Kroger simplifies its budget private labels

Kroger has updated its opening price point strategy in private label, winnowing 17 brands down to two: Heritage Farm for fresh and dairy product lines and a new brand, Smart Way, for nonperishable items. Do you see more benefits than drawbacks to Kroger’s move to consolidate its value-tier private labels to two brands?

Kroger has updated its opening price point strategy in private label, winnowing 17 brands down to two: Heritage Farm for fresh and dairy product lines and a new brand, Smart Way, for nonperishable items.

Kroger launched Smart Way last week with approximately 150 products and will add more items will this fall.

“As our customers face an ongoing inflationary environment, we know they are looking to stretch their dollars further than ever before,” said Stuart Aitken, Kroger’s SVP and chief merchant and marketing officer, in a statement. “Smart Way is an exciting, eye-pleasing product line that will be easy for customers to find. By adding a simplified opening price point brand strategy to Our Brands portfolio, we will further cater to every customer, every time.”

Last week on Kroger’s second-quarter conference call, Rodney McMullen, chairman and CEO, said the Smart Way launch enabled Kroger to add some “incremental” items to its lower-tier private label offerings but indicated that the primary reason for consolidating sub-brands is “making it easier for customers to shop.”

He added, “Those items are always great value for the money.”

Kroger’s private label portfolio runs across three tiers — premium (primarily the Private Selection label), middle (represented by its largest brand, The Kroger) and value (previously represented by Big K, Check This Out, Heritage Farm and other brands). Store brands also include the Simple Truth natural and organic brand and the Home Chef meal kits and heat-and-eat brand.

Walmart, Target and several grocers have seen private label grocery sales accelerate this year as consumers trade down due to inflation. At Kroger, same-store sales across “Our Brands,” its private label portfolio, rose 10.2 percent in the second quarter, nearly double the grocer’s overall 5.8 percent same-store gain.

Kroger has successfully expanded its private label offerings to represent about 20 percent of revenues in 2021. Mr. McMullen told analysts Kroger was recognized by Store Brands magazine with 12 “Editors’ Pick” awards for best new products, the most of any retailer. He said, “Our Brands are delivering innovative products at a great value.”

• Kroger Announces New Smart Way Product Line – Kroger
• Kroger Reports Second Quarter 2022 Results and Raises Full-Year Guidance – Kroger
• Kroger’s Sales, Profits Grow as U.S. Shoppers Prioritize Essentials – The Wall Street Journal
• Kroger raises annual forecasts on upbeat grocery, essentials’ demand – Reuters