The Grocery Giant Has Been Making Big Changes. What Does It All Mean?

Kroger, the second largest grocer in the U.S., has been under immense pressure from competition and investors alike in 2019. While stock prices have been on a steady slide since they announced disappointing Q4 2018 earnings back in March, the company has been launching a steady stream of innovations in 2019 that give good reason for optimism for the future of the mega grocer.

The past month has been especially active, as the company has made a few huge announcements with big long-term implications for the company. What happened and what does it all mean? Let’s dive in and take a look.

They’re Transforming Analytics into Service Offerings

Back in 2015, Kroger purchased the U.S. arm of U.K.-based analytics company dunnhumby and transformed it into their own data intelligence arm, renaming it 84.51°. Last week, 84.51° announced Stratum, an omnichannel tool for CPGs to get a single snapshot of their consumers’ in-store and online purchasing habits.

The tool will leverage the massive amounts of data Kroger has collected from their 2,800+ stores and various online properties, helping CPGs best position their products for the omnichannel experience. The investment in analytics and RaaS (retail as a service) tools is a key component of the diversification strategy Kroger has been pursuing as part of their Restock Kroger initiative.

They’re Looking to Evolve Their Brand with Their Business Model

In another big announcement this week, Kroger announced they would be hiring DDB New York as their first ever ad agency of record. Founded in 1949, DDB (Doyle Dane Bernbach) is one of the world’s most reputable and awarded ad agencies. The company’s client list includes Volkswagen, McDonald’s, Unilever, and Johnson & Johnson, to name a few.

The move is an interesting one, as the market as a whole has moved away from the “Agency of Record” model in favor of building up internal teams and partnering with creative shops for select projects. Kroger felt DDB’s experience with large, complex clients made them an ideal fit for their multi-faceted business. Expect DDB to reinvigorate the Kroger brand and creative, particularly as the business branches out in new directions with their B2B RaaS offerings and quickly evolving fulfillment model… which just happens to be our next topic.

They’re Breaking Ground on Groundbreaking Fulfillment Centers

Kroger’s partnership with pioneering British grocer Ocado has been one of the big developing stories of 2019. Ocado, who specializes in automated warehouses for grocery order fulfillment and delivery, formed a partnership with Kroger in May of last year.

Last month, after breaking ground in June on their first automated fulfillment center in Monroe, OH, Kroger announced a second high-tech warehouse location in Forest Park, GA. The new $55 million cutting-edge fulfillment center will bring 400 jobs to the area.

Kroger is currently planning 20 of these “sheds”, which will likely have a massive impact in the growing online grocery sector. The innovative sheds use autonomous robotic vehicles to fulfill customer orders quickly, allowing customers to get fresher food faster.

Look for these “sheds” to have a tremendous impact on the future of the Kroger brand, and look for more location announcements to come in the near future.

They’re Building a Much Faster Last Mile

Last month, Kroger quietly piloted a program near their hometown of Cincinnati that may give us some indication of what the future may look like for the grocer.

“Kroger Rush” is a 30-minute delivery pilot program that is currently available to customers within a 3-mile radius of two Kroger stores (Oakley, OH and Newport, KY). As it’s currently constructed, the program offers a limited selection of “quickly needed” products including “heat-and-eat” meals, produce and beverages for a delivery fee of $5.95.

As the Kroger “sheds” become more common, and if their autonomous vehicle delivery program continues to grow, Kroger Rush is likely to become more viable in a much wider array of markets. While Amazon, Target and Walmart have been battling on the same-day and next-day delivery front, Kroger may just swoop in and lay claim to the 1-hour delivery crown.

Keep an eye on this program, as it could have huge implications in the ongoing war for the last mile.

What do you think about these latest developments from Kroger? Do you think their RaaS offerings will appeal to CPGs? Will their efforts to win the last mile have a significant impact on the market as a whole? Do you think the “sheds” and “Kroger Rush” will be pillars for their future branding efforts? We’d love to hear what you have to say. Sound off on social media now and join the conversation.