1883: Foundation of Krogers Co.

Capital: $ 372

2011: 2449 supermarkets 795 Convenience stores 1035 supermarket fuel centers 359 fine jewelry stores 1966 Pharmacy ( Food and drug)

We believe that our customer base is becoming increasingly diverse not only in terms of ethnicity, but also in terms of income levels, household mix, and purchasing patterns. We are addressing customer diversity through our multiple formats and product selection. Our broad array of formats positions Kroger to take advantage of growth trends in retailing. Expanding our formats and their elements also allows us to further leverage Krogers existing distribution and manufacturing facilities. By David Dillon CEO

1900: Bakery, Butcher, General store, vegetable market 1920: Grocery chain 1930: A&P had 16000 stores, $ 1 billion sales 1930-1950: Chain retailer to supermarket 1960: Convenience stores (1962: Wal-Marts first store) 1960-1990: Hypermarket

GROCERY CHAINS o Kroger o The Great Atlantic & Pacific Tea Company (A&P) MASS MERCHANDISERS Wal-Mart Kmart Target WAREHOUSE CLUB STORE OPERATORS Costco Sams BJs

Share of food sales 65.8%------60.3% 0.91 times

Share of food sales 2.8%------8.1% 2.89 times

2003 Limited Assortment stores

Aldi & Sav-A-Lot High quality Private label items Lower prices

2004 Emergence of new store format Fresh market Drug Dollar Mass Military

Extensive assortment High quality perishables

Kroger Grocery and Baking company 1902: 40 stores and $ 1.75 million annual sales 1904: Bought 14 Nagel meat makers 1908: 136 stores 1916: Self service format 1920: 5575 stores 1930: Store of the future award 1956: Wesco Foods Produce buying arm 1970s: Ultra modern stores

First company to operate their own bakery

First company to sell meat and grocery under same roof First company to test the food scientifically Sales Figures 1952: $1billion 1963: $ 2 billion 1968: $ 3 billion Cheese, deli, bakeries & flowers

Variety: Fresh seafood to Finest fragrances

1972: First superstore in Ohio 1983: Where New Ideas Come to Life Merger with Dillon Companies

Coast-to-coast operator for food, drug and convenience store Manufacturer of more than 4000 food and non food products

1999: $ 13 billion deal with Fred Meyer 2000: Grocery Distributor of the Year 2003: Natural/ Organic food

140 item ranging from baby food to pasta

2004: 1-2-3 Rewards Master Card

To earn free groceries Saving on products

2005: Hurricane Katrina

$6 million donation food water and other necessary products

2006: Quarterly dividend program $ 1 billion per year with minority and women owned suppliers

2007: Kroger was inducted in to Bilion Dollar Roundtable

Retailer of the Year for 5 times in 7 years

Principal supermarket - 3 different formats

Combo stores Superstores Conventional stores

Addition to supermarkets

Multidepartment stores Price-impact warehouses Convenience stores Fuel centres Jewellery stores Food processing plants

Combo stores
Drew customers from a 2 2.5 mile radius 59,000 square feet and required an avg investment of $9.5 million (real estate) One-stop shopping Offering high-margin specialty products

Superstores
Smaller than combo stores Generally did not include pharmacies Had fewer specialty departments

Conventional stores
Broad selection of grocery items Operated in less than 25,000 square feet Limited the perishable and general merchandise departments

Multidepartment stores
Larger in size than combo store 2 formats x Fred Meyer
x Size -130,000 to 200,000 square feet x Avg investment of $24.5 million (real estate) x 225,000 food and non-food products

x Frys marketplace
x Smaller compared to fred meyers x Size - 80,000 to 100,000 square feet x 1st opened in arizona in 2000, by 2003 there were 17 of them x Avg investment of $13.5 million

Price-impact warehouses
Operation - no-frills, low-cost warehouse

format with superior quality Offer - everyday-low prices plus promotions for - grocery, and health and beauty care items. Size - 53,000 square feet (avg) similar to combo store The Food 4 Less banner was launched in southern california, nevada, illinois and indiana Foods co., Operated in northern california.

Convenience stores (c-stores)

795 c-stores - 96 were franchised to

independent third-party operators Focus - small to medium-sized towns (2/3rds in towns with fewer than 75,000 residents) Location - near interstate highways and the majority of the locations occupied hightraffic corner sites Size - 2,700 square feet, customer count around 5,000 (avg) Stock- 3,500 items (approx) Offers - staple food items and general merchandise, in most cases sold gasoline

Jewellery stores
436 fine jewelry stores in 35 states (1 of

the largest) fred meyer multi dept stores (100) and shopping malls (300+) Operated with a high-margin and with good cash flow Www.Fredmeyerjewelers.Com and www.Littmanjewelers.Com

Pharmacy
7th largest in US OTC and prescription sales Offers : Online pharmacy via easyfill (18%) Postal prescription service Drive-thru pharmacies (437)

Supermarket fuel centres

Natural addition - convenience and value Parking lots (3 to 7 mpds) 8 x 12 kiosk Credit and debit cards , loyalty program Low margins but high ROI 537 fuel centers by 2004 in 29 states

Natural foods department 1,378 stores - health conscious consumers 100% organically grown and manufactured products - juice, cereal, fresh dairy and frozen organic products Categories such as sports nutrition, condiments, supplements and snacks Launch of naturally preferred Minimally processed; using all natural/organic ingredients and contained no artificial color, preservatives, or flavours Herbicide-free and pesticide-free Different formats x The natures markets frys , dillons and kroger bannered stores x Natural food centers - fred meyer and QFC stores
x Integrated sets at Ralphs, King Soopers, Smiths, and City Market - tied into the pharmacy to promote the Wellness theme

Size -1,100 and 1,400 square feet (avg) Included - all natural and organic foods, vitamins, energy bars,

Sports drinks and herbs in one area of the store

Corporate Brands
Corporate brand products were produced

and sold in three quality tiers :

x Private selection

x Premium-quality brand x 765 different Private Selection items by the end of 2004

x Banner brands
x Kroger, Ralphs, King Soopers, etc x Designed to be equal to or better than the national brand x Try It, Like It, or Get the National Brand Free

x For Maximum Value (FMV)

x Value brand x Designed to deliver good quality at an affordable price

3-tier strategy of good, better, best

I-wireless (Wireless Services)

National wireless service provider sold in over 2,200 retail locations Allows customers to accrue minutes for using their shopper's card on qualifying purchases

Disney Magic selections

To help promote healthy eating among children

Movie rentals Financial Services

Offer various stores' branded x MasterCards x Mortgages x Home equity loans x Pet, rental's and home insurance x Identity theft protection

Manufacturing Plants
Largest networks of private label

manufacturing Kroger operates 40 manufacturing plants, and packages and sells items - InterAmerican Products Company Kroger operates 15 dairies and three ice cream plants 10 Bakeries/Delis 2 Meat Plants 8 Grocery Items

Distribution Restructuring of logistics network To improve efficiency To lower costs To improve product safety and quality Distribution centres and store delivery fleets were outsourced to third party logistics providers 3-tier distribution system

3-tier distribution system x 1st tier: x Regional centres - 200-mile radius with quick turn and perishable products x Served as the cross-dock centres for palletized merchandise that went directly to a x Retail store. 2nd tier x Consolidation centres/peytons - 350-mile radius with slowerturn pharmaceuticals, x Health and beauty care items, and dry grocery merchandise x Larger quantities at the lowest possible price bracket x Depending on value and movement - piece-picked, sleevepicked, or case-picked (product was) x Shipped directly to stores two or three times each week 3rd tier x Part of the peyton network x Covered a larger geography than consolidation centres x Shipped seasonal and promotional products to stores

Wal-Mart Super Center Format Competitive Pricing

 

Target & Costco High Discounts Traders Joe Niche Super Market

   

STURDY MARKET POSITION BRAND EQUITY THREE PRONGED BRANDING APPROACH PROFICIENT MANUFACTURING CAPABILITIES

DIVERSIFIED RETAIL INVENTORY

  

VENDOR QUALITY LAPSES A UNIONISED WORKFORCE LEGAL PROCEEDING RELATED TO RALPHS GROCERY CASE

INCREASED EMPHASIS ON PRIVATE LABEL BRANDS

 

STRATEGIC EXPANSION PLANS IN-STORE HEALTH CLINIC PROGRAM

  

INCREASING LABOUR COSTS HIGH DEBT BURDEN DISMAL ECONOMIC PROJECTIONS