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.