Kroger Shifts Division Leadership

A management reshuffling by Kroger Co. that affects its Southern California and Mid-Atlantic divisions may be designed to improve operating performance in those areas in the wake of intensified competition, some industry observers said last week. The shift in management responsibilities, which takes effect Aug. 19, will include the following changes: Mike Donnelly, president of the

CINCINNATI — A management reshuffling by Kroger Co. here that affects its Southern California and Mid-Atlantic divisions may be designed to improve operating performance in those areas in the wake of intensified competition, some industry observers said last week.

The shift in management responsibilities, which takes effect Aug. 19, will include the following changes:

  • Mike Donnelly, president of the 116-store Fry's division, will become president of Ralphs. Donnelly has held the title of president of Fry's twice since 2000, with a stint in between as senior vice president, drug/GM merchandising and procurement, at the corporate level. Kroger did not name a successor to the Fry's post.

  • Dave Hirz, president of the 265-store Ralphs division, will return to Food 4 Less as president, a post he held prior to 2004.

  • Jay Cummins, president of the 146-store Food 4 Less division, will move east to become president of Kroger's Mid-Atlantic division.

  • Pete Williams, president of the 129-store Mid-Atlantic division, will become senior vice president, operations, at the corporate level, where he will provide direction and guidance to several Kroger divisions, the company said.

“These changes should result in improved performances in both [the Southern California and Mid-Atlantic] divisions,” said John Heinbockel, an analyst with Goldman Sachs, New York.

He said Kroger's two Southern California chains — Ralphs and Food 4 Less — account for combined annual sales of approximately $9 billion, or 13% of the chain's total.

Southern California is a market “that has lagged a bit from comp and EBIT growth standpoints,” Heinbockel said.

Accordingly, Heinbockel said, the shift of Donnelly, a veteran Kroger executive, from Fry's to Ralphs, will give him “the opportunity to ‘Krogerize’ Ralphs [in terms of] solid pricing, renewed perishables authority and more nonfoods.”

At the same time Hirz will move back to Food 4 Less to enable him to enhance that franchise, Heinbockel said.

“This takes on added importance with Tesco on the way,” he added.

Gary Giblen, executive vice president of Goldsmith & Harris, New York, also said the moves are likely to improve the performance of the Southern California and Mid-Atlantic regions.

“Ralphs has definitely been losing share in its marketing area,” Giblen told SN, “and with Tesco coming into Southern California, this is an opportunity for Kroger to strengthen its positioning in a market where Vons has staked its claim on lifestyle stores; where Albertsons is getting a lot of attention from its new owner, Supervalu; and where Whole Foods and Costco continue to be strong competitors.”