Harris Teeter/Kroger integration

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Re: Harris Teeter/Kroger integration

Post by pseudo3d »

architect wrote:
pseudo3d wrote:
storewanderer wrote: Kroger did to Hiller's what Albertsons just did to "Paul's." The bottom line is if these changes fail, the customers will shop elsewhere and stores will ultimately close. The customers are the boss and they always vote with their feet.
With all due respect, I think there is a bit of a difference. I believe Kroger closed the stores for a longer time to redecorate, and I don't think they kept any of the Hiller's programs (wide beer selection, the bar in the new store) while Albertsons at least kept a few of the programs as a test run (the donuts, and I've heard McCall's clothing dept.)

Both had owners who were sell-outs, though.
Honestly, this difference in approach demonstrates the competency in management between Kroger and Albertsons. Since Hiller's was a chain of only 6 stores, there is no economically feasible way to retain these stores as a separate division and manage separate marketing/merchandising efforts for these locations alone. Although Kroger can (and often does) take ideas from chains they acquire, some specialized programs can either be too complex to manage (such as the Hiller's bar concept) or require an order of certain products in extremely low volumes (which is usually cost-prohibitive). On the other hand, Albertsons attempts to manage (but not import) exclusive programs from Paul's will stretch the company's resources and ultimately just delay the process of integrating these stores in the Albertsons fold.
It doesn't need to run things as a separate division or region. Like I said before, Kroger *supposedly* localizes each store to the store and not to the division like Albertsons does, therefore the former Hiller's stores should still largely carry the same items they did before (and by the way, other Kroger stores like Ralphs DID have that concept). The specialized programs at Paul's don't necessarily conflict with Albertsons' systems (like, say, if they had their own loyalty/rewards card, which for what it's worth, they DID) and help give the stores a local identity.

Tying this back in with Harris Teeter, which IS large enough to run as a separate division, converting to Kroger would require a massive change of systems that Harris Teeter isn't equipped for and would generally be a downgrade in all categories but price. The idea would be that the stores cross-pollinate to create a better supermarket, but historically acquisitions means that the identity largely dissolves as new management finds new ways to cut corners and homogenize.
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Re: Harris Teeter/Kroger integration

Post by storewanderer »

Different Kroger divisions handle the "localization" differently. Different districts within each given division may also handle the localization differently. Some do it better than others. Some of the divisions may be a little complacent running stores that are "similar" across relatively small geographies and their stores are a lot more boring/similar than the divisions that span a wide geography. Dillons comes to mind of an example of this. Not being in Kroger Michigan before I have no idea how they operate things.

I never heard anything about Hiller's or heard anyone with particularly good things to say about it except for you, here, on this message board. The news articles quoting customers were pretty similar to those that discussed Albertsons take down of Paul's.
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Re: Harris Teeter/Kroger integration

Post by Knight »

pseudo3d wrote:Tying this back in with Harris Teeter, which IS large enough to run as a separate division...
Harris Teeter operates as a subsidiary. If integration remains to be completed, will it be in line to become an actual division?
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Re: Harris Teeter/Kroger integration

Post by pseudo3d »

storewanderer wrote: I never heard anything about Hiller's or heard anyone with particularly good things to say about it except for you, here, on this message board. The news articles quoting customers were pretty similar to those that discussed Albertsons take down of Paul's.
Reading Yelp reviews and other sources is a good way to get an idea about what a store is/was like. Admittedly, neither of us have lived in Michigan, but my brother's favorite supermarket was Hiller's when he lived there. Most of the Paul's things I've heard is good meat sales, the local feel, and the bakery, and that's just about it.

Maybe I don't give enough credit to Kroger, but to dismiss criticism like that just isn't true.

/

OK, we've established that Kroger's divisions are fairly different, and I get the impression that the areas where Kroger and Harris Teeter overlap that the Kroger division is inferior. You even implied that when I suggested the possibility of converting the Fernandina Beach store to a Kroger. The question that I posited earlier in this thread (though it was a loaded question with relation with Nashville) is that would Kroger ever convert any of its stores to Harris Teeter? Even Albertsons gave up some of its overlapping stores in North Texas and eastern NM to United to run (which is a smart move--I consider United to be a superior operator by far to Albertsons).
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Re: Harris Teeter/Kroger integration

Post by storewanderer »

Albertsons gave stores to United for geographic reasons. Albertsons also made a series of changes to the divisions over its own stores for geographic reasons also at the same time. It had nothing to do with what division was a better operator than the other. For instance, before the Safeway merger, at the same time as they gave those Albertsons Southwest Stores in TX to United, they also switched Albertsons Colorado from Albertsons LLC/Southwest to Albertsons Intermountain. I can tell you this was not a positive move as Southwest ran much hotter ads and had much better pricing than Intermountain. They also switched Albertsons Las Vegas from Albertsons SoCal to Albertsons Southwest. This appears to have been a sideways move for Las Vegas locations based on traffic there.

I just went over to Yelp and look at all of the photos of Hillers and the reviews. It looks like Hillers was fairly uneven but generally better rated than Kroger in MI. The Hillers Stores look nicer, but dated.

It also appears to me Hillers was in financial trouble before they sold out. I read in one of the articles that the union was asked to take, and accepted, a $1/hr pay cut in September 2014. Kroger announced they were taking over in May 2015. I suspect this chain was close to flat out closing down.

The wine bar you describe was in the South Lyon Store which is the one location that has very positive ratings by customers on Yelp since Kroger took over. The South Lyon Store opened in 2013; its poor performance or not performing well enough probably brought down this whole company.

I've said it a lot and think it a lot, in the grocery business, price cures many ills. This is why Wal Mart is the largest grocer in the country despite having poor operations (sloppy service), poor perimeters, and other various questionable practices. They have what many customers perceive as good prices and the customers are willing to overlook all of the problems and shop there for that reason. Looking at Kroger vs. Hillers I see a similar situation. Kroger takes over stores, downgrades them to some extent (moving away slow moving specialty items- you need more room on the shelf for items many people are buying when you get better center store volumes going like Kroger has), but is able to capture more customers because there are more people looking for good prices than looking for specialty items. Just like a wine bar may be nice but in the end if a Starbucks will get you more profit/traffic that is what you will put in. Plus Starbucks appeals to many customers, wine bars appeal to a fairly limited demographic.

If Hillers had had enough customers to be successful, they would not have sold out to Kroger. The stores would not have looked so dated and old.

This is also why I do not think you will see Kroger converting standard Kroger locations over to Harris Teeter. I think Kroger targeted more middle class areas, whereas Harris Teeter targeted more upper middle class areas for its stores. The locations work as Kroger and too many customers will be very upset with a higher priced format. Unfortunately in too many cases, you capture more customers with lower prices than with specialty foods. I think they can enhance certain Kroger locations that are in "better" middle class areas significantly by adding some Harris Teeter features and items to the locations (primarily pertaining to bakery/deli/prepared foods). The Harris Teeter center store isn't much different than Kroger on mix, it is just priced higher, neater, and looks a lot more polished.
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Re: Harris Teeter/Kroger integration

Post by pseudo3d »

storewanderer wrote:Albertsons gave stores to United for geographic reasons. Albertsons also made a series of changes to the divisions over its own stores for geographic reasons also at the same time. It had nothing to do with what division was a better operator than the other. For instance, before the Safeway merger, at the same time as they gave those Albertsons Southwest Stores in TX to United, they also switched Albertsons Colorado from Albertsons LLC/Southwest to Albertsons Intermountain. I can tell you this was not a positive move as Southwest ran much hotter ads and had much better pricing than Intermountain. They also switched Albertsons Las Vegas from Albertsons SoCal to Albertsons Southwest. This appears to have been a sideways move for Las Vegas locations based on traffic there.

I just went over to Yelp and look at all of the photos of Hillers and the reviews. It looks like Hillers was fairly uneven but generally better rated than Kroger in MI. The Hillers Stores look nicer, but dated.

It also appears to me Hillers was in financial trouble before they sold out. I read in one of the articles that the union was asked to take, and accepted, a $1/hr pay cut in September 2014. Kroger announced they were taking over in May 2015. I suspect this chain was close to flat out closing down.

The wine bar you describe was in the South Lyon Store which is the one location that has very positive ratings by customers on Yelp since Kroger took over. The South Lyon Store opened in 2013; its poor performance or not performing well enough probably brought down this whole company.

I've said it a lot and think it a lot, in the grocery business, price cures many ills. This is why Wal Mart is the largest grocer in the country despite having poor operations (sloppy service), poor perimeters, and other various questionable practices. They have what many customers perceive as good prices and the customers are willing to overlook all of the problems and shop there for that reason. Looking at Kroger vs. Hillers I see a similar situation. Kroger takes over stores, downgrades them to some extent (moving away slow moving specialty items- you need more room on the shelf for items many people are buying when you get better center store volumes going like Kroger has), but is able to capture more customers because there are more people looking for good prices than looking for specialty items. Just like a wine bar may be nice but in the end if a Starbucks will get you more profit/traffic that is what you will put in. Plus Starbucks appeals to many customers, wine bars appeal to a fairly limited demographic.

If Hillers had had enough customers to be successful, they would not have sold out to Kroger. The stores would not have looked so dated and old.

This is also why I do not think you will see Kroger converting standard Kroger locations over to Harris Teeter. I think Kroger targeted more middle class areas, whereas Harris Teeter targeted more upper middle class areas for its stores. The locations work as Kroger and too many customers will be very upset with a higher priced format. Unfortunately in too many cases, you capture more customers with lower prices than with specialty foods. I think they can enhance certain Kroger locations that are in "better" middle class areas significantly by adding some Harris Teeter features and items to the locations (primarily pertaining to bakery/deli/prepared foods). The Harris Teeter center store isn't much different than Kroger on mix, it is just priced higher, neater, and looks a lot more polished.
It probably was on the ropes, as the South Lyon store actually sat for several years after the structure was completed before it finally opened. Likely, Hiller's was a victim of mergers and acquisitions. We've seen an incredible amount of mergers, acquisitions, and liquidations in the grocery industry in the last few years. Safeway and Albertsons are now one, Kroger has purchased Roundy's, A&P has gone under entirely, Haggen has had its rise and fall, and smaller, weaker chains simply died. I'm reminded of Village Foods, the last remaining legacy of the once-huge Houston division of Safeway.

Back on Harris Teeter, if Kroger doesn't convert some of its nicer stores to the Harris Teeter name, then it likely won't survive in that name at all in most of its markets and will slowly become Krogers, even if the Kroger stores become better. After all, Kroger did finally excise the Scott's name in Fort Wayne because of overlap.
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Re: Harris Teeter/Kroger integration

Post by storewanderer »

We know Michigan has been a tough market and the economy there has been pretty iffy for quite some time.

Maybe in 10, 20 years we will see the Harris Teeter stores so similar to a standard Kroger that they could do a banner change. At this point, the formats are just simply much too different. There aren't many overlapping markets and even in the overlapping markets we aren't in a situation where a Kroger sits across the road from a Harris Teeter. From what I saw in the NC Triangle Region, Kroger is a lower end operator there. They are just a step above a Wal Mart. Almost to the point of being like a Food 4 Less with a larger mix and where they bag your groceries (and have large service departments). Harris Teeter is just the opposite, the stores are beautiful, quality is good, prices are definitely higher but people seem to be paying them. The physical facilities at Harris Teeter are very appealing in these large stores that are well-trafficked and have nice perimeters. Harris Teeter falls apart in lower volume situations where their perimeter gets watered down or poorly executed (such as small stores, and/or such as Nashville).

At this point we don't even have any Kroger brand items in Harris Teeter and as was pointed out here, it isn't a "division" - it is a "subsidiary." I suspect that will eventually change... but for now these are very separate formats.

Scotts was a SuperValu banner focused in one geographic area (how many stores was it? 15? 20?). It didn't have its own private label, its own buying function, or anything. Harris Teeter is a full legitimate chain with over 100 stores spanning multiple states, its own private label, own buying, own systems, etc. There is a difference.
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Re: Harris Teeter/Kroger integration

Post by Knight »

storewanderer wrote:At this point we don't even have any Kroger brand items in Harris Teeter and as was pointed out here, it isn't a "division" - it is a "subsidiary." I suspect that will eventually change... but for now these are very separate formats.
Harris Teeter can easily operate as a full-fledged division overlapping with Kroger's Atlanta and Mid-Atlantic divisions. Harris Teeter has good span of control into regions, districts, and stores, similar to Publix, Kroger should consider implementing. For example, Jay C would operate better as a region of the Central Division.
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Re: Harris Teeter/Kroger integration

Post by pseudo3d »

storewanderer wrote:We know Michigan has been a tough market and the economy there has been pretty iffy for quite some time.

Maybe in 10, 20 years we will see the Harris Teeter stores so similar to a standard Kroger that they could do a banner change. At this point, the formats are just simply much too different. There aren't many overlapping markets and even in the overlapping markets we aren't in a situation where a Kroger sits across the road from a Harris Teeter. From what I saw in the NC Triangle Region, Kroger is a lower end operator there. They are just a step above a Wal Mart. Almost to the point of being like a Food 4 Less with a larger mix and where they bag your groceries (and have large service departments). Harris Teeter is just the opposite, the stores are beautiful, quality is good, prices are definitely higher but people seem to be paying them. The physical facilities at Harris Teeter are very appealing in these large stores that are well-trafficked and have nice perimeters. Harris Teeter falls apart in lower volume situations where their perimeter gets watered down or poorly executed (such as small stores, and/or such as Nashville).

At this point we don't even have any Kroger brand items in Harris Teeter and as was pointed out here, it isn't a "division" - it is a "subsidiary." I suspect that will eventually change... but for now these are very separate formats.

Scotts was a SuperValu banner focused in one geographic area (how many stores was it? 15? 20?). It didn't have its own private label, its own buying function, or anything. Harris Teeter is a full legitimate chain with over 100 stores spanning multiple states, its own private label, own buying, own systems, etc. There is a difference.
I don't know, your arguments regarding some of the conversions (Hiller's, Nashville HT) indicate that Kroger's lower prices bring in more people despite reduced niceties (and to note, the reviews for Hiller's were actually better pre-Kroger in both South Lyon and Ann Arbor) but also changing the existing Harris Teeter stores to Kroger would be a trashy downgrade and would do no favors to the area. Additionally, since NC Triangle seems to be an area where a nice Kroger in a great neighborhood doesn't exist (unlike Houston Division, which has a range of stores ranging from nice to dumpy), you also seem to indicate that converting "better" Kroger stores to Harris Teeter isn't a good solution either.
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Re: Harris Teeter/Kroger integration

Post by storewanderer »

Different things work in different regions. The Hiller's format was obviously not successful (if it was, they would not have sold out, or they would have sold out to someone who would have kept the format going...). I don't know what the Kroger Michigan Stores are like or what kind of reputation the chain has there since I have not seen the stores firsthand, but from the looks of it, their reputation isn't great and they have a mix of stores in some better areas and some not so better areas. We know they closed their couple of Detroit proper stores a number of years ago and passed on taking any Farmer Jacks in Detroit proper so maybe they do not operate in the worst neighborhoods in that market.

Harris Teeter is successful as is in a good number of its markets as I saw firsthand in Charleston, Charlotte, and the Triangle areas, despite higher pricing. There is no reason to convert stores that are already drawing in good crowds of customers. There is no reason to fix what isn't broken.

Harris Teeter Nashville was poorly performing and poorly executed. Hiller's, I do not know, but I have to assume something was wrong performance-wise for them to sell out... these stores appeared to be broken. it appears to me in both cases they needed to do something to those stores to bring in more customers. A high priced format that was supposedly "upscale" wasn't working so their solution was to go and do what they are comfortable with and that is make the stores into a Kroger which is not high priced and not an upscale format, but should appeal to a wider range of customers. In 3-5 years if these stores are closed we will conclude they misread the markets and may have made some mistakes.
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