Kroger's strange DFW growth patterns?

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Kroger's strange DFW growth patterns?

Post by architect »

Something I have been thinking about recently is the odd way in which Kroger has located their stores in DFW. What I mean by this is that despite Kroger being one of the top grocers in the market, there are many neighborhoods in which they have little or no presence (including several areas with excellent demographics). Here are a few examples:

1. Kroger has no stores in Rowlett, despite the town being a large (and growing) suburb. The closest stores are in Downtown Garland (a former 90's Albertsons which is terribly dumpy and not in a great area), Sachse (a large upscale store, but difficult to access from Rowlett and largely requires traveling on a toll road to get there) and Rockwall (all the way across Lake Ray Hubbard, enough said). There is still a vacant Minyard Sun Fresh in Rowlett directly across the street from a Tom Thumb (the town's only traditional grocer). Why Kroger hasn't taken over this location is anyone's guess, as the demographics in the area are a perfect fit for an upscale-leaning (but still mainstream) grocer.

2. A similar situation exists in Roanoke, where the closest Kroger locations are in either Southlake or Keller. Again, there is a perfectly good former Minyard Sun Fresh sitting vacant, along with favorable demographics. Kroger was actually rumored to be taking over this location, but no indications of such a move have appeared yet.

3. Nearby, Grapevine/Colleyville is another area with a Kroger drought. The only Kroger store truly convenient to the area is in Southlake, and Albertsons has the market cornered with stores of varying banners all over the area. Kroger could wage war here, especially considering the upscale demographics.

4. Kroger's presence in the Park Cities/Preston Hollow area is weak at best. There are 2-3 stores currently serving this wide area at Mockingbird/Greenville (a high traffic store packed with SMU students), Forest/Greenville (a store which many shoppers from the aforementioned areas tend to avoid due to seedy apartment complexes nearby) and two stores just to the north of Uptown at Maple/Medical District and Cedar Springs/Douglas (both of these stores are a huge stretch). Years ago, Kroger also operated a store at Forest/Marsh which was closed in the late 90's and replaced by an Albertsons (later converted to Minyard Sun Fresh/now Fiesta). Again, a perfectly good Minyard Sun Fresh acquisition opportunity that Kroger let slip by. Also of significance, Tom Thumb has potentially up to 10 stores serving this same shopper base, in some of the highest income neighborhoods in all of DFW. Access to vacant/redevelopable land is probably the main culprit here.

5. The general Casa Linda area in East Dallas also has no Kroger presence, despite demographics which are moving more upscale (and the only traditional grocer being one of the Dallas' two remaining Albertsons). Again, access to vacant/redevelopable land could be the culprit here.

There are also a few other similar areas scattered around DFW, which is somewhat odd to see considering the fact that Kroger's operations in DFW are generally strong, and they are growing at a fast rate within the market as a whole. What are y'all's thoughts?
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Re: Kroger's strange DFW growth patterns?

Post by pseudo3d »

I would guess that Kroger's problems in Dallas stem from relatively lax growth in the 1990s when Kroger wasn't quite as hot as it became in the 2000s and 2010s. To illustrate, we can compare it to the Houston market, which Kroger merged its division with in the '80s: the Houston market primarily had Safeway (later AppleTree), Randalls, and Kroger in the 1980s as the top-tier stores. Soon after the death of AppleTree (which Kroger did buy several stores of), Albertsons hit hard and fast, and with Randalls also in growth mode, it forced Kroger to step up its game and develop the Signature stores. The closure of Albertsons' Houston Division (and purchasing THOSE stores) and the weakening of Randalls allowed Kroger to pull into 1st place, and only with more intensive growth out of H-E-B and Kroger's allowance of weaker, older stores (Greenhouses mostly) to close has made it mostly a two-way race with Fiesta and Walmart as strong contenders and Randalls still puttering along.

In Dallas, the situation was a bit different. In Houston in 1992*, Kroger enjoyed a close second place of 19.4% (Randalls was #1 at 21%, with Fiesta at 14.3%, and AppleTree at 11.9%, though it was just before its first bankruptcy) but it wasn't too great in D-FW. There, Jewel-Osco (Skaggs Alpha Beta) was #1 at 17.5%, Tom Thumb at 16.9%, then Kroger at 14.5%. Albertsons was fifth at 7.4%, but then Albertsons bought J-O, giving them close to 25% (I would assume a handful were divested). Kroger was then in a solid third place as Tom Thumb (now owned by Randalls) and Albertsons were on growth mode, which I assume is what created a position where Kroger got "locked out" in several areas. Luckily for Kroger, though, those two retailers ran into problems later on, where they had to close down stores where Kroger sailed on, resulting in the position now, where both Tom Thumb and Albertsons have to merge just to have enough market share to take on Kroger. If it was Albertsons, Skaggs, and Tom Thumb all merged in the early 1990s, then they would have a staggering 40.8% market share but today actually have a market share of 14.6% with Market Street...just barely more than Kroger's 13.3%, which is about what it had in 1992.


* Progressive Grocer magazine survey as reported by Houston Post, July 2, 1992
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