With the oversupply of restaurants driving tough competition in the foodservice market, supermarket brand Kroger Co. looks to add to the supply by expanding their strategy to include restaurants. Kroger aims to expand to a 360 degree focus in an effort to increase share of stomach and consumer wallet.
According to Technomic, supermarket foodservice is expected to grow 6.5 percent in 2017, outperforming lackluster restaurant industry growth. Strong competition from meal delivery brands like Blue Apron and HelloFresh are putting pressure on the supermarket chains with meals delivered to the consumer’s doorstep. With the threat of AmazonFresh grocery delivery, food retailers have to find new ways to keep customers coming through their doors.
Kitchen 1883, named to include the year Kroger Co. was founded, will give Ohio-based Kroger a way to utilize some of their existing square footage to maximize sales per square foot. With so much competition from big-box stores and warehouse clubs like Target and Costco, the traditional supermarket “center-of-the-store” has seen tough times as consumers find greater value in stocking up elsewhere. Whole Foods has found success with their 365 Everyday Value products and has found good traction with their foodservice offerings. Expanding from retail food to foodservice is a natural migration but requires some very specialized focus and differentiation in the approach.
Often, retailers underestimate the effort needed to shift into prepared foods and restaurant operations. Success requires hiring and training experienced foodservice professionals. Cross training cashiers and stock handlers very often creates a poor environment. It’s necessary to create a separate strategy, utilizing dedicated staff who with food handling, food safety experience. Building a menu that resonates with value and targets the appealing menu items that taste great can also be a difficult task for even the most experienced restaurant operators. Lastly, creating an environment that is clean and comfortable for patrons can make or break a concept as the customer experience has to lead to return visits and frequency.
For Kroger to succeed, the Kitchen 1883 will have to facilitate existing customer trial and maximize the convenience factor for shoppers. There will be strong opportunities for quick breakfast and lunch occasions, snacking and beverage stops and takeout opportunities for dinner. Poor service can tarnish the brand, but good service can lead to increasing their share and trying to give customers another reason to shop Kroger more frequently.