Kroger will continue investment in Wisconsin
3 years after purchase, Roundy’s experiences turnaround in competitive market
Three years ago, Roundy’s and its Pick ‘n Save, Metro Market and Copps grocery stores in Wisconsin were not exactly thriving. Its locations were dated and in need of a makeover. Competitors big and small were chipping away at the company’s dominant market share in the state. Same-store sales were dropping.
And the company was handcuffed by debt that prevented it from plowing money back into stores and lowering prices to keep up with competitors.
All the while, Rodney McMullen, the chief executive at Cincinnati-based Kroger, was grocery shopping at Roundy’s stores across Wisconsin.
“I got into a lot of stores on my own before I even started talking to them,” about any kind of business combination, he said in an interview during a visit to Milwaukee on Monday.
What he and members of Kroger’s team saw in the Wisconsin stores was something they believed they could build upon. “They took care of their customers,” McMullen said. “That was important to us.
“Clearly in Wisconsin, they hadn’t had the financial resources to keep the stores up to date,” he added.
“But when you would talk to people in the stores, we really felt comfortable that the people — the associates — their
hearts were in wanting to serve people.”
That boots-on-the-ground intelligence, combined with market research that showed consumers still had a positive view of Roundy’s stores in Wisconsin and its Mariano’s stores in Chicagoland, were enough to convince McMullen to make an offer to acquire Roundy’s.
“Clearly, Wisconsin and Chicago were places where we wanted to do business,” McMullen said.
Three years ago this month, Kroger acquired Roundy’s in an $800 million deal.
Roundy’s now operates as a wholly owned subsidiary of The Kroger Co. The company operates 106 stores and employs about 13,000 people in Wisconsin.
As a result of that 2015 deal, Milwaukee-based Roundy’s suddenly found itself able to tap the resources of Kroger, a behemoth company that is the nation’s second-largest retailer behind Walmart.
Kroger operates more than 2,700 stores in 35 states and generated $123 billion in sales in 2017. Kroger serves 9 million customers a day.
Grocery shopping is ‘a blast’
Hailing from Pineville, a town of about 1,700 in southeastern Kentucky, McMullen is plain-spoken and friendly. He’s a huge baseball fan. He began his career as a Kroger stockboy and developed a passion for the business.
McMullen says he still considers going grocery shopping “a blast.”
You’d never know he was the top executive at a company that employs nearly 450,000 people and operates 37 food production facilities across the U.S.
But make no mistake, he is a fierce competitor, as is the company’s entire executive team.
Competition in the Wisconsin grocery market is as heated as ever, with everyone from home improvement warehouses to quick stop convenience stores selling grocery items.
“This business has always been competitive, and it always will be,” McMullen said. “To me it’s the fun part of this industry.
“You can never, ever get comfortable,” he added. “The customer every day gets to decide who’s doing the best job for them, and we are going to work our butts off to always be that (store) who, along with its associates, give the best experience to their customers.”
The resources that come with being such a massive business in terms of technology, pricing and cost of goods, tend to generate cost savings.
Those savings have been poured back into Wisconsin stores.
Since purchasing Roundy’s, Kroger has invested $300 million in its Wisconsin stores. Of that, $25 million has been invested in nine city of Milwaukee locations, including stores in areas where other retailers have pulled out. “That’s something we’re very proud of,” said Jessica Adelman, group vice president, corporate affairs, at Kroger.
The company also has closed under performing locations and introduced new technology across the enterprise. It changed a number of stores to the Pick ‘n Save banner.
It is adding fueling stations and also has added a fuel incentive program for customers.
And, it has lowered prices across Wisconsin. “We’ve made a significant investment in price,” McMullen said.
Technology is ‘difficult’
Kroger doesn’t break out specific sales and traffic numbers for its various divisions, but overall executives say they have seen a turnaround in Wisconsin.
“We’re winning. We weren’t before” the Kroger purchase, said James Hyland, vice president of communication and public affairs for Kroger’s Roundy’s division.
Is McMullen satisfied with the company’s performance in Wisconsin of late? “Absolutely,” he said.
Meanwhile the grocery industry is changing by the day, creating challenges for retailers.
Consumers these days are just as likely to buy groceries online as they are in a supermarket.
“We’ve doubled our technology investment,” McMullen said.
Adapting to the rapid changes is not easy.
“It is difficult. It is hard. But anything that’s worth doing is going to be difficult,” McMullen said. “If it was easy, it would have already been done.”
The only constant is the need to take care of customers, he said.
“Every single day, the world is changing. Every single day you’re out there trying to understand the latest food trends and how do we support that,” McMullen said. “We are going to be there for people, but it’s going to constantly change: ‘Today, I want to pick up my order. Tomorrow, I might want it delivered, and the day after that, I might actually want to go into a store and shop.’”
More fuel on the way
Looking ahead in Wisconsin, McMullen said the company is not going to rest.
Kroger will continue to use technology to make shopping more convenient for time-starved families.
“You’ll see us continue adding fuel,” McMullen said. “You’ll see us continue to do a better and better job of connecting with each household one-on-one.” Investments in stores will continue. “We’re able to start building on the great foundation that is in place and the momentum that our business has” in Wisconsin, McMullen said.
“To me, Wisconsin is such an exciting place, and there is still plenty of opportunity to grow.”