Kroger Relaunches Reformulated Home Sense Line

June 21, 2011

Kroger has reformulated or rebranded hundreds of products in its Home Sense private label household line, and continues to focus heavily on private label growth opportunities, executives said during a first quarter earnings call with analysts.

korger store front “A highlight of the quarter was the launch of our new homes essentials brand, Kroger Home Sense, with 200 reformulated or rebranded products,” said Rodney McMullen, president and COO. “The collection of smart simple solutions helps customers get great results everywhere in their home. You'll find our new brand in paper towels, facial tissue, paper housewares and more.”

Overall, store brands dollar market share was flat and units were down one point in the first quarter of this year compared to the same period last year. For the quarter corporate brands represented approximately 26 percent of grocery department sales dollars and 33 percent of grocery department units sold, McMullen said, compared to 26 percent and 34 percent, respectively, for the first quarter last year.

Private Selection pizza “Growth in national brand categories where Kroger does not have a presence was the primary driver of this decline,” McMullen said. “Corporate brand share overall continues to be well in excess of the pre-recession levels.”

Kroger’s same-store sales for the quarter increased 4.6 percent for the quarter, excluding fuel. “This continues Kroger's industry-leading trend of positive identical sales growth for 30 consecutive quarters,” CEO David Dillon said. “Our first quarter performance was broad-based. Each of the 18 retail divisions had positive identical sales excluding fuel. We're particularly pleased with sales in our deli/bakery, grocery and natural foods departments.”

McMullen notes that Kroger's first quarter results reflect the power of offering our customers a choice of both private label and national brands.

“Millions of loyal households shop with us, and 99.9 percent of them bought at least one corporate brand item per quarter,” he said. “We're still working on that 0.1 percent. This is particularly important today as shoppers continue to watch their spending and look for quality items at good prices.”

McMullen also mentioned the new Private Selection frozen pizza launch, a news story that Store Brands Decisions broke last week. (For more on this see “Kroger Expands Private Selection Brand Renovation.” )

“We also introduced new artisan-inspired Private Selection, hearth-baked pizzas… and I can tell you at least the barbecue chicken one tastes delicious. My wife and I had it for dinner last night.

“These new offerings and others like them will help ensure our customers continued loyalty through our exclusive preferred brand,” he said, noting that rising food costs are affecting consumer behavior.

“For the quarter, we estimated product cost inflation, excluding fuel, was approximately 3.5 percent. We saw inflation in all categories including grocery,” McMullen said. “Grocery product cost inflation approached 2.1 percent excluding milk. Last quarter, we mentioned that rising costs for many agricultural commodities were driving higher retail prices for packaged goods in our grocery department. While that continues, inflation is disproportionately affecting our perishable departments especially seafood. We expect this trend to continue as well. We are passing along product cost increases from suppliers and we plan to continue to do so.”

SBD Views: Rodney McMullen’s comments during the investor call, leave no questioning top management’s support for Kroger store brands. This is the kind of senior management support that is necessary for store brands to achieve their potential. Watch for continued innovation and investment in store brands at Kroger. -- John Failla for Store Brands Decisions

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Keywords: private label household products, private label packaging desing

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