pursues its planned acquisition of Harris Teeter Supermarkets in the Southeast, few new geographic territories remain for it to expand in the United States. Some retail experts suggest the nation's largest traditional grocery chain could instead take its stores, and its leading loyalty program, into Canada.
"Canada's a much more accommodating market," said Burt Flickinger III, managing director of Strategic Resource Group. "I think Kroger would do U.S. acquisitions first and then Canadian acquisitions as a strategic sequel, but if the U.S. acquisitions are priced at a premium, I can see Kroger changing the order and moving into Canada."
If so, Kroger's loyalty data, spanning roughly 2,400 supermarkets and mass merchandise stores in 31 states, would be an asset — if it can be applied seamlessly to Canadian consumers. This is why analysts suspect that any northern expansion by Kroger would likely be through a sophisticated, and financially sound, acquisition.
"Kroger's advantage is the expertise in how it would leverage, organize and integrate the data in its merchandising and marketing strategies. But depending on how they enter this market, they won't have the existing data," said Brian Ross, president of Precima, a LoyaltyOne analytics solution. "Every major competitor in this market has a loyalty program and every one has an advantage over Kroger in that they already have the data. Unless Kroger acquires someone and leverages existing data, it's starting from scratch and the race would be on."
The Canadian market is certainly seeing its share of consolidation, including Sobeys' move to acquire Safeway Canada and Loblaw's pending merger with Shoppers Drug Mart. Target entered the market this year through the acquisition of more than 200 Zellers stores. Walmart, meanwhile, continues its expansion into Canada, with 380 locations. Both Target and Walmart lack loyalty programs.
Chuck Cerankosky, an analyst with Northcoast Research Partners, who has covered Kroger for more than 20 years, said it is known not to overpay. But he agreed that its loyalty program surely would give it an edge.
"It's very easy to generate sales in a new market by lowering prices, but you need profitable sales and loyalty [marketing] is a way to do that," said Mr. Cerankosky. "You need the best customers and the program helps you know who they are."