Post-merger, Kroger plans a bigger local product play.
While the Kroger-Albertsons merger represents a potential large-scale change for the grocery industry, the $24.6 billion deal is slated to bring one small change that customers are likely to notice on the shelf: more locally sourced products.
Cincinnati-based Kroger Co. said Tuesday that it plans to lift the number of local products in stores by 10%–or about 30 products per store–after the Albertsons acquisition closes, expected in early 2024.
Currently, Kroger said, the company brings locally sourced foods and other products into its stores in several ways. First, its supermarkets sell a range of produce from local farmers. That provides benefits in product quality, since by cutting the distance between farms and stores, shoppers get more days of product freshness, the company noted.
Second, many stores also allocate shelf space specifically to local products and highlight the regional connection with special signage, Kroger reported. And finally, farmers and local producers work directly with Kroger to determine the best ways to get the word out about their products to customers.
“Local farmers, bakers and producers are important parts of our Fresh for Everyone brand promise,” Kroger Chairman and CEO Rodney McMullen said in a statement. “Every local product we stock has a unique producer, with their own story standing behind it. Since the beginning, this merger has been about growth, and we look forward to inviting our local suppliers to grow alongside us. We are dedicated to supporting the innovation that only a small business owner can create.”
Examples of locally sourced products in Kroger stores include Stemilt cherries in Washington, Sun Pacific citrus fruit in California, Talbott Farms Palisade peaches in Colorado and Southern Press blueberries in Georgia.
According to Stuart Aitken, senior vice president and chief merchant and marketing officer at Kroger, local products not only enhance the shopping mix for customers but also make a statement about the quality offered at the store.
“We know just how important local products are to our customers,” Aitken commented. “Our customers know we offer the freshest local products, and they will ask our teams when their favorite seasonal items will be on shelves. We are excited to provide more opportunities for local producers to grow their businesses.”
Kroger already stands to serve up a much broader own-brand offering via the Albertsons merger. If the transaction is approved by regulators, the combined company would field a private-label roster of more than 30 brands encompassing some 34,000 products.
Kroger’s Our Brands lineup represents an approximately $28 billion annual business, which executives have said would make Kroger the ninth-largest U.S. CPG company. Overall, the portfolio spans nearly 20 brands—including the new, fast-growing Smart Way value-focused label—and offers more than 14,000 items. Four labels are billion-dollar brands, including Simple Truth, Private Selection, Home Chef and Kroger—the latter being the largest by far with sales of $15 billion.
Albertsons’ Own Brands portfolio currently includes about a dozen brands and more than 14,000 items, and it generated sales of over $16.5 billion in fiscal 2022. The grocer’s Signature Select, Signature Cafe, O Organics and Lucerne labels are among its billion-dollar own brands, a club that Open Nature was projected to join by the end of 2022.