Case 13: Attention Shoppers: Executive Compensation at Kroger, Safeway, Costco, and Whole Foods.
MGT 495
November 13, 2011
Case Discussion Questions:
Retail grocery sales represent a significant portion of the U.S. economy. The industry was highly competitive, with companies operating on low gross and net margins. As a result, grocery stores were generally under significant pressure to reduce their operating costs in order to maintain profitability. For the last several decades, the grocery industry grew roughly in line with gross domestic product and was considered a mature industry. In order for companies to succeed, they needed to find effective strategies to steal customers from competitors. Many sought to differentiate themselves through store format, store location, product mix, ancillary services, or quality of customer service. Strategies, however, could easily be imitated by competitors, putting grocery store chains under constant pressure to innovate and remain efficient. In general, growth also required the expansion into new store locations. Companies that failed to grow often went bankrupt or were acquired.
 S.W.O.T: Kroger, Safeway, Costco, and Whole Foods
Kroger:
Strengths
• Multiple formats and solid market share in major metropolitan areas
• Shopper insights program
• Well known regional brands
• Developed private label and loyalty marketing programs
• Pricing image
• Very strong organic growth (i.e., comparable and identical store sales) Weaknesses
• High operating expense structure
• Inconsistent productivity and execution across divisions
• Legacy costs - store base aging rapidly

Opportunities
• Expansion of Food 4 Less and Marketplace formats into new markets
• Leverage synergies across Kroger East and West
• Centralizing functions to create operating and merchandising efficiencies
• Beginning to re-capture