If you find yourself grimacing every time you approach the checkout lanes at the supermarket lately, you’re not alone.
Grocery prices have soared in recent months, and that’s on top of building inflation in the category.
In May, grocery costs rose 2.7% on an annual basis, according to the Consumer Price Index. Food prices as a whole, including restaurant food, increased 3.1% year over year.
In March, an alarming 49% of Americans said they’re having a difficult time affording food, according to a LendingTree survey. And almost 90% have changed how they shop for groceries to cope with higher costs.
For some people, that could mean ditching traditional supermarket chains in favor of more affordable grocery destinations, whether it’s warehouse clubs such as Costco offering bulk discounts, discount grocers like Aldi with limited selection, or giants such as Walmart that somehow manage to perpetually undercut the competition.
Kroger, the largest supermarket chain in the U.S., according to MMCG Invest, doesn’t want to lose more customers to Walmart.
If anything, it wants to lure customers away from the big-box giant. And the company’s latest strategy might make that more than possible.
Kroger makes concrete plans to slash prices
During Kroger’s most recent earnings report, the company highlighted a 2.4% increase in same-store sales, not including fuel costs, and an operating profit of $1.246 million.
“Food volumes improved and grocery sales were a larger portion of our sales mix,” former Interim CEO Ronald Sargent said on the company’s earnings call.
“This quarter, we again made price investments to lower everyday prices and to offer more promotions,” Sargent added. “And this improved our value perception with our customers.”
But Kroger’s work isn’t done. The company is now on a mission to reduce prices even more, in an attempt to better compete with longtime rival Walmart.
“The reality is, the basket has to come down,” recently appointed CEO Greg Foran told Bloomberg News. “And not everyone’s basket is the same. It needs to be across thousands of products, and it has to be something that passes the commonsense piece with customers.”
Kroger takes holistic approach to customer value
Foran is well aware that the company must go several steps further to draw customers away from Walmart, a retailer known as much for its low prices as for offering the convenience of a wide range of products under one roof.
But there are a few areas in which Kroger may be able to take the lead. As Bloomberg reported, the company has been focusing on the five Fs: fresh, fast, affordable, friendly, and for you.
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The last item speaks to Kroger’s ambitions to offer a more personalized grocery shopping experience.
“Our objective is to execute what we think is a very clear, sensible plan. We want to be America’s best grocer,” Foran said.
Of course, if it’s hoping to beat Walmart at the pricing game, Kroger has its work cut out for it. As consumers change their spending habits to cope with higher costs, Walmart has seen an uptick in customers.
“Our value proposition continues to resonate with customers…. In the first quarter, we delivered constant currency sales growth of nearly 6%,” Walmart CFO John Rainey said during the company’s most recent earnings call.
But if Kroger is able to cut prices while offering a better and more customized shopping experience, it could gain market share as consumers grow increasingly choosy about where and how they spend their money.