Kroger Scores Points With Shell Partnership

CHRISTINA VEIDERS

CINCINNATI — Kroger’s partnership with Shell Oil Product U.S., Houston, which was announced today, is viewed by some observers as a competitive tiebreaker in the fuel rewards-grocery game.

Under the partnership, Kroger will extend redemption of its fuel discounts on Feb. 15 through participating Shell gas stations here and in Dayton, Knoxville, Nashville and San Diego.

Until now, redemption of fuel points was through Kroger Fuel Centers. The agreement is said to triple the number of locations where shoppers can redeem Kroger fuel points.

Chuck Cerankosky, an analyst with Northcoast Research, Cleveland, said Kroger is not only expanding the convenience of its popular fuel rewards program but also it is getting around not having fuel stations in the San Diego market.

“In dense markets like San Diego, it can be difficult to get a zoning variance or any kind of approval to put in a fuel station on your parking lot. This allows you to point consumers to a gasoline retailer to honor the food retailers’ gas rewards,” he said.

The drawback, Cerankosky pointed out, is Kroger may lose a second shopping trip because consumers can redeem points at a Shell station not located near a Kroger grocery store.

The announcement follows several years in which Kroger has been upgrading its fuel rewards program.

Shoppers in participating markets can use a Kroger Plus Card or Ralphs Reward Card to earn one fuel point for every dollar spent at participating Kroger stores. Fuel points also can be earned by purchasing prescriptions or with a purchase of $50 in gift cards from Kroger’s in-store Gift Card Malls; loyalty card holders receive 100 fuel points.

Shoppers can earn a minimum of 10 cents off a gallon of gasoline for every 100 fuel points. The offer is valid up to 35 gallons per fuel purchase.

Jim Hertel, managing partner at Willard Bishop, Barrington, Ill., called the Kroger-Shell partnership “a great move on Kroger’s behalf.”

“You are talking about two industries that are ubiquitous in terms of penetration and narrow profit margins; two commodities — fuel and food — that 100% of the population purchases. From the shoppers’ point of view, this makes sense,” said Hertel. Fuel is used as a loss leader to drive store traffic. Hertel said, especially these days, traffic is critical for supermarkets.

Approximately 40% of all U.S. households hold a loyalty cared from one of Kroger’s family of stores and more than 80% of Americans live within five miles of a Shell station, Kroger noted in a press release.

Plans for future rollouts of the program will be determined following the launch of the five markets, Kroger said.

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