Last updated on December 12th, 2024
The recent Global Produce & Floral Show in Atlanta, Georgia, provided a platform for industry leaders to discuss the evolving landscape of the grocery industry. In a candid conversation with moderator Patrick Vizzone, Kroger Chairman and CEO Rodney McMullen shed light on the dynamics shaping consumer behavior and the company’s strategic response.
McMullen highlighted the increasing economic divide among consumers: “It’s becoming much more bifurcated … If you look at the person that’s on a budget, that person is under tremendous strain.”
This economic disparity has led to significant shifts in consumer behavior, including:
- Increased reliance on private-label brands: As consumers seek value, Kroger’s Our Brands have become increasingly popular.
- Shift toward home cooking: The COVID-19 pandemic accelerated the trend of cooking at home, and consumers continue to prioritize meal preparation.
- Changing shopping habits: Consumers are adapting their shopping patterns to optimize their budgets, with some opting for larger purchases at the beginning of the month and smaller purchases toward the end.
Tech, supply chain innovation
Vizzone noted that the consumer has evolved over the years and asked how Kroger has adapted to that evolution.
McMullen responded that price, value and quality continue to be important to consumers, but there have been changes in how they shop.
“The definition of convenience is totally different today than what it was 10 years ago,” he said, adding that consumers can go to an app and schedule a delivery in 30 minutes or less.
McMullen noted that in the past, Kroger’s capital budget would have been predominantly store-based investments. Today, it is more seamless.
“What we find is the customer wants to engage with us, sometimes with delivery, sometimes pick up and sometimes in-store. There’s a tremendous amount of technology that you need to invest in to make sure that that customer can bounce back and forth,” he said.
“We spend multiples more on technology today; we spend more on the supply chain today. If you think about produce, we’ve got to figure out a way to go from the farm to the customer faster, and that is a combination of partnerships, having another supply chain and using technology to do it.”
McMullen said he looks at supply chain as partnerships to get produce from farm to stores more quickly, thereby delivering a fresher, higher quality product for customers.
While there are challenges to navigate in that process, McMullen said he sees conflicts as opportunities to differentiate.
“I think about one of our berry suppliers who does a ton of work with AI and supply chain, and the customer is beginning to realize that that product will taste better more consistently,” he said. “When you accomplish that, it also allows the customer to have a better value, and the products they get at home will have more shelf life. And it just eliminates waste.”
Future of food
Vizzone mentioned that on Kroger’s last earnings call, McMullen said produce is doing well, “better than, essentially, the store. Can you inform us of that trend?”
McMullen emphasized the growing importance of health and wellness in the food industry.
“It really gets back to food is medicine,” he said. “If you look at the United States, it’s estimated that half of health care costs is preventable if somebody changes their behavior. The No. 1 behavior change they can do is what they eat.”
Kroger is committed to offering healthier options and educating consumers about nutrition. The company offers OptUP, which tells consumers the nutritional value of what they eat. McMullen said it is very easy to use and can influence them to buy a product that “would be a little bit better for them.”
He said providing fresh, quality produce is important when trying to encourage healthier eating.
Lessons learned
Vizzone shared that McMullen started his career as a part-time grocery store clerk. “You often talk publicly about the lessons learned during that time. What are the key lessons learned?”
McMullen said he is a big believer in education, adding that his grandfather couldn’t read or write. To encourage ongoing education at Kroger, McMullen said the company offers a Feed Your Future program.
“We’ll support somebody from the GED to the Ph.D.,” he said. “If you help somebody learn, hopefully they’ll continue to learn.”
He added that company leaders have a responsibility to support their teams for the next generation. “What are you doing to make sure the generation that’s coming up is doing something better than you?”
McMullen also shared that he continues to visit Kroger stores along with those of its competitors. “Last year, I got into about 250 of our stores and about 500 of our competitors.”
While it is important to recognize and appreciate the things that the company does right, it also must strive to get better.
“It’s something so much bigger than any of us individually. We get to feed people. When we help families eat as a family, they’re more connected. Their kids stay out of trouble … It’s so much bigger.”
At the end of the day, he said what really matters is supporting customers, associates and communities.
Looking ahead
McMullen said in the coming years, advances in technology, including artificial intelligence, will become even more important for the produce industry.
“How do you get to where you’re scaling those things? You partner,” he said.
From a floral standpoint, he said the same applies.
“I would challenge all of us to figure out how to take flowers from a special occasion to an everyday occasion. Europe has it figured out. If you look at flowers, it’s an everyday thing where people have fresh flowers in their house. In the U.S., we still have a lot of work to do.”
