As shoppers head into the holiday season, one trend that’s sticking is the need for more groceries. Stay-at-home cooking and larger family gatherings are lifting grocery sales—not to mention consumers’ cooking skills.
Cincinnati-based Kroger Co. posted stronger-than-expected third-quarter earnings Dec. 2, recording comparable sales growth of 3.1% over the third quarter of 2020. During an earnings call, Kroger Chairman and CEO Rodney McMullen credited home cooks and increasing demand for premium products for the company’s higher earnings.
“Customers engaged in larger celebrations with friends and family compared to last year,” said McMullen according to a Sentieo transcript of the call. “We also saw them continuing to cook at home, leading up to and during the holiday, and select more premium products to elevate the food experience.”
McMullen said he doesn’t see the food-at-home trend fading anytime soon, but rather it will remain, which explains the interest in higher quality products to enhance at-home dining experiences.
“These are all reasons why we believe the food-at-home change is structural and not temporary,” McMullen said. “With most people consuming meals at home and grocery stores continuing to capture the majority share of stomach, it is more important than ever that we provide customers with flexibility on how they choose to shop with us.”
Kroger says it’s ready for in-store holiday shopping, with McMullen noting the grocer has “the right seamless ecosystem in place” to meet shoppers’ needs.
“Leading into Thanksgiving, 70% of consumers said they would be doing more of their holiday shopping in the store this year,” he announced on the call, adding “84% of consumers said that they will continue to shop online the same amount or more in the future.”
But with the impact of inflation still a concern among its shoppers, Kroger is looking for ways to help shoppers feel less of a pinch in their wallets.
“We know that inflation is having an impact on customers as well,” McMullen emphasized, adding that 82% of consumers polled across the country are feeling the impact of inflation, and one in four consumers are not confident in their finances right now.” He noted “personalized promotions, big packs and dynamic holiday offerings,” are ways Kroger is aiding shoppers during the holiday season.
Also addressing the issue of inflation, CFO Gary Millerchip said: “In some key areas, we are choosing not to pass through cost increases and continuing to invest in value for the customer. We are investing where it matters most, using our proprietary data to be strategic in our pricing and personalization with the objective of winning long-term customer loyalty.”
Later in the call, McMullen discussed the way in which consumer behavior has evolved: “We continue to see people focus on health. If you look at early in COVID, people were not as focused on health, but they're definitely back where they're focused on health in a more aggressive way—all across the board, you see premiumization on what people do.”
McMullen also spotlighted the success of Home Chef, which reached the $1 billion mark earlier this year, as well as Kroger’s plans to “aggressively” grow its private label brands including Simple Truth and Private Selection.
As more at-home trends take hold, McMullen sees greater stickiness with premiumization.
“I always say I'm a reasonably aggressive shopper in our Murray's Cheese. Growing up, I would have never had really good cheese. And once you have really good cheese, it's hard to go back to what you were used to. And what we're finding is customers—when they upgrade and try higher-quality product—they love it, and they become loyal to it.”