Head of America's Largest Grocer Talks Amazon and Ugly Tomatoes
August 22 2017 - 5:59AM
Dow Jones News
By Heather Haddon
If you run America's largest supermarket chain, it should be
easy to travel anywhere in the country and answer questions about
where you work. But for Kroger Co.'s Rodney McMullen, those
conversations can be a chore.
"I'll say 'Kroger,' and they don't even know what that is," says
Mr. McMullen, who became the company's chief executive in 2014.
Then, "they will Google it and go 'oh, wow.'"
Until recently, investors were just as enthralled with the
world's third largest retailer. But after three years presiding
over steady growth, Mr. McMullen, a farm-raised Midwesterner, has
been navigating Kroger through its stormiest period in more than a
decade.
The Cincinnati-based company's stock fell 19% in June after it
reported a slide in sales growth and lowered its guidance for the
year. The next day, Amazon.com Inc. announced it was buying Whole
Foods Market Inc.
To fend off Amazon and other online grocery services, Kroger is
sacrificing profits to provide e-commerce pickup options at
hundreds of stores. It is also lowering prices on staples as it
competes with Wal-Mart Stores Inc. and European discount chains
Aldi and Lidl for value-oriented shoppers.
Mr. McMullen, 57 years old, sat down with The Wall Street
Journal this month to talk about the competition, Kroger's future
and the value of ugly vegetables.
Edited excerpts:
The Wall Street Journal: Where were you when you got news of the
Amazon-Whole Foods deal?
Mr. McMullen: I was with our internal audit team. The average
age is in their low 20s. One of our interns who is 20 years old,
the very first question to the group is, 'I thought bricks and
mortar was dead? If it's dead, why is Amazon buying Whole Foods?'
It didn't surprise me at all. Several years ago, we decided that
the customer wants a physical experience and an online experience.
Obviously, it surprised the market a lot more than it did me.
WSJ: What does the deal mean for Kroger?
Mr. McMullen: There isn't anything from a strategy standpoint
that we will change because the strategy we've been executing
assumed something [like the Amazon deal] would happen. It makes it
a lot easier in terms of helping [Kroger executives] understand the
sense of urgency.
WSJ: Given the competition, have you had conversations with,
say, Albertsons Cos., about a deal?
Mr. McMullen: I always tell people that if there's anything out
there, you should assume we've looked at it.
WSJ: Which of these developments is making you lose the most
sleep: Whole Foods/Amazon, a revitalized Wal-Mart or the growing
presence of foreign chains like Aldi and Lidl?
Mr. McMullen: I worry about all of them. And I worry about
restaurants. We operate in an industry that is $1.5 trillion in
terms of how much people spend on food. If people are eating a
meal, we want to get our fair share of that meal. Anybody who is
getting a meaningful part of that, we'd worry about.
WSJ: What are you doing to cut down on food waste?
Mr. McMullen: Over the last four years, we've partnered with
local food banks and provided over 1 billion meals. In some of our
fresh departments, that would have been product we'd have thrown
away. We were able to partner with local food banks so fresh
product that is still high quality to eat, but you wouldn't sell
from an appearance standpoint, [is donated]. We legitimately
believe we will be able to get every store to be zero waste.
WSJ: Much of the food that's wasted in the U.S. is edible
produce that doesn't meet aesthetic standards. Do you believe
customers are open to eating less-attractive tomatoes?
Mr. McMullen: I grew up on a farm. Last Sunday, I went out to
see my parents and their garden, and I find the produce that looks
the ugliest tastes the best.
WSJ: You started as a stock clerk for Kroger. How does that
experience inform the way you do your job today?
Mr. McMullen: I've done a lot of different jobs in the company
so it helps you understand how hard each person's job is. You know
how hard it is to stock shelves, to work an eight- or 10-hour
shift. Every year I'll go and work in a store. In the old days, I
could do any job in the store. Today, bagging is about the only job
I can do. Which is embarrassing but at least I can still do
something.
WSJ: Time travel to Kroger 2025. What would it look like?
Mr. McMullen: It wouldn't surprise me that customers would be in
the store eating but they would use an app to order what they want.
When they are finished, [the store clerk] would deliver the
groceries to them. It will be so easy because we'll be able to
predict a lot of the things you want. The associates you engage
with will be so knowledgeable about where tortillas came from. I
believe some stores will be big and some small. And it will be the
combination of all those things that make it special.
(END) Dow Jones Newswires
August 22, 2017 05:44 ET (09:44 GMT)
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