Image Courtesy of Kroger
Kroger, seeking a new CEO since early March, recently revealed it’s focusing on an outside hire for the first time in its 143-year history.
Kroger chief people officer Tim Massa told the Cincinnati Business Courier that the grocer is seeking an external CEO candidate as part of the publication’s C-Suite Awards coverage. Massa’s being recognized in the chief human resources officer category.
The CEO search started after Rodney McMullen resigned following a board investigation of his personal conduct that was unrelated to the business but “inconsistent” with Kroger's policy on business ethics. Kroger’s lead director Ron Sargent, Staples’ former chairman and CEO, took over as interim CEO as a search ensued.
McMullen’s surprise exit came after Kroger terminated its two-year effort to acquire rival Albertsons in a $25 billion deal, a move McMullen insisted was vital to help Kroger compete on prices with Walmart, Costco, and others. The highly-publicized termination came after the merger was blocked by federal and state regulators on antitrust concerns and led to lawsuits from Albertsons and C&S Wholesale Grocers, which had agreed to acquire divested stores post-merger.
However, several analysts had been critical of McMullen’s overall stewardship as CEO since 2014, including a costly project to partner with British-based online grocery delivery company Ocado -- one seeking to build 20 robotic fulfillment centers nationwide.
Critics Say Kroger Has Become Distracted and Off-Message
Some analysts felt the focus on 84.51° data analytics company and building out its retail media network was distracting management from the core grocery business -- one that’s losing market share to Walmart, Amazon, Costco, Aldi, and others.
“The golden age of Kroger was before Rodney took over,” Scott Mushkin, CEO of R5 Capital, told Grocery Dive earlier this year. “If you just look at the business … I would say they’re kind of bumping along, kind of hanging on a little bit rather than thriving.”
Mushkin believes Kroger has become less effective at communicating its value proposition versus rivals such as Sprouts Farmers Market and Publix.
“It’s very difficult when you’re multi-banner, multi-regional, with different go-to-market strategies, to define what you are,” Mushkin told Grocery Dive. “It’s the challenge for whoever takes over Kroger: Why, as a consumer, should I shop you beyond location?”
Analysts have also questioned whether Kroger needs to shift from a high-low (HL) pricing strategy driven by promotions to an EDLP (everyday low pricing) positioning. Sargent said in September on Kroger’s Q2 analyst call, “There’s no debate about moving to an EDLP pricing architecture. Kroger is a retailer that for many, many years has been a promotional retailer. Our customers respond to that. Our customers come to us for that.”
Kroger's Next CEO: An External Hire?
Jose Tamez, managing partner at executive search firm Austin-Michael, told Supermarket News he believes Kroger has a strong internal team, calling out Mary Ellen Adcock, EVP, chief merchant and marketing officer, but said an outside CEO was widely expected. He said, “Oftentimes when a CEO leaves, for whatever reasons, it gives a company a chance to rethink things, reset some things and refresh others.”
Brittain Ladd, a consultant focused on the grocery business, mentioned four potential replacements to the Cincinnati Business Courier, including Greg Foran, who’s credited with turning around Walmart’s grocery business and is stepping down as Air New Zealand CEO on Oct. 20.
He also cited Judith McKenna, former Walmart International CEO whose noncompete agreement expires in January; Hal Lawton, CEO of Tractor Supply; and Tony Hoggett, chief operating officer at meal platform Wonder, and who was formerly Amazon’s top grocery executive.
Asked on the Q2 call by an analyst what traits Kroger’s board is looking for in its next CEO, Sargent said, “You're looking for critical experiences in people's backgrounds. I think you're looking for competencies in terms of expertise of things they've done. You're looking at personal attributes around leadership and style and people skills.”