Private Label Buyer

Kroger Dives Into Whole Store Private Label

June 20, 2013

For the first time, Kroger discussed private label share of its whole store during remarks Thursday after the release of fiscal 2013 first quarter results.

Kroger said that corporate brands were 23.7 percent of all sales in the quarter, excluding fuel and pharmacy sales, which was a gain of 0.3 percent from a year earlier. Unit sales total 26 percent of all units sold, again up 0.3 percent from a year earlier.

The company had been reporting private label share of grocery department sales and units only before Thursday, with share ranging between 26 percent and 27 percent a quarter. Kroger President Rodney McMullen told analysts why the retailer broke out share that way.

“If you look at the private label share that I outlined, it includes all the departments except for fuel and pharmacy, so it would include produce, meat, seafood, drug/GM plus the grocery categories that we've always done in the past,” McMullen said, according to transcripts of the earnings conference call from Seeking Alpha. “So it’s the complete store excluding pharmacy and fuel. Those things we thought would be a little complicated because we're not – the generic drugs you put as private label or not and then obviously, fuel, we sell all our fuel unbranded.”

McMullen said sales of the company’s Simple Truth private label line have been strong, and the company is planning to launch 75 new items in addition to the 450 currently offered in the brand.

“If you look at shelf space, the model that we use to determine whether an item gets on the shelf is exactly the same for our corporate brands as it is for national brands,” McMullen said, according to the Seeking Alpha transcripts. “We want to make sure from a customer standpoint the same dynamic is driving the location on a shelf and the item itself, whether it even gets on the shelf. The accountability for that has to be the same for our corporate brands, just like a national brand.

“In terms of Simple Truth, it's been obviously a huge home run. It's connected really well with our customers. Because of that … the brand itself is earning more shelf space, and we continue to find new items that will fit nicely into that. … So it's working really well, but it’s earning its way there because of the connection with our customer.”

Kroger reported same-store sales up 3.3 percent in the quarter, excluding fuel. Total sales rose 3.4 percent to $30 billion, up 3.8 percent excluding fuel.