Dive Brief:
- Kroger announced Friday that it has launched a budget-priced private label line, Smart Way, that includes around 150 products.
- The grocer has updated its opening price point strategy in private label, winnowing 17 brands down to two, CEO Rodney McMullen said during the company’s second quarter earnings call Friday. Smart Way is now its budget brand for nonperishable items while Heritage Farms is its budget store line for fresh and dairy items.
- Identical sales for Kroger’s store brands increased 10.2% in the company’s second financial quarter as shoppers continue to seek cheaper product alternatives.
Dive Insight:
As inflation-weary consumers continue to put more private label products in their carts, Kroger has revised its store brand strategy with the goal of simplifying its budget-priced options for consumers.
Smart Way is the new brand for a collection of products that previously stretched across 16 legacy private label lines. This includes grocery items like jarred pickles and four packs of canned corn, as well as nonfood items like dish soap and boxes of napkins. The orange-and-white label features the brand in lower case letters along with taglines like “saving in the right direction” and “smart ways to save everyday.”
Heritage Farms, meanwhile, launched in 2014 and currently includes fresh items like chicken breasts as well as ham and beef patties, according to Kroger’s website.
“These brands are competitively priced and meet the needs of customers on a budget,” McMullen said Friday morning. “We've launched with 150 SKUs and expect to roll out additional products by the end of the year.”
Kroger has become a leading developer of private label grocery lines, with brands like Simple Truth, Private Selection and Home Chef covering categories ranging across natural and organic products, gourmet selections and prepared foods. The company’s Kroger brand and its Home Chef line, which Kroger acquired in 2018, led growth among the company’s store brands in Q2, McMullen said.
Late last year, Kroger introduced a new head of private brands, former Ahold Delhaize and H-E-B executive Juan De Paoli.
In its release announcing the launch of Smart Way, Kroger acknowledged the impact inflation is having on store brand sales. Recent research by the Food Industry Association found that 41% of shoppers are buying more private label products than before the pandemic.
Kroger reported a 5.8% increase in Q2 identical-store sales Friday, driven by robust demand for at-home meals. Digital sales rose 8% while net sales came in at $34.6 billion. The grocer raised its full-year guidance, and now expects identical-store sales increases to range from 4% to 4.5% and for adjusted net earnings per diluted share to fall between $3.95 and $4.05.
