At the kicko; presentation at the retailer’s Cincinnati headquarters, McMullen
and his team explained how the company
would invest nearly ;; billion over three
years to help regain the pace that for a
dozen years produced remarkably consistent and industry-leading performance,
only to have it ground to a near-halt upon
a combination of calamitous conditions,
sharpening competition and a rapidly
changing consumer that had outdated its
venerable “Customer ;st” strategy.
The ambitions of the Restock plan,
McMullen said, were to be built upon
four pillars, one of which had a decidedly
dull description—“Partner for Customer
Value”—that stood out for its relative
vagueness and passivity beside its three
easier-to-grasp, action-oriented elements
of the Restock initiative: Live Our Purpose;
Develop Talent; and Rede;ine the Customer Experience.
While the company has taken action in all
of those arenas since the plan began late last
year, observers say Kroger’s investments
in partnerships may have the best chance
at changing the trajectory of the industry.
Moreover, the partnerships illustrate how
business itself is bending to conform to a
world rapidly transformed by technology;
in e;ect, businesses like Kroger are moving
to become networks in and of themselves.
“We live in a networked world,” says
Andrew Wolf, a ;inancial analyst covering Kroger with Loop Capital in Chicago.
“Once you get to the abstract, and really
think about what’s going on, what the inter-
net does in a big way is create networks. You
go to a website, and you get better networks
and better information. So in a networked
world, where everything is connected, it
only makes sense to test partnering up.
“In a practical sense,” he continues,
“partnerships also make sense, because
you can’t go around throwing money after
every good idea.”
Hot on the trail of a cost-e;cient “net-
work” designed to transform the role gro-
cery stores will play in this new world, Kro-
ger, which may be only just getting started,
has generated headline after headline this
year, choosing partners with whom to con-
nect, such as:
An alliance with British e-commerce
company Ocado to bring to the U.S. the
technology underpinnings of the Ocado
Smart Platform, which includes online
ordering, automated ful;illment and
home delivery capabilities.
An agreement with noted fashion
designer Joe Mimran to launch an exclusive apparel line to be available at select
stores later this year.
A deal with a Silicon Valley robotics
company called Nuro to pilot an on-road
driverless vehicle designed to make grocery home deliveries later this year.
A merger with Chicago-based Home
Chef to take over and expand Kroger’s
nascent meal-kit program in stores and
An expansion of its Scan, Bag and Go
shopping program to as many as ;;;
stores this year.
Kroger’s partnership model in some
ways is ripped out of the pages of the tech-
nology world that has so disrupted grocery,
says Diana Sheehan, director with Lon-
don-based Kantar Retail’s grocery channel
“Basically, how so many software, tech-
nology and logistics companies make their
money today is in creating unique IP ;intel-
lectual property; and then, through part-
nerships, expanding their reach,” she says.
Kroger is now doing this quite literally:
As part of Restock, it has set up a subsidiary,
Sunrise Technologies LLC, that is pursuing
alternative revenue streams through licens-
ing of its proprietary technologies such as its
Kroger Edge digital shelf-tag program and
Zigbee router. Seen another way, Kroger’s IP
could also be its concentration of stores and
geographic locations; its store tra;c; shop-
per data; fresh merchandising skills; man-
agement and employees; and so on. Team-
ing those with the skills and capabilities of
its new partners will build the new Kroger.
Not all industry observers WGB spoke
with for this piece agree on how successful
the Restock initiative will ultimately be.
In a practical sense,
make sense, because
you can’t go around
throwing money after
every good idea.”
—Andrew Wolf, Loop Capital
hen The Kroger Co. announced its
Restock initiative last year, the big
company didn’t lack for lofty goals—
“to serve America though food inspiration
and uplift” was how CEO Rodney McMullen put it—
nor for the hefty price it would pay to achieve them.