Stock Price 12/3/10 and performance

Closing price for 12/3/10 was $21.11, down $1.95 from 11/26/10.

Stock price on September 3, 2010 was $20.69.  If  I invested $1,000 that day, I could have bought 48.3325 shares.  Today my shares would be worth $1,020.29.

I would have made $20.29.  While $20 is a half a tank of gas in my vehicle, it would still not be a stock I would have invested in.

Final Post

Kroger actually released its third quarter results today (12/2/10).  Investors were hoping for better news after heightened expectations helped push Kroger stock to a 52-week high Wednesday of $24.14. On Thursday, its shares fell $2.23, or 9 percent, to close at $21.63. They have traded as low as $19.08 the past year.
http://finance.yahoo.com/news/Grocer-Kroger-rings-up-3Q-apf-2055133968.html?x=0&.v=9
I am not sure I would invest in Kroger stock.  It seems to have been fairly consistent over the past year (trading within a $5 range), but I would probably invest somewhere else.

Although Kroger seems to have a good organizational culture in place I don't think I would want to work there.  Maybe its just me, but at places like Kroger and Wal-Mart it seems that people never stay at the same store for very long.  At our Kroger in Madisonville it seems like manager changes frequently (there is a picture of the current manager by the door).  For advancement in this type of company the employee would probably have to be willing to relocate.

I am a customer of Kroger, a frequent one.  Although sometimes you can find really good deals and lower prices at Kroger, on average Wal-Mart's prices will be a little lower (especially on non-food items).  The Kroger in Madisonville is about 1 1/2 miles from my house while Wal-Mart is about 4 miles.  Even though its just a few minutes extra to get to Wal-Mart than Kroger, I would much rather pay a few cents more and and go to Kroger and not have to hassle with Wal-Mart.  Kroger is where I do my main grocery shopping and I usually just go to Wal-Mart when I need household items.  Although there are some Kroger's that are big in size, they do not compare to Wal-Mart.  I don't want to have to deal with the people and lines at Wal-Mart for a gallon of milk when I can get in and out of Kroger in allot faster time.

Lessons from Kroger

One of the most interesting things I learned about Kroger this semester was how diversified they were.  Before, when I thought of Kroger, I thought of just supermarket.  I had no idea that it was involved in as many different businesses as it is.  There are 16 supermarket brands under the company, the multi-department store Fred Meyer, several convenience stores, and 4 jewelry store brands.  It also offers financial and medical services.  Kroger is becoming a one stop shop for customers.  Kroger has a very strong organizational culture and is very involved in local communities.  Kroger competes with Wal-Mart for customers.  However Kroger is not about having the lowest price.  Kroger's strategy is to provide shoppers with a better overall shopping experience.  Sometimes Kroger will have a lower price and sometimes it won't.  But Kroger counts on its focus on customers as being the main factor that keeps its customers returning.  Kroger is more concerned with focusing on its loyal existing customers than dropping prices significantly to attract new customers.  The loyal customer is Kroger's main target group.

The Little Clinic

I was in the Madisonville Wal-Mart Friday and noticed that there is now a clinic inside the store.  It got me to wondering if Kroger also offered medical services in its stores.  There is not a clinic in the Madisonville Kroger but there are some clinics in stores in other parts of Kentucky as well as Arizona, Colorado, Ohio, and Tennessee.

The Little Clinic offers medical care on your schedule, in your neighborhood –– right where you grocery shop. Clinics are staffed by Board Certified Nurse Practitioners (BCNPs) and Physician Assistants (PAs) that treat common illnesses and minor injuries. They also provide wellness care; like routine check-ups, screenings and vaccinations. Plus, they can prescribe medication when you need it.

No appointment is necessary, the clinic is open 7 days a week (including weeknights), and accepts most insurance plans.

http://www.thelittleclinic.com/default.asp?store=Kroger

Kroger Helping Fight Hunger During the Holidays

Kroger has focused on feeding the hungry for decades. From the Great Depression to the Great Recession, Kroger has partnered with local food banks, Feeding America and other organizations to fight hunger in local communities.  Now customers who shop at any of Kroger's family of stores can help, too, by taking advantage of simple donation opportunities while they shop.

--Making a financial donation to a local food bank is as easy as scanning a pre-marked tag or asking the cashier to 'round up' a grocery order.  Customers can take advantage of this option in all Kroger, City Market, Dillons, Fry's, Jay C, King Soopers, QFC, Ralphs and Smith's stores.


--Pre-filled bags of nutritious food can be purchased and added to collection barrels at Kroger stores in Alabama, Georgia, Illinois, Indiana, Kentucky, Louisiana, North Carolina, South Carolina, Tennessee and Texas and QFC stores in Washington and Oregon.  


--Specially-marked coin boxes will collect spare change at check stands at Kroger stores in Kentucky, Michigan, Ohio, Tennessee and Texas, and in all City Market, Dillons, Fred Meyer, Food 4 Less, Fry's, Jay C, King Soopers, QFC, Ralphs and Smith's stores.


--A number of stores across the country will host major food drives on site, partnering with local media outlets to raise awareness and much-needed food for local hunger agencies.

In 2009, Kroger stores and customers partnered to provide nearly 16 million meals to local families during the holidays.  Kroger donated 50 million pounds of food valued at more than $75 million in 2009, which translates into roughly 42 million meals for hungry families.

Through special partnerships with key vendors, Kroger directs even more funding to food banks in communities where its customers and associates live and work.  Bringing Hope to the Table, Kroger's annual cause-marketing campaign, raises $3 million in financial support and food valued at $1 million to assist more than 80 food banks that are members of Feeding America, the nation's largest domestic hunger relief organization.

In addition, Kroger's industry-leading food rescue program – the Perishable Donations Partnership (PDP) – continues to grow and direct more fresh meat, produce, dairy and bakery items that can no longer be sold in retail stores to food banks that are equipped to handle it.  Through the PDP, Kroger donated more than 36 million pounds of fresh food in 2009, the equivalent of 30 million meals, and the company is on target to exceed that level in 2010.

http://finance.yahoo.com/news/Kroger-Fights-Hunger-During-prnews-2604181917.html?x=0&.v=2

Kroger Continues Partnership with Salvation Army

The Salvation Army's iconic Red Kettles will once again ring in the season at The Kroger Co.'s family of stores. Customers and associates generously support the campaign each year, helping provide food, clothing, toys and social services in the communities where funds are raised.

In 2009, Kroger customers and associates contributed $11.3 million to the campaign, which represents 8% of the record $139 million raised nationwide. All funds collected are used locally in the community where the donations are raised. The Red Kettle campaign enables The Salvation Army to assist 30 million Americans in over 5,000 communities across the country.

Lynn Marmer, group vice president of Corporate Affairs for Kroger, was quoted as saying "The annual Red Kettle campaign lets our customers and associates make a real difference in the lives of their neighbors in need, one small donation at a time.  We value our long-standing partnership with The Salvation Army and the impact the campaign makes in the communities we serve."

http://finance.yahoo.com/news/Kroger-Family-of-Stores-prnews-251488587.html?x=0&.v=1

Stock Price 11/26/10

Closing price for 11/26/10 was $23.07 up $.24 from 11/19/10.

Kroger offers fully prepared Thanksgiving meal

I was searching on the Kroger website for the weekly ad in the Madisonville area and noticed that Kroger is offering a fully prepared Thanksgiving meal.  The meal is heat and serve and takes approximately 2 1/2 to 3 hours to prepare.  It serves 8-10 people and includes: Whole Turkey; (1) 1 lb Cranberry Relish; (1) 2 lb Turkey Dressing; (1) 48 oz Mashed Potatoes; (1) 1 lb Giblet Gravy; (1) 12 ct Dinner Rolls; (1) Pumpkin Pie, 8 Inch.  All of this can be had for $39.99.  I don't cook but this seems like a good deal to me.

http://louisville.inserts2online.com/customer_Frame.jsp?divID=024&drpStoreID=00563

Stock Price 11/19/10

Closing price for 11/19/10 was $22.83 down $.16 from 11/12/10.

Flying Fruit Lid

The things people sue over....this is an article about a man who filed a lawsuit against Kroger and Del Monte Foods over a jar lid that exploded off a jar and hit him in the face.  Kroger and Del Monte offered a $150,000 settlement, but the plaintiff refused the offer.  Did I mention that the reason the lid exploded off was because he tried to open the jar by hitting it with the handle of a screwdriver??!!??

A grocer and a fruit company have offered a $150,000 settlement to a man who says he was knocked unconscious when a lid exploded off a jar of fruit and hit him in the face.  Del Monte Foods of San Francisco and Cincinnati-based Kroger Co. insist there's no credible evidence the jar was unsafe. They made the offer Tuesday after a judge refused to dismiss the lawsuit by Darryl Alexander of Southfield, Mich.  Alexander's lawyer, Mark Miller, says the offer is too low because Alexander has permanent eye damage.  Alexander says the stubborn lid flew through the air and struck him in the eye after he hit it with the handle of a screwdriver in April 2008. He said he first placed the jar of Orchard Select mixed fruit under warm water.

http://finance.yahoo.com/news/Flying-fruit-lid-sparks-150K-apf-3459307520.html?x=0&.v=3

Kroger and 2010 Daytona 500

This article is several months old but it talks about how Kroger advertised itself during the 2010 Daytona 500.  Sponsorship on NASCAR race cars is very expensive, but Kroger was able to get their name on three cars for free. Cincinnati-based Kroger took the full paint scheme on Marcos Ambrose's No. 47 Toyota, and the rear panel on Kyle Busch's No. 18 Toyota and Clint Bowyer's No. 33 Chevrolet. The placements were the result of a trade-out between Kroger and the regular sponsors on those cars.  Ambrose is sponsored by a collection of consumer-packaged goods, including Kimberly-Clark (Kleenex), Kingsford and Little Debbie. Busch is supported by Mars, and Bowyer by General Mills.  In exchange for the regular sponsors giving advertising space on the cars to Kroger, those sponsors use the trade-out to drive additional displays in Kroger's nearly 2,500 stores.

Kroger also locked down an extension on its deal with Daytona International Speedway through the 2014 Daytona 500. Kroger is recognized as Daytona's retail licensing partner.  Kroger came on board in 2007 and ran the largest retail promotion in NASCAR history leading up to the 50th running of the 500 in 2008. More than 50 brands participated with special Daytona 500 packaging.  From April 2009 through this year's race February 2010, 55 brands across 23 companies had used the special 500 packaging and discounts.

http://www.nascar.com/2010/news/business/02/25/kroger.budweiser.daytona.500/index.html

Glass fragments in frozen vegetables

A voluntary recall has been issued for certain frozen vegetable manufactured by Pictsweet Company out of Tennessee.  Pictsweet manufactures store branded frozen vegetables for both Kroger and Wal-Mart.  Kroger branded peas and carrots and Wal-Mart Great Value branded peas and mixed vegetable have recently been identified as having glass fragments in them. 

http://www.usaliveheadlines.com/1043/glass-fragments-spark-frozen-vegetable-recall-at-walmart-kroger.htm

Fuel discounts on gift card purchases

Kroger's Delta Division, based in Memphis, TN currently operates 111 stores and 60 fuel centers in five states under the Kroger banner in Memphis and West Tennessee, Arkansas, Mississippi, Southern Missouri, and Southwest Kentucky.  The division is offering a holiday promotion where beginning Nov. 21 and continuing through Dec. 11, 2010, Kroger will offer customers fuel savings of 40¢ off per gallon (123 REWARDS MasterCard Customers receive 45¢ off per gallon) for every $100 in gift cards purchased.  Customers can even mix and match gift cards to reach the $100 threshold.  Even if you did not want to give a gift card as a present, you could buy the gift cards and then use the gift cards to purchase the gift allowing yourself to save on fuel.

http://www.katv.com/Global/story.asp?S=13504277

Stock Price 11/12/10

Closing price for 11/12/10 was $22.99 down $.12 from 11/5/10.

Undercover Boss

Kroger Co CEO David Dillon frequently joins shoppers at Kroger stores in an effort to see one of his stores through the eyes of a customer and to help identify why the shopper makes the choices he/she does.  Dillon tells Wall Street analysts that the nation's largest traditional grocery chain has sophisticated consumer data none of its competitors can match. But he still frequently does shopalongs, visits consumers in their homes and peeks into their cupboards, shops stores alone and incognito, and drops in on employees unannounced.  Such up-close-and-personal study of consumers, employees, and stores has been part of the management style of an executive whose grocery experience goes back four decades to his family's Dillon's grocery chain.  By being in the stores, by doing the shopalongs, Dillon personally commits himself to making Kroger a better company on Main Street, which makes it a better company on Wall Street.  Shoppers are urged to be critical. They usually aren't aware that Dillon is a Kroger employee, thinking he is a market researcher and making it more likely they will speak bluntly.  Their feedback, combined with data, has led to changes in staffing, training and technology to create faster checkout lines, more-helpful employees, and cleaner stores with better presentation.

http://news.yahoo.com/s/ap/20101110/ap_on_bi_ge/us_ceo_goes_shopping

Gas Perks in Indiana

In an attempt to lure more shoppers to its stores in Indiana, Kroger Co. is offering price breaks on gasoline to their loyal customers.  Kroger launched a rewards program that lets shoppers who load up on groceries earn up to $35 a month in free gas at Kroger fuel centers.  The revised program, which applies to all Indiana stores in Kroger's Central Division, is in 10-cent increments.  For each dollar spent inside Kroger, customers receive one point.  Customers who earn 300 points would get 30 cents off per gallon, those who earn 500 points, 50 cents off -- and so on.  Earn 1,000 points in a month and get $1 off per gallon, up to 35 gallons.

Kroger is hoping the program will not only help it stand out in one of the most saturated grocery markets in the nation, but also will break through the crowded field of gasoline savings programs.  Kroger acknowledges that the program will cause it to lose money on gasoline but is hoping it will more than make it up in increased grocery sales.  This program could provide Kroger a differentiated strategic advantage over other grocers.

http://www.indystar.com/article/20101104/BUSINESS04/11040411/Kroger-pumps-up-gas-perks

Overcharging Scandal in Los Angeles

Ralph's is a supermarket that is under the Kroger Co banner.  In May 2010 in Los Angeles criminal charges were filed against Ralphs and parent company the Kroger Co accusing them of overcharging for goods.  The city attorney filed 14 counts of false and misleading advertising along with other charges, including false labeling and unlawful computation of value. Both Ralphs and the Kroger Co faced fines and penalties of up to $256,000.  Undercover inspections visited 14 Ralphs stores across Los Angeles between January and March and found customers were being gouged for prepackaged and weighed products including fried chicken and salad.  Inspectors from the county's Department of Weights and Measures discovered 27 violations. Most of the violations involved the store illegally charging for the weight of the package, or including the ice glaze on frozen products in the net weight, authorities said. Some prepackaged items also were found to be under the weight on the label.

I have not been able to find out if the companies were found to be at fault.

http://www.meattradenewsdaily.co.uk/news/210510/usa___supermarket_over_charging_scandal_.aspx

Stock Price 11/5/10

Closing price for 11/5/10 was $23.11 up $1.11 from 10/29/10.

Supplier Diversity Part 2

Dr. Busija has asked about the ratio of Kroger's diversity vendors versus the overall total vendors.  While I have not been able to find a exact number of total vendors I have found that they are in the multiple thousands.  Of these, Kroger has utilized the services of 1,024 women and minority owned businesses.  Below is an except from Kroger's sustainability report (page 26).

"In each year from 2006–2009, Kroger spent more than $1 billion with minority and women-owned business enterprises (MBEs and WBEs). As a result, Kroger is a member of the Billion Dollar Roundtable, a prestigious forum of 17 corporations that have achieved $1 billion or more in annual spending with M/WBEs. We achieved this goal by partnering with more than 1,024 M/WBE companies."

http://www.thekrogerco.com/documents/KrogerSustainReport2010.pdf

Electronic Data Interchange

I found something interesting tonight regarding how Kroger deals with its vendors in its supply chain activities.  Kroger uses Electronic Data Interchange, or EDI, as an integral business strategy to increase customer satisfaction. Several years ago, Kroger began trading EDI documents and saw first hand how doing so takes cost out of the supply chain. Kroger wants to pass this cost savings onto customers and drive sales, mutually beneficial for both Kroger and its vendors.  Kroger requires vendors to accept purchase orders and submit invoices via EDI. 

Vendors who do not submit an EDI Partner Set-Up Form prior to doing business with a Kroger division will receive a formal notice from that Kroger division with a given time frame to establish an EDI connection. Vendor compliance to EDI requirements must be met before the end of the specified time. Should the vendor not send or receive documents electronically after the compliance deadline, a $150.00 assessment will be applied against all future payments until EDI compliance is met to help offset the cost of manual processes.

http://edi.kroger.com/faq_001.htm

Retail Division Buying Decisions

Kroger has established a corporate-wide focus on operations, merchandising, and support systems.  This structure enhances Kroger's ability to achieve synergies from economies of scale throughout the company.  Kroger has 17 retail divisions, which are organized on a geographic basis. Kroger's Merchandising Group ("KMG") in Cincinnati directs and coordinates most of the company's retail buying process by bringing together top merchants in almost every major category to develop strategies and direct merchandise selection.  While most of the Company's merchandise selections are driven by KMG teams, local retail divisions round out their merchandise by directly buying items that reflect local preferences. This allows Kroger retail divisions to tailor their stores' offerings to meet local market demographics and regional preferences. These items are purchased by division buyers from suppliers that can offer quality and outstanding service at a competitive price.  The organizational structure of Kroger supports the local divisional merchandising and operating strategies that are targeted to customers in each local market. Kroger's retail divisions implement merchandising, pricing and operations that address local market conditions.

http://www.thekrogerco.com/supplier/supplierdiversity_doingbusiness.htm

Stock Price 10/29/10

Closing price for 10/29/10 was $22.00 up $.20 from 10/22/10.

Supplier Diversity

Diversity is one of the core values for Kroger.  This value stands for "reflecting a workplace that includes a variety of people from different backgrounds and cultures, diversity of opinions and thoughts.  Supplier diversity is important to Kroger's strategy.  The goal is for the suppliers and products to reflect the diversity of Kroger's customers and to foster the use, growth, and development of minority owned and women owned businesses.  Kroger's supplier diversity program is more than 25 years old.   Kroger works with hundreds of minority owned and women owned businesses.  Attached is Kroger's supplier diversity statement.

http://www.thekrogerco.com/supplier/documents/supplier_diversity.pdf

Sustainability

Kroger is making many efforts to improve its impact on the environment.  Kroger released its 2010 Sustainability report in June.  According to Kroger CEO David Dillon “our approach to sustainability is a commitment to continuously improve our environmental and social impacts in order to better our communities and the lives of our customers and associates, and ensure the long-term success of our business”.

The sustainability report is 32 pages long but it focuses on four core priorities:

• Reducing Kroger’s carbon footprint, especially by decreasing energy usage

• Eliminating and recycling waste including reducing plastic bag use

• Lowering the impact of Kroger’s transportation operations

• Enabling Customers to make sustainable choices

The following is an excerpt from David Dillon’s letter in the report:

“Kroger has achieved outstanding results in lowering energy consumption in our stores, plants and other facilities. Since 2000, Kroger has reduced overall energy consumption in our stores by more than 27%. That is enough electricity to power every single family home in Memphis, Tennessee, for one year. Our goal for 2010 is to reduce our stores energy use by 30% from our baseline year of 2000.”

“Reducing plastic bag use and eliminating and recycling waste is top of mind with our
Customers and Kroger.  In 2009, we set a goal of saving 1 billion plastic bags. Our efforts to achieve this goal include engaging our associates in a campaign called: Less Plastic—Fantastic. This program trains our store associates to avoid plastic bags for items that the customer can carry home “as is,” and to “fill up the bag” when a Customer requests store-provided bags.  Our results to date have been excellent, saving more than 200 million plastic bags in 2009. In 2009, Customers continued to do their part by purchasing and using reusable bags. Each of these colorful bags has the potential to replace 1,000 plastic bags in its lifetime. Kroger sold and provided nearly 7 million reusable bags in 2009—potentially replacing about 7 billion plastic bags.”

“Kroger’s trucks travel millions of miles each year to deliver fresh, wholesome food to our stores. Our focus on increasing the efficiency of our fleet takes many forms. In 2009, Kroger’s transportation efficiency (cases shipped per gallon) improved by 7%.”

“Sustainability is an integral part of Kroger’s business and is embedded in our core values and mission.”

http://www.thekrogerco.com/documents/KrogerSustainReport2010.pdf

Stock Price 10/22/10

Closing price for 10/22/10 was $21.80, down $0.21 from 10/15/10.

Kroger Marketplace

I am in Lexington this week for business and and noticed something I had not seen before regarding Kroger.  Right up the street from the hotel is a Kroger Marketplace.  The Kroger Marketplace in Lexington at Beaumont Centre contains products such as jewelry, furniture, and toys in an attempt to lure customers from rivals Wal-Mart and Meijer.  The store has thousands of items that are not available at your typical Kroger store.  The Kroger Marketplace stores will not compete directly with Wal-Mart because they are slightly smaller in size (average Kroger Marketplace store size is 125,000 square feet and Wal-Mart Supercenters average 185,000 square feet) and Kroger Marketplace does not sell  clothing.  Kroger Marketplace more directly competes with Meijer. 

Kroger began exploring the Marketplace concept in 1999 after merging with Fred Meyer.  Kroger has focused on establishing the Marketplace stores in their core markets.  There are about 50 Marketplace stores nationwide.
http://www.kentucky.com/2009/04/23/770354/new-kroger-aims-for-meijer-wal.html

Charitable Giving

Kroger is very active in charitable giving.  There are four causes that Kroger donates funds for:

Neighbor to Neighbor - Kroger donated more than $167 million to local communities and non profit organizations in 2009.  More than 30,000 local schools, hunger relief agencies, youth programs and nonprofit organizations in communities where Kroger operates stores or manufacturing facilities received support from the Company.

Giving Hope A Hand - Kroger will be contributing $3 million for breast cancer awareness, treatment, and research in local communities where Kroger’s customers and employees live and work.

Salvation Army - Kroger’s red kettle campaign raised $11.3 million for the Salvation Army during the 2009 holiday season.  Every dollar donated stayed in the local community where it was raised.  In addition to the donations, Kroger participated in events like organizing toy drive and providing holiday meals for those less fortunate.

Bringing Hope To The Table - Kroger is donating $3 million in funds and $1 million in product to help feed those struggling with hunger through this cause-marketing partnership with Feeding America.  Kroger is one of the founding members of Feeding America.  Kroger executives and senior management serve on the boards of local food banks and the Feeding America national organization.  Store associates volunteer to sort donations, stock food bank shelves, and pack care boxes.

http://www.kroger.com/company_information/community/Pages/default.aspx

Pet Insurance

I was unaware that Kroger offered pet insurance.  Kroger offers this service through its Kroger personal finance division.  With the pet insurance plan, you have the freedom to use any veterinarian nationwide — including emergency care clinics, specialists and holistic care providers.  Whenever your dog or cat needs to visit the veterinarian, simply take a claim form with you and pay your vet at checkout like normal. You'll then file the claim, and you'll be reimbursed for 90% of your expenses after a per incident deductible.

There are three options of coverage: accident, accident & illness, and comprehensive.

Accident Coverage

The Accident plan protects your pet and your wallet from the expense of unexpected injuries. This plan offers $1,000 of pet insurance coverage for accidents including bites, cuts, broken bones and swallowing objects.

Accident coverage starts at less than $10 per month for your dog or cat.

Accident & Illness Coverage

The Value plan provides coverage for unexpected accidents and illnesses protecting your pet from everyday hazards and hiccups. This plan provides $1,000 of accident and $1,000 of illness coverage with a total benefit allowance of $2,000. The Value plan covers everything covered by the Accident plan and also offers coverage for illnesses including cancer, infections, allergies, arthritis and more.

Accident and illness coverage starts at less than $17 per month for your dog and less than $12 per month for your cat.

Comprehensive Coverage

The Basic and Preferred plans offer coverage for routine care as well as unexpected accidents and illnesses. The Basic plan provides $7,500 of annual coverage, and the Preferred plan provides $12,000 of annual coverage. These comprehensive plans cover everything covered by the accident and illness coverage and also offer coverage for routine care expenses including annual exams, prescription flea control, vaccinations and more.

Comprehensive coverage starts at less than $39 per month for your dog and less than $29 per month for your cat.

http://www.krogerpersonalfinance.com/pet-insurance-rates/

Kroger 1-2-3 Mastercard

Kroger offers financial products and services through its personal finance division.  Most all of us are familiar with the Kroger 1-2-3 Rewards Mastercard that Kroger offers.  Many times when your receipt is printed there is an invitation to apply for a Mastercard from Kroger which lets you earn purchase rewards.  These rewards are in tiers: 1 point for every dollar spent outside Kroger family of stores, 2 points for every dollar you spend inside Kroger family of stores, and 3 points for every dollar you spend on Kroger family branded products.  As you can see the aim of this promotion is offer better rewards for dollars spent inside Kroger family stores and once inside purchase Kroger family branded products.

Every 1,000 points equals $5.00 in free groceries.

http://www.krogerpersonalfinance.com/credit-cards/

Kroger Operations

Kroger does not have any operations outside the United Sates.  As of August 4, 2010 Kroger has:

2,468 grocery retail stores in 31 states
784 convenience stores in 18 states
372 fine jewelry stores
40 food processing of manufacturing facilities
932 fuel centers
1,968 pharmacies

The fuel centers and pharmacies are services that add to Kroger's one stop shopping strategy.

http://www.thekrogerco.com/operations/operations.htm

Stock Price 10/15/10

Closing price for 10/15/10 was $22.01, up $0.72 from 10/8/10. 

Mergers

Kroger's last big merger was in 1999 when it merged with Fred Meyer Inc.  Acquisitions have played a key role in Kroger’s growth over the years. In 1983, 100 years after the company’s founding, Kroger merged with Dillon Companies Inc. in Kansas to become a coast-to-coast operator of food, drug and convenience stores. The biggest merger in Kroger’s history came in 1999, when the company teamed up with Fred Meyer, Inc. in a $13 billion deal that created a supermarket chain with the broadest geographic coverage and widest variety of formats in the food retailing industry. The merger also enabled Kroger to generate huge economies of scale in purchasing, manufacturing, information systems and logistics. In an era when many larger mergers failed, the success of the Kroger-Fred Meyer merger stands out.

http://www.thekrogerco.com/corpnews/corpnewsinfo_history.htm

Fred Meyer's buying relationships capabilities allowed Kroger to try some products that were too expensive for Kroger to buy and sell on its own.  Fred Meyers supplier relations and manufacturing systems have provided Kroger with an advantage of being able to offer more products and a better price than before the merger.  Industry authorities believed that Kroger's merger with Fred Meyer was a necessity to compete against Wal-Mart, Meijer, and the Costco wholesale buying club.

The most significant benefits of Kroger's merger with Fred Meyer won't be visible to the average shopper. The changes involved cost savings that made Kroger leaner and a more efficient profit generator on Wall Street.  Half of the cost savings came from purchasing power - a $43 billion company can make larger orders at better prices than a $28 billion company.

http://www.enquirer.com/editions/1999/12/05/fin_new_stuff_at_kroger.html

Kroger sees human resources as key

Katy Barclay, senior vice president of Kroger Co., explained how investing in employee engagement has contributed to Kroger's success — including driving sales and profits, customer loyalty and productivity. “We truly believe that Kroger's continued success in driving its competitive advantage will in large part be determined by how our associates engage with our customers,” Barclay said. “That's our sweet spot. That's what creates a superior shopping experience.”  Employees are one of the key areas of Kroger's Customer 1st strategy.  Central to the effort to improve employee engagement is acknowledging, reinforcing, and rewarding positive interactions between store employees and shoppers.  This is accomplished through training that involves all associates and leaders at the company.

http://supermarketnews.com/retail_financial/kroger_sees_hr_1004/

Stock Price 10/8/10

Closing price for 10/8/10 was $21.29, down $0.43 from 10/1/10.  

Vertical Integration/Outsourcing

Kroger uses both vertical integration and outsourcing.  Approximately 39% of the corporate brands sold are produced in Kroger's manufacturing facilities.  The remainder of corporate brands is outsourced to other manufacturers.  Kroger performs a make or buy analysis based on a comparison of market based transfer prices adjusted for plant profit versus open market purchases.  All corporate brands, whether manufactured or purchased, are held to the same high standards.  The consistent focus on quality provides the foundation of Kroger's corporate brands program.
http://www.thekrogerco.com/operations/operations_manufacturing.htm

Kroger operates dairy, bakery, meat, and grocery manufacturing facilities.  The following link shows a map of where all of Kroger's manufacturing facilities are located.  There are three manufacturing facilities in Kentucky.  There is a grocery manufacturing facility in Murray, a dairy manufacturing facility in Winchester and a bakery manufacturing facility in Bowling Green.
http://www.thekrogerco.com/operations/operations_manufacturing_map.htm

Kroger Manufacturing Vision:
We will be the first choice for high-quality products of exceptional value in every market we serve.

Kroger Manufacturing Mission:
Kroger Manufacturing will achieve its vision and become the employer-of-choice by valuing people and by professionally managing our business to provide:
-An injury free workplace 
-Uncompromising quality 
-Exceptional value 
-Outstanding reliability and productivity 
-Exceptional customer service 
-Innovation and reapplication 
-Investment in people 
-Diversity 
-Community involvement
http://www.thekrogerco.com/operations/operations_manufacturing_vision.htm#

Best Cost Provider Strategy

Of the five generic competitive strategies, I feel that Kroger is using the best cost provider strategy.  This strategy aims at giving customers more value for the money.  As stated in the textbook, the key is to deliver superior value to buyers by satisfying their expectations on key qualities/features/performance/service attributes and beating customers expectations on price.  Kroger achieves best cost status from its ability to incorporate attractive or upscale attributes at a lower cost than their rivals, such as Wal-Mart.  Customers of Kroger know that the prices at Kroger might not be as low as Wal-Mart, but Kroger believes that it offers customers a better value for their money by providing a better shopping experience and a better selection of grocery items.  Kroger's Customer 1st strategy reflects this best cost provider strategy.  The strategy focuses on four keys areas of Kroger: employees, prices, products and services, and the overall shopping experience.  Kroger believes that focusing on these four areas will keep its customers returning.

Kroger and dunnhumby

Since 2003, Kroger has been partnering with London-based dunnhumby Limited to gain a better understanding of the company’s customers and identify opportunities to enhance their shopping experience in its stores. dunnhumby is the United Kingdom’s leader in the fields of data management, customer analysis and insight-led planning.

“The most successful loyalty programs work because they are able to take information and turn it into actions that provide customers with recognizable benefits,” said Edwina Dunn, dunnhumby chief executive officer. “Those benefits strengthen the customer’s bond with the company, because the customer can see that the company cares about them and their business. Our partnership with Kroger underscores their commitment to understanding their customers. Kroger recognizes that over the long term, retaining valuable customers is crucial to maintaining growth and staying competitive. We are delighted that Kroger has selected dunnhumby to help achieve these goals.”

http://www.thekrogerco.com/corpnews/corpnewsinfo_pressreleases_05122003.htm

With the help of dunnhumby Kroger has been able to make better informed merchandising and marketing decisions.  It is thanks to the data gathered and analyzed by dunnhumby that we get the specific targeted coupons we receive from Kroger. 

The following link contains a video of the process dunnhumby uses to collect data from the point at which you scan your Kroger Plus shopping card.

http://www.dunnhumby.com/us/about-us-what-we-do

Kroger Facebook

Here is the link to Kroger's Facebook page http://www.facebook.com/Kroger#!/Kroger?v=wall.

Kroger is recognizing breast cancer awareness in the month of October.  Kroger is hanging special banners and lighting its Cincinnati headquarters pink.  Also, the current promotion on their Facebook page is for every fan that "likes" sharingcourage.com http://www.facebook.com/SharingCourage Yoplait and Kroger will donate $1 to the Susan G Komen for the cure up to $150,000. 

Picture of pink headquarters: http://www.facebook.com/photo.php?pid=5085459&fbid=431969783217&id=60686173217

Stock Price 10/1/10

Closing price for 10/1/10 was $21.72, down $0.37 from 9/24/10.  

SWOT Analysis

Strengths:
Sturdy Market Position
Three Tier Branding Approach
Proficient Manufacturing Operations
Diversified Market Position

Weaknesses:
Vendor Quality Control
Unionized Workforce
Legal Issues (regarding acquisitions)

Opportunities:
Increased Emphasis on Private Label Brands
Strategic Expansion Plans
In-Store Health Clinic Programs

Threats:
Increasing Labor Costs
High Debt Burden
Slumping Economic Projections

http://www.marketingteacher.com/swot/kroger-swot.html

Kroger Second Quarter Earnings Transcript and Customer 1st Strategy

For those that are interested (if any..ha) here is a link to the transcript of Kroger's 9/14/10 second quarter earnings report.  In the transcript, CED David Dillon says "The competitive environment remains challenging. During the quarter, we saw significant and aggressive promotional pricing at several competitors. Our customers tell us that while price is important, it is not the only factor that influences their shopping decisions. The customer experience matters and that’s why Kroger's strategy incorporates all elements that are important to our customers".  Kroger calls their strategy that on focuses on customers their "Customer 1st Strategy"  This strategy is desgined to reward loyal customers and is based on listening to what customers and associates say is important to them and acting on their feedback. This strategy focuses on four keys areas of Kroger: employees, prices, products and services, and the overall shopping experience.  I believe that this focus on the customer helped Kroger to beat analysts projections for the second quarter.  While Kroger could have gained more one time customers by slashing prices on certain products they feel their strategy of focusing on the repeat customer would be more advantageous and profitable.  I tend to agree with their strategy.

http://seekingalpha.com/article/225174-kroger-ceo-discusses-q2-2010-results-earnings-call-transcript

Stock Price 9/24/10

Closing price for 9/24/10 was $22.09, up $0.30 from 9/17/10.

Quarterly Dividends Increased by 10.5%

The Kroger Co. announced on 9/16/10 that its Board of Directors increased the amount of its quarterly dividend to 10.5¢ per share from 9.5¢ per share. This 10.5% increase is the fourth time the Board has raised the quarterly dividend since it initiated the program in 2006.  According to David Dillon, chairman and chief executive officer of Kroger, “We are creating value for our shareholders by reducing debt and returning value to them through dividends and share repurchases. We believe Kroger is in a strong position to continue to deliver shareholder value now and in the future and we appreciate the continued trust and support of our shareholders."
http://www.thekrogerco.com/corpnews/corpnewsinfo_pressreleases_09162010.htm

Loyal Households

Kroger's second quarter results beat industry analysts estimated earnings.  Kroger attributes this success to its loyal customers.  Kroger focused on service to keep its existing customers as opposed to slashing prices to attract new customers.  Cherry pickers, as they are known, shop various different stores looking solely for the lowest price.  Kroger calculates "loyal households" based on the total purchase size and how often they shop at its stores.  According to Kroger, the number of loyal households rose during the second quarter.  As a way to increase service to these customers Kroger targeted coupons to frequent customers and made efforts to increase its customer service.  I can attest to the increased distribution of the coupons.  I received in the mail last month a coupon book from Kroger.  These coupons targeted the items that I frequently purchase.  In addition to the normal $.50 to $2.00 off coupons this booklet also included coupons for free products such as free pizza, free sandwich meat, free cookies, and free potato chips.  When I went grocery shopping this week the free coupons added up to almost $10.00 worth of items.  That was reason enough for me to make a trip to the store before the coupons expired.  Of course I bought more than just the free items but that strategy was a way to get previous customers back in the store.

http://www.reuters.com/article/idUSTRE68D2OA20100914

Second quarter results

Kroger reported its second quarter (which ended August 14th) results on September 14th. Here is an excerpt from The Kroger Company website.  The full press announcement is included in the link at the end of this post.  Also included in the link are financial statements for the second quarter.

"The Kroger Co. (NYSE: KR) today reported total sales, which include fuel, increased 6.0% to $18.8 billion in the second quarter of fiscal 2010 compared with $17.7 billion for the same period last year. Excluding fuel sales, total sales increased 3.3% in the second quarter, which ended August 14, 2010, over the same period last year. Identical supermarket sales, without fuel, increased 2.7% in the second quarter over the same period last year.  Net earnings for the second quarter totaled $261.6 million, or $0.41 per diluted share. Net earnings in the same period last year were $254.4 million, or $0.39 per diluted share."

“Kroger’s sales have remained solid in the face of competitive and economic challenges because of the strong credibility we have with our shoppers. Our team understands the importance of finding ways to make each customer visit better than the last one, resulting in consistent positive identical supermarket sales growth,” said David B. Dillon, Kroger’s chairman and chief executive officer. “We continue to build momentum through our Customer 1st strategy, which serves Kroger customers, associates, shareholders and communities well in a variety of operating environments.”

Note: as a definition, Kroger considers an "identical supermarket" as those stores that are open without expansion or relocation for five full quarters.

http://www.thekrogerco.com/corpnews/corpnewsinfo_pressreleases_09142010.htm

Stock Price 9/17/10

Closing price for 9/17/10 was $21.79, up $0.54 from 9/10/10.

Corporate Brands

Corporate brand products play a central role in Kroger's merchandising strategy and provide a key competitive advantage to Kroger. Kroger uses its corporate brands to build and solidify customer loyalty.  Kroger supermarkets, on average, stock approximately 11,000 private label items.  Kroger brand products are produced and sold in three quality tiers. This strategy fills the needs of all customers in the various markets in which Kroger operates. All tiers are value priced to offer shoppers big savings over other premium, national and economy brand items.

Private Selection is Kroger's premium quality brand is designed to meet or beat "gourmet" or "upscale" national or regional brands.
Banner brands (such as Kroger, Ralphs, King Soopers), which represent the majority of the 11,000 items stocked in stores, are designed to be equal to or better than the national brand. These brands are backed by a "Try It, Like It, or Get the National Brand Free" guarantee.
Value brand is designed to deliver good quality at a very affordable price.

Kroger’s three-tier corporate brands strategy generates enhanced profit margins and its “good, better, best” approach enables Kroger to serve a very broad and diverse customer base.  Approximately 39% of the corporate brand units sold are produced in Kroger's 40 manufacturing plants; the remaining corporate brand items are produced to Kroger's strict specifications by outside manufacturers.

http://www.thekrogerco.com/operations/operations_manufacturing.htm

Recession Hits Kroger

People's spending habits change during recessions.  The grocery industry has been called "recession proof" because during tough economic times people eat out less, shoppers are going to a one-stop place like a Kroger store to buy food instead of multiple outlets in order to save fuel, and instead of going out for fun more people are entertaining at home, meaning that they will grocery shop for party favors and refreshments.  However even though consumers are shopping at grocery stores more during these tough times, Kroger has still been impacted by the recession.  For example, consumers are buying lower cost generic items that have resulted in lower overall earnings in the grocery industry.  In a previous blog I discussed the new online coupons that Kroger now offers.  This new strategy was a direct result of Kroger trying to improve its earnings by getting more shoppers in their stores and buying more branded (both store and national) products.

Here is an excerpt from the article in the attached link that discusses Kroger's stock averages. "The recession seems to have hit Kroger hard, as the equity is currently pinned beneath long-term resistance from its 10-month and 20-month trend lines -- the latter of which has capped the grocer's progress since November 2008.  However, from a shorter-term perspective, Kroger appears to have staged a rally, inching slowly, but steadily, higher since early June. Along the way, the stock regained the support of its 10-week moving average, and is currently attempting to overtake its 20-week counterpart.  Kroger has not closed a week above this duo since April 23". http://www.schaeffersresearch.com/commentary/content/the+kroger+co+makes+plans+to+combat+the+recession+--+and+technical+resistance/observations.aspx?ID=101362

Stock Price 9/10/10

Closing price for 9/10/10 was $21.25, up $0.56 from 9/3/10.

Kroger sees opportunities in beauty

This summer Kroger increased its efforts in promoting its store branded beauty products. CEO David Dillon said Kroger sees health and beauty products as an "undeveloped area among store brands".  Mirra is Kroger's store branded line of cosmetics, shampoos, and other beauty products. Kroger has made store brands a high priority, saying the products build customer loyalty. Store brands also usually have bigger profit margins than national brands. Corporate brands account for 34 percent of Kroger grocery items sold and 26 percent of grocery revenue.  Currently there are fewer than 100 Mirra branded products but that number is up from 41 just three three months ago.  Kroger plans to introduce more Mirra branded items this fall, such as anti-wrinkle products with retinol-A and anticipates more new products next summer.  So far the product has not been marketed very heavily, only through in-store demonstrations and word-of-mouth.  However, Kroger will increase its marketing efforts this fall with national advertising inserts and coupons.  We will have to wait and see if consumers are willing to try store branded beauty products versus national brands.  Here is the link to the article. http://www.google.com/hostednews/ap/article/ALeqM5iq0GAe44yRxHH16-LbwDoFoHIHhgD9HIMOC80

Stock price 9/3/10

So we can monitor the stock price I am going to post the price at the end of each week and compare it to the ending price from the week before.

Closing price for 9/3/10 was $20.69, up $0.36 from 8/27/10.

Digital Coupons

Here is something I found interesting and I can see this as an opportunity for Kroger.  All of us that shop at Kroger probably have a Kroger Plus Shopper's card.  This card give you access to special deals in the store.  The Kroger Co. has unveiled its all-new digital coupon center, available on its website.  The website address is www.kroger.com/digitalcoupons.  The coupon center is an industry-leading combination of manufacturer, Kroger brand and web-only exclusive coupons, all located in one online center. Customers can easily load offers directly onto their Kroger Plus Card or loyalty cards for other stores Kroger operates including City Market, Dillons, Fred Meyer, Fry’s, Jay C, King Soopers, QFC, Ralphs and Smith’s.  The website allows you to search by category, sort the results, and then add the coupons directly to your Kroger card.  If you are interested in the press release it is posted here http://www.thekrogerco.com/corpnews/corpnewsinfo_pressreleases_07222010.htm

For consumers who are extremely price conscious and use coupons received the traditional way such as newspapers and direct mail, I see this as an opportunity for Kroger to get more shoppers in their stores.  This opportunity fits in with a trend posted in the previous blog about ad spending going digital.

Industry Trends

I was searching online for supermarket trends for 2010 and came across an article that lists six trends.  They are fully discussed in the link below but I will briefing describe them here:
1. Value is King - Private label brands will continue to gain market share at branded products expense.
2. Ad spending improves and goes digital - Brands will be forced to increase their ad and consumer promotion spending to drive sales volume and add value to their products.
3. Health drives the consumer - The consumer is finally doing what they say and buying more healthful products.
4. Pricing remains stable - Commodity pricing will be stable and somewhat boring compared to prior year price swings. Deflation hurts the retailers the most but moderate price increases on basic commodities will not lead to aggressive price increases because companies will risk losing market share.
5. Mergers and competition intensify - Increased consolidation and acquisition activities of commodities companies.
6. Home Cooking, but not really - The consumer will continue with their home focus over restaurants for family food consumption.
http://www.glgroup.com/News/Top-Supermarket-Trends-For-2010-46238.html

Competition

Kroger is the nations largest traditional retail supermarket chain in the United States and is the second largest general retailer, behind Wal-Mart.  Supervalu and Safeway are major competitors, but Kroger's biggest competitor is Wal-Mart and faces many competitive pressures from Wal-Mart.  According to market analysts, in response to pressure from its bigger rival, Wal-Mart, which has become more aggressive about cutting its prices on food products to lure customers away from discount and traditional grocery competitors, Kroger offered promotions and discounts on dairy and meat products to keep their customers.  But despite Wal-Marts efforts to lower prices to lure customers from Kroger and other grocers into Wal-Mart, Kroger's 1st quarter earnings were higher than expected.  Kroger has an opportunity to gain food manufacturers and suppliers that stand to lose sales when rival brands are featured as temporary, fast-moving Wal-Mart rollbacks.  The demands by Wal-Mart to suppliers to cut prices presents an opportunity for suppliers to move to Kroger.  According to Kroger CEO David Dillon, "It cannot be just about price. If it is just about price, that really is Wal-Mart's game and not our game, so we don't focus just on that."  Kroger feels that customers are basing their shopping decisions on things other than just price.  So, in addition to keeping prices competitive, Kroger is focusing on improving the overall customer shopping experience.  http://finance.yahoo.com/news/Grocer-Krogers-1stqtr-net-apf-547066984.html?x=0&.v=7

Stock price 8/30/10

Todays stock price closed at $19.92, which is down $.41.

Strategic plan, mission, values

Strategic plan
The balance between margin and sales growth is the foundation of Kroger’s strategic plan. During the past several years, Kroger has been transitioning its business model to meet the changing needs and expectations of our customers in a competitive and consolidating industry. This strategic plan requires a balance among several elements – including sales, earnings, and capital investment – and is driven by strong, sustainable identical sales growth. Our identical sales growth is the result of merchandising and operating initiatives that improve the shopping experience and build customer loyalty. These initiatives are funded by operating cost reductions and productivity improvements. Kroger’s associates are focused on improving our customers’ shopping experiences in three major areas: service, selection, and value. Our strategic plan aligns everything we do with meeting the needs and expectations of our customers. Simply put, our business is focused on putting the Customer first. We are confident that our “Customer 1st” business strategy will enable us to generate positive results as we face continued challenges in the rapidly changing retail grocery industry.
http://www.thekrogerco.com/finance/documents/SectionV-5.pdf

Mission
Our mission is to be a leader in the distribution and merchandising of food, pharmacy, health and personal care items, seasonal merchandise, and related products and services.
http://www.thekrogerco.com/corpnews/corpnewsinfo.htm

Values
-Honesty : Doing the right things, telling the truth.
-Integrity : Living our values in all we do, unified approach to how we do business and treat each other.
-Respect for Others : Valuing opinions, property and perspectives of others.
-Diversity : Reflecting a workplace that includes a variety of people from different backgrounds and cultures, diversity of opinions and thoughts.
-Safety : Watching out for others, being secure and safe in your workplace.
-Inclusion : Your voice matters, working together works, encouraging everyone’s involvement, being the best person you can be.
http://www.thekrogerco.com/corpnews/corpnewsinfo_values.htm

Management Team

The Kroger Company was founded in 1883 by Barney Kroger and is headquartered in Cincinnati, OH.  Total full time employment is approximately 334,000 employees.  David B. Dillon has been the Chief Executive Officer of Kroger Company since June 26, 2003. Mr. Dillon served as the President and Chief Operating Officer of The Kroger Company from June 26, 2000 to June 26, 2003.  Mr Dillion also serves as the chairman of the Kroger Company Board of Directors.  The Board is comprised of 14 individuals (2 from Kroger and 12 from outside companies).  W. Rodney McMullen, the other Kroger employee on the Board, currently serves as President and Chief Operating Officer.  J. Michael Schlotman serves as the Chief Financial Officer.  Of the 14 Board members, two of the members are female.  The Kroger Company Board does include independent directors.  The following is a statement from the Board's Guidelines on Issues of Corporate Governance and discusses the composition of the Board.  The substantial majority of directors will be independent of the Company's management.  An independent director is one who has never held a position as officer of the Company or any of its subsidiaries, has no significant business or personal interest connected with the Company, and who meets the definition of “independent” under the NYSE listing standards. A retired officer of the Company or one of its subsidiaries who continues to serve as a director will be considered an outside director but not an independent director. Ownership of at least that number of shares required under the stock ownership policy described in paragraph 25 of these Guidelines is required and will not impair the independent status of a director.
Another excerpt taken from the Guidelines:  The Kroger Co. Board of Directors serves the Company's shareholders and other constituencies by its direction of corporate policy; its election of the chief executive and other officers; and its continuing oversight of management.

Here is the link to the entire Guidelines on Issues of Corporate Governance.  From reading these guidelines it appears that the Board is very involved with its oversight of Kroger management.
http://www.thekrogerco.com/documents/GuidelinesIssues.pdf

Choosing Kroger

The reason I chose Kroger is I thought it would be interesting to learn about the operations of one of the largest grocers in the United States.  Plus since a large portion of my budget is spent at Kroger I wanted to study a company that I actually buy products from.  Kroger is one of the nation's largest grocery retailers, with fiscal 2009 sales of $76.7 billion. The Kroger Company has operations in many states with store formats that include grocery, multi-department stores, convenience stores, jewelry stores, and financial services.  I had no idea that Kroger's operations included jewelry until I started researching the company.  Turns out that Kroger operates 375 fine jewelry stores in 35 states.

Here are some more quick facts about The Kroger Company:
•Kroger operates 2,470 grocery retail stores in 31 states under nearly two dozen banners.
•Kroger operates 779 convenience stores under five banners in 18 states.
•Kroger is the only major U.S. supermarket company to operate an economical three-tier distribution system.
•Kroger operates 40 food processing or manufacturing facilities producing high quality private-label products that provide value for customers and enhanced margins for Kroger.
•Kroger operates 909 supermarket fuel centers.
•Kroger's operates 1,963 pharmacies.