Kroger Lucky's Market

Will Kroger get Lucky with its latest investment?

Kroger has already proven itself to be a force in the organic and natural foods market. That presence is only likely to grow now that the company has made a strategic investment in Lucky’s Market, a 17-store specialty grocery chain with locations in 13 states.

Lucky’s store layouts are intended to resemble a farmers’ market and feature a wide selection of fresh organic and conventional produce, along with meat and seafood, baked goods, and prepared meals. The chain’s “L” private label promises to be free of artificial colors, flavors or preservatives. Ten percent of profits from L sales are reinvested in local communities.

In recent years, Kroger has made a concerted effort to grab greater market share in the organic foods category. Today, the company maintains it is the largest seller of organics in the U.S. in large part because of its own private labels such as the “Simple Truth.”

Kroger was attracted to Lucky’s for a number of reasons, including the chain’s emphasis on being “the natural and organic food grocer for the 99 percent,” Kroger’s group vice president for corporate affairs, Jessica Adelman, told the (Boulder) Daily Camera.

While specific financial details were not made public, Kroger described its investment in Lucky’s as “meaningful” with a goal of helping accelerate the chain’s growth in new and existing markets.

BrainTrust

"Kroger already has a significant knowledge base about marketing organic to the masses but this will provide them the opportunity to learn about niche marketing of organics."

Steve Montgomery

President, b2b Solutions, LLC


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Adrian Weidmann

Managing Director, StoreStream Metrics, LLC


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Adrian Weidmann

Managing Director, StoreStream Metrics, LLC


Discussion Questions

DISCUSSION QUESTIONS:
What do you expect Kroger’s investment in Lucky’s Market to mean for each company? What will it mean for their mainstream and natural foods competitors?

Poll

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David Livingston
David Livingston
7 years ago

This is a much better choice than the financially stressed The Fresh Market. Lucky’s is only about 17 to 19 stores so there won’t be a huge investment risk. Lucky’s has been more selective in picking real estate. They go into markets with the right demographics but don’t take the high rent locations. Often they will take a supermarket that has lost its lease (they took a Kroger in Lansing, MI) and a Marsh in Bloomington, IN.

They seem to fare a little better than Fresh Thyme in sales while having lower occupancy costs. I think Kroger likes the way they do business. Lucky’s will be a good fit for many of the older Kroger stores where Kroger is ready to relocate and build a newer unit. Look for any old beat up Kroger stores about 30,000 square feet near a college campus to become a Lucky’s. For Whole Foods and Trader Joe’s it means a stronger competitor. For Sprouts, The Fresh Market, Earth Fare or some local co-ops, it could spell disaster and store closings. Many of those are not doing well and Kroger can now run them off the road.

Steve Montgomery
Steve Montgomery
7 years ago

The investment will provide the funding to allow Lucky’s to enter new markets and increase its rate of expansion. It can also allow them to learn from Kroger about operating on a larger scale. It’s one thing to operate 17 stores, it’s another thing entirely to operate 200.

Kroger already has a significant knowledge base about marketing organic to the masses but this will provide them the opportunity to learn about niche marketing of organics. It will also allow them to learn how to market to a different demographic than the one that might shop in their regular stores. More of a Whole Foods approach than the typical supermarket that they operate.

The investment will allow both companies to be even more formidable competitors in both the natural foods and mainstream segments of the retail food business. I don’t envision having the two formats operate in the same shopping center but I could see them operating in two areas within the same market.

Tony Orlando
Tony Orlando
7 years ago

Kroger knows what they are doing. They pulled out of our area many years ago as our economy tanked and they knew it was not coming back. They can take on anyone with their deep pockets, and they run very good stores. Consolidation will continue and Kroger will keep their eyes out for the next regional supermarket to add to their big tent. This will be a good fit for them.

Jeff Hall
Jeff Hall
7 years ago

“Being the natural grocer for the 99 percent” indicates why this is a great alignment — between a savvy large-scale operator and smaller aspirational brand performing well in its respective markets. Lucky’s entered the Ann Arbor market recently (in a former Kroger) and is holding its own against two local Whole Foods and a Trader Joe’s. The Lucky’s store environment is attractive and experiential, while the price points are more affordable. The investment gives Kroger access to a proven natural/organics banner with plenty of opportunity for growth.

David Livingston
David Livingston
7 years ago

Jeff Hall corrected me, it’s Ann Arbor, not Lansing that Lucky’s took over a Kroger.

Craig Sundstrom
Craig Sundstrom
7 years ago

Presumably, Kroger sees this as a testing ground — or they’re being REALLY proactive about heading off competitive threats — since 17 stores isn’t even a rounding error at their volume levels.

As to whether or not Lucky’s becomes a major player, I think it will be largely a matter of chance, since Kroger has plenty of nameplates and formats it can choose from, and it’s unclear why this one would be selected over others that are larger (either overall, or at least more concentrated). I wish them well.