storewanderer wrote: ↑February 11th, 2024, 1:01 am
They are too small, most lack fuel stations, they were slower to adopt Clicklist/Pickup than other divisions, they have a lower percentage of stores with pharmacies than most other Kroger divisions (QFC has fewer, F4L has almost none); based on posts here they seem to have a poor reputation with customers (compared to other Kroger regions), the attitude of employees seems universally worse than other Kroger regions, I do not think their success/penetration with Kroger private label lines is as good as other regions...
Why does any of that matter? At the end of the day, the stores are busy. People are shopping there. They don't need fuel stations or pharmacies to be succesful and they aren't trying to compete against other regions.
I would guess that California is one of Kroger's most profitable markets. Ralphs has leading market share in many parts of the LA area, and Food4Less/FoodsCo is popular with Hispanics and others.
storewanderer wrote: ↑February 11th, 2024, 1:01 am
They are too small, most lack fuel stations, they were slower to adopt Clicklist/Pickup than other divisions, they have a lower percentage of stores with pharmacies than most other Kroger divisions (QFC has fewer, F4L has almost none); based on posts here they seem to have a poor reputation with customers (compared to other Kroger regions), the attitude of employees seems universally worse than other Kroger regions, I do not think their success/penetration with Kroger private label lines is as good as other regions...
Why does any of that matter? At the end of the day, the stores are busy. People are shopping there. They don't need fuel stations or pharmacies to be succesful and they aren't trying to compete against other regions.
I would guess that California is one of Kroger's most profitable markets. Ralphs has leading market share in many parts of the LA area, and Food4Less/FoodsCo is popular with Hispanics and others.
That matters because the average Ralphs cannot bring in as much revenue as larger stores in surrounding divisions. Additions like fuel and Pick Up were considered additional revenue for the stores and that has been very important to Kroger. The pharmacy is very important to Kroger, most of their divisions have very busy pharmacies, there is a loyalty tie in to pharmacy (fuel points with prescription fills). By having additional services like fuel and pharmacy Kroger is able to make more money off of each customer vs. the Ralphs situation where people "just go there to buy groceries" then stop at the Arco/Shell/Chevron down the road for gas and hit the CVS for prescriptions.
Based on what I know of Kroger profitability, Harris Teeter, Fred Meyer and King Soopers are reportedly the highest profit divisions and have been for some time. I've heard things about some other divisions being very profitable but Ralphs is not a division I've ever heard mentioned. It is strange since Ralphs/F4L has the largest store count of any division... you would think it is the most profitable.
If Kroger had properly expanded Ralphs, and we were seeing Ralphs build new stores in growing areas (like Stater is), I'd have a different opinion. But this Ralphs chain is not growing as it should be... and hasn't. I think they have lost too much ground (short of acquiring Stater...). Had Ralphs not closed NorCal/Fresno/Bakersfield at least they'd have 8 new early 2000's build stores in those markets all of which had pharmacies and one of which had fuel (could have added fuel to a few more). That would be 8 more stores that were "closer to a typical Kroger operation" even if far flung/far apart from each other. Ralphs lost a lot of ground when they closed NorCal and didn't immediately double down on efforts to grow in SoCal (they did the opposite-kept closing stuff in SoCal too and hardly opened any new stores after the Strike). Divisions like King Soopers, Smiths, or Frys I don't think have ever closed any 2000's build stores and those chains enjoy strong positioning in their markets and have done a good job following growth patterns.
storewanderer wrote: ↑February 11th, 2024, 1:01 am
They are too small, most lack fuel stations, they were slower to adopt Clicklist/Pickup than other divisions, they have a lower percentage of stores with pharmacies than most other Kroger divisions (QFC has fewer, F4L has almost none); based on posts here they seem to have a poor reputation with customers (compared to other Kroger regions), the attitude of employees seems universally worse than other Kroger regions, I do not think their success/penetration with Kroger private label lines is as good as other regions...
Why does any of that matter? At the end of the day, the stores are busy. People are shopping there. They don't need fuel stations or pharmacies to be succesful and they aren't trying to compete against other regions.
I would guess that California is one of Kroger's most profitable markets. Ralphs has leading market share in many parts of the LA area, and Food4Less/FoodsCo is popular with Hispanics and others.
That matters because the average Ralphs cannot bring in as much revenue as larger stores in surrounding divisions. Additions like fuel and Pick Up were considered additional revenue for the stores and that has been very important to Kroger. The pharmacy is very important to Kroger, most of their divisions have very busy pharmacies, there is a loyalty tie in to pharmacy (fuel points with prescription fills). By having additional services like fuel and pharmacy Kroger is able to make more money off of each customer vs. the Ralphs situation where people "just go there to buy groceries" then stop at the Arco/Shell/Chevron down the road for gas and hit the CVS for prescriptions.
Based on what I know of Kroger profitability, Harris Teeter, Fred Meyer and King Soopers are reportedly the highest profit divisions and have been for some time. I've heard things about some other divisions being very profitable but Ralphs is not a division I've ever heard mentioned. It is strange since Ralphs/F4L has the largest store count of any division... you would think it is the most profitable.
If Kroger had properly expanded Ralphs, and we were seeing Ralphs build new stores in growing areas (like Stater is), I'd have a different opinion. But this Ralphs chain is not growing as it should be... and hasn't. I think they have lost too much ground (short of acquiring Stater...). Had Ralphs not closed NorCal/Fresno/Bakersfield at least they'd have 8 new early 2000's build stores in those markets all of which had pharmacies and one of which had fuel (could have added fuel to a few more). That would be 8 more stores that were "closer to a typical Kroger operation" even if far flung/far apart from each other. Ralphs lost a lot of ground when they closed NorCal and didn't immediately double down on efforts to grow in SoCal (they did the opposite-kept closing stuff in SoCal too and hardly opened any new stores after the Strike). Divisions like King Soopers, Smiths, or Frys I don't think have ever closed any 2000's build stores and those chains enjoy strong positioning in their markets and have done a good job following growth patterns.
Obviously Ralphs is terribly mis-managed. Although I believe that it is profitable, remember that allegedly the sales volume is only $3.6 Billion last year. For a $146B company to have their largest division by store count only deliver 2.4% of their revenue is absolutely shocking. It supposedly did $5.4 Billion in 1998 which is $10.5 Billion in today's dollars, meaning that under Kroger's watch Ralphs has lost 70% of its sales volume. At one point Ralphs had over 400 stores in SoCal, and now has only 184 per their website. An astonishing failure where over half of the chain has disappeared. Stater Bros is over $4B a year meaning they took out Ralphs some time ago in volume and they're still building new busy and productive stores in areas where they had to compete with Walmart long before LA did. They already took out Ralphs in store count as well. If Vons and Albertsons had not combined then Stater Bros would be the #1 grocery chain in SoCal, and imagine how much opportunity they still have with many legacy stores that are only about 25K size.
Obviously it's hard to get true sworn numbers by division, so all of these figures are from Google searches. I will check multiple sites before quoting a figure though so I'm assuming the figures are pretty accurate.
As far as what to do with Ralphs? That's a lot tougher. I'd love to say Kroger should sell it to Stater Bros, but they won't know what to do with it. They won't know how to operate in the urban areas of LA where Ralphs runs tiny little boxes with very high volumes. They understand the suburbs which is why they do well in their key markets of Orange, Riverside, and San Bernardino counties. Unfortunately, we just don't have enough competition anymore so there isn't anyone who would be qualified to operate it.
Obviously Ralphs is terribly mis-managed. Although I believe that it is profitable, remember that allegedly the sales volume is only $3.6 Billion last year. For a $146B company to have their largest division by store count only deliver 2.4% of their revenue is absolutely shocking. It supposedly did $5.4 Billion in 1998 which is $10.5 Billion in today's dollars, meaning that under Kroger's watch Ralphs has lost 70% of its sales volume. At one point Ralphs had over 400 stores in SoCal, and now has only 184 per their website. An astonishing failure where over half of the chain has disappeared. Stater Bros is over $4B a year meaning they took out Ralphs some time ago in volume and they're still building new busy and productive stores in areas where they had to compete with Walmart long before LA did. They already took out Ralphs in store count as well. If Vons and Albertsons had not combined then Stater Bros would be the #1 grocery chain in SoCal, and imagine how much opportunity they still have with many legacy stores that are only about 25K size.
Obviously it's hard to get true sworn numbers by division, so all of these figures are from Google searches. I will check multiple sites before quoting a figure though so I'm assuming the figures are pretty accurate.
As far as what to do with Ralphs? That's a lot tougher. I'd love to say Kroger should sell it to Stater Bros, but they won't know what to do with it. They won't know how to operate in the urban areas of LA where Ralphs runs tiny little boxes with very high volumes. They understand the suburbs which is why they do well in their key markets of Orange, Riverside, and San Bernardino counties. Unfortunately, we just don't have enough competition anymore so there isn't anyone who would be qualified to operate it.
I think the 400 store count was right in 2000 and included F4L, Cala, Bell, FoodsCo, in addition to Ralphs, so that would have included ~50 stores in NorCal.
This is the point I was trying to make to HCal. Kroger's thing has been focusing on growing top line since the Dave Dillon days and that is the strategy that made them so successful in that late 2000's and early 2010's period, and also enjoying a favorable reputation among customers in most of their markets. This is where things like fuel and pharmacy come in. They may not contribute much to the bottom line profit but they contribute to the top line revenue and they keep customers engaged. Ralphs has lagged behind other divisions on Kroger's various "top line" initiatives.
It is likely that Ralphs with lower revenue throws out solid bottom line profit to keep everyone happy enough, maybe even has higher profit margins than other divisions, but that is inconsistent with the typical Kroger operating format which is focused on high volume. QFC is also another one that is very inconsistent with typical Kroger format. And if Kroger was so happy with Ralphs, why don't they build some new stores? The lack of new stores speaks volumes. There is a feeling of indifference. They still do these store remodels... even if they look terrible... that is money being spent... and market the chain heavily in the operating area... I guess they send mixed signals.
I still wonder how Fred Meyer / Ralph’s / Fry’s / Smith’s would have done as a stand-alone company versus the Kroger merger, and how much different the grocery retail scene would look today given what others have mentioned about Ralph’s volume. I’m guessing the Fred Meyer experiment in California would have expanded, possibly into Nevada and Arizona, and we’d be talking about a super-regional chain with pretty decent financials.
bryceleinan wrote: ↑February 11th, 2024, 1:16 pm
I still wonder how Fred Meyer / Ralph’s / Fry’s / Smith’s would have done as a stand-alone company versus the Kroger merger, and how much different the grocery retail scene would look today given what others have mentioned about Ralph’s volume. I’m guessing the Fred Meyer experiment in California would have expanded, possibly into Nevada and Arizona, and we’d be talking about a super-regional chain with pretty decent financials.
It would be minus Frys since Frys was a legacy Kroger property.
But they would still have Smiths/Smittys in AZ. I am sure they would have proceeded with moving Smittys to Fred Meyer and actually expanding Fred Meyer in AZ, also in Sacramento at a minimum.
I also don't think Ralphs NorCal would have closed.
How AZ would have looked would be very interesting... Frys definitely wouldn't be what it is today...
bryceleinan wrote: ↑February 11th, 2024, 1:16 pm
I still wonder how Fred Meyer / Ralph’s / Fry’s / Smith’s would have done as a stand-alone company versus the Kroger merger, and how much different the grocery retail scene would look today given what others have mentioned about Ralph’s volume. I’m guessing the Fred Meyer experiment in California would have expanded, possibly into Nevada and Arizona, and we’d be talking about a super-regional chain with pretty decent financials.
There were Fred Meyer stores planned for Arizona. Smitty's had been rebranded to Fred Meyer Marketplace in the late 1990s and a new Fred Meyer had been partially constructed.
But Kroger doesn't need to get rid of Ralphs unless they wanted a vision for the chain that Ralphs couldn't be part of, or if the financial situation was so bad that Ralphs went up on the sale block. There are people on this very forum who think the Southern Division should disappear solely because it's not trouncing its competitors in market share, not taking into account that if they solely looked at market share, Aldi should just self-immolate, or why in 2013 the hammer came down on Dominick's and not Randalls/Tom Thumb, despite the former having greater market share.
bryceleinan wrote: ↑February 11th, 2024, 1:16 pm
I still wonder how Fred Meyer / Ralph’s / Fry’s / Smith’s would have done as a stand-alone company versus the Kroger merger, and how much different the grocery retail scene would look today given what others have mentioned about Ralph’s volume. I’m guessing the Fred Meyer experiment in California would have expanded, possibly into Nevada and Arizona, and we’d be talking about a super-regional chain with pretty decent financials.
It would be minus Frys since Frys was a legacy Kroger property.
But they would still have Smiths/Smittys in AZ. I am sure they would have proceeded with moving Smittys to Fred Meyer and actually expanding Fred Meyer in AZ, also in Sacramento at a minimum.
I also don't think Ralphs NorCal would have closed.
How AZ would have looked would be very interesting... Frys definitely wouldn't be what it is today...
If the merger hadn't happened Fry's in Arizona would've probably gone the same way Fry's in California did. I'd assume Kroger would've eventually thrown in the towel as Fry's wasn't getting a lot of investment by Kroger prior to the merger (majority of pre-merger stores were built in the 1980s before Albertsons and Smith's entered in 1989 and were inferior in almost every way to the newer Albertsons, Bashas', Safeway and Smith's stores that were built throughout the 1990s). Fry's didn't have many stores in faster growing suburban areas in comparison to Albertsons, Bashas', Safeway and Smith's (because most new construction Fry's stores stopped in the early 1990s while everyone else was expanding). Fry's opened a few stores in the late 1990s that may have been under development pre-merger but they weren't built until after the merger and I'm not convinced they would've been built if the merger didn't occur.
Most of the higher volume legacy stores are all former Smith's or Smitty's (Fred Meyer Marketplace) locations. I'd imagine those stores would've continued onand Smith's / Smitty's (Fred Meyer Marketplace) would've been #1 in Phoenix like Fry's is today (except potentially a better Walmart competitor as they'd have more full line supercenters).
As an Arizonan it would've been a more interesting and more useful collection of stores than currently exist. Outside of those few late 1990s stores Kroger rarely built any new stores throughout most of the 2000s and didn't really start modernizing / expanding the Fry's store fleet until the 2010s (while also closing a number of "legacy" Fry's or Smith's stores.
storewanderer wrote: ↑February 11th, 2024, 1:35 am
That matters because the average Ralphs cannot bring in as much revenue as larger stores in surrounding divisions. Additions like fuel and Pick Up were considered additional revenue for the stores and that has been very important to Kroger. The pharmacy is very important to Kroger, most of their divisions have very busy pharmacies, there is a loyalty tie in to pharmacy (fuel points with prescription fills). By having additional services like fuel and pharmacy Kroger is able to make more money off of each customer vs. the Ralphs situation where people "just go there to buy groceries" then stop at the Arco/Shell/Chevron down the road for gas and hit the CVS for prescriptions.
Revenue only matters if it improves profits. Based on our discussion in the pharmacy forum, the insurance industry is so messed up right now that a lot of retail pharmacies aren't profitable. There is a reason why so many regional supermarkets are closing their pharmacies. A Kroger pharmacy might help drive customer engagement, but if the store is already busy then that may not make much difference.
Same with gas stations. Most independent gas stations make far more on their convenience store than on the gas. I would think the only real value in Kroger's fuel stations is the fuel points program which boosts grocery sales, but that can easily be accomplished through a tie-in with another company (such as Shell in California).
So in the end, I think that Kroger may simply not see the need for these things in California. There isn't space, and customer counts are already sufficient. That doesn't mean the stores are struggling or unable to keep up, it just means that the ROI isn't worth it like it might be in other parts of the country.
