US grocery retailer Albertsons’ efforts to increase its customer value proposition – and investor appeal in the wake of its breakup with Kroger – could open doors for emerging brands and increase in-store and digital marketing opportunities for food and beverage manufacturers.
But, elements of its multi-prong ‘Customers for Life’ strategy also could cause trouble for brands, including complicating price negotiations and increasing private label competition.
“Loyalty memberships, digitally-engaged customers, omni-channel households and transaction counts are all growing because our Customers for Life strategy places the customer at the center of everything we do. So, as our customers’ needs for value evolve due to inflationary pressures, so are our strategies to address these needs,” CEO Vivek Sankaran told investors yesterday during the company’s third-quarter earnings call.
He explained “customers are feeling pressure,” and seeking relief in part by shopping more outlets – prompting Albertsons to explore new ways to effectively win-over consumers.
“These strategies to drive better value for customers, in addition to increasing total category growth, including working with our vendor partners to strategically invest in price in certain categories and markets and increasing own-brand penetration,” Sankaran said.
“To deliver this, we will source products that customers trust and need at a better value. To drive profitable unit growth and increase share of wallet from existing customers in own brands we will also offer products at an attractive entry price point so that customers always have an accessible alternative and more prominently feature an existing own brands offer,” he added.
Enhanced marketing opportunities
While price negotiations and private-label competition may stiffen because of Albertsons’ initiatives, so too could brands’ ability to connect with shoppers at the point of purchase.
Albertsons’ is investing heavily in ecommerce, its loyalty program, digital platforms that enhance in-store use of its mobile app and retail media campaign capabilities – all of which could bring brands closer to consumers.
For example, Sankaran explained, Albertsons’ loyalty program is integrated with its mobile app, which together offer a key engagement tool and entry point for digital and personalized marketing.
“In April of 2024, we launched a simplified and enriched program to make it easier for our customers to earn points and redeem coupons, fuel and grocery rewards. For the first time, it also allows customers to simply redeem points for dollars off their grocery bill. Since the launch, we have seen more frequent engagement, higher retention and increased customer spend. Going forward, we expect to continue to see increased adoption, and we will leverage strategic partnerships to provide our members with even more ways to get rewarded,” he said.
In addition, Albertsons’ integrated its mobile app for use in its stores and launched an in-store geo-located mobile feature, which opens opportunities to deliver “real time coupons, help shoppers locate products and plan meals and assist customers with their shopping lists,” Sankaran said.
He noted more than 8 million customers have used this feature and he expects even more to try it as Albertsons adds capabilities “to drive even deeper engagement over time.”
At the same time, Albertsons is improving its understanding of how different consumers shop and what they need – allowing it to run more effective targeted media campaigns, enhance product offerings and better “execution for brand campaigns across our digital and physical assets,” he said.
Albertsons proactively seeks innovative, emerging brands
Offering brands that consumers “trust and need” is central to Albertsons’ plan for enhancing loyalty and engagement, and one way it plans to do that is by hosting a competition at Natural Products Expo West to find emerging and innovative brands.
Earlier this week, the retailer launched its 3rd Annual Albertsons Companies Innovation Launchpad competition, which includes a live pitch event at Natural Products Expo West in March and a chance to win prices valued at more than $300,000 total, including cash and industry services.
The retailer is encouraging independent food brands with between $3 million and $10 million in net retail sales with products that meet growing demand for “functional beverage, hydration, sober-curious beverages, low sugar or carb, protein solutions, global flavors, healthy meal solutions and premium pet items” to apply here by Jan. 19.
Albertsons will select 50 applicants to present their brands to judges and three will receive prices and consideration for distribution in Albertsons Cos. Banner stores.
Last year, more than 700 brands applied and the three that walked away winners were WunderEggs, Evergreen and Blue Zone Kitchen.
Albertsons portrays a strong future without Kroger
Albertsons’ efforts to entice consumers with on-trend products they need and trust and to better engage with them through its loyalty program and multi-media and omni-channel marketing are part of a larger effort by the retailer to reinforce its standing with investors after its long-planned and controversial proposed merger with Kroger fell apart earlier this year.
Albertsons terminated the deal after facing significant pushback by regulators and the US Attorneys General who argued the merger would decrease competition, raise grocery prices and harm thousands of workers.
Sankaran told analysts during this week’s sales and earnings call that while Albertsons was disappointed the merger was terminated, “we never stopped investing in our business and our customers,” as illustrated by its investments in digital platforms, consumer engagement, its mobile app and more.
These investments appear to be paying off as the company reported net sales increased 1.2% to $18.77 billion in the third quarter despite a difficult economic environment. It reported same stores sales also grew 2% and digital sales increased 23%.
The company expects its gains to continue and raised its guidance to reflect its optimism. It now expects an annual adjusted profit of $2.25 to $2.31 per share – up from a previous projection of $2.20 to $2.30 per share.
