kroger presentation 2014

GENBUS 450 – Section 001

by

Andy Amoureux, Wade Aldridge, Candy Kingsley, & Kurt Mathiesen

Executive Summary

• Current and Future of Supermarket Industry

• Kroger’s Multi-Facet Strategy

• Customer First Focus• Product Differentiation• Corporate Branding• Diversification• Recommendations

(Candy)

Summary of Kroger Co

• Barney Kroger Opens First Grocery Store in1883

• His Motto: “Be particular. Never sell anythingyou would not want for yourself.”

• Kroger Company Today– 2,640 Stores in 34 States with 98 Billion

Dollars in Sales

– Diversification: 1,240 Supermarket FuelCenters, 786 Convenience Stores, 320 JewelryStores, 38 Processing Plants and 36Distribution Centers

(Candy)

Vision and Mission Statement

• “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. We place

considerable importance on forging strong supplier partnerships. Our

suppliers, large or small, local or global, are essential components in

accomplishing our mission”.

(Kurt)

Values

• Honesty:

- We insist on truthfulness with eachother, with our customers, with ourvendors and in our business records.We expect and value openness.

• Integrity:

- We act in accordance with our values,even when it’s difficult.

• Respect:

- We treat all with dignity and value theopinions and perspectives ofothers. (Kurt)

Values

• Diversity:- We seek and embrace differences in

the backgrounds, cultures andethnicities of all associates,customers and vendors.

• Safety:- We protect our customers and each

other from injury with a safe andsecure workplace and shoppingenvironment.

• Inclusion:- We encourage and expect

collaboration, teamwork andthe active involvement of allassociates (Kurt)

External Analysis

• Political• Low due to dependence on retail

• Economic• High, fluctuations can effect all

aspects of prices and distributions.

• Social• Medium; constant changes in

generations and new customers tomarket towards.

(Kurt)

External Analysis

• Technological• High; innovations in supply chain

and customer applicationsseparate the competition.

• Ecological/Environmental• Medium; growing concern with

being a ‘green’ corporationswithout violating the JevonsParadox

• Legal• High/Medium; preventing huge

lawsuits is crucial(Kurt)

Financial Analysis

Costco• January 2011

Revenue:• $88,915 Million

• January 2014Revenue:• $112,640 Million

Kroger• January 2011

Revenue:• $82,049 Million

• January 2014Revenue:• $98,375 Million

Walmart• January 2011

Revenue:• $421,849 Million

• January 2014Revenue:• $476,294 Million

• January 2011Net Income:• $1, 462 Million

• January 2014Net Income:• $2,058 Million

• January 2011Net Income:• $1,116 Million

• January 2014Net Income:• $1,519 Million

• January 2011Net Income:• $16,389 Million

• January 2014Net Income:• $16,022 Million

(Candy)

FIve

Forces

• Rivalry is high among competitors – High Concentration• Supermarkets Compete on Value, Service & Location• Low Switching Costs

• Threat of Substitution is High• Product Differentiation• Corporate Branding

• Threat of New Entry is Low• High Startup Costs• Food and Drug Administration 2011

• Buyer Power is Low• Must Choose between Lower Prices and Quality.• Pricing Discounts

• Supplier Power is Low• Slotting Fees, Promotional Discounts & Stocking Fees• Regulatory Costs

Porter’s

Competitive Rivalry

Threat of Substitution

Threat of New Entry

Buyer Power

Supplier Power

(Candy)

Competitor Analysis

• World’s Largest Retailer

– Every Day Low Prices

– Distribution Centers

– Cross Docking

– RFID

– Universal Product Code

– Lawsuits, Working Conditions, No Differentiation

– Profit Margins

– Sales System Tracking

• Wholesale Warehouse Retailer

– Selling Bulk at Low Prices

– Cap on Profit Margin

– Diverse Product Mix

– Co-Dependency on U.S.

– Dependency on California Operations

– Low Prices & Product Mix

– Executive Members & Work Environment

(Candy)

Internal Analysis

(Andy)

Resources

• Distribution centers – 36. Three tier distribution network: dry food, freezer,

and perishable. Each tier gets closer to grocery stores with perishable

distribution centers within 200 miles of grocery store

• Supermarkets and multidepartment Stores - 2,640

• Shareholders Kroger March 28, 2014 - 30,449

• Items carried in stores - 40,000-50,000

(Andy)

Capabilities

• Total sales 98.4 billion• Reaches 34 states and the district of

Columbia• Operation profit (GAAP) 2.7 billion ( P.3,4)• Profit Margin: 1.51%• Operating Margin: 2.76%• Return on Assets: 6.69%• Return on Equity: 32.14%• Revenue: 103.96 B• Quarterly Revenue Growth: 11.6• Gross Profit: 20.24B• Total cash: 248 M• Total Debt: 11.2 B• Operating cash Flow: 3.52 B• Levered free Cash flow 659.75 M (P.1)

(Andy)

Core Competencies

Innovation

• Installed Quevision to help reduce check out time by 30 seconds. (2010)

• Kroger (2013) website “providing customers with a single place to find information”(P.47)

• Express line Harris Teeter stores Provide on-line ordering with store pick up.

Customer Oriented

• Customer 1st strategy. The key of this strategy according to Kroger’s (2013) Customers should say:• The people are great! • I get the products I want, plus a little more.• The shopping experience makes me want to return.• The prices are good. (pg.49) (Andy)

Kroger SWOT Analysis

(Andy)

Strengths

• Brand Name

• Private Brand

• Customer and Technology Driven

• Diversification

(Andy)

Weakness

• Intense Competition

• Quality Control

• Legal Proceedings

(Andy)

Opportunities

• Private Label

• Sustainability

• Expansion

• In-Store Health Clinic

(Andy)

Threats

• Contamination

• Post-environmentalism

• Operation Cost

(Andy)

Current Strategy

• Customer 1st implemented in

2009

Kroger's Sales 2010-2013 from Kroger’s Fact Books

2013 2012 2011 2010

Sales …………….. 98,375 96,619 90,374 82,049

Change …………….. 1.8% 6.5% 9.2% 5.8%

(Kurt)

Current Strategy

• Corporate Social Responsibility &

Sustainability Strategy

Implemented 2014

- Designed to provide economic and

environmental transparency.

- Keep social and governmental

issues in good standing. (Kurt)

Goals & Objectives

• Customer First Strategy

• Great People

• Products People Want

• Good Prices

• A place the customer will

return to(Wade)

Great People

•Hiring the right customer

focused individuals

• Training Programs

•Balancing staffing levels

(Wade)

Products People Want

• Products People Want

– Specialty products that enhance the

experience

• Corporate Owned Brands

– Why corporate owned Brands

– Not just generic

– Packaging

– Loyalty

(Wade)

Products People Want

• Product Options

– Healthy & Organic

– Locally sourced goods

(Wade)

Good Prices

• Don’t try to beat Walmart

• Give the customer a reason to pay more – Specialty products

– Product differentiation

– Unique experience

• Coupons – Online, and smart phone app

• Customer relationship (Wade)

Good Prices

• Fuel Centers

– Fuel Rewards

• Online Shopping

– Convenience

(Wade)

Repeat Customers

• Shopping Experience

– Store Layout

– Time and convenience

• Unique Products

• Customer service

• High quality / great value products

(Wade)

Financial Objectives

• Existing Stores Sales Growth

• Carefully selected new markets

• Managing Debt Load

(Wade)

Business Corporate Strategy

• Differentiation

– Justification of higher prices

• Related diversification

• Mergers and acquisitions

– Harris Teeter

– Vitacost

(Wade)

Recommendation

• Customer first strategy

– Supports goal of differentiation

– Don’t try to be Walmart

• Continue Diversification Strategy

• Growth in existing Markets

• Monitor Prices

– Economy is still recovering

– Consumers are more price sensitive

(Wade)

Work Cited

• http://sheblogsit.com/2013/07/02/kroger-brand-bbq-party/

• http://www.mmbearcupoftea.com/2013/03/simple-truth-products-review.html

• http://www.trashsociety.com/2011/01/29/aldi-vs-walmart-a-shopping-comparison-day-248/price-shopping-comparison-kroger-aldi-walmart-groceries-toiletries/

• https://www.flickr.com/photos/retroweb/5983092140/?rb=1

• https://ld.fgiresearch.com/fgireportbuilder/kroger/gw?proc=1

• http://www.todayifoundout.com/index.php/2010/06/where-the-dollar-sign-comes-from/

• http://www.prnasia.com/blog/archives/5601

• http://www.tecnomastergroup.com/capabilities_eng.html

• http://joelfromcanada.com/strength/

Work Cited Continued…

• http://www.thekrogerco.com/corpnews/corpnewsinfo_values.htm

• http://www.sodahead.com/united-states/cass-sunstein-out/question-2852781/

• http://www.digitalmanagementblog.com/2013/09/24/digital-marketing-platforms-equal-opportunities/

• http://www.dreamstime.com/photos-images/threats.html

• http://www.greenretaildecisions.com/news/2013/06/27/kroger-commits-to-zero-waste-sustainable-palm-oil

• http://www.miheadlines.com/2014/05/03/michigan-kroger-stores-double-coupon-policy/

• http://wepartypatriots.com/wp/2014/08/28/holding-out-fred-meyer-forces-teamsters-strike-after-competitors-ratify-new-deals/

• http://www.findagrave.com/cgi-bin/fg.cgi?page=gr&GRid=2037

Work Cited Continued…

• http://corporate.walmart.com/

• http://www.watchlistnews.com/profit-rises-for-costco-wholesale-by-3/32844/

• http://www2.houstonisd.org/HISDConnectDS/v/index.jsp?vgnextoid=910d6430597f4310VgnVCM10000028147fa6RCRD&vgnextchannel=051bdfb83de94310VgnVCM10000028147fa6RCRD

• http://www.gopixpic.com/640/kroger-customer-first-demo-13-minutes/http:%25257C%25257Cb*vimeocdn*com%25257Cts%25257C861%25257C961%25257C86196170_640*jpg/

• http://www.just-food.com/analysis/kroger-in-safe-hands-after-dillon-exit_id124576.aspx