The Kroger Co. has come a long way since Barney Kroger in 1883 invested his life savings of $372 to open a grocery store in downtown Cincinnati.

Kroger, who the company claims was the first grocer in the country to sell meats and groceries under one roof and was an early manufacturer of his own foods, planted the seeds of a supermarket operation that has become one of the country’s largest. The Kroger Co. now operates more than 2,500 stores in 31 states under two-dozen banners with annual sales of more than $66 billion.

Chains include Kroger, Ralphs, King Soopers, City Market, Dillons, Smith’s, Fry’s, Fred Meyer and Food 4 Less.

Now in its 125th year, the retailer has four primary store formats— Combination Food & Drug, Multi- Department, Marketplace and Price Impact Warehouse.

Kroger also has more than 50 “Fresh Fare” combo stores, which emphasize high-quality perishables and exceptional customer service, the company states.

In addition, Kroger—with 42 facilities—is one of the country’s largest food processors. Kroger manufacturers more than half of its 8,000-plus private-label items, including packaged meats, sausages, salads, breads, rolls, spreads and dips.

Such products are among the assortment of meat and deli offerings that have become key elements in Kroger’s overall merchandising strategy. In listing its competitive advantages, for instance, Kroger cites stores’ “quality” beef (USDA Choice, Certified Angus USDA Choice and Natural), and pork and poultry (all-natural pork and locally grown and organic poultry), along with fresh seafood.

“Kroger appears to be trying to make each of its deli and meat departments separate destination entities,” says Gene Hoffman, president of Corporate Strategies International, a Wayzata, Minn.- based retail consulting firm, and a former Kroger Co. president.

“The departments, with a little fine tuning, could almost stand alone in a boutique location as a separate store.” The meat and deli areas, he notes, are designed to appeal to the specific desires of customers in each outlet.

While many other chains follow the same blueprint, Hoffman says Kroger “has a stronger merchandising flair than most, as well as good locations as a result of their solid real estate strategy.” The retailer, he adds, also continually adjusts its meat and deli offerings in accordance with changing consumer lifestyles “The key focus is freshness and carrying products that appeal to neighborhood customers,” he notes.

Such shoppers, including those at Kroger’s Combination Food and Drug stores—the company’s primary format—typically live within a 2.5-mile radius. Kroger reports that the Combo outlets are designed for “one-stop shopping” and are “tailored to meet the specific needs of the neighborhood’s demographics.” Most of the locations have full-service deli, meat and seafood departments.

The company is able to track the buying behavior of its diverse customer base by monitoring purchases through its loyalty card programs.

Indeed, Kroger states that 40 percent of all U.S. households hold one of its shopper cards.

Hoffman, meanwhile, says stores are able to effectively serve those customers by training employees on how to best merchandise fresh items and educating them on product nuances.

Such marketing includes targeting perishables for specific buyer segments. A Kroger store in an upscale suburb of Dallas, for instance, carries a large array of higher-priced value-added meats in the full-service case.

Selections include Bacon Cheddar Burgers, Stuffed Boneless Pork Roasts, Seasoned Beef Round Sirloin Tip Roasts, Seasoned Beef Round Eye of Round Roasts, Pork Shish Kabobs, Seasoned Boneless Pork Chops, Chicken Breast with Garlic Seasoning and Baby Back Ribs with BBQ Seasoning.

Among the store’s meat brands are Butcher’s Premium, Pilgrim’s Pride, Tyson, John Morrell, Smithfield, Perdue, Butterball, Sara Lee, Laura’s Lean, Nolan Ryan’s Guaranteed Tender All Natural Beef and Kroger.

Most of the meats and cheeses in the full-service deli case are premium items from Sarasota, Fla.- based Boar’s Head Provisions Co.

Inc. Other brands include Kroger’s private-label Private Selection and Land O’Lakes.

The majority of deli meats at a Ralphs outlet in Anaheim, Calif., meanwhile, have either the Private Selection or Kretschmar brands.

Most of the bulk cheeses also have the Private Selection moniker.

Other cheese brands include Tillamook and Alpine Lace.

The Ralphs store also offers about 30 types of fresh prepared deli foods behind the counter, including 10 varieties of salads, and a hot case with such items as Rotisserie Chicken and Meatloaf.

Delis also offer made-to-order sandwiches for $3.69 (small) and $4.99 (large).

Ralphs meat brands include Sanderson Farms, Foster Farms, Zacky Farms, Jennie-O, Laura’s Lean and Hillshire Farm.

Yet, it is private-label that is playing an increasingly prominent role in Kroger’s perishables merchandising. The company, for instance, targets different shopper segments with three tiers of storebranded items.

Private Selection—which Kroger calls its “premium quality brand”—is intended to meet or beat “gourmet” or “upscale” national or regional brands, the company notes.

Also available are “banner brands” (such as those with the Kroger, Ralphs and King Soopers labels). Banner brands comprise the majority of stores’ private-label offerings and are designed to be equal to, or better than, the corresponding national brand, Kroger states.

The Value brand, meanwhile, is intended to “deliver good quality at a very affordable price for the shopper who is on a budget.” In addition to leveraging store brands, Kroger also is working to differentiate its perishables by carrying new and diverse selections of proteins. Last year, for instance, the company started heavily marketing the vacuum-packaged Flat Iron Steak.

Also known as the Beef Shoulder Top Blade Steak, the Flat Iron was among the 10 Beef Value Cuts that were identified in the muscle-profiling initiative that was launched by the nation’s beef producers in 1999.

Mark Van Buskirk, Kroger vice president of meat and seafood procurement and merchandising, says the Flat Iron attracts new customers to the meat case while providing another meal occasion for shoppers.

Kroger supported the 2007 launch with thousands of demonstrations in its stores, aisle signs, rail strips, radio and television advertising and promotions in the weekly circular.

A campaign in Texas incorporated the catchphrase, “A New Steak in Town,” with all commercials emphasizing the Flat Iron’s value, quality and fl avor, notes Charlie Milacki, Kroger corporate meat buyer.

Van Buskirk says that representatives from state beef councils also briefed associates on the Flat Iron so they could provide accurate information on the cut to consumers and answer all questions.

Kroger, which initially introduced the item at its Fred Meyer and Dillons stores prior to the company-wide rollout, also is promoting the Flat Iron in 2008 with such vehicles as circulars and radio advertising, he states.

“The launch was an opportunity, not a risk, because it provides a great eating experience,” Van Buskirk adds. “The business continues to grow and sales have exceeded our expectations.” By introducing new items and marketing a wide range of privatelabel and supplier-branded proteins, Kroger is appealing to more customer segments while personalizing each meat and deli location, Hoffman says.

”Some day they also could test new store formats since the supermarket, supercenter and warehouse clubs may become boring to forthcoming consumers,” Hoffman adds.

Kroger at a Glance

Company: The Kroger Co.

Headquarters: Cincinnati, Ohio
Founded: 1883
Stores: 2,500+
Market: 31 states
Supermarket Banners: Baker’s, City Market, Dillons, Food 4 Less, Foods Co., Fred Meyer, Fry’s, Fry’s Marketplace, Gerbes, Hilander, Jay C Food Stores, King Soopers, Kroger, Kroger Marketplace, Owen’s, Pay Less Super Markets, Quality Food Centers (QFC), Ralphs, Smith’s, Smith’s Marketplace

Source: The Kroger Co.

Where Meat is King

The meat area is one of The Kroger Co.’s signature departments. And as activity at the retailer’s King Soopers chain illustrates, operators are in tune with changing consumer trends.

Stores, for instance, are increasingly leveraging proteins that are designed to meet growing shopper interest in health, wellness and convenience.

A Denver-based chain of more than 100 locations in Colorado and Wyoming, King Soopers is heavily marketing natural and organic items, which are the fastest-growing products in the fresh meat department, says Randall Melton, King Soopers director of meat and seafood.

“The Colorado meat shopper is very informed and aware of ecological and nutritional issues,” he states.

Outlets offer natural beef from Lexington, Ky.- based Laura’s Lean Beef and natural beef and pork from Denver-based Coleman Natural Foods.

Livingston, Calif.- based Foster Farms supplies Foster Farms and Redbird-branded natural poultry, as well as Costal Range-branded organic chicken.

Yet, stores also have fewer meat brands than many other chains. Most of the beef selections, for instance, are generic and there are a handful of private-label offerings, including Kroger-branded chubs and King Soopers sausage.

“Most customers are not looking for brands,” Melton states. “We had branded beef but moved away from it.”

Instead, he notes that more shoppers are studying labels for product attributes, such as proteins that were developed without antibiotics or growth hormones.

King Soopers also is working to attract shoppers by marketing such unconventional meats as natural buffalo and organic beef ribs, strips and tenders, Melton states.

In addition, the chain about two years ago switched exclusively to Choice beef.

“We previously had a branded Select program, but the quality wasn’t acceptable,” Melton states.

To publicize the move, King Soopers ran a print campaign describing the attributes of Choice beef, and employees wore buttons that mentioned the change.

In addition, Melton says associates, including cashiers, were educated on Choice meats. And staffers were given pocket-sized information cards stating the differences between Choice, Select and Prime items so they could accurately talk to customers about the products.

Even though King Soopers didn’t raise the price of its beef after switching to Choice, Melton says it still took many customers a while to embrace the items.

“ Many shoppers knew the beef tasted better, but were confused about the different grades and what each meant,” he notes.

The chain also is emphasizing its meat quality by spotlighting the natural proteins. A natural section in the self-service area, for instance, is highlighted with signage and dividers and is strategically located at the beginning of the case.

“Our number-one focus is natural and organic and shoppers will see those products when they first enter the meat department,” Melton states.

Signs also call attention to the natural proteins in the full-service case.

Indeed, Melton says an increasingly larger percentage of customers are purchasing meats at the counter, which he attributes in part to enhanced advertising in the weekly circular.

Drawing shoppers to the service case is important because it provides “a great opportunity for interaction with employees who also can make cooking suggestions,” he states. “Many shoppers still are not knowledgeable about preparing meats or familiar with many cuts.” In addition, King Soopers is adding butchers for enhanced customer service. Many of the cutters are learning the craft through the company’s training program.

“We want shoppers to go to the full-service case so we need associates who can speak with them,” Melton says.

To better attract time-conscious consumers who are seeking convenient and simple meals, King Soopers also is increasingly marketing value-added fresh meats.

Melton notes, for instance, that about 40 percent of the items in the full-service case are either marinated or seasoned, up from 20 percent two years ago.

Stores, however, carry different items in accordance with the demographics of their customer bases. Melton says locations are segmented as either Upscale, Mainstream or Value.

Upscale outlets have greater selections of organic and natural items, while Value stores have more lower-priced choices, he states.

Click here to view Kroger Through the Years and The Kroger Co. Line-up.