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In 1883, Barney Kroger invested his life savings of $372 to open a grocery store in downtown Cincinnati. Kroger ran his business with the motto: “Be particular. Never sell anything you would not want yourself.” Kroger’s motto and the mentality that followed such a belief of never selling anything that he would not want himself served him well. In over 120 years, the business evolved into a variety of formats aimed at satisfying the evolving needs of shoppers. Kroger now has nearly 2,500 stores in 31 states under 24 banners. These stores bring in sales of more than $70 billion, and Kroger ranks as one of the nation’s largest retailers.
Many aspects of the company’s business today trace their roots to Mr. Kroger’s early efforts to serve his customers in the best way possible. In most of the country’s grocery stores or supermarkets, two specialty departments, bakeries and meat and seafood shops, are located at these different stores. In the early 1900s, most grocers bought their bread from independent bakeries but Mr. Kroger realized that if he baked his own bread, he would be able to reduce the price for his customers as well as continue to make a profit. Mr. Kroger was the first grocer in the country to establish his own bakeries, and he was the first to sell meats and groceries under one roof.
Mr. Kroger decided to increase his income by manufacturing the products that he sold. It began when farmers came to town selling their produce and Mr. Kroger bought more cabbage than he could expect his customers to buy. He took this extra cabbage home to his mother who turned it into tangy sauerkraut that proved to be extremely popular with his German customers. The manufacturing effort born in Mr. Kroger’s mother’s kitchen marked the beginning of one of the largest food manufacturing businesses in America. Kroger operates 40 food processing facilities that make thousands of products ranging from bread, cookies and milk to soda pop, ice cream and peanut butter. Nearly half of the 14,400 private-label items found in the company’s stores today are made at one of these manufacturing plants. These “corporate brands” today account for an impressive 26% of the grocery dollar sales at Kroger, providing the company with a huge strategic advantage.
Mr. Kroger would hardly be able to recognize his business because the new Kroger stores tip the scales at 65,000 square feet or more. The shelves today are packed with up to 50,000 items ranging from basic grocery staples to more innovative fare such as organic vegetables, natural foods, and hot meals ready to eat. Kroger operates approximately 1,900 in-store pharmacies that fill more than 120 million prescriptions a year. Its floral shops ring up enough business to make Kroger the world’s largest florist. Kroger has even installed fuel centers in the parking lots of more than 700 stores to appeal to customers who want to gas up their cars during their shopping trip.
Kroger has also acquired different companies that have added to Kroger’s growth over the years. In 1983 Kroger merged with Dillon Companies Inc. in Kansas to become a coast-to-coast operator of food, drug and convenience stores. The biggest merger in Kroger’s history came in 1999, when the company teamed up with Fred Meyer, Inc. in a $13 billion deal that created a supermarket chain with the broadest geographic coverage and widest variety of formats in the food retailing industry. The merger also enabled Kroger to generate huge economies of scale in purchasing, manufacturing, information systems and logistics.
Throughout its rich history, Kroger has served as a pioneer in the supermarket industry. During the 1930s, it was the first grocery chain to routinely monitor product quality and test foods offered to the customer. In 1972, Kroger became the first grocery retailer in America to test an electronic scanner. It was installed in a store in suburban Cincinnati, and visitors from around the country attended the event. In the ‘70s, the company became the first grocer to formalize consumer research. Kroger soon was interviewing more than a quarter-million shoppers each year to find out what they wanted in a supermarket. That feedback prompted Kroger to introduce unpackaged produce and service specialty departments such as delis.
With dozens of manufacturing facilities and distribution centers around the country, Kroger also has one of the largest privately owned truck fleets in the country. Trucks moving merchandise and supplies among our stores, warehouses and manufacturing plants log more than 100 million miles annually.
The business principles that made the first Kroger store successful in 1883 – service, selection and value – continue to guide the company’s operations today. From one tiny grocery store in Cincinnati more than a century ago, Barney Kroger laid the foundation for what today ranks as one of the largest companies in America.
Sharp cheddar cheese
Deluxe cookies and cream ice cream
Asian noodle meals
Frozen fresh fruit
Men’s and women’s multi vitamins
Healthy O’s cereal
Nonfat and low fat yogurt
Fat free milk
Products for newborns
Products for infants
Products for toddlers
Daily shampoos and conditioners
Body care products
Garden and garden+ salads
Baby blend salads
Single-serve salad kit
Multi-serve salad kit
Their website is
They are in the retail industry
Founded by Bernard Kroger
Mr. Bernard Kroger ------>
David Dillon is CEO and chairman
Kroger is one of largest grocery retailers in the United States with fiscal sales of $82.2 billion in 2010. Its headquarters is in Cincinnati Ohio; however, it has many locations that span nationwide(mainly in Midwest and Southern U.S.) The Kroger company has other store formats besides grocery; for example convenience stores, mall jewelry stores, and department stores. Kroger believes in building strong local ties and and brand loyalty with their customers.
All of the types of stores are Supermarkets, Price-Impact Warehouse stores, Multi-Department Stores, Marketplace Stores, Convenience Stores, Jewerly Stores, and Services such as personal finance.
Channels of Distribution
Consumer Distribution Channel
Industrial Distribution Channel
Rationale for Channels
The channel does fit the target customer because obviously it is working since Kroger is one of biggest grocery stores in the United States. Also the channel works because it gets the products the target customer want in their area, and it still gets them there fresh.
The channel does fit the brand positioning because it keeps the Kroger brand products exclusive to Kroger stores. Also it keeps quality products that customers want in the store, thus money is always being made.
The channel is a very good fit for the company and it works efficiently. In some cases Kroger manufactures their products distributes their own products to their stores and sells them. That channel is good because Kroger does it all themselves and doesn’t have to rely on anyone else.
While it is difficult to do Kroger does achieve economic goals through the channel. They only make 1 to 2 cents per dollar they sell, which isn’t really great but it get the job done. Since the profit margin is so small Kroger keeps bringing in new products that the customers want.
The distribution intensity that is utilized by Kroger is exclusive distribution. Exclusive distribution is when customers/consumers are only able to find Kroger’s products are certain stores, but in Kroger’s case, the stores that they own. Fortunately for customers, Kroger’s products are able to be found nearly everywhere because Kroger has thousands of stores across the country. Kroger uses exclusive distribution because it allows them to have more control of their brands and it causes customers to go to Kroger’s stores to find Kroger products.
How the Channel Works
CHANNEL SPECIFICS AND INTERMEDIARIES
The channel distributes the different products to the retailers to distribute to the customers. Kroger, since it is privately owned, is the owner of the different channels of distribution utilized. Kroger serves as wholesaler, retailer, and provides the different forms of transportation for their own products. Because the intermediaries that Kroger uses are privately owned by Kroger, they are able to have heightened control over the distribution of their brands. Kroger also saves money because instead of hiring different intermediaries, they are self-sufficient.
HOW THEY CONNECT WITH CUSTOMERS
The channels of distribution connect with the customers at the retail level. Kroger privately owns 3,619 retail stores. At these different stores, customers are able to find and purchase the different products made by Kroger that they want.
HOW KROGER HANDLES LOGISTICS
Kroger handles the assortment, storage, sorting, and ticketing of their products on their own. Kroger pick and choose their own products. Kroger manufacturers around 39% of their own products, and the others come from general mills or from other countries. Agents, employed by Kroger, are in constant contact with these other manufacturers trying to decide what Kroger should buy and sell. Because Kroger serves as its own wholesaler and retailer, they sort, ticket, and store their own products. Being able to do all of this on their own allows them to have more control over how they would like to sell and market their products. It also allows them to have even more brand control. Kroger sorts, stores, and tickets their products at the warehouses before they transport them to their retailers.
FINANCING AND SALES
Forms of Transportation
Forms of Transportation
The different forms of transportation used by Kroger include trucking and occasionally waterways. Trucking is used on a daily basis by Kroger. Kroger has a fleet of 1,800 tractors and 8,200 trailers that make about 3,000 deliveries a day. Kroger, because of the rising price of fuel, has worked on the aerodynamics of their trailers and tractors, and have invested capital into the development of trailers that will have better gas mileage. Waterways are occasionally used when receiving products from foreign countries, but because the majority of products come from either General Mills or Kroger, waterways are rarely utilized.
There are many advantages associated with the use of trucking to transport products. These advantages include: trucks are able to carry products with a limited shelf life, they are trusted to carry highly valued products, and they have flexible schedules (no fixed schedule of when to leave). Since Kroger has its own fleet of trucks/trailers to use for transportation, this allows them to have more control over their brands.
Waterways have many advantages because it is the cheapest form of transportation and because Kroger can transport large, bulky items/resources easily on the ships/carriers that transport the goods/products.
Main Points/Review Questions
1. Kroger is one of the biggest grocery retailers in the nation.
2. Kroger large company with more types of stores than just grocery.
3. Kroger serves as their own intermediaries.
4. Kroger utilizes trucking and waterway transportation.
5. Kroger uses exclusive distribution.
1. What is Kroger?
2. What type of distribution does Kroger use?
3. What type of transportation does Kroger use?
4. Who founded Kroger and where?
5. What industry is Kroger in?
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