The system allows Kroger to identify which items matter most to customers when it comes to price and prevents the company from discounting products that would sell at higher prices.
With nearly 2,500 stores in 31 states, Kroger is the nation's largest grocery company. It operates under two dozen local banner names, including Ralphs and Food 4 Less in Southern California, Fred Meyer in the Pacific Northwest, Food 4 Less in Chicago, Fry's Food and Drug in Arizona and Kroger in Ohio, the Midwest and much of the South. The company also owns 385 jewelry stores.
The one place Kroger isn't doing better than its rivals this year is on Wall Street, where its shares have fallen nearly 19% since Jan. 1, closing Friday at $21.46. Safeway is down 12% and Supervalu is up almost 9%.
Over the last 12 months, however, Kroger looks better -- with a stock price decline of about 18%, compared with 30% for Safeway and 49% for Supervalu.
Kroger has proved especially adept at operating in regions where Wal-Mart Stores Inc.'s supercenters have captured large market shares, analysts say. Last year, Kroger's share grew almost a full percentage point in regions where Wal-Mart is no less than the No. 3 seller of groceries.
It could be nothing more than Kroger's giant size and reach "allowing it to be the last man standing," said Jim Prevor, editor in chief of PerishablePundit.com, a food industry website. "Wal-Mart comes in and destroys the independents but doesn't get all of that share. Kroger gets a slice too."
But Kroger also has benefited from shoppers turning to private label goods to save money, said Andrew Wolf, an analyst at BB&T Capital Markets in Richmond, Va. Private labels are now a $12.5-billion annual business at Kroger.
Encouraged by its success, Kroger is marketing private label goods with techniques once reserved for national brands. Shoppers who belong to the company's loyalty club now get coupons and special offers for Kroger goods. Recently Ralphs devoted the entire back page of in-store advertisements to its private label products .
"I like the Ralphs Private Selection brand," said Derek Twells of Long Beach. "I think it is a good value for the dollar, and the quality is close to what you get in a national brand."
The lower price, however, doesn't mean the Kroger makes less money on the sale, said Agnese of Standard & Poor's.
