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Kroger seeks alternative revenue streams

As part of its Restock Kroger program, Kroger Co., BB #:100073 Cincinnati, OH, has also been positioning itself for profitability by investing in businesses outside of traditional grocery.

These alternative revenue streams grew 20 percent in 2018 and are expected to bring in $100 million for 2019 and $150 million in 2020.

With Microsoft, Kroger is piloting “connected-experience” stores with several new features, including upgraded shelf technology with digital displays for pricing, promotions, and nutritional information; frictionless shopping with a scan-bag-and-go checkout system; and new technology to help employees find items more quickly for pickup orders.

If successful, Kroger and Microsoft hope to offer the new technology to others as a retail-as-a-service (RaaS) product. Similarly, Kroger began offering Stratum, a customer data, analytics, and personalized marketing solution, overseen by its 84.51° subsidiary, to help producers better position their retail brands.

Nonfood initiatives
In addition to its future-forward stance on in-store experiences, Kroger is reaching far and wide to add value for its customers, with new healthcare, automotive, and financing initiatives.

On the healthcare front, the grocer continues to increase its presence in healthcare. Kroger360care, launched in 2019, has the company partnering with hospitals and healthcare networks to provide access to lower-cost healthcare through its 215 Little Clinic locations in nine states and its 2,000-plus pharmacies.

The company is also dabbing in transportation. Kroger Auto, through an alliance with TrueCar, offers exclusive discounts to Kroger, Fred Meyer, King Soopers, Dillons, QFC, Ralphs, and Smith’s customers, who then receive discounted fuel at Kroger-affiliated gas stations.

Then there’s enhanced involvement in both personal finance and precision marketing, both of which represent two of Kroger’s key alternative revenue streams when it comes to growth potential.

While these forays may meet Kroger’s goals for establishing new revenue streams, Bruce Peterson, president and founder of Peterson Insights Inc., in Bentonville, AR, believes they are more about marketing than innovation.

“All these things are working laboratories that allow Kroger to gain insights into consumer behavior,” he says. “Kroger continues to invest in learning opportunities to stay relevant in the eyes of consumers—I don’t see any as particularly trendsetting, but more as keeping up.”

“None of the new strategies are unique,” agrees Mark Hayes, president of Twin Garden Sales in Harvard, IL, BB #:119080, who believes Kroger is following the lead of others. The basics of food safety, logistics, quality, and price are much more important when it comes to produce. “The other things don’t make a mark.”

This is a multi-part feature adapted from the cover story of the March/April 2020 issue of Produce Blueprints.