Kroger's own brands are 'crushing' the competition

CINCINNATI — A key part of Kroger's go-to-market strategy is the company's commitment to own brand innovation, Rodney McMullen, Kroger chairman and CEO, told analysts Thursday. And the proof is literally in the pudding — in blind taste tests Kroger customers chose the company's Simple Truth and Simple Truth Organic products in favor of many leading national brands.

"Last year, we commissioned an independent third-party to conduct research that would give us an objective view of how our customers view our brands," McMullen said. "This included blind taste tests with national brands and other private label foods. Our research showed that the most-loved brands sold in our stores are our brands above even the national brands," he said. "Our brands outperformed competitive national brand and other private label products almost 100% of the time."

"We don't look at [product development] in terms of trying to do something versus a CPG, [it's] doing the things that the customer wants.”

"Our brand has been incredibly important to Kroger since the founding of the company," shared Michael Schlotman, CFO Kroger. "We wanted to make sure we weren't just biased because we're so close to it. [So] we did the research with our customers and our customers gave us glowing feedback on how strong our brands were, how great the products were in a blind panel [and] we just crushed the competitors in that space," he said. "We don't look at [own brand product development] in terms of trying to do something versus a CPG. We really look at it as our brand and building our brands and doing the things that customer wants."

For the latest quarter, Kroger's own brand penetration came in at 28% of total units sold and 25.6% of sales dollars, excluding fuel and pharmacy.

But that customer validation only means Kroger's own brand products need to continue to raise the bar going forward, McMullen said. "Our journey is never done so our customers will continue to see rising quality and better value on our brand products in the future," he said. "By having brands our customers love that are only available from us, we gain loyalty and advocacy from our customers."

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