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How Kroger Thrived on Change During Its First 125 Years

How Kroger Thrived on Change During Its First 125 Years

Remaining in business for 125 years is no small accomplishment. It's a huge accomplishment when a company goes well beyond surviving by rising to the top of a sizable industry.

The accomplishments of the supermarket chain that has done all that — the Kroger Co. — are acknowledged in a detailed news feature in this week's SN written by SN's Mark Hamstra and Elliot Zwiebach. See Page 1. Let's take a quick look.

As is apparent, a company as old as Kroger has gone through so many changes that it really has been many companies. So change is paramount. The culture of embracing change may date to Kroger's founder, Barney Kroger, who opened the first store in 1883 in Cincinnati. It became one of the first grocery companies to bake its own bread and to sell meat and groceries in the same venue.

Kroger also pioneered food safety testing in the 1930s, converted from a corner-store operator to become a chain of full-line supermarkets in the 1950s, was an early experimenter with scanning in the 1970s and was the first to routinely use consumer research.

There's much more, of course, and it all underpins Kroger's longevity, David Dillon, chairman and chief executive officer, told SN: “It's the willingness to change that has given us our 125th birthday. Without a willingness to be a very different company every 10 to 20 years, we would not still be here, in my opinion.”

Indeed, the fact that Dillon himself is where he is illustrates another Kroger propensity, to change through acquisition and to learn from acquired companies. In 1983, Kroger bought Dillon Cos., the family-owned chain from which sprang two chief executives, first Joseph Pichler, then David Dillon.

“The fact that Kroger was receptive to having two executives come out of a company that was acquired, and have both rise to the level of CEO, is a testimonial to Kroger's whole culture,” Dillon said. Maybe it's more than that: Kroger's openness to learn from acquired companies may be fundamental to Kroger's success. Look at Kroger's 1999 acquisition of Fred Meyer Inc., the company widely acknowledged to be the model upon which Wal-Mart based its supercenters. That acquisition gave Kroger the intellectual capital needed to become the chain that has been most successful in competing against Wal-Mart supercenters.

Leveraging Fred Meyer's expertise, Kroger was able to open Kroger Marketplace stores, supercenter-like combination units with a wide range of nonfood products. Kroger now has about 30 such locations in four states and is likely to roll out several more and enter additional markets with them.

More critically, Kroger has been able to increase supply chain efficiencies to the point that it's fairly close to Wal-Mart's supercenter pricing structure, and has achieved that in a more commodious shopping environment. Many observers are of the opinion that striking within an 8% range of Wal-Mart's price points is sufficient to stanch the shopper exodus. Kroger does that.