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Dillon to Retire: What's Next for Kroger?

Written by Tom Ryan

Dave Dillon, who has adeptly run Kroger Co. for the last decade, last week announced plans to retire at the close of the year, replaced by COO Rodney McMullen.

The 37-year veteran, as CFO, led the 2009 integration of the $13 billion merger with Fred Meyer, allowing Kroger to get into the non-grocery business with categories such as jewelry and furniture. Mr. Dillon became CEO in 2003 as newer threats to the traditional grocery format soon sent several competitors to file for bankruptcy protection or to downsize. The disruption came not only from Walmart, Target and warehouse clubs, but dollar stores and c-stores making bigger pushes into food, organic rivals led by Whole Foods, and limited-assortment specialists like Trader Joe's and Aldi.

With its Customer 1st strategy focused on offering competitive pricing, broad assortments, faster checkouts and customer service, Kroger has tallied 39 consecutive quarters of comparable-store sales growth. It's been relentless around feeding any cost savings into lower prices for customers, something Wall Street has wished would be used to boost profit margins.

Kroger was also seen as well ahead of the curve when it partnered with dunnhumby in 2003 to better analyze the customer data coming from its loyalty program with the goals of personalizing offers and learning more about shopper habits. The Cincinnati Business Journal said the partnership gave "Kroger entry into the world of 'big data' before it was even called big data."

Mr. McMullen, whom Mr. Dillon said played a key role in both the development of the Customer 1st approach and the dunnhumby alliance, still faces the newer food competitors and must also steer the pending acquisition of Harris Teeter, Kroger's biggest acquisition since Fred Meyer.

The transition also comes as same-day delivery pushes from Amazon, Walmart and several upstarts are yet again promising to bring e-commerce to grocery on a large scale. Mobile apps and other digital technologies also appear set to transform the in-store grocery shopping experience.

"The progress we've made on digital tells us that there's tremendous growth there," Mr. McMullen, a 35-year Kroger veteran, told The Wall Street Journal, last week. "Whether it's people finding discounts on things they care about, looking at the layout of the store, or creating a shopping list, customers are engaging through our app."

Mr. Dillon told the Journal that "new blood coming in" is necessary given the rapidly changing environment.

"The new era of supermarkets began 10 years ago, when people started buying food in lots of places, not just supermarkets," Mr. Dillon said. "We caught it pretty early, but most other supermarkets did not."

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