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Kroger Private Label Sales Dip But Gaining Share

November 29, 2012
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Kroger announced higher third-quarter profits Thursday that topped analysts’ expectations, while saying that its share of corporate brand sales in the quarter dipped slightly from the second quarter.

Kroger President and Chief Operating Officer Rodney McMullen told analysts that corporate brand share in the quarter was 26 percent in dollar shares and 32.9 percent in unit sales. Those were down from 26.3 percent dollar share in the second quarter, and 33.5 percent unit share.

“Some of the decline in corporate brand share in grocery is due to some CPG companies getting more aggressive and promoting certain items,” Mullen told analysts, according to transcripts from Morningstar. “While we strive to grow the corporate brand part of our business over time, we have long said our goal is to give the best value to our customers and in this quarter, some of the national brands provided a great value. The mix between national brands and corporate brands fluctuate in any given quarter, and we continue to be the market leader in corporate brands.”

McMullen also discussed the launch of Simple Truth earlier this year.

“We recently introduced our new Simple Truth and Simple Truth Organic brands, which are free from 101 artificial ingredients and preservatives that some customers have said they do not want in their foods,” he said. “Together, these are our fastest-growing brands, and we are very excited about our early results.”

In answer to a question about vendor relationships, McMullen talked about the goals of Kroger’s work with CPG companies as well as its corporate brands program.

“From our perspective, we are really kind of indifferent in terms of how a vendor spends their money, because if they get to where their pricing it too high, that’s the reason why we think a corporate brand – or a strong corporate brand program – is still positive,” he said. “’Cause it gives a great value, and great quality for our customers. So the vendor CPG gets to where their prices are too high and they spend 20 times as much as they have spent before our marketing, that balance won’t work for them.

“So we really are focused on how do we work with our CPG partners, how do we grow their business together, and if they get to the point where they get out of balance, we find our corporate brands always pick up share.”

Finally, analyst Scott Mushkin of Jefferies & Co. asked whether the data within the earnings release showed that Kroger was accelerating share gains against the competition. Kroger CEO David Dillon seemed eager to answer.

“I think we’re quite clear that we believe we’ve picked up share,” he said. “We just don’t think it’s been dramatic or sudden. We think it’s been gradual over time.

“The industry has widened to places, not just supermarkets. So you’ve seen a lot of the mass operators and the dollar stores and the drug stores and the club stores, all those places sell food. And so now the market is a much wider market. … We think that we are separating ourselves from many in the industry. We are among the winners in the industry, and we think that there are other winners in the industry, as well.”

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