Kroger CEO Discusses Post-Merger Grocery Ecosystem

Following up on the announcement that, as a combined company, The Kroger Co. and Albertsons Cos. will increase the number of local products in its stores by 10%, Kroger Chairman and CEO addressed the audience at Groceryshop in Las Vegas to discuss that initiative further, as well as the recently announced divestiture of more than 400 of its stores, price competition, store experience and more.

During a keynote interview, McMullen touched on the urgency behind moving forward with Kroger’s pending merger with Albertsons Cos., which hinges on both value to customers and being able to spread costs and leverage capabilities for things like retail media, data and technology.

“Once you decide to do something and once you come to an agreement, everything is urgent then because you really want to get the two companies merged so you can start doing the things that are good for the communities, good for the associates and good for the customers,” McMullen explained. “If you look at the original premise of the merger, the values of the two companies are so similar and if you look in terms of some of the things that are being worked on, scale was even more important.”

In terms of the recent announcement of the divestiture of 413 Kroger and Albertsons stores and other assets to C&S Wholesale as part of the merger deal, McMullen reiterated his confidence in C&S as the right company to do business with. McMullen also stressed that, as part of Kroger and Albertsons’ commitment to labor unions, C&S was one of the few potential buyers that agreed to recognize its labor contracts from day one.

As for McMullen’s argument to the audience that the Kroger/Albertsons merger is beneficial for CPG brands and producers, and also won’t lead to increased competition among other retailers, he said the focus is not arm wrestling, but simply looking to grow both businesses. “I don’t look at any of this as ‘you lose, I win,’” McMullen shared. “To me, we have to figure out a way where we both win together.”

McMullen also promises that the shopper experience will change on day one after the merger goes through, especially as it comes to lowering prices.

When it comes to competing against companies known for low prices, McMullen pointed to Kroger’s go-to-market strategy and how it differs from those other grocers. He stressed that Kroger is very active with promotions and is focused on fresh departments, but will never make a compromise on providing high-quality fresh products, great service and a good value for their money.

“If you look at our actual household growth, we had household growth for the ninth consecutive quarter,” McMullen said. “If you look at the more upscale customer, we had much stronger growth there. You’re never satisfied with market share, so every day you work a little harder to make sure every customer is getting the value they want.”

As for Kroger and Albertsons’ renewed commitment to pushing forward locally sourced products, McMullen said the companies are focused on identifying local products that their customers might not know about but that they will love. That commitment promises at least 30 incremental new local products for every store, allowing local producers to widen their net and gain more exposure.

Further, McMullen touched on the post-COVID grocery ecosystem and the need to make doing business both online and in brick-and-mortar stores completely seamless, even when it comes to making each type of shopping equally profitable. One of the main challenges, he shared, is creating great experiences in both venues.

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“If you look at post-COVID, the customer bounces back and forth between those channels,” he said. “Sometimes they want delivery, sometimes they want 30-minute delivery, sometimes they want to pick it up and sometimes they want to shop. We’re doing everything we know how to do to make it totally seamless for the customer to be able to bounce back and forth between those channels.”

One of his company’s big dreams, McMullen shared, is simply for Kroger and its banners to be what customers think of when they think of food. That’s partly where the company’s Boost membership program comes in, especially when it comes to creating customer loyalty.

“When you become top of mind, you’re able to gain share,” he said. “Well over half of our delivery business is from Boost members. For us, it’s just part of that overall equation and our aspirations for people to fall in love with the experience, fall in love with our associates and have incredible value.”

Groceryshop is taking place Sept. 19-21 at the Mandalay Bay in Las Vegas. 

Serving 11 million customers daily through a digital shopping experience and retail food stores under a variety of banner names, Cincinnati-based Kroger is No. 4 on The PG 100, Progressive Grocer’s 2023 list of the top food and consumables retailers in North America. Boise, Idaho-based Albertsons operates more than 2,200 retail stores in 34 states. The company is No. 9 on The PG 100. PG also named both companies to its Retailers of the Century list.

Founded in 1918 as a supplier to independent grocery stores, Keene, N.H.-based C&S services customers of all sizes, supplying more than 7,500 independent supermarkets, chain stores, military bases and institutions with 100,000-plus products, in addition to operating corporate stores. The company is No. 17 on The PG 100.