Kroger’s Rodney McMullen talks shop at Groceryshop

The Kroger Co. Chairman and CEO Rodney McMullen shed some light on his company’s strategic game plan in an opening keynote session at the annual Groceryshop conference in Las Vegas.

Held by Hyve Group plc, Groceryshop is one of the top industry events in the retail, grocery and consumer packaged goods sectors, drawing executives, associates, business partners and service providers of supermarkets, mass merchants, convenience stores, drugstores, warehouse clubs, discount stores and online retailers.

At this year’s show, which closed yesterday, McMullen spoke in a Q&A-style presentation titled “Kroger Delivers the Future of Grocery Shopping Now” with former CNBC retail reporter Krystina Gustafson, senior vice president of content for Groceryshop.

The Kroger Delivery Now service launched with Instacart offers customers 30-minute delivery. (Photo courtesy of Kroger)

“Kroger’s ability to proactively and strategically leverage our assets has positioned us to lead and thrive,” McMullen said in the on-stage interview, held late Sunday afternoon. “Our relentless focus on serving our customers, uplifting our associates and living our purpose to feed the human spirit has guided us through the many unknowns of COVID-19, and these principles will continue to shape our culture and operations as we continue to transform and capitalize on the momentum we’re experiencing.”

Related:Kroger, Instacart team up on ‘virtual convenience store’

In his talk, McMullen shared five insights guiding Kroger as it navigates and adapts to today’s changing marketplace, shaped by the COVID-19 pandemic, accelerated omnichannel shopping, a greater sense of social responsibility, and the need to address sustainability and climate change.

• The Customer Is Going to Win. Today, shoppers are increasingly dictating how, when and where they want to interact with grocery retailers, according to McMullen. To that end, Kroger continues to build a seamless, omnichannel business model in which consumers will get the high level of freshness, quality, selection, pricing, convenience and speed whether they shop in-store or online or want groceries now or tomorrow. He noted that Kroger doubled its digital business in its 2020 fiscal year and aims to double those sales again — as well as its digital profitability — by the end of 2023. Besides e-commerce and food retail, key to those efforts are alternative businesses such as Kroger Precision Marketing, the company’s retail media business, and Kroger Personal Finance, partnerships, and CPG data and analytics. Currently, Kroger has nearly 11 million daily retail customers and 4 million daily online customers, he noted.

Related:Kroger beats the Street in Q2 despite identical, digital sales declines

Kroger entered 2021 with plans to invest $350 million in hourly wage hikes, in addition to $800 million invested in wages between 2018 and 2020.

• Think Food. Think Kroger. Kroger is working hard to stay attuned to customers’ changing food and meal needs, which shift by day, week, hour and occasion, McMullen noted. That has the supermarket giant constantly innovating and scaling its assets — including associates, stores, supply chain, fulfillment network, fleet, technology systems, data and insights, and strategic partners — to create a seamless ecosystem melding traditional shopping with emerging digital commerce methods. For example, Kroger last week launched Kroger Delivery Now in tandem with Instacart. The 30-minute delivery service complements Kroger’s existing assets by leveraging its network of stores and Instacart’s national on-demand fulfillment network, bringing customers more immediacy so they can get what they want when they need it.

• Kroger Enhances the Associate Experience. Kroger has continued to invest in its almost 500,000 associates, according to McMullen, who noted their performance and dedication in operating stores, e-commerce, pharmacies, supply chains and manufacturing facilities through the COVID crisis. He said the company entered 2021 by planning to allocate $350 million to hourly wage hikes for associates this year, in addition to the $800 million invested in wages between 2018 and 2020. Now, Kroger’s average hourly wage tops $16, and including comprehensive benefits that will grow to $21 by the end of this year. McMullen pointed out that 70% of current store leaders began as hourly associates and that benefits like the company’s education assistance program provide up to $21,000 toward degrees ranging from a GED to a PhD. He said Kroger is now hiring for more than 20,000 positions in advance of the holiday season and will host a nationwide hiring event on Oct. 13 to recruit store, e-commerce, corporate, manufacturing, logistics and pharmacy staff.

McMullen said Kroger's customer fulfillment centers, built with e-commerce partner Ocado, will enable the grocer to serve new geographies.

• Kroger Zero Hunger | Zero Waste Marks Four-Year Anniversary. Kroger’s Zero Hunger | Zero Waste social and environmental impact plan is clearing obstacles to food access and capturing the full value of food produced across the U.S. supply chain, McMullen reported. Through the plan, Kroger aims to create communities free of hunger and waste by inspiring assistance from associates and customers, investing resources and activating partnerships. Over the past four years, Kroger has donated 1.8 billion meals to communities — including 641 million meals in 2020 — and provided $1.2 billion in charitable giving. The company also cut its retail food waste generated by 20%. In the interview, McMullen announced a special donation of 10 meals on behalf of every attendee at Groceryshop, totaling 25,000 meals, to Three Square, southern Nevada’s only food bank and the area’s largest hunger-relief organization.

• Kroger Looks Ahead to What's Next. Kroger remains focused on where its customers — and the overall food market — will be in 10 years. Through its brick-and-mortar and digital ecosystem, the company will expand its reach and enter additional new geographies by leveraging assets such as Kroger Delivery customer fulfillment centers, built through its multiyear partnership with Ocado. McMullen said the new Kroger Delivery operation in Florida has ramped up faster than expected, opening up more ways of executing and operating, leading to high customer repeat rates and Net Promoter Scores. He also predicted a sustained trend of consumers opting to cook at home versus dining out because it helps them stretch food dollars, eat healthier and prepare household favorites, as well as new recipes.

“Groceryshop is honored to have industry giants like Kroger join us for this year’s conference,” Gustafson commented. “The sector has evolved immensely in the past 18 months, and Rodney McMullen’s perspective emphasized just how much consumer behavior has changed and how retailers are responding and evolving to meet new expectations.”