Note By Jim Dudlicek
Golden Nuggets DEFLATE-GATE SPELLS END FOR KROGER!
Want to stay relevant and profitable in the age of disruption? Don’t be afraid to try new things. Engage your shoppers. Offer a seamless experience across all platforms, real and virtual.
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figured that would get your attention, in keeping with this month’s tabloid-style “fake news” theme for PG’s 84th Annual Report of the Grocery Industry. But you might be led to believe that some analysts actually think so, by how they were advising folks to dump their Kroger stock in the wake of the grocery giant’s reporting the end of its amazing 13-year streak of same-store sales growth amid persistent market deflation. “This may be a difficult trend to reverse now that Wal-Mart Stores is experimenting with lower grocery prices,” Dow Theory Forecasts proclaimed shortly after Kroger’s last earnings call, as reported by the retailer’s hometown Cincinnati Business Courier. Difficult? Maybe. Impossible? Hardly. It’s a testament to Kroger’s strength as a retailer that it took this long for ongoing deflation to knock its quarterly comps into the red. It isn’t anything that grocers haven’t seen before, despite today’s new market disrupters, like Amazon, which is not only rolling out its own brick-and-mortar grocery stores, it’s also urging CPG companies to bypass retailers completely and reach out directly to consumers. Kroger has successfully repelled Walmart in markets around the country, besting the big box in selection and service, if not often enough on price. Kroger’s investments in shopper insights, clickand-collect, and other omnichannel initiatives have helped its Customer 1st strategy pay dividends. Despite headlines about low grocery prices reaching a fever pitch, deflation is easing, and Kroger’s in a better position than anyone to rebound. Things are looking up already — as this issue went to press, Moody’s Investors Service announced that it expects grocery prices to rise about 1 percent this year, with ebbing deflation bringing an 8 percent boost to retailers’ operating profits, after
Jim Dudlicek Editor-in-Chief jdudlicek@ensembleiq.com Twitter @jimdudlicek
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| Progressive Grocer | Ahead of What’s Next | April 2017
dropping 5 percent last year. Improvements at Kroger, as well as Albertsons and Whole Foods Market, will drive sector growth, Moody’s predicted. It appears that the smart money will be on grocery — as of this writing, just a couple of weeks after the compstreak bad news, CNN Money was reporting that a consensus of investment analysts agree that it’s time to buy Kroger as its stock price begins to rebound from a temporary downslide. So it seems that grocery stocks are nothing to lose sleep over. For what retailers are tossing and turning about, turn to page 43 and start reading our latest Annual Report. Amid the challenges of driving an industry fast approaching $700 billion in sales, grocery retailers are most worried about the rising cost of all aspects of doing business, labor issues and competitive threats, particularly the spread of online retailers and the expansion of the limited-assortment format. In fact, limited assortment supermarkets, specifically hard-discounter Aldi, have been responsible for the largest leap in physical store growth, according to data in our annual report. Aldi and newcomer Lidl are poised to go head to head and drive innovation within the format. Want to stay relevant and profitable in the age of disruption? Don’t be afraid to try new things. Engage your shoppers. Those are two key areas embodied by Woodland, Calif.-based Nugget Markets, whose hybrid lifestyle-warehouse concept store, Fork Lift, is this issue’s Store of the Month, starting on page 24. Offer a seamless experience across all platforms, real and virtual, and work on defining what that means for your company. As PG’s Randy Hofbauer reported from the National Retail Federation show earlier this year, keynoter Rod Sides, of Deloitte, asserted that winning retailers do three things: offer integrated experiences, whether online or offline; leverage customer data in meaningful ways for each category; and compel shoppers to return to their stores by creating integrated unique experiences. Or, as former Jewel Foods CEO Bill Bolton said at Western Michigan University’s recent Food Marketing Conference, “We must be willing to cast aside today’s methods, however effective, for those that seem better suited for tomorrow.” PG