Kroger hosted a virtual 2021 Investor Day today to provide an update on the retailer’s strategic initiatives and plans to deliver strong and sustainable total shareholder return of 8% – 11%.
“Kroger continues to deliver for customers through our seamless ecosystem and relentless focus on freshness, value and convenience,” said Rodney McMullen, Kroger’s chairman and CEO. “Building upon the foundation established by our Restock Kroger transformation, and leveraging key learnings from operating during the pandemic, our strategy of Leading With Fresh and Accelerating With Digital is designed to convert our industry’s near-term tailwinds into long-term competitive advantages.
Private Brand continues to be one of the retailer’s 4 competitive moats: private brands, fresh food solutions, engaging our customers across our seamless ecosystem. W. Rodney McMullen Chairman & Chief Executive Officer, Kroger spoke glowingly of what they call “our brands”, “Simply put, customers tell us they love our brands and choose them over other leading competitor brands. Our Brands business, if it were a standalone company, would rank 8th on the Fortune 500 listing of CPGs.”
“These brands are only available at Kroger and draw customers to shop with us.
In center store, our brands is equally as strong. Our tiered strategy is anchored by mega brands such as Kroger, Private Selection, and Simple Truth. These products appeal to a vast swath of customer needs such as natural, organic, epicurean and value. Customers love our brands and they tell us in three main ways.
First, with their purchasing behavior. It’s a CPG tucked inside our business, but it’s anything but small. It’s a business that’s 8 times larger than the largest CPG company that sells products in our stores. Customers also tell us a Net Promoter Scores, our NPS is 30% to 40% higher for Kroger Simple Truth and Private Selection versus comparable competitive store brands. And finally, in product comparisons; 100% of our new our brands items in 2020 are rated as good or better than the leading CPGs. Our innovation team knows food. They perform more than 10,000 product validations last year and we’ll continue to be a key lever in our innovation strategy well into the future.
Innovation is a growth pool that is worth billions to Kroger. And with our brands and our national brand partners, we’ll win here as well. This year we’ll launch more than 660 exciting new our brands items, nearly 60% of these will be under the Simple Truth or Private Selection brands, the brands that provide us the highest margins. And it’s not just innovating in our brands, but with our national brand partners as well. We’ll be working with them to bring innovative first-to-market items that grow our collective businesses.
“Today, Kroger is uniquely positioned because of the strength of our assets and our competitive moats cultivated over several years of disciplined investment and focused execution. Our go-forward strategy builds on these strengths to drive share growth, increase profitability across digital, and deliver strong and sustainable total shareholder returns. Our talented and energized team is already delivering on our objectives, and we look forward to continuing to position Kroger to win in a post-COVID world.”
At the Investor Day event, Kroger’s leadership team will discuss the three core elements of its strategy:
- Grow sales and share by leading with fresh food;
- Increase profitability by accelerating with digital, which is now a growth engine; and
- Widen and deepen the competitive moats that will generate customer loyalty and market share gains – Seamless, Personalization, Fresh, and Our Brands.
Kroger’s leadership team will outline key growth opportunities that will drive the financial model forward including a clear path to deliver total shareholder return between 8% – 11%, through net earnings growth of 3% – 5% and strong and growing free cash flow to invest in growth initiatives and return cash to shareholders.
“Kroger is delivering on its value creation model, and over the period of 2019 to 2021, we expect to significantly exceed our total shareholder return target,” said Gary Millerchip, Kroger’s CFO. “The strength of our execution, combined with our strategic plans to continue to lead in fresh, accelerate digital, and grow alternative profit streams will enable us to achieve our 2021 guidance and deliver profitable growth beyond 2021.”