2011 Power 50: No. 2 David Dillon

Although he's No. 2 in the SN Power 50 list for 2011, perhaps a more telling number describing David Dillon's leadership is the number 30.

Last month Cincinnati-based Kroger Co. [3], where Dillon is chairman and chief executive officer, reported its 30th consecutive quarter of same-store sales growth. Despite the turmoil of the economic recession, Kroger's well-established price position in the market gave it an edge against competitors through the downturn.

“Kroger had a very strong year,” Dillon told SN. “Sales increased 7.1% in 2010, we gained market share and, in June, we delivered our 30th consecutive quarter of positive identical supermarket sales. We're proud of those numbers, but the most significant accomplishment is that we are connecting with our customers in more personal and meaningful ways than ever before. That is thanks to the teamwork and dedication of our 338,000 associates.”

Dillon said the company — the nation's largest conventional supermarket operator with $82 billion in sales — projected earlier this year that rising fuel prices and food inflation would impact consumers this year, noting that a $1-per-gallon increase in the price of gas can cost an additional $100 per month to a household's budget.

“While shopping behavior changes as a result of these factors have been modest, we hear from customers all the time about how difficult it is to keep up with the rising cost of fuel,” Dillon said. “Customers can save with our fuel rewards program, which is available at more than 1,000 supermarket and convenience store fuel stations or at our partner Shell's more than 5,000 locations.

“All of our customers are looking for ways to save on their everyday purchases. We continue to pursue our strategy of finding savings and investing them in four key areas — our people, products, prices and the customer shopping experience — to drive increased sales and growth.”

He estimated that Kroger is saving customers more than $2.1 billion per year by investing in lower prices.

The company's strategic shift to improve its pricing a decade ago — long before the recent recession — not only helped it weather the downturn, but continues to reward it as inflation drives up food costs, analysts said.

Neil Currie, an analyst with Dahlman Rose & Co., New York, said Kroger remains one of the best-positioned supermarket operators going forward.

“Kroger systematically lowered its gross margin to levels at which most supermarkets couldn't survive,” he said in a report last week. “It hasn't been a smooth ride in terms of profits, with periods of severe earnings decline along the way, but Kroger is in a better position today to take share on a sustainable basis.”

Dillon said Kroger continues to keep a close eye on the economy.

“We are closely monitoring several factors that will have a dynamic effect on the operating environment this year, including continued high levels of unemployment, inflation, rising pension and health care costs, and the rationality of the overall retail environment. We will continue to follow our business strategy and are prepared to make adjustments as needed to weather these influences.”