The Kroger Co., together with its subsidiaries, operates as a retailer in the United States. It also manufactures and processes food for sale in its supermarkets. The company operates retail food and drug stores, multi-department stores, jewelry stores, and convenience stores. Its combination food and drug stores offer natural food and organic sections, pharmacies, general merchandise, pet centers, fresh seafood, and organic produce; multi-department stores provide general merchandise items, such as apparel, home fashion and furnishings, outdoor living, electronics, automotive products, toys, and fine jewelry; and price impact warehouse stores offer grocery, and health and beauty care items, as well as meat, dairy, baked goods, and fresh produce items. The company's marketplace stores comprise full-service grocery, pharmacy, health and beauty departments, and perishable goods, as well as general merchandise, including apparel, home goods, and toys. It operates under the banner brands, such as Kroger, Ralphs, Fred Meyer, King Soopers, etc., as well as Simple Truth and Simple Truth Organic brands. As of January 28, 2017, the company operated 2,796 retail food stores, including 1,445 fuel centers; 784 convenience stores; and 319 fine jewelry stores and an online retail store, as well as franchised 69 convenience stores. The Kroger Co. was founded in 1883 and is headquartered in Cincinnati, Ohio.
Business Analysis of Kroger
The Retail Sector is witnessing a major shakeup, new age business models in the industry are transforming both customers and businesses. Faced with this uncertainity, companies are investing resources to transform their business. An in-depth business analysis is a valuable resource to identify and articulate the need for a business model change. At R&P Research we believe, the starting point for a business analysis is Benchmarking. Business benchmarking can be done at various levels: 1) Industry Benchmarking 2) Peer Benchmarking 3) Disruptors Benchmarking. In this report, we share the snapshot of how Kroger compares against the industry on the major performance indicators. This analysis, along with peer group/disruptors benchmarking and revenue model understanding can help identify growth and cost optimization opportunities to maximize the value delivered by Kroger to its stakeholders. R&P Research Industry Intelligence Platform provides historical data for last 15 years with an easy to use benchmarking interface for an in-depth comparative business analysis.
Here is the performance snapshot of Kroger with an interactive chart.
- Revenue Growth: Kroger reported a revenue growth of 1.3% year-on-year during 2016. Grocery Retail Industry grew at 1.1% in the same period
- COGS share of Revenues: As a percentage of revenue, Kroger spent 77.8% of its total revenues on COGS. Grocery Retail industry average (COGS share of revenue) in the same period was 77.2%
- R&D share of Revenues: Kroger R&D share of Revenues details are not available because either company does not share the data or we do not have it
- SG&A share of Revenues: As a percentage of revenue, Kroger spent 16.3% of its total revenues on Sales, Marketing, and General Administration (SG&A). Grocery Retail industry average SG&A spending in the same period was 16.9%
- Inventory share of Revenues: As a percentage of revenue, Kroger spent 5.6% of its total revenues on Inventories. Grocery Retail industry average Inventory spending in the same period was 5.3%
- Accounts Payable share of Revenues: As a percentage of revenue, Kroger invested 5.2% of its total revenues on Accounts Payable (A/P) Grocery Retail industry average Accounts Payable investment in the same period was 4.8%
- Accounts Receivable share of Revenues: As a percentage of revenue, Kroger invested 1.6% of its total revenues on Accounts Receivable (A/R). Grocery Retail industry average Accounts Receivable investment in the same period was 1.6%
- PP&E share of Revenues: As a percentage of revenue, Kroger invested 17.9% of its total revenues on Property, Plants, and Equipments (PP&E). Grocery Retail industry average PPE investment in the same period was 17.8%
- Intangibles share of Revenues: As a percentage of revenue, Kroger invested 3.4% of its total revenues on Intangibles. Grocery Retail industry average Intangibles investment in the same period was 4.2%
- Net Margins: Kroger Net Margins in the year 2016 were 1.9%. Grocery Retail industry average Net Margins in the same period were 1.9%
Sector and Industry Association of Kroger
For the purpose of performance benchmarking of a company with a sector or industry average, R&P Research associates every company with one sector and one industry. An industry consists of companies with related/similar business models. A sector comprises of a group of related/similar industries.
Kroger is associated with Retail Sector and Grocery Retail Industry.
Retail sector is comprised of the following industries: Broadline Retail; Grocery Retail; Specialty Retail; Apparel Retail; Home Improvement Retail; Specialized Consumer Services. The definitions for each of the industries is as follows:
- Broadline Retail industry includes retail outlets and wholesalers offering a wide variety of products including both hard goods and soft goods.
- Grocery Retail industry includes retail stores that primarily offer non-perishable food that is packaged in cans, bottles and boxes, with some also having fresh produce, butchers, delis, and bakeries
- Specialty Retail industry includes retailers and wholesalers concentrating on a Single Class of Goods, such as electronics, books, automotive parts or closeouts. It also includes automobile dealerships, video rental stores, dollar stores, duty-free shops and automotive fuel stations not owned by oil companies.
- Apparel Retail industry consists of retailers and wholesalers specializing mainly in Clothing, Shoes, Jewelry, Sunglasses and Other accessories.
- Home Improvement Retail industry includes retailers and wholesalers concentrating on the sale of home improvement products, including Garden Equipment, Carpets, Wallpaper, Paint, Home Furniture, Blinds and Curtains, and Building materials.
- Specialized Consumer Services industry includes providers of consumer services such as Auction Houses, Day-care Centers, Dry Cleaners, Schools, Consumer Rental Companies, Veterinary Clinics, Hair Salons and providers of Funeral, Lawn-maintenance, Consumer-storage, Heating and Cooling installation and Plumbing services.
Industry Ranking of Kroger
With $109.8 billion revenues, Kroger ranked number 1 of all the companies in the US Grocery Retail industry. There were a total of 10 public companies in the US Grocery Retail industry that had revenues greater than $50 million during 2016.
The top-10 companies in the US Grocery Retail industry by revenues during 2016 were:
- Kroger ($109.8 billion)
- Supervalu ($17.5 billion)
- Whole Foods Market ($15.7 billion)
- Casey's General Stores ($7.1 billion)
- Smart & Final Stores ($4.3 billion)
- Sprouts Farmers Market ($4 billion)
- Ingles Markets ($3.8 billion)
- Weis Markets ($3.1 billion)
- Village Super Market ($1.6 billion)
- Natural Grocers ($705.5 million)
Business Model Analysis (BMA) Framework
We use the following framework to assess the business model of a company. Business Model Analysis framework can be used by organizations to articulate growth strategies and identify cost optimization opportunities. Technology and consulting companies can use this framework to identify the value drivers and pain points of their targeted customers. Entrepreneurs can use this framework to understand the language of business and identify promising business opportunities. This framework can be used by any professional aspiring to take up a leadership role to better understand the businesses challenges, articulate growth strategy, and monitor the business improvement requirements for the organization.