As Kroger’s (KR, Financial) business thrives, Rodney McMullen is going all in on technology –Â ClickList, Vitacost.com and an endless aisle experience –Â that could change the future of grocery.
At Kroger McMullen and his team have been busy developing Main & Vine, a grocery store concept that mixes local, specialty and everyday products at affordable prices. At Kroger innovation is on overdrive: creating seamless experiences for customers, new formats, driving digital engagement and launching new Corporate Brand products
It’s the future of the company that excites McMullen and the other executives, a future of building strong brands and continuing the journey that they have been on for the last several years. The Kroger CEO is the kind of guy who is 100% focused on the customer. For him it's all about the customer experience and innovation; he has his focus on one customer at a time as consistently as possible.
After 49 consecutive quarters of supermarket sales growth and 11 consecutive years of market share growth, McMullen still has the goal of connecting at a local level a little deeper than the company normally would.
J. Michael Schlotman, chief financial officer and executive vice president, sees Kroger's market share getting even bigger with its recent acquisition.
"The other thing about Roundy's, particularly in Wisconsin, not only did they have the very strong market share even though it's declined, the real estate sites they had were phenomenal," Schlotman said. "And we probably would not have considered a transaction like this if they didn't have outstanding real estate sites where we know we can grow their market share back to where it once was."
But there’s another side of McMullen –Â and that’s McMullen the pioneer. McMullen is not afraid to innovate and try new things when it comes to connecting with customers. In 2014 McMullen assumed the role of CEO. Since taking on the role he has brought the company into new markets. McMullen has pushed the company even deeper into natural and organic. He's increased capital investment while improving return on invested capital, grown market share, improved experiences for customers and adjusted store hours to better serve customers.
And he has pushed the entire company to acquire other companies. More than two years into McMullen's role as CEO, Kroger is getting even stronger. It's looking for companies that bring something to them that they don't have today –Â Mariano's, Roundy's and Pick 'n Save –Â are bringing the company into new markets and are creating partnerships and synergies.
Whole Foods (WFM, Financial) today considers Kroger its No. 1 competitor. But so do Trader Joe's, Aldi, Sprouts (SFM, Financial), Costco (COST, Financial) and a long list of regional chains. “And relative to the competitive environment, we pay attention to every competitor and what they're doing," said Schlotman. "We get into a lot of our competitor stores. I think a lot of this, when we travel around, whether it's domestically or internationally; we probably often get into as many or more competitor stores as our own stores to keep an eye on what everybody else is trying to do."
Kroger’s growth and success is clear. It has grown more than 14% in the past three years, with revenue topping $109 billion in the most recent year. Kroger’s cash has been growing, too. The company is now sitting on $274 million in cash, allowing McMullen to invest in things such as acquisitions.
"On the capability, we're really looking at things that are in our core business," said McMullen. "So we're in the food business, and we're in the health and wellness business. Those are the areas where we're going be focused on how do we get a deeper and better connection with our customers. So you shouldn't assume something that's out in left field."
In less than two years McMullen has made enormous strides in serving the customer who wants natural and organic. Natural and organic is not new. The company was in the space before he became CEO. But now McMullen is embarking on new projects. The company is embarking on 100 major store projects. Kroger has expanded its Corporate Brands, which now represents 29% of total units sold and 26% of sales dollars. It launched Simple Truth as a lifestyle brand and introduced Simple Truth household, personal care and baby products. It has invested in leadership development and training for all its associates including high volume store managers and future senior leaders. It’s begun focusing on a great food experience. And it continues to offer high quality food at affordable prices, so it continues to win with customers even though they remain cautious when it comes to spending.
Kroger’s original mission "is to be a leader in the distribution and merchandising of food, pharmacy, health and personal care items, seasonal merchandise and related products and services." Today sustainability plays a part in that vision. "We look forward to sharing our new five-year sustainability goals, with an eye toward pushing even faster and having more accelerated progress in the near future," McMullen said.
He wants the company to maintain the best-in-the-world quality of the product. It’s the combination of 400,000 associates connecting with customers every day and a strong pipeline of high quality projects that are encouraged by the results from the company's new stores that makes Kroger the best in class.
