More Our Brands Growth On The Horizon At Kroger

Kroger’s continued growth of its private label assortment is having a positive impact on the grocer’s gross margin rate, and now the retailer is moving forward with plans to expand its selection of store brand products.

During a conference call to discuss fourth quarter results, Rodney McMullen, chairman and CEO of Kroger, said the grocer expects to launch 800 new products this year in its Our Brands assortment. 

While McMullen did not offer specifics on the types of products that will be included among the new items, or when those items would hit stores, he did reveal some news about forthcoming changes to the grocer’s broad private label assortment.  

“As part of the next phase of Kroger's brand architect work, the team is reimagining the Our Brands portfolio with a refresh to look (of the assortment), which is based on the insights and preferences collected from extensive customer feedback studies,” he said.

McMullen said the grocer’s Our Brands assortment continues to allow the grocer to offer innovative products at a great value, which helps boost sales and also provides products that are unique to Kroger owned stores. He pointed to the recent launch of Mercado, a Hispanic-inspired assortment, as an example of how Our Brand is able to innovate in categories that meet the evolving needs of shoppers and also accelerate growth.

Launched in October of 2023, Mercado includes more than 50 products such as but not limited to fresh meat, beverages, snacks, sides, and desserts. 

"Kroger Mercado embraces Hispanic culinary heritage with the quality and innovation our customers have come to know and expect from Our Brands," Juan De Paoli, vice president, Our Brands for Kroger, said when Mercado launched. "We are thrilled to offer authentic products that are accessible and exceptional in quality, creating a brand that fills a void for some customers and creates a cultural experience for others.”

Kroger’s Our Brands is also having a positive impact on the company’s financials. Todd Foley, interim chief financial officer, noted the 18 basis point increase in gross margin rate seen during the fourth quarter was primarily attributable to strong Our Brands performance, sourcing benefits, lower supply chain costs, and the effect of the company’s terminated agreement with Express Scripts,

“Our strategy to improve margin over time has many components, including the expansion of Our Brands,” he said. “With Our Brands, we get the best of both worlds. Not only from a margin standpoint because of the margins Our Brands deliver, but our customers are looking for value and they get to experience that through Our Brands. They get value and don’t have to sacrifice quality. That’s a double win for me.”

As Kroger shoppers turn more to its Our Brands assortment to save money, they’re also taking advantage of other money-saving initiatives from the grocer, McMullen noted customers in 2023 clipped 4 billion coupons, an increase of 1 billion compared to 2022.

“We know these offers help customers stretch their budget and lead to deeper loyalty. During the fourth quarter, our effective promotions helped turn traffic positive,” he said. “These trends position us well and give us optimism for 2024.”