HCal wrote: ↑May 10th, 2024, 8:37 pm
This may sound wild, but hear me out.
If Kroger wants to expand in California, they should introduce the Ruler Foods format. Their attempts at conventional supermarkets clearly aren't working, but small, limited assortment stores might. Aldi had a great concept that seemed to be doing incredibly well in California, until they screwed something up (still not exactly sure what) and lost a lot of traffic. Grocery Outlet was also doing well until they weren't. Kroger can buy the leases on some of the closing 99 Cents Only stores and start a price impact format that would do quite well if they execute it correctly.
If they aren't willing to do that, then I think they should just stick with what they have. You don't have to be #1 in market share to be successful. Just keep the existing stores chugging along. If Kroger acquires Safeway Norcal, whether through the current merger or a smaller deal, I bet they will botch it.
I don't think Ruler Foods has done all that well for Kroger. They haven't opened many of them (any?) in recent years. It seems like there is little to no marketing for the concept anymore.
I think the problem at the end of the day is these stores that run low dollar transactions, even if they are busy, the actual dollars of revenue that they generate are low. So you have Kroger who can develop a 20k square foot Ruler Foods. It may do $150k a week despite seeming "busy" the problem is the average cart is under $20 and it has limited operating hours. Or they can develop a 100k square foot Marketplace that will do over a million a week and get a higher margin mix of merchandise plus be able to offer fuel/pharmacy which can push the revenue from that site well over $2 million a week.
If I observed Ruler Foods "beating" Aldi in the Midwest I'd say this is a good idea. But I don't see Ruler Foods "beating" Aldi. The Aldi Stores have a wider assortment than Ruler Foods. Ruler Foods is actually closest to that Joe V's HEB format in terms of mix (or lack thereof). I liked Ruler Foods for staple type Kroger merchandise and all labels were represented from ST to PS (not much PS); mostly standard Kroger stuff.
However I do wonder if acquiring Grocery Outlet would make sense for Kroger. They could basically let Grocery Outlet keep doing its thing, then be the "back up" supplier for goods when Grocery Outlet has challenges securing inventory. The operator model is used by Loblaw and Sobeys up in Canada for the No Frills/FreshCo Stores which are more of a Ruler/Aldi style format.
There is a lot of real estate on retail available in California with all the 99 Only leases coming available, and I expect hundreds more closures in the drug/(what category do we consider Big Lots..) category... many of which would make great grocery stores in some format.