The Cincinnati Business Journal reports that Kroger CEO Joseph Pichler has told analysts that he is satisfied that his strategy of cutting costs in order to compete better with Wal-Mart is “the right program” to do battle with the discounter’s fleet of supercenters.
Pichler says that that Kroger’s strategy is to acquire market share from smaller competitors through price cuts, acquisitions and new formats that offer services like gasoline, and that it plays to the company’s “economic advantage.” According to the paper, Pichler said that “fifty percent of the market share in our major markets is held by competitors who do not have economies of scale, who are not supercenters and who are not even strong regional operators. We see the opportunities there."
Outside analysts, however, note that this strategy only will work as long as these smaller operators exist in markets where Kroger does, and that eventually the company will have to go head-to-head with Wal-Mart.
Pichler says that that Kroger’s strategy is to acquire market share from smaller competitors through price cuts, acquisitions and new formats that offer services like gasoline, and that it plays to the company’s “economic advantage.” According to the paper, Pichler said that “fifty percent of the market share in our major markets is held by competitors who do not have economies of scale, who are not supercenters and who are not even strong regional operators. We see the opportunities there."
Outside analysts, however, note that this strategy only will work as long as these smaller operators exist in markets where Kroger does, and that eventually the company will have to go head-to-head with Wal-Mart.
- KC's View:
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It’s probably not fair to suggest that Kroger isn’t going to head-to-head with Wal-Mart every day. It is.
However, it would be our view that beyond the strategy of grabbing market share from weaker competitors, Kroger has to make a concerted effort to define the “Kroger shopping experience” beyond just not being Wal-Mart. There have to be differential advantages to be exploited, or there’s no reason, ultimately, to choose Kroger over Wal-Mart.
