Kroger Q4 2020 sees 'sticky customer engagement' in digital business, first Ocado automated warehouse goes live
Within its digital business, delivery sales grew 249% during the quarter as more and more new customers engage with the companies “seamless ecosystem,” said Kroger CEO Rodney McMullen on the company’s Q4 2020 earnings call.
“We see a 98% retention rate within our ecosystem highlighting how sticky our customer engagement is,” McMullen said.
McMullen noted how the company continues to improve its digital profitability and is advancing its personalized shopping experience leveraging data analytics to forge deeper relationships with its customer based.
In 2020, Kroger tracked over 1.3 billion customer interactions across digital, a 30% increased over last year.
“In 2020, we presented nearly 11 million personalized recommendations for a week, that's 11 billion recommendations personalized each week. When you look at that over the year, that's more than half a trillion offered personalized for customers during 2020,” said McMullen.
As part of its ongoing digital transformation, this past week Kroger completed its first order through its automated fulfillment center, the Ocado Shed in Monroe, Ohio, which began construction in 2019 backed by a $55m investment from the company. A grand opening of the facility will take place in April 2021, said McMullen.
"We continue to be excited about the elevated experience that this will bring to our customers in the Tri-State area and across the country as we continue to open additional facilities," he added.
Simple Truth line shines: ‘One of the key launches for the year was Simple Truth Oatmilk ice cream’
Consumer behavior continues to evolve and the company saw an uptick in fresh product sales as well as the retailer’s organic private label line, Simple Truth.
“Our produce and floral departments outperform total company. Customers are focused on eating healthier as evidenced by the increased engagement in our Simple Truth brands which
grew 18% during the quarter,” said McMullen.
Across the retailer’s entire brand portfolio, Kroger brands achieved a record year in 2020 exceeding $26.2bn in sales. The company’s Simple Truth line, launched in 2015, exceeded $1bn in annual sales for the first time.
“One of the key launches for the year was Simple Truth Oatmilk ice cream. This line has brought new customers to the category and sales are continuing to outpace projections,” said McMullen.
“We also saw customers trading up and buying higher quality premium products like luxury wine and Murray's cheese which also outperformed the total company.”
The amount of customers looking for food inspiration and quality meal solutions have grown, and as a result, the company’s Home Chef meal kit line “finished with the year with record sales capturing additional share,” said McMullen.
Despite its positive earnings results, a recent report from the American Customer Satisfaction Index (ACSI), found that Kroger has slipped in favor among consumers. ACSI, which measures for customer satisfaction metrics, found that Kroger dropped 3 percentage points in 2020 compared to 2019.
Employee investment
In the midst of several labor union negations with The United Food and Commercial Workers (UFCW) groups across the country, McMullen said Kroger is continuing to invest in its employee base to provide solid wages, affordable health care and retirement benefits for its associates.
Last year, Kroger invested approximately $300m to help increase pay rates for hourly employees.
“Our average hourly rate is now $15.50 up from $15 last year and with comprehensive benefits factored in, our average hourly average rate is over $20. In 2021, we expect to invest an incremental $350 million in continued average hourly wage increases for our associates,” said McMullen.
“Our financial results continue to be pressured by health care and pension cost which most of our competitors do not face. We continue to communicate with our local unions and the international unions which represent many of our associates on the importance of growing our business in a profitable way, which will help us create more jobs and career opportunities and enhance job security for our associates.”
