In 1883, Barney Kroger invested his life savings of $372 to open a grocery store at 66 Pearl Street in downtown Cincinnati. The son of a merchant, he ran his business with a simple motto: “Be particular. Never sell anything you would not want yourself.”
It was a credo that would serve The Kroger Co. well over the next 130 years as the supermarket business evolved into a variety of formats aimed at satisfying the ever-changing needs of shoppers.
With more than 2,600 stores in 34 states under two dozen banners and annual sales of more than $108.5 billion, Kroger today ranks as one of the world’s largest retailers.
Many aspects of the company’s business today trace their roots to Mr. Kroger’s early efforts to serve his customers. Consider two specialty departments that today are regular fixtures in the company’s supermarkets – bakeries and meat and seafood shops. In the early 1900s, most grocers bought their bread from independent bakeries. But Mr. Kroger, always pursuing quality as the key ingredient for profit, recognized that if he baked his own bread, he could reduce the price for his customers and still make money. So, in 1901, he became the first grocer in the country to establish his own bakeries. He was also the first to sell meats and groceries under one roof.
Mr. Kroger also spied the promise of increasing his income by manufacturing the products he sold. It began in that first Kroger store on Pearl St. When farmers came to town with their produce, he bought far more cabbage than he could expect his customers to buy. He took the cabbage home to his mother who, following her favorite recipe, turned it into tangy sauerkraut that proved hugely popular with his German customers.
The manufacturing effort born in that back room was the beginning of what is today one of the largest food manufacturing businesses in America. Kroger operates 37 food processing facilities that make thousands of products ranging from bread, cookies and milk to soda pop, ice cream and peanut butter. About 40% of the more than 12,000 private-label items found in the company’s stores today are made at one of Kroger’s manufacturing plants. These Corporate Brands today account for an impressive 25% of Kroger’s total store dollar sales, providing the company with a significant strategic advantage.
Yet in many other respects, Mr. Kroger would hardly recognize the company today. In response to customers who want the convenience of one-stop shopping, stores have grown much larger to accommodate more variety and more merchandise. New combination stores, Kroger’s primary format, today average 67,000 square feet or more. The company’s Marketplace stores, which offer expanded general merchandise, average 125,000 square feet, and multi-department stores under the Fred Meyer banner truly tip the scales at over 165,000 square feet.
The shelves today are packed with up to 50,000 items ranging from basic grocery staples to more innovative fare such as organic vegetables, natural foods, and hot meals ready to eat. Kroger operates more than 2,111 in-store pharmacies that fill more than 160 million prescriptions a year. Its floral shops ring up enough business to make Kroger the world’s largest florist. And Kroger has installed fuel centers in more than 1,330 locations to appeal to customers who want to gas up their cars during their shopping trip.
Mergers have played a key role in Kroger’s growth over the years. In 1983, 100 years after the company’s founding, Kroger merged with Dillon Companies Inc. in Kansas to become a coast-to-coast operator of food, drug and convenience stores.
The biggest merger in Kroger’s history came in 1999, when the company teamed up with Fred Meyer, Inc. in a $13 billion deal that created a supermarket chain with the broadest geographic coverage and widest variety of formats in the food retailing industry. The merger also enabled Kroger to generate huge economies of scale in purchasing, manufacturing, information systems and logistics. In an era when many larger mergers failed, the success of the Kroger-Fred Meyer merger stands out.
Today Kroger offers a store format for nearly every kind of shopper. Our formats include supermarkets, multi-department stores, Marketplace stores, price-impact stores, convenience and fine jewelry stores.
Throughout its rich history, Kroger has served as an innovator and pioneer in the food retail industry. During the 1930s, it was the first grocery chain to routinely monitor product quality and scientifically test foods. In 2012, the company’s long-standing commitment to food safety and quality earned it the highly prestigious Black Pearl Award, awarded to only one company each year by the International Association for Food Protection.
In 1972, Kroger became the first grocery retailer in America to test an electronic scanner. It was installed in a store in suburban Cincinnati, and visitors from around the country attended the event. Technology continues to play an important role in Kroger’s store operations today. In just the last few years, Kroger pioneered QueVision, an innovative faster checkout program that has reduced the time customers wait in line to check out, on average, from four minutes in 2010 to less than 30 seconds in stores today.
Also in the ‘70s, the company became the first grocer to formalize consumer research, interviewing 4,000 shoppers the first year. In 2012, the company listened to 1,993,227 customers, who provided invaluable feedback and insights.
Innovation is also at the heart of Kroger’s sustainability efforts, aimed at improving today to protect tomorrow. In the mid-2000s, Kroger created a process to rescue safe, edible fresh products and donate them quickly to local food banks. This innovation has been replicated by other retailers and today fresh products make up more than half of the food distributed nationwide by Feeding America, America’s largest food bank network.
With dozens of manufacturing facilities and distribution centers around the country, Kroger also has one of the largest privately-owned truck fleets in the country. Trucks moving merchandise and supplies among our stores, warehouses and manufacturing plants log nearly 297 million miles annually.
The business principles that made the first Kroger store successful in 1883 – service, selection and value – continue to guide the company’s operations today. From one tiny grocery store in Cincinnati more than a century ago, Barney Kroger laid the foundation for what today ranks as one of the largest companies in America.