Kroger has a format for every taste and wallet
Kroger has a wide range of store formats catering to consumers in the upper, middle and lower end of the grocery spectrum. While the grocery giant recently made news for a significant investment in Lucky’s Market, the Boulder, CO-based organic and natural foods chain, it has also continued to expand the store count of its hard discount Ruler Foods business.
There are currently 43 Ruler Foods operating in six states across the Midwest. Kroger has said it will announce another 10 units this year. Similar to other hard discount operators, such as Aldi, Ruler Foods operates smaller stores with a focus on merchandising store brands.
In an earnings call last month, Kroger CEO Rodney McMullen admitted in a response to an analyst’s question that the company is still trying to get a handle on managing the Ruler Foods business.
“We’re still trying to understand the economics of the model to get to where it actually performs at an ROIC that we’re happy with,” said Mr. McMullen (via Seeking Alpha). “We continue to make progress, but we do not think we’ve figured it out.”
The investment in Ruler Foods goes to Kroger’s attempt to provide a format for virtually every segment of the grocery market.
When asked about competition from Aldi and Lidl, the latter in the process of entering the U.S. market, Mr. McMullen said, “We have a lot of respect for those formats. There are certain customers that we believe like to shop in that environment. Everything that we can tell, it’s not all customers. It is a customer segment, and what we’re trying to do is to serve that segment.”
- Kroger (KR) W. Rodney McMullen on Q4 2015 Results (Earnings Call Transcript) – Seeking Alpha
- Operations – The Kroger Co.
- Kroger to build 10 Ruler Foods Stores – Supermarket News (reg. required)
Do you think Kroger is pursuing the right policy of offering store formats to meet the needs of grocery consumers in the upper, middle and lower ends of the market? How do you expect Ruler Foods to do against Aldi, Lidl, Save-A-Lot and others competing for the shoppers that patronize those stores?