Kroger is seeing success from premium customers looking for joy in giant packages of blueberries and betting on its four 'competitive moats' for continuing profits post-pandemic

  • Kroger CEO and chairman Rodney McMullen spoke about his company's "four competitive moats" during the grocery giant's Thursday earnings call.
  • According to McMullen, the advantages of fresh foods, Kroger brands, personalized data capabilities, and seamless fulfillment help the company stand out.
  • "We are fulfilling our customer's growing demand for  premium products, as they seek joy and elevated experiences," McMullen said
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During the coronavirus pandemic, happiness can be derived from the simplest pleasures. Even a seamless online order of fresh blueberries could be enough to chase away the COVID-19 blues, according to Kroger chairman and CEO Rodney McMullen.

McMullen addressed his company's pandemic-era strategies on the company's Thursday earnings call, during which Kroger announced that it beat Wall Street expectations and saw soaring digital sales. He spoke specifically about how his company is "merchandising in new ways to both meet that demand and  inspire our customers to trade up" to premium products.

"We are fulfilling our customer's growing demand for premium products, as they seek joy and elevated experiences," McMullen said. "We're merchandising in new ways to both meet that demand and inspire our customers to trade up to items like premium jumbo blueberries and larger sized packages of strawberries, raspberries, and grapes."

McMullen centered his comments around the company's four "competitive moats," which the company describes as Fresh, Our Brands, Data & Personalization, and Seamless."

According to the CEO, those four moats have helped Kroger succeed and bring "joy" to customers during the pandemic, at a time when the grocer has been seeing "increased basket  sizes and fewer customer visits."

The company's strategy around fresh prominently features its partnership with Home Chef, a meal kit and food delivery business that Kroger acquired for $200 million in 2018.

"Our efforts are also driving strong market share growth in packaged produce, fresh prepared foods and specialty cheese," McMullen said. 

For the company's "Our Brands" moat, McMullen said that Kroger's brand capabilities grew 8.6% in the third quarter, with a 17% spurt in Private Selection and around 15% growth in Simple Truth. The company introduced 250 new products in the third quarter, a record for Kroger.

On the "Personalization" front, McMullen said that the company's "customer email open rate" is 18% higher than the industry average.

McMullen also called out Kroger's "Seamless" capabilities. The CEO said that the company began by leveraging its physical stores to fulfill orders, opened up "various-sized facilities optimized based on volume, demand profile, and density," and embracing automation and scale. Kroger currently has established 2,200 pickup and 2,450 delivery locations throughout the United States, reaching 98% of the company's customer base.

"The investments made to enhance our competitive moats are paying off and as a result, we are growing market share," McMullen said.

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