Harris Teeter to expand price advertising

Harris Teeter is touting its new lower-price positioning with radio and TV ads in the Charlotte market, and will likely expand that effort to other markets as well, a Kroger executive said at an investor conference this week.

As previously reported, Kroger Co., Cincinnati, lowered prices at its recently acquired Harris Teeter division, flagged with signage in the aisles.

“They typically have not done a lot of radio or TV, but they were on radio and on TV today shouting the lower prices, and you should probably expect to see that in other markets where they operate as well,” said J. Michael Schlotman, Kroger SVP and CFO, in a presentation at the J.P. Morgan Consumer & Retail Conference in London.

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He said Kroger’s research found that Harris Teeter’s pricing at the time of the merger actually had been “a little worse than the customer's perception of the pricing.” The more affluent shoppers in the market apparently didn’t consider price that important when determining where to shop, he said.

Schlotman noted that Kroger was able to achieve some cost savings to invest in lower prices through synergies such as self-distribution of pharmaceuticals. Previously, Harris Teeter had used a third party for pharmaceutical distribution.

Other matters Schlotman addressed at the conference:

• Harris Teeter’s Express Lane click-and-collect service is primarily used to supplement in-store shopping, not replace it. “That customer doesn't abandon in-store shopping. They do this for certain trips or certain life events,” such as when a family has a baby, he explained. “As the baby gets a little older they do it a little less. If they have another baby, they go back into it in a big way.”

• The redemption rate for digital coupons through Kroger’s recently acquired YOU Technology is “dramatically higher than freestanding inserts when people clip coupons,” Schlotman said, without revealing specifics. He also said the number of people who download coupons and then shop in a store within 36 hours “is phenomenal.”

• Asked about reallocating space in the stores to reduce shelf space for categories that are being supplanted, such as traditional yogurt, Schlotman said most Kroger stores are probably under-allotted in terms of shelf space for yogurt. “They just don't have enough space for the explosion in that category overall in the different varieties of yogurt,” he said, noting that in some stores the company has removed orange juice from the dairy section to make room.

• Asked if there was an area at which Kroger could improve, Schlotman cited store conditions, noting the company isn’t always good at getting stores back into prime shape after a busy holiday sale or other event.

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