Kroger Store Brand Manufacturing and Product Testing Get Attention

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October 15, 2009

From its unique position as a grocer who manufactures nearly 50 percent of its store brand products to its diligent approach to store brand new product testing, Kroger made headlines this week in various newspapers that picked up two special features written by the Associated Press.

Perhaps all the media attention stems from the company's recent declining financial performance that has some analysts downgrading the stock on fears that Kroger, like many other retailers, may be too deeply discounting. In mid-September the company reported net earnings slipped and gross profits declined by a full percentage point in the quarter that ended in August.

One special interest piece focused on Kroger as a manufacturer who makes nearly 50 percent of its 14,400 store brand products through its 40 factories, while most grocers contract with outside suppliers to make their products. Kroger sited speed to shelf as well as stronger controls over cost and production as its prime reasons for self-manufacturing. Thirty-five percent of the products sold in Kroger's 2,500 stores nationwide are store brands, up from 31 percent five years ago, according to the report.

"We're growing significantly in what we make," said Calvin Kaufman, president of Kroger manufacturing. "We are adding shifts as well as adding people, and we keep getting more efficient to add to capacity."

The second article focused on Kroger's taste-test center at headquarters where new store brands pass or fail before hitting shelves. Seven at a time, volunteer testers, who are rewarded with in-store coupons, sit in cubicles for 10 minutes or so where samples of products are handed to them through slots. Testers then evaluate the products samples with computerized questionnaires.

Every year, Kroger test 500 to 600 new product possibilities, 70 percent of which pass the tasting panels. It takes approximately 100 testers to accurately evaluate a product's viability, said Mayro Kanning, manager of Kroger's taste center

Kroger allows company employees to participating in testing, which Kanning said does not skew results because they don't know which companies make the items they are sampling.

Read These Related Articles:

• Deflationary Pressures Cut Grocery Company Sales and Earnings
• Managing the Growth of Store Brands
• Meijer and Kroger Forecast Double-Digit Store Brand Growth
• Retailer and CPG Panel Attempts to Ease Tension Over Store Brands
• Kroger's New and Remodeled Units Offer Expanded Prepared Foods

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