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 120+ years as the supermarket business evolved into a variety of formats aimed at satisfying the ever-changing needs of shoppers. With nearly 2,500 stores in 31 states under two dozen banners and annual sales of more than $70 billion, Kroger today ranks as one of the nation’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 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 40 food processing facilities that make thousands of products ranging from bread, cookies and milk to soda pop, ice cream and peanut butter. Nearly half of the 14,400 private-label items found in the company’s stores today are made at one of these manufacturing plants. These “corporate brands” today account for an impressive 26% of the grocery dollar sales at Kroger, providing the company with a huge 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 stores today tip the scales at 65,000 square feet or more. 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 approximately 1,900 in-store pharmacies that fill more then 120 million prescriptions a year. Its floral shops ring up enough business to make Kroger the world’s largest florist. Kroger has even installed fuel centers in the parking lots of more than 700 stores to appeal to customers who want to gas up their cars during their shopping trip.
Acquisitions 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, price-impact warehouse stores, convenience and fine jewelry stores.
Throughout its rich history, Kroger has served as a pioneer in the supermarket industry. During the 1930s, it was the first grocery chain to routinely monitor product quality and test foods offered to the customer. 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. For example, more than 1,600 Kroger stores now offer self-checkout, which allows customers to scan their own groceries and pay for them without any assistance from a cashier. Also in the ‘70s, the company became the first grocer to formalize consumer research. Kroger soon was interviewing more than a quarter-million shoppers each year to find out what they wanted in a supermarket. That feedback prompted Kroger to introduce unpackaged produce and service specialty departments such as delis.
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 more than 100 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.