Speaking on the Q4 earnings call, after posting slightly lower-than-expected revenues, he said it was still early days, but “customer feedback has been very positive” about Kroger’s new Main & Vine store concept unveiled in Gig Harbor, Washington in early February.
Main & Vine: We’re trying to re-imagine the modern grocery shopping experience
The 27,000sq ft store - which features 'local, specialty and everyday products, all at affordable prices' - attempts to “re-imagine the modern grocery shopping experience, placing in the middle of the store fresh produce and bulk items along with an event center where shoppers can enjoy cooking demonstrations, food and beverage tastings and find a new recipe idea for dinner tonight”, said McMullen.
“If you look at Main & Vine… there's a customer segment that we don't think anybody out there is really serving, and we're trying to identify a model that will serve that customer.”
But he cautioned: “It’s very, very early. And we only have one store. And it's only been open a few weeks.”
As for the target demographic, he said: “We would be looking more at a customer that would be overly influenced by speed and convenience for dinner, and a little bit more bent towards natural and organic. So that would be the customer that we would be looking for, and it would be driven more by that than by economics.”
Ruler: We continue to make progress, but we do not think we've figured it out
Asked about Ruler, Kroger’s discount store concept, he said, “We're still trying to understand the economics of the model to get to where it actually performs at an ROIC that we're happy with. We continue to make progress, but we do not think we've figured it out.”
While he had “tremendous respect” for discount retailers Aldi and Lidl, Kroger is trying to cater for a group of customers that enjoy their offer but are looking for a different kind of shopping experience, he said.
“Certain customers we believe likes to shop in that environment [Aldi, Lidl stores]. [But from] everything that we can tell, it's not all customers. It is a customer segment, and what we're trying to do is to serve that segment.”
Online shopping
Asked how Kroger is responding to food delivery services such as Amazon Fresh and meal kit delivery services such as Blue Apron, he said Kroger had tested a variety of concepts in order to provide customers with a “seamless experience”, whether they wanted food delivered, or wanted to collect it themselves.
Kroger, which has partnered with InstaCart (click HERE) in Georgia, has also benefited from technology developed by companies it has acquired such as Harris Teeter and Vitacost, he said.
“We developed ClickList, our shop online, pickup at the store service based on what we learned from Harris Teeter's express lane and I am pleased to share that we've expanded ClickList from one market to seven markets.
“We are testing Vitacost.com's technology and ship to home infrastructure in Denver through a pilot in our King Sooper's division. We are also testing a similar endless aisle experience in our new store format [Main & Vine] that we launched in Gig Harbor, Washington."
A seamless experience for our customers
He added: “What we're really working hard on… is trying to create it where it's a seamless experience for our customer. By no means do I think we have arrived, but what we're finding is some customers like to engage with us multiple ways and we're really striving to make sure that we have a model where we can let the customer decide how they want to engage with us versus us deciding that.
“So it's an exciting time to be in the industry. There is no doubt there's a lot of change going on and the changes that we have been making over the last couple of years we feel really good about positioning us to address where the customer is headed versus where they've been.”
Kroger's revenue rose 3.8% year-over-year to $26.17 billion for the quarter ended January 30, but missed estimates of $26.29 billion. Same store sales, excluding fuel, were up 3.7%.
Kroger corporate brands
Kroger's store brands accounted for c.29% of total units sold and 26.2% of dollar sales in Q4 (excluding fuel and pharmacy), said CEO Rodney McMullen.
"Simple Truth continues to grow at an incredible rate, setting sales records quarter after quarter. The brand reached $1.5 billion in revenue for the year."