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In the realm of private labels, Kroger’s strategy has been both long-standing and innovative. Some of its private labels have been in stores for decades, yet the grocer continues to find new ways to expand its private-label presence and vary its offerings for customers.

In the 1990s, Kroger first started playing around with store brands, developing its eponymous version, a high-end Private Selection line, and a Value label. In more recent years, it has further expanded its store brands to include Simple Truth (an all-natural line of products), Check This Out (for paper and cleaning products), P$$t (canned goods), and Heritage Farm (fresh foods) brands. In addition, it chose to phase out the line of Value brand products.

Article 4These moves reflect its general private-label strategy, in which these store brands are no longer poor quality, cheap alternatives. Rather, the options offer a broader array of choices to consumers. The primary goal is to fill any gaps in the product offering, to make sure customers get whatever they need and want. It seemingly is successful in this effort: The Simple Truth brand, which caters to shoppers seeking to avoid artificial additives, is on track to become a $1 billion brand, just two years after its introduction.

In some cases, the store brands are less expensive than national brand counterparts—but not necessarily. Furthermore, Kroger insists that the quality of its store-branded products maintain at least a minimum standard, so that customers actually might prefer those options, regardless of the price. Several Kroger representatives and customers mention its peanut butter specifically as a high quality, delicious product that people prefer. In turn, its private labels now account for around one-quarter of Kroger sales.

As Kroger has expanded and increased its private-label offerings, by approximately 60 percent in recent years, it has also enhanced its manufacturing capabilities, as well as its collaborations with traditional manufacturers. Kroger produces approximately 40 percent of its store-branded products itself in 38 factories, then contracts the rest to other vendors.

Discussion Questions:

  1. Why has Kroger expanded its offering of store brands?
  2. What are some disadvantages of growing store brands?

 

Source: Alexander Coolidge, Cincinnati Inquirer, September 20, 2014