Kroger simplifies its budget private labels

Discussion
Source: Kroger
Sep 12, 2022

Kroger has updated its opening price point strategy in private label, winnowing 17 brands down to two: Heritage Farm for fresh and dairy product lines and a new brand, Smart Way, for nonperishable items.

Kroger launched Smart Way last week with approximately 150 products and will add more items will this fall.

“As our customers face an ongoing inflationary environment, we know they are looking to stretch their dollars further than ever before,” said Stuart Aitken, Kroger’s SVP and chief merchant and marketing officer, in a statement. “Smart Way is an exciting, eye-pleasing product line that will be easy for customers to find. By adding a simplified opening price point brand strategy to Our Brands portfolio, we will further cater to every customer, every time.”

Last week on Kroger’s second-quarter conference call, Rodney McMullen, chairman and CEO, said the Smart Way launch enabled Kroger to add some “incremental” items to its lower-tier private label offerings but indicated that the primary reason for consolidating sub-brands is “making it easier for customers to shop.”

He added, “Those items are always great value for the money.”

Kroger’s private label portfolio runs across three tiers — premium (primarily the Private Selection label), middle (represented by its largest brand, The Kroger) and value (previously represented by Big K, Check This Out, Heritage Farm and other brands). Store brands also include the Simple Truth natural and organic brand and the Home Chef meal kits and heat-and-eat brand.

Walmart, Target and several grocers have seen private label grocery sales accelerate this year as consumers trade down due to inflation. At Kroger, same-store sales across “Our Brands,” its private label portfolio, rose 10.2 percent in the second quarter, nearly double the grocer’s overall 5.8 percent same-store gain.

Kroger has successfully expanded its private label offerings to represent about 20 percent of revenues in 2021. Mr. McMullen told analysts Kroger was recognized by Store Brands magazine with 12 “Editors’ Pick” awards for best new products, the most of any retailer. He said, “Our Brands are delivering innovative products at a great value.”

DISCUSSION QUESTIONS: Do you see more benefits than drawbacks to Kroger’s move to consolidate its value-tier private labels to two brands? What’s the key to a successful value-tier store brand strategy at grocery?

Please practice The RetailWire Golden Rule when submitting your comments.
Braintrust
"Streamlining value-tier private labels helps Kroger maximize awareness as consumers seek deals."
"Retail’s private brand-palooza has been cranking up for a while. As a result, the private brand arena has become quite crowded and cluttered."
"Anchoring Kroger shoppers around two primary value-driven, owned brands should strengthen both as a revenue engine and growth-driver."

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19 Comments on "Kroger simplifies its budget private labels"


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Neil Saunders
BrainTrust

With inflation still running rampant, more consumers than ever are trading down to private label – with opening price points being particularly important. Kroger has always been very strong on private label, but the entry offer was somewhat confused with a jumble of brands. This new strategy allows consumers to easily look across the range and find the value-for-money products. Having separate entry brands for fresh and non-perishable makes sense as there are very different purchase dynamics and considerations within each set of categories.

Richard Hernandez
BrainTrust
Richard Hernandez
Director of Commerce
16 days 4 hours ago

I have always been a believer in the good/better/best tiers of private label product. If anything, if it is supported by a very clear marketing program it should provide customers with another option for saving money.

Gary Sankary
BrainTrust

I think this is an excellent move by Kroger. Too many labels confuse the customer and dilute one of the primary purposes of private labels, driving loyalty.

Dr. Stephen Needel
BrainTrust

Simplifying is almost always a good thing. That said, as a regular Kroger shopper, it wasn’t very complicated to begin with. We knew that Private Selection was better, Simple Truth was “natural/organic”. Not sure if they get economies of scale for the rest of the products, which would be their financial justification. Otherwise, they’ll confuse current shoppers for a bit.

Lisa Goller
BrainTrust

Streamlining value-tier private labels helps Kroger maximize awareness as consumers seek deals. Consistent quality, value for money and terrific taste earn consumer trust in value-tier grocery private labels.

Carol Spieckerman
BrainTrust

Retail’s private brand-palooza has been cranking up for a while. As a result, the private brand arena has become quite crowded and cluttered. I expect more retailers to follow in Kroger’s portfolio-tightening footsteps. Clarity is key in a sea of brand options.

David Naumann
BrainTrust

Consolidating private label brands is a smart strategy, as it will help drive brand loyalty. Costco has been very successful with its Kirkland private label brand so that consumers trust the quality of these private label products. With many different private label brands, it made it difficult for Kroger to develop private label brand loyalty.

Rich Kizer
BrainTrust

This is an aggressive and brilliant move by Kroger: products priced right, easy to find, eye-pleasing, and at great pricing. Most importantly, they better make sure they stay in stock. Promises like this have to have a great record of consumer fulfillment with no stockouts.

Dick Seesel
BrainTrust

Simplifying the opening tier of Kroger’s private brands can only help clarify its good/better/best strategy. It will also raise the profile of its value brands for Kroger’s more budget conscious shoppers. This should help solidify Kroger’s market share in its own labels.

Steve Montgomery
BrainTrust

Anything that helps customers identify a retailer’s private label brands and the lower cost that goes with them is a good idea. Kroger’s approach has done just that. The use of separate PL brands for different product categories takes this even a step further. This will be a winner for Kroger.

Joan Treistman
BrainTrust

There are typically more advantages from simplification. As long as Kroger shoppers recognize the intended differences between the private label brands, Kroger will benefit along with its customers.

Patricia Vekich Waldron
Staff

Making it easy for consumers to see the full category range — and their respective price points — is always a smart move.

Jeff Hall
BrainTrust

This focused and simplified private label strategy makes great sense. Smart Way and Heritage Farm will both benefit in having greater pervasive visibility across the entire store. Anchoring Kroger shoppers around two primary value-driven, owned brands should strengthen both as a revenue engine and growth-driver.

Ananda Chakravarty
BrainTrust

More benefits. Inherent benefits include: simplification, lower managing costs, lower printing costs, internal management across PL, holistic planning. From the customer side, easier to spot, clearly identifiable, and cross-product brand building.

The key grocery brand strategy for the value tier is highest bang for the buck — in other words, value. At lower prices, even commodity products become value products, so long as it’s not in a price war. Smart Kroger move.

Craig Sundstrom
Guest

When a company has more than one brand, they’re generally trying to communicate something: price-point, high/low quality, “green,” etc. So while I like the idea of simplification, and there’s little gained by arbitrary differences (why should canned goods carry a different name than bread or milk?) two seems like it may not be enough. (If that’s in fact really the case: the article’s statement “Kroger’s private label portfolio runs across three tiers” is in the present tense).

storewanderer
Guest
16 days 1 hour ago
Packaging reminds me of some Amazon private label food. I like the packaging. This is the lineage of the old FMV and Kroger Value product lines. These are the low quality lowest possible price items. The old black and white generics. I see very few of these items in the Kroger locations I visit. The super thin paper products and “frozen dairy dessert” are still there. The big can of irregular peaches with stones in the can, the shredded imitation cheese, and can of irregular olive pieces with pits are long gone at Ralphs, Smiths, Fred Meyer, King Soopers, and Frys … I am surprised they are focusing on this low quality line at all. I don’t think these items sell very well, and why should they … the higher quality Kroger counterpart doesn’t cost much more. I feel this line should be discontinued entirely and they just focus on the standard Kroger line to have quality that meets or exceeds national brand at a very competitive price point. Also hopefully Safeway won’t have any… Read more »
Gene Detroyer
BrainTrust

One builds brand value by creating awareness. Kroger’s move from 17 to two gives the brands more awareness and value. By separating the two brands, they give meaning to the brand itself.

Jeff Sward
BrainTrust

Smart move. Proliferation of choices is confusing and dilutes the ability for any of them to become meaningful. Kirkland at Costco is a powerful lesson in what one owned brand can accomplish. And Kroger still has plenty of opportunity for telling different brand stories in the other tiers.

Clay Boatright
Guest
15 days 3 hours ago

Retailers moving from a three-tier to a two-tier store brand strategy has been going on for a long time and makes a lot of sense. The short-term changeover can be tough as middle-tier buyers usually migrate down, but long term it streamlines the portfolio, improves space allocation and holding power, and enables better equity gains leveraged off the national and regional brand players.

wpDiscuz
Braintrust
"Streamlining value-tier private labels helps Kroger maximize awareness as consumers seek deals."
"Retail’s private brand-palooza has been cranking up for a while. As a result, the private brand arena has become quite crowded and cluttered."
"Anchoring Kroger shoppers around two primary value-driven, owned brands should strengthen both as a revenue engine and growth-driver."

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