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Questions emerged about Kroger's reorganization of its Utah operations, reported yesterday on MNB. One member of the MNB community wrote:

I don't get it. Why convert to Smiths Banner if Fred Meyer is working for them? Looks to me like Kroger Corporate has an agenda focused on something other than the consumer. Do Utah Consumers prefer Smiths - or will this just be another attempt to turn a grocery store into a supercenter? From a vendor standpoint, Kroger has been confused about their identity(s) since they purchased Smiths, City Markets, Fred Meyer, Ralphs, etc. Their Cincinnati office has not been real successful consolidating sourcing programs, and they have had resistance from each division on most initiatives. I'm not real impressed with their ability to manage their various divisions - but then, none of us are very impressed with most of the large grocery chains lately - are we?

MNB user Rich Honaker chimed in:

I guess it's all in the spin in corporate life. The following is a quote from today's Salt Lake Tribune:

    "Kroger's decision to expand Smith's presence at the expense of Fred Meyer doesn't surprise industry observers such as Utah Tax Commission chief economist Doug Macdonald.

    He said Wal-Mart has captured an increasing share of grocery dollars spent in Utah with its massive Supercenters, which carry groceries and merchandise, forcing other food retailers to make hard decisions.

    "People are driving to these Supercenters and putting pressure on the regular grocery stores," Macdonald said. "That makes things very competitive."

    The number of traditional grocery stores in Utah has dropped from 534 in 2001 to 507 in 2003, Macdonald said, reflecting the growth of Wal-Mart's grocery business in the state and the closing of unprofitable stores by other grocery companies.

    Meanwhile, Wal-Mart keeps growing in Utah. The Arkansas-based company operates six standard Wal-Mart stores, seven Sam's Club warehouse stores, and 16 Supercenters. The company has also added four Neighborhood Market grocery stores. It is building a fifth Neighborhood Market in Layton and three new Supercenters in Salt Lake City and Lindon."

To paraphrase Lee Iacocca, you gotta lead, follow or get out of the way.

The question is, which of the two latter choices is Kroger following?

Another MNB user wrote:

Kroger has several markets where their stores need massive upgrading, such as Michigan and their home territory in Ohio. These are markets where Meijer has already done the SuperCenter thing and had success. Then there's Southern California. There's nothing to say that Kroger's not planning to respond to Wal-Mart by pre-emptively using what they've already learned in the west (IIRC, one reason Kroger bought Fred Meyer to begin with was to learn something about the general merchandise business) to take on the smiley face.

If Kroger is really smart, they'll convert stores they already have to this new format (they already do have Ralphs Marketplace stores, but they're not on the scale of a FM or the proposed Smiths, they're far far smaller), which will be under the radar screens of most of the places that don't want the Smiley Face there.

Kroger seems to be trying all kinds of new formats at a time when other chains aren't. There's Kroger FreshFare (an idea they borrowed from Ralphs in California), Marketplace, which is being adapted from Fred Meyer. As we've all read about other chains trying to differentiate themselves from the Bentonville boys, Kroger is taking it cautiously, which is a smart thing, because they know their markets, they know their business. More so than the competition does.

I respect Kroger a lot for not centralizing its stores (a-la Safeway), and keeping things within the divisions that know their product. In the case of Smiths, Smiths and Fred Meyer were competing with each other, not complimenting. The move to Smiths makes perfect sense for that very reason. Also by letting FM do what it does best (general merchandise) and Smiths do what it does best (food), it's a pretty good marriage.

And yet another MNB user wrote:

The one thing that both organizations (FMC and Smiths) have is their Presidents. Both have been with their respective companies for many years. Halsey is one of the long timers with Smiths going back to the days of Dee Smith. Webb started from the ground up at Freddies. His background is strong in the GM and HBC areas while Halsey has both but the real strength is in merchandising.

Extremely personable and do take care of their associates. This is a great move and will solidify their position in Salt Lake City and surrounding areas.
KC's View: