A Coronavirus Bull Market for Groceries
The owner of Manhattan’s largest supermarket chain, John Catsimatidis, on panic buying, mask-clad cashiers, and how the pandemic will permanently change his business.
By Tunku Varadarajan
April 3, 2020 2:11 pm ET
John CatsimatidisILLUSTRATION: KEN FALLIN
New York
In the days before the Wuhan coronavirus hit America hard, widespread alarm ensued. This expressed itself most obviously in the flocking to supermarkets. Shelves were depleted of their contents, with a few items—such as hand sanitizer, disinfectant wipes and Lysol products—becoming prized and scarce. Of all the things dear to American civilization, toilet paper became the leitmotif of the country’s collective panic.
The run on toilet paper makes grocer John Catsimatidis angry, even though its recent sales are bound to have fattened his bottom line. “There’s a rumor that there will be a shortage of toilet paper—and then there is a shortage of toilet paper,” he sputters over the telephone. (This interview was conducted pursuant to social-distancing best practices.) There is no real shortage of toilet paper, he insists, describing any passing scarcity as the result of unhinged demand. “What do you normally have at home, maybe four rolls? Now homes have 12, 24, 36.” As for Purell, he says, people “normally don’t have it, or one bottle at home at best. Now they have one in every room.”
New York is the American city hardest hit by Covid-19, and Mr. Catsimatidis, 71, is New York’s grocer. He owns one chain of supermarkets, Gristedes, and a controlling interest in another, D’Agostino. With 34 stores in total, his is the largest supermarket presence in Manhattan (with a store each, he insists I note, in Brooklyn and on Roosevelt Island, which sits in the East River but is part of the borough of Manhattan). The Forbes 400 list of wealthiest Americans reckons his net worth at $3.3 billion, money made from loo paper gone gangbusters, real estate and oil.
“There is no reason to panic about supplies,” Mr. Catsimatidis says. “I want people to know that. Only panic buying causes shortages.” Immediately, he texts me a picture, taken at one of his stores, of shelves stacked with paper goods. The virus has doubled his business. “Before the jump in demand,” he says, “around 200 trucks unloaded at our stores every day. Now we’ve got 400 trucks daily.”
In a few days, the local supermarket was transformed from a mundane place every American took for granted into a shrine to human survival. Mr. Catsimatidis counsels Americans who wish to stock up to buy “no more than two to three weeks’ worth of supplies. Most people have stuff for three days, in normal times. They don’t need stuff for two or three months.”
The grocery industry is one of the few in America that are hiring at a time when many businesses are laying people off. Mr. Catsimatidis says that he’s hired 100 additional employees at his stores: “We found that our loyal staff were working something like 70 hou.
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A Coronavirus Bull Market for GroceriesThe owner of Manhattan’s .docx
1. A Coronavirus Bull Market for Groceries
The owner of Manhattan’s largest supermarket chain, John
Catsimatidis, on panic buying, mask-clad cashiers, and how the
pandemic will permanently change his business.
By Tunku Varadarajan
April 3, 2020 2:11 pm ET
John CatsimatidisILLUSTRATION: KEN FALLIN
New York
In the days before the Wuhan coronavirus hit America hard,
widespread alarm ensued. This expressed itself most obviously
in the flocking to supermarkets. Shelves were depleted of their
contents, with a few items—such as hand sanitizer, disinfectant
wipes and Lysol products—becoming prized and scarce. Of all
the things dear to American civilization, toilet paper became the
leitmotif of the country’s collective panic.
The run on toilet paper makes grocer John Catsimatidis angry,
even though its recent sales are bound to have fattened his
bottom line. “There’s a rumor that there will be a shortage of
toilet paper—and then there is a shortage of toilet paper,” he
sputters over the telephone. (This interview was conducted
pursuant to social-distancing best practices.) There is no real
shortage of toilet paper, he insists, describing any passing
scarcity as the result of unhinged demand. “What do you
normally have at home, maybe four rolls? Now homes have 12,
24, 36.” As for Purell, he says, people “normally don’t have it,
or one bottle at home at best. Now they have one in every
room.”
New York is the American city hardest hit by Covid-19, and Mr.
Catsimatidis, 71, is New York’s grocer. He owns one chain of
supermarkets, Gristedes, and a controlling interest in another,
D’Agostino. With 34 stores in total, his is the largest
supermarket presence in Manhattan (with a store each, he insists
2. I note, in Brooklyn and on Roosevelt Island, which sits in the
East River but is part of the borough of Manhattan). The Forbes
400 list of wealthiest Americans reckons his net worth at $3.3
billion, money made from loo paper gone gangbusters, real
estate and oil.
“There is no reason to panic about supplies,” Mr. Catsimatidis
says. “I want people to know that. Only panic buying causes
shortages.” Immediately, he texts me a picture, taken at one of
his stores, of shelves stacked with paper goods. The virus has
doubled his business. “Before the jump in demand,” he says,
“around 200 trucks unloaded at our stores every day. Now
we’ve got 400 trucks daily.”
In a few days, the local supermarket was transformed from a
mundane place every American took for granted into a shrine to
human survival. Mr. Catsimatidis counsels Americans who wish
to stock up to buy “no more than two to three weeks’ worth of
supplies. Most people have stuff for three days, in normal times.
They don’t need stuff for two or three months.”
The grocery industry is one of the few in America that are
hiring at a time when many businesses are laying people off.
Mr. Catsimatidis says that he’s hired 100 additional employees
at his stores: “We found that our loyal staff were working
something like 70 hours per week, and we had to lighten the
load.” Will he keep them on after the crisis? “It depends on our
needs,” he answers, “and it depends on the mood of New York’s
people.”
An epidemic poses special challenges to face-to-face retail.
“We’ve put up a visible guard between customers and
employees at the checkout,” Mr. Catsimatidis says, as he texts
me a photo of a masked employee behind a transparent screen at
a register. “And we put tape on the floor near the checkout to
mark a 6-foot distance for customers.” The stores are
distributing masks to employees. “We have our stores fumigated
every night, and we have our managers monitoring the
temperature of every employee before they come in and log in.”
He adds ruefully that “we’re short thermometers right now.”
3. In response to a question about employee morale, Mr.
Catsimatidis says “we have a few” who are unhappy, “but not as
many as Whole Foods or Amazon.” It helps that he gets along
with the unions that represent his employees: “I’m in business
51 years. We’ve been unionized 51 years. And we’ve worked
with them 51 years.” Many of the employees at Gristedes and
D’Agostino have been “very loyal, working with the company
for 10, 20, 30 years.”
Mr. Catsimatidis says the pandemic will have a “huge impact”
on how Americans live—and how they shop. He sees changes in
behavior unfolding in real time that he doesn’t think will be
reversed once the coronavirus abates. “You have the brick-and-
mortar stores like ours, and the internet companies that deliver,
like Instacart.” People are ordering “the heavy stuff, the paper
goods” online, and won’t stop. “They’ll rather have it delivered
and pay the extra dollar than—how do you say that Jewish
word?—schlep it home themselves.”
With the paper-goods business migrating online and “half of all
drugstore space now used for food,” Mr. Catsimatidis says
supermarkets like his may have to repurpose themselves into
“convenience stores where people come to buy specific food
products.”
Yet the closure of restaurants is helping the supermarket
business. Dining out is prohibited under emergency executive
orders, and many eateries have shuttered takeout and delivery
too. This redounds to the supermarkets’ advantage, and Mr.
Catsimatidis thinks that may continue after the crisis.
In normal times, “60 cents of every food dollar spent in New
York City is spent in restaurants,” he says. “Let me say that
again: 60% of the food eaten in New York is made by
restaurants. And this is where the real increase in business is
coming to the supermarkets right now.” New Yorkers who
seldom cooked have had to take to their kitchens under
lockdown. “Some of them are making good food at home,” he
says. “Really good food.”
Mr. Catsimatidis thinks the eclipse of restaurants could have a
4. profound impact on New Yorkers’ habits. “People are getting
used to staying home, and restaurants could be hurt by it if we
decide we like eating at home.” The pandemic could accelerate
a similar change in the entertainment business: “Tell me, when
you go to the movies, do you know who you’re sitting next to?
No, you don’t. Wouldn’t you rather stay home and
pay Disney $30 to watch a first-run movie?”
The grocery mogul’s life, it could be said, is not unlike a movie
script. Born on Nisyros, a tiny Greek island, he was 6 months
old when his parents migrated to the U.S. They settled in
Harlem, where he grew up on 135th street. His father worked as
a busboy. Mr. Catsimatidis bought his first grocery store while
he was an undergraduate at New York University. He dropped
out eight credits short of graduation, and now lives palatially on
Manhattan’s Fifth Avenue, a man of self-made wealth. In 2016
his native Greece honored him by putting his likeness on a
postage stamp. A former “Bill Clinton Democrat,” he
unsuccessfully sought the 2013 Republican nomination for
mayor of New York. His opponent went on to lose to Democrat
Bill de Blasio.
How would he handle the crisis if he were in City Hall? “I’d be
sitting down with Donald Trump and saying, ‘What else can you
do for me? Please. And thank you, sir.’ ” He contrasts this with
the combative approach Gov. Andrew Cuomo initially took: “I
gave Cuomo some advice. I said, ‘Donald Trump, whether you
like him or not, is the president of the United States. You’ve got
to decide. He can move mountains for you if you’re nice to him.
You don’t want to be nice to him? You’re not going to get as
many mountains.’ And I think I had an effect on Cuomo.”
The supermarket business, Mr. Catsimatidis says, “changes
every 10 years or so.” The food he sells in his stores today
bears little relation to the stock on display at his first Red Apple
grocery half a century ago. The most notable change of late has
been in the volume of produce sold. “Ten years ago,” he says,
“your produce departments did 7% of store sales and your meat
departments 17%. Now they have flipped. Produce and
5. vegetables are way up there; meat products are way down.”
He expects the pandemic will drive the next great change, a
demonstrative focus on hygiene. There will be a next generation
of packaging. “People won’t be touching the produce so much,
or touching it at all. Everything will be packaged around human
handling.” Prodding the tomato or sniffing the melon before you
buy may be a thing of the past. “The mood will demand that
everything be clean, untouched. I think the people’s mood will
be very important for us, in everything we do.”
https://www.wsj.com/articles/a-coronavirus-bull-market-for-
groceries-11585937507?mod=searchresults&page=2&pos=17
Coronavirus Pushes Restaurants Into the Grocery Business
New York eateries tap their supply chains to bring customers
fresh produce and meat as pandemic puts strain on grocers
Fort Defiance, a restaurant and bar in Red Hook, Brooklyn, has
been filling a need for grocery options during the coronavirus
crisis.
PHOTO: MARK SHORTLIFFE
By Charles Passy, The Wall Street Journal
April 15, 2020 4:38 pm ET
Soon after St. John Frizell was forced to shut down Fort
Defiance, his restaurant and bar in Brooklyn’s Red Hook
neighborhood, because of the pandemic, he struggled to figure
out a way to bring in any revenue.
A plan to offer takeout fizzled. But Mr. Frizell couldn’t help
but note that many in the community were hesitant to visit the
local supermarkets and were finding it difficult to get a delivery
time slot with online grocers.
So, Mr. Frizell decided to re-christen his dining and drinking
spot as a mini grocery for locals, working with some of his key
vendors to offer customers fresh produce, meat, fish and select
6. other items on a pickup basis.
“It would be of more value to them then going up to my window
and ordering an Irish coffee,” he said.
Mr. Frizell has plenty of company. Several restaurants in New
York City, from independent operations to chains, are trying
similar efforts, though the size and scope of the offerings
varies.
Fort Defiance is working with some of his key vendors to offer
customers fresh produce, meat, fish and select other items on a
pickup basis.
PHOTO: FORT DEFIANCE
Just Salad, a New York-based salad chain, has launched a robust
delivery program that incorporates not only produce and
proteins, but also everything from meal kits to toilet paper. The
operators of Taiyaki and the Dough Club, two New York-based
establishments that specialize in Japanese desserts, have
introduced an online grocery, Konveny.com, devoted strictly to
Japanese products, from rice crackers to red-bean ice-cream
bars.
Business has taken off with the Konveny platform to the point
that Jimmy Chen, co-founder of Taiyaki and the Dough Club, is
worried about keeping pace with the demand and finding
storage space for his items, particularly frozen ones.
“If you know anyone with a freezer, I’m buying,” he said.
Other food-related businesses are forging their own path in the
grocery realm as well. Baldor Specialty Foods, a New York-
based importer and distributor of produce and other items, is
venturing beyond the wholesale market for the first time to
deliver food directly to customers, with a $250 minimum.
And Purslane, a Brooklyn-based catering company, is delivering
what it calls a weekly “farmers market box” to locals, along
with prepared foods. It plans to increase offerings in the coming
days to include olive oil, flour, butter and eggs.
While the obvious driving factor for all these businesses is the
need to find alternate sources of sales during the pandemic, the
7. effort for restaurants is also about maintaining a connection
with customers with an eye on the post-pandemic return to
normal. The hope is that patrons will be all the more loyal to
these establishments when they fully reopen because of the
grocery service each provided.
Some of the produce sold through the Fort Defiance General
Store.
PHOTO: FORT DEFIANCE
“There’s a feel-good emotion” that will pay dividends down the
road, said John Davie, chief executive of Dining Alliance, a
company that works with independent restaurants on
purchasing.
Mr. Davie and others in the industry also noted that restaurants
are well-positioned at this time because their supply chain isn’t
typically the same as that for supermarkets, which means they
can sometimes procure hard-to-get items. On top of that, they
often have access to high-quality fare, from prime-grade meats
to heirloom produce, not found in markets.
That is something that Stacey Douglas Moverley, a resident of
Red Hook in Brooklyn, has appreciated about the items she has
picked up from Fort Defiance during the pandemic. She pointed
to everything from a “lovely pork loin” to “amazing breakfast
sausages,” saying such fare has kept her well fed during the
health crisis.
“It’s just been a godsend,” she said.
https://www.wsj.com/articles/coronavirus-pushes-restaurants-
into-the-grocery-business-
11586983087?mod=searchresults&page=2&pos=4
America’s Biggest Supermarket Company Struggles With
Online Grocery Upheaval
Kroger adjusts operations and invests in technology to hang on
to customers who avoid stores; ‘we’ve got to get our butts in
8. gear’
ByHeather Haddon
Updated April 21, 2019
Nobody can say Rodney McMullen doesn’t know the grocery
business. He started as a bagger at Kroger Co. when he was in
college, rising through the ranks to become chief financial
officer, then chief executive officer, of America’s biggest
supermarket chain.
But can he lead the 2,764-store Cincinnati-based company
through the changes upending the supermarket industry?
“You are in Cincinnati. You are a conservative bunch of
people,” said Bill Smead, chief executive of Smead Capital
Management and a Kroger investor. “Does anyone’s blood pulse
through their veins with an entrepreneurial bent?”
Not since Walmart Inc. first pushed into groceries in the late
1980s have traditional chains faced so many challenges. E-
commerce is transforming the business, forcing cash-strapped
companies to overhaul their operations and invest heavily in
technology and talent to keep customers from straying
to Amazon.com Inc. At the same time, they have to keep food
prices as low as consumers have come to expect.
Kroger CEO Rodney McMullen says he believes the company
has devised a plan to help it grow again. PHOTO:SANGSUK
SYLVIA KANG/THE WALL STREET JOURNAL
The transition has proven rough for Kroger, which stayed
focused on store sales long after mass-merchant competitors
were investing in online-ordering technology and delivery
services. Executives have debated which investments to make
and how drastically to change the company’s business model.
Some would-be technology partners have been turned off by
what they see as the grocer’s conservative culture—including
members of one group who stormed out of a meeting in protest.
Mr. McMullen knows it is a pivotal moment for the
company and that investors are concerned. “We’ve got to get
9. our butts in gear,” he said in an interview. “There was no doubt
we were behind.” He said he believes Kroger executives have
devised a plan to help it grow again.
Few American retailers have managed the online transition
smoothly. Target Corp. and Walmart struggled before improving
stores and e-commerce operations. Sears HoldingsCorp. filed
for bankruptcy protection in October. Toys “R” Us was
liquidated in March 2018.
Online ordering and delivery has been around in the U.S.
grocery business for decades, but it hasn’t caught on as rapidly
as it has in other sectors. Many U.S. shoppers live close to
supermarkets and prefer to select food from the aisles. That is
changing as more young people form families and older people
get more comfortable ordering online. One option proving
especially popular is for consumers to order groceries online for
pickup in a store’s parking lot.
Online purchases account for just 5% of the roughly $1 trillion
U.S. food and consumer-product market, according to Nielsen.
Yet online sales are growing 40% annually, while in-store sales
have been flat for years.
“It’s like driving on the autobahn,” Mr. McMullen told
investors last fall. “It’s incredibly exciting. But there’s a lot
going on, and it’s going on fast.”
Years ago Walmart became the largest food seller in the U.S.,
while Kroger remains the biggest supermarket chain by stores
and sales. Walmart boosted its delivery business with its 2016
purchase of Jet.com, bringing on Jet executives to accelerate
online grocery sales. Target bought Shipt Inc., another grocery
delivery service, in 2017. And Amazon broadened its reach into
the grocery business by buying Whole Foods in 2017, although
it, too, has struggled with online delivery of groceries.
To catch up, Kroger has budgeted $4 billion for investments,
including warehouses managed by robots, a meal-kit company
and digitally enabled shelves that market products to customers
through LED displays. Last year, it formed a partnership with
an autonomous-vehicle startup, Nuro Inc., and started selling its
10. line of natural and organic products on Alibaba Group Holding
Ltd.’s Tmall site in China.
Those investments are denting its profits at a time of intense
competition to sell groceries cheaply. Its shares are down 17%
since June 2017, when Amazon said it would buy Whole Foods,
and have dropped after five of Kroger’s eight latest quarterly
earnings reports.
Sapphire Star Capital, an investment fund, sold a $350,000
stake in Kroger in September. “We just had to cut them loose,”
said Michael Borgen, the fund’s chief executive. “They just got
too volatile.”
Kroger has invested in Ocado Group to build a network of
automated warehouses for online retail akin to this Ocado
facility in the U.K. PHOTO: PETER NICHOLLS/REUTERS
John San Marco, a research analyst at Neuberger Berman, an
investment-management firm that owns Kroger stock, said the
company is doing the right thing by investing in online
operations, even if it dents profitability in the near term.
“Kroger is in the very early innings of a business
transformation,” he said. “This isn’t a one and done.”
Mr. McMullen, who became CEO in 2014, has acknowledged
that Kroger was slow to invest online. He said many
competitors also avoided investing in online operations until
recently. On Kroger’s latest earnings call in March, he sought to
reassure investors that Kroger’s investments will pay off. “You
have to start somewhere, and you have to learn,” he said.
Kroger has a record of dabbling in digital projects without
committing to more significant changes to its business, current
and former employees say.
In 2000, when Mr. McMullen was CFO, Kroger canceled a pilot
delivery program in Columbus, Ohio, because of low demand.
Another pilot has been running at Kroger’s King Soopers chain
in Denver for two decades without expanding to additional parts
of the country.
Another such effort began about seven years ago when
11. executives were told that Amazon had surpassed Kroger as a top
seller of Procter & Gamble Co. ’s diapers.
At the time, Kroger’s digital-operations staff fit into a small
room at its Cincinnati headquarters. They started meeting every
Friday at 7 a.m. to discuss ways to improve Kroger’s digital
efforts. The operation soon expanded.
Kroger didn’t have the infrastructure to ship goods to
customers. Building warehouses and wooing tech talent to build
an online-grocery portal would have cost hundreds of millions
of dollars, employees say.
Kroger is experimenting with using autonomous vehicles to
deliver groceries. PHOTO: KROGER/ASSOCIATED PRESS
Kroger managers remained focused on their stores, where sales
determine their compensation and chances for advancement.
Some believed boosting online sales would create extra work
and distract the company from maximizing store revenues,
former executives said.
“Most of us, when we say the digital world, automatically
conclude that e-commerce is where everything is going,” then-
CEO David Dillon told investors in 2013. “I don’t draw that
same conclusion.” Reaching customers digitally also included
things like online coupons and social media, he said.
Amazon continued to siphon diaper sales from Kroger and other
retailers, notching roughly $500 million in diaper sales last
year, according to estimates by market research firm Edge by
Ascential.
Kroger turned to acquisitions to boost its digital reach. It
bought Vitacost.com, an online retailer of natural foods and
supplements, for $280 million in 2014. But Kroger was slow to
integrate Vitacost’s technology into its operations. That
frustrated Vitacost’s founders and Kroger employees who had
brokered the deal, according to people from both companies.
A meeting at Vitacost’s Boca Raton, Fla., headquarters soon
after the deal closed underscored the divide. Vitacost employees
suggested emailing promotions to customers so that discounts
12. could be tweaked more often than through the paper circulars
that Kroger planned months in advance.
Kroger executives balked, with one marketing head saying that
Vitacost was a rounding error in the company’s overall balance
sheet and it wouldn’t just change its promotional plans,
according to people from both companies. Some Vitacost
executives walked out in protest.
Kroger was slow to add a link to Vitacost on its website or
place signs in its stores promoting Vitacost. Officials from the
two operations clashed over whether to let Vitacost accept
Apple Pay or PayPal, the people said. Vitacost’s revenue grew
less than that company had expected. Engineers and executives
left the company. Other Vitacost executives have remained at
Kroger and helped on various technology initiatives.
Although Walmart is the largest food seller in the U.S., Kroger
remains the biggest supermarket chain by stores and
sales. PHOTO: ERIK S. LESSER/EPA/SHUTTERSTOCK
Some at Kroger acknowledge more could have been done to
make its Vitacost investment pay off. “Some look at us and
argue we haven’t done much with Vitacost,” said Michael
Schlotman, who stepped down as chief financial officer this
month and will retire at the end of the year. “It’s a fair
assessment.”
Kroger now accepts PayPal on Vitacost but not its other e-
commerce sites. It uses Vitacost’s technology for a ship-to-
home grocery service that made its debut last year. Executives
hope the service will win back business from Amazon’s
subscription service for staple goods.
“It’s just starting to get legs,” Mr. McMullen said.
Kroger recently tried to partner with, invest in or acquire three
different startups: Shipt, the online grocery delivery service;
meal-kit company Plated; and Boxed.com, a bulk online retailer,
according to people familiar with those efforts. None panned
out.
Target bought Shipt in December 2017. National grocery chain
13. Albertsons Cos. purchased Plated in 2017 for more than Kroger
offered, according to people familiar with the negotiations.
Boxed executives and investors balked over terms offered by
Kroger in negotiations, talks stalled and Kroger never made a
formal offer.
“They aren’t willing to pay enough to buy technical talent,” said
one person involved in negotiations between Kroger and those
startups.
Amazon broadened its reach into the grocery business by buying
Whole Foods in 2017. PHOTO: JOHN
MINCHILLO/ASSOCIATED PRESS
Yael Cosset, Kroger’s chief digital officer, declined to comment
on any negotiations. He said the company tends to be more
conservative in rolling out tech pilots that directly affect
customers in stores, but has moved faster behind the scenes on
other efforts.
Kroger officials say the company is now working
with Microsoft Corp. , Oracle Corp. , IBM Corp. and other tech
companies, and is spreading the word about Kroger to potential
tech startup partners at the Cincinnati-based Cintrifuse startup
investment fund.
“Kroger has been very bold in their vision,” said Luke Jensen,
chief executive of Ocado
Solution
s, a division of U.K.-based automated-grocery company Ocado
Group PLC that Kroger has invested in to build a network of
automated warehouses for online retail in the U.S. “They are
learning from us, but we are learning from them.”
Kroger spent years negotiating with Instacart Inc. before
14. Amazon’s Whole Foods purchase spurred executives to strike a
deal. Instacart now makes deliveries from more than 1,600
Kroger stores.
Some suppliers give Kroger executives credit for
acknowledging the challenges they face. Last year, one grocery-
delivery vendor told a Kroger technology executive that despite
the company’s investments in automated online warehouses, it
still wasn’t getting digital orders to customers as fast as its
competitors.
The executive agreed, according to a person familiar with the
conversation. To figure out how to make same-day deliveries,
he told the vendor, Kroger might need to make another
acquisition.
As the company tries to change, some senior executives are
leaving. Mr. Schlotman is retiring after more than three decades
at the company. Christopher Hjelm, the chief information
officer who urged fellow executives to help him turn Kroger
into “a technology company that just happens to sell food,” is
also departing. Matt Thompson, the digital official who devised
many of Kroger’s online pickup and delivery strategies, left
earlier this month. Investment banker Robert Beyer is stepping
down as lead independent director in June.
A Kroger supermarket in Cincinnati in 1948. PHOTO: BETZ-
MARSH STUDIO/CINCINNATI MUSEUM CENTER/GETTY
15. IMAGES
A Kroger spokeswoman said the retirements were long planned.
Mr. McMullen has recruited new officials with technology
experience at the executive and board levels, she said.
Executive bonuses have declined in the past two fiscal years,
reflecting Kroger’s weaker sales. Financial filings show that
executives hit less than 4% of their targets for performance-
based bonuses in the last fiscal year, the lowest payout in at
least two decades.
Mr. Cosset, the chief digital officer who is set to succeed Mr.
Hjelm as chief information officer in May, has set ambitious
time lines for opening online-pickup locations and other goals.
Yet he has also been careful not to drift too far from Kroger’s
focus on its stores.
“The traditional brick-and-mortar customer shouldn’t feel
neglected,” he said.
https://www.wsj.com/articles/americas-biggest-supermarket-
company-struggles-with-online-grocery-upheaval-
11555877123?mod=searchresults&page=1&pos=1
Kroger Seeks Patience As It Works to Reshape Business
Shares of nation’s biggest supermarket operator fell 12% over
past 12 months
16. Kroger is grappling with tumult in the grocery sector, as e-
commerce changes how consumers shop for
food. PHOTO: LUKE SHARRETT/BLOOMBERG NEWS
ByMicah Maidenberg
Updated June 20, 2019
Kroger Co. KR 0.04% executives are seeking patience from
investors as they continue to oversee efforts to transform the
business while facing heightened competition from a range of
food retailers and shifting shopping patterns.
The nation’s biggest supermarket operator on Thursday reported
same-store sales excluding fuel rose 1.5% in the latest quarter, a
weaker performance compared with last year and below what
analysts predicted for the period.
Kroger faces competition from growing discount chains
like Walmart Inc. WMT 0.16% as well as
from Amazon.com Inc., which is working to bring customers
into its Whole Foods Market unit and plans to launch a separate
grocery business.
Chief Executive Rodney McMullen said on a conference call
that Kroger must “step up our game.”
“What we find is there’s a lag between when you make those
improvements and when the customer starts rewarding you with
their checkbook,” he said, referring to efforts to upgrade the
experience for shoppers.
17. The company has been investing in its e-commerce operation
and said on Thursday that home-delivery services or online-
order-and-pickup at stores is now available at 93% of its
locations. Digital sales grew 42% in the first quarter, which
ended May 25.
Kroger has also been developing new businesses, such as selling
consumer data and targeted advertising. The company said those
efforts would yield $100 million in incremental operating profit
in its current fiscal year compared with the prior one.
Shares of Kroger closed down 2% at $23.13 on Thursday and
have fallen 12% over the past 12 months, compared with a 6.5%
gain in the S&P 500.
The Cincinnati-based grocer reported $37.25 billion in revenue
in the first quarter, down 1% from a year earlier but better than
what analysts polled by FactSet had forecast.
The company attributed the most recent decline to the sale of its
convenience-store business. Kroger has now reported year-over-
year total sales declines for three consecutive quarters.
Pet products, natural foods and several beverage categories
were strong performers in the latest period, executives said.
Kroger also added 219 of new private-label products during the
quarter. Sales of such brands grew faster than total sales, driven
in part by products like pork-belly bites.
The profit margin for private-label products exceeds what
Kroger gets from selling national brands. But overall gross
18. profit margin fell in the quarter, primarily due to the
performance from its pharmacy business, according to the
company.
Kroger reported a profit of $772 million, or 95 cents a share,
compared with $2.03 billion, or $2.37 a share, a year earlier,
when the grocer recorded a gain on the sale of its convenience-
store business.
After adjustments, Kroger reported a profit of 72 cents a share
for the most recent period, beating Wall Street targets by a
penny.
The grocer has been slimming down its operation and hunting
for investment opportunities. In April, it sold a company that
makes ice cream, ice teas and other products. Kroger said in
May it formed a new venture with a private-equity firm to make
investments in consumer brands.
Kroger recently struck new labor contracts with unions in
Indianapolis, Denver and Louisville, and is working on deals
with employees in several other cities, finance chief Gary
Millerchip told analysts.
Like other companies, Kroger has been raising wages amid the
tight labor market. The new contract covering Indianapolis
workers increased starting pay from $8.50 to $10 per hour for
most clerks, the company said in a statement Monday.
Corrections & Amplifications
A new contract covering Kroger’s Indianapolis workers
19. increased starting pay from $8.50 to $10 per hour for most
clerks. An earlier version of this article incorrectly stated that
starting pay increased from $8 per hour. (June 20, 2019)
https://www.wsj.com/articles/kroger-sales-slip-again-as-grocer-
looks-for-traction-
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e&cx_tag=contextual&cx_artPos=3#cxrecs_s
Online Grocers Are Getting a Preview of Their Future
Major supermarkets are struggling to meet surging demand for
home delivery, but the coronavirus crisis will leave their web
businesses sharper
Preparing an online order into a Peapod delivery bin at a Stop &
Shop supermarket in Windsor, Connecticut, U.S.
PHOTO: SCOTT EISEN/BLOOMBERG NEWS
By Carol Ryan, The Wall Street Journal
March 27, 2020 5:52 am ET
If the Covid-19 outbreak provides a global test for buying food
online, it is one that supermarkets are by and large failing. Yet
their e-commerce businesses should be in a different league
after the crisis.
20. Since the pandemic began, the websites of major food retailers
have been as inundated as their physical stores. Pressure on
these still-small online operations is only likely to increase as
more nations place their populations on full lockdown.
Average daily traffic to Walmart’s grocery site reached 1.1
million between March 1 and March 20, according to analytics
company SimilarWeb—a 55% increase on average daily visitor
numbers during the previous two months. Kroger, Peapod,
Instacart, Carrefour and Tesco have also experienced big surges
in daily traffic. The number of U.S. households ordering
groceries online roughly doubled this month to 40 million
compared with levels recorded in August 2019, data released
Thursday by consulting firm Brick Meets Click shows.
Although supermarkets have invested heavily in their online
businesses in recent years, they are not ready for current levels
of demand. Infrastructure is still immature globally: 7.6% of
groceries in the U.K. were bought over the web before the
outbreak, while in Spain just 2.4% of sales have moved online,
according to Kantar data. The U.S. has around 3.1% penetration.
During the pandemic, it is proving harder to ramp-up capacity
quickly online than in physical stores. Automated warehouses in
the U.K., like the ones that Kroger is currently building with
grocery-tech company Ocado in the U.S., need time to increase
output. And getting additional delivery vans on the roads is
complicated by the fact that they need to be specially kitted out
21. with refrigerators for chilled orders.
That is leading to a frustrating experience for web shoppers in
many markets. U.S. consumers face delays when using the
services of retailers such as Walmart and Amazon Fresh. Ocado,
which runs one of the most advanced e-commerce operations in
the U.K. in partnership with local retailer Marks & Spencer, is
no longer accepting new customer registrations. The risk is that
some consumers trying the service for the first time will be
turned off for good.
As many businesses around the world struggle, a Canadian
disinfectant company is increasing production to keep up with
demand during the novel coronavirus outbreak. Photo: Ron
Kolumbus/WSJ
Still, some retailers are betting that the extra demand will stick.
Ahold Delhaize, owner of the Peapod delivery service, has
doubled its server capacity in the U.S. since the crisis began. Its
website will be able to handle much higher order volumes after
the spike subsides.
The rush of orders is bringing some benefits. Online grocers are
learning how to allocate delivery slots most efficiently in times
of peak demand. They are testing in real time how different
order-fulfillment methods, such as manual picking in stores or
from dedicated online warehouses, perform under stress.
But the constrained capacity online also has one important
advantage. Sales delivered to a shopper’s home are far less
22. profitable than those made in stores. Grocers need time to
manage the shift online to avoid a big hit to their already thin
operating margins.
Online grocery businesses may be struggling at the moment, but
they will emerge from their unexpected trial better equipped for
the future.