business news in context, analysis with attitude

In his annual letter to shareholders this week, Kroger chairman/CEO Rodney McMullen laid out the company’s mission and goals.

Some excerpts:

• “Kroger’s vision is to serve America through food inspiration and uplift. We are uniquely positioned to be the partner our customers turn to for their needs because meals have been our expertise for 135 years and – every day since day one – we place the customer at the center of everything we do.

• “We have the scale, data, physical assets and human connection to win with our customers today and into the future. We are energetically creating a seamless digital experience for our customers and providing personalized inspiration to help America decide what’s for dinner. As we pursue our Restock Kroger plan, Kroger will change the way America eats.

• “We are proactively addressing customer changes and we’re making strategic investments to create the future of retail: a seamless digital experience, customer-centric technology solutions, an enhanced associate experience, space-optimized stores and smart-priced products.

• “One of Kroger’s differentiating strengths is our physical presence in our communities. We are part of the fabric of the neighborhoods we serve, and 135 years in the grocery business have taught us a few things about people and about food. We know that meals matter. Families that share meals together have children who do better in all aspects of their lives. Throughout our history, Kroger has always provided the food and nourishment people need to live their best lives.”

• “Our Restock Kroger plan creates an exciting ecosystem for those who want to develop, test and scale the innovative solutions that will fundamentally redefine the food and grocery customer experience.”

“What’s exciting about Restock Kroger,” McMullen wrote, “are several aggressive plays that we haven’t run before:
“We are redeploying capital to prioritize the digital experience and a seamless shopping experience for all customers so they can choose how, where and when they want to shop with us.
“We are forming strategic partnerships to grow alternative revenue streams. For example, last year we launched Kroger Precision Marketing, powered by 84.51°, to monetize the media opportunity to reach the more than nine million sets of eyes in our stores and on our digital properties every day.
“We are redoubling our efforts to expand our world-class data and personalization work with 84.51°, including using data insights to optimize space in our stores for the future.
“We are investing in our associates more than ever before, starting with a half-billion-dollar investment in wages for many store associates announced as a part of Restock Kroger.”

McMullen also emphasize the fact that Kroger is taking some of the savings from new tax cut legislation and applying it to “Kroger’s new industry-leading education benefit.” which it ids calling “Feed Your Future. Under the new benefit, we expect to increase by five times Kroger’s total annual investment in associate education.”

And, McMullen concluded:

“Kroger has successfully competed in an ever-changing retail landscape throughout our history. We know that our success in the future will depend on our ability to see where the customer is going and to proactively address their changing preferences. Restock Kroger is our plan to do just that. We know we can accomplish Restock Kroger because it is built on a foundation of our strengths, including:

“Kroger has more data than any of our competitors, which leads to deep customer knowledge and unparalleled personalization. We use this data to improve our customers’ experience.

“We have incredibly convenient locations and platforms for pickup and delivery within one-to-two miles of our customers.

“We have a leadership team that combines deep experience with creative new talent.

“We have the scale to win with more than 60 million households shopping with us annually… And, we have an abiding commitment to uplift and improve the lives of our associates, customers and communities.”
KC's View:
It was the monk and poet John Lydgate (c. 1370 – c. 1451) who is widely credited with being the first one to say, “You can please some of the people all of the time, you can please all of the people some of the time, but you can’t please all of the people all of the time.”

I bring this up not just because I’m sure some shareholders may argue that Kroger ought to be spending less money on employee benefits and more on shareholder rewards. For the record, I think that companies ought to define “stakeholder” as broadly as possible … and Kroger is absolutely correct to focus on front line personnel who make it successful.

I also bring it up because I get conflicting signals from some folks in the MNB community about my treatment of Kroger. Just last week I got an email accusing me of being too positive in my Kroger coverage, and yesterday I got an email implying that because I write about a certain e-commerce company so much, I am ignoring the good work being done by companies such as Kroger. (You can find that email in Your Views, below, along with my response.)

Look, here’s the deal. I think it is hard for major companies such as Kroger to make the kind of fundamental changes that may be necessary for them to be relevant and resonant in the current competitive climate. I think size, in this case, can be both an advantage and a handicap - ubiquity can help, but it also means that consistency and nimbleness can be a reach.

I think that Kroger’s long-term commitment to data is a positive, but I also have the sense that sometimes the company is too slow to move on the kind of technological initiatives that could redefine its ability to compete.

I think that McMullen is spot on when he says, as he did in an interview recently, that “the only thing that stays consistent is people keep eating, but the way they eat will constantly change. People are much more interested in being inspired by food and food that’s healthy for them, but on their terms.”

That kind of differentiation is critical, in my view … but incredibly hard to achieve for a company the size of Kroger. In short, it is a mixed bag … but I’d rather bet on a company that understands the importance of internal disruption and tries to achieve it than on a company that has its head buried in the sand.