CINCINNATI -- Kroger here selected TWT Distributing, Charlotte, N.C., to manage the ethnic health and beauty care category for 12 of its divisions in an effort to reach out to diverse customer segments, said a source with TWT.
Under the agreement, TWT will be responsible for sourcing, procuring and merchandising ethnic HBC, as well as developing consumer-driven marketing and promotional programs for the chain, according to statements from the distributor. TWT will assist Kroger in developing planograms and marketing programs that include promotions and temporary price reductions, as well as selling it products, said Michael Gruver, chief information officer for TWT.
"[Kroger] realized [ethnic customers] are an underserved segment," stated Gruver. "As they reach for sales and growth in earnings, it's got to come from somewhere. They're looking to find low-hanging fruit, or areas of the market they haven't serviced to the level that they probably can going forward."
The move says a lot about Kroger's commitment to its customers, Gruver added.
In the face of increasing competition, retailers are forced to focus on every potential customer, commented Andrew Wolf, analyst at BB&T Capital Markets, Richmond, Va. This relationship signifies incremental change, he said.
"Ethnic is important," Wolf said. "Getting ethnic marketing done well could be really beneficial for Kroger. It positions them structurally to implement better merchandising." Having one distributor for the ethnic HBC categories standardizes the process, he said, and allows Kroger to exert greater control over the marketing of products by refining its approach to category management, among other things.
The question, said Roy White, vice president of education for the General Merchandise Distributor's Council Educational Foundation, New York, is how to approach ethnic merchandising in a complicated market. "It's even more complicated now than ever before because ethnic merchandising used to just cover African-American groups. Now, it's a number of different groups," he said.
Retailers have to ponder merchandising mainstream products or specialty products, hiring multilingual employees, integrating the product mix or establishing a special section, and selecting the stores best suited to an ethnic section.
"Now that our population has become so diverse, it's absolutely vital that retailers get a handle on ethnic merchandising," White said. The topic could be the focus of future GMDC research and recommendations, he said.
It's not unusual for retailers to rely on an outside party to help them with merchandising and marketing, White said. They have the expertise to manage the category better than the retailers' purchasing or merchandising person, he said. "The benefit is you're buying expertise."
Divisions under the agreement include the Central, Great Lakes, Delta, Mid South, Mid Atlantic and Southwest divisions. The agreement also extends to the Dillons, Fry's, Smiths, King Soopers and Jay C's banners in Kansas, Phoenix, Salt Lake City, Denver and Indiana, respectively.
The new relationship took effect last month. Prior to this arrangement, TWT Distributing, a minority-owned business, supplied two of Kroger's divisions with ethnic HBC products, Gruver said.
TWT has had supplier relationships with other chains as well, including Food Lion, Hannaford Bros., Bruno's, Tops Markets, Stop & Shop, Harris Teeter, Ukrops, H-E-B and Family Dollar, Gruver said. Different customers utilize the distributor's category expertise to varying levels, depending on their history with the ethnic market, he said.