No More Free Balloons: Kroger Shoppers May Notice Changes, and Here's Why

Kroger is cutting here and spending there and generally disrupting itself. The second largest U.S. grocer and seventh largest pharmacy is making decisions in Dallas-Fort Worth and nationwide that it wouldn’t have contemplated a few years ago. Kroger laid off 17 of its 300-plus D-FW pharmacists two weeks ago, shed long-term local floral supplier contracts - some were 20 and 30 year relationships - and even stopped giving free Kroger helium balloons to children.But it’s also hiring 11,000 additional store staff -- 550 in D-FW -- to improve store operations. And it’s using tax-cut savings to fund college tuition for employees.Kroger is making changes in the wake of the grocery industry’s upheaval where online is finally taking market share as Amazon and Walmart duke it out and customers with abundant food shopping choices are no longer loyal to one grocery store or one chain.“The only thing that stays consistent is people keep eating, but the way they eat will constantly change,” said Kroger CEO Rodney McMullen in an interview on Bloomberg TV last week from the Milken Institute’s annual conference.“People are much more interested in being inspired by food and food that’s healthy for them, but on their terms,” he said. Last year, Kroger bought Murray’s Cheese, a company it had partnered with since 2008 and so far has put 400 of its branded cheese shops inside Kroger stores. Kroger also created the Simple Truth organic brand five years ago and it now has annual sales of $2 billion, McMullen said.Last fall, Kroger announced a program it called “Restock Kroger” that it said would generate $400 million in profit by 2020 and cut costs to free up $4 billion to put to work in other parts of its business including lower prices and higher wages.Locally, Kroger saved money when it shifted a contract in December to Penske Logistics to run its Keller warehouse that supplies its 93 D-FW stores. The former warehouse operator employed 690 people. Now Penske is running it with 80 fewer people: 584 in job, plus 25 openings it’s actively trying to fill.The 135-year-old supermarket chain is changing the store experience. This year, it added Scan, Bag, Go systems to 19 D-FW stores while closing a handful of unprofitable stores. Last year, it added ClickList, an online shopping curbside pickup service.“Kroger is a great retailer. Every retailer is trying to find the optimum operating model and they’re doing it in a time when the rate of change in the industry just keeps speeding up,” said Thom Blischok, a longtime Phoenix-based consultant to the top companies in the grocery business. “So, yes, people will lose jobs and people will be hired in other jobs.”The merger between CVS and Aetna, Albertsons purchase of Rite Aid and a potential deal between Walmart and Humana put pressure on supermarket pharmacies, he said.“The pharmacist is the most trusted person in the store. But there’s a huge focus now on that business,” Blischok said. “We are in the age of experimentation. It’s not about reducing pharmacy.”Painful StillPharmacy has been one of the most productive sections of the modern neighborhood supermarket, and most of Kroger’s stores have pharmacies: 2,268 of its 2,782 supermarkets.Kroger and other supermarket chains are trying to keep it that way. But just like the grocery business, the prescription drug business is rapidly changing.  Continue reading...

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