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Kannan Ramaswamy
William Youngdahl
Kelly Molera

Te Digital Transformation of Kroger:

Remaking the Grocery Business
Customer obsession is […] why we’re building a platform to serve customers anything they want,
anytime they want, and anywhere they want. Our customers don’t distinguish between an in-store
and online experience. Rather, they typically have a food-related need or a problem to solve and
want the easiest, most seamless solution.
William Rodney McMullen, CEO, The Kroger Co.1

Te year of the pandemic, 2020, had just wound down, and there was an air of relief mixed with apprehension.
While mass vaccinations were underway across the globe, the economies of major countries were still facing
signifcant headwinds. Tere was a lot of unease about the possibility that mutations of the COVID-19 virus could
once again bring everything to a grinding halt. Te Kroger Co. was one of a handful of grocery companies that
beneftted from a pandemic boom. With a large segment of the population forced to stay indoors and restaurants
and food service businesses closed, people looked to grocery stores as their only choice for buying ingredients to
prepare home-cooked meals. Kroger’s sales in its third quarter of 2020 had grown by $1.9b, a growth of 11.3%
over the same period in 2019. McMullen attributed some of these historic gains to the Restock Kroger initiative
that he launched in October 2017. It promised to radically transform the customer experience for Kroger shoppers
and elevate the company as a leader in ecommerce and digital business. Te initiative was expected to cost $9b
and generate $400m in incremental operating margin by 2020.2 However, by 2019 Kroger was already pulling
back its digital overhaul after it announced its ffth consecutive quarterly decline in profts despite digital sales
increasing by 21%. Te company was facing intensifying price competition at both the national and regional
levels, and even the smaller players such as Aldi, Lidl, and Publix were increasing their revenues at a much faster
clip than Kroger was able to deliver. Te digital transformation initiative was scaled back to allow the company
to regain its footing. Against that backdrop, the pandemic provided an unexpected boost to Kroger’s fortunes.
It remained to be seen whether the record performance of 2020 could be repeated in 2021 and whether the
Restock initiative would deliver the operating margin increases that were originally promised. As 2021 dawned,
success was far from certain. Exhibits 3a and 3b provide a synopsis of key fnancial and operating statistics of
frms in the industry.

Would Kroger be able to forge a path to sustained proftability while transforming its digital presence and
simultaneously radically changing its physical stores? Would its digital transformation strategy provide enough of
a foil against peer competitors such as Walmart and Amazon who had much deeper pockets and grander visions
of omnichannel strategies? How would the promise of a superior customer experience translate into proftability
at a time when the pandemic was upending traditional customer preferences and the entire grocery industry
landscape? Te very notion of superior customer service had become a rapidly moving target.

Te Transformation of Grocery Retailing

Towards the end of the pre-pandemic era, it was very clear that the grocery retailing industry was in the throes
of a massive transformation. Te industry had already witnessed signifcant changes, ranging from the rise of

Copyright © 2021 Tunderbird School of Global Management, a unit of the Arizona State University Enterprise. Tis case was
written by Professors Kannan Ramaswamy, William Youngdahl, and Kelly Molera (Tunderbird 2021) for the sole purpose of providing
material for class discussion. It is not intended to illustrate either efective or inefective handling of a managerial situation. Any
reproduction, in any form, of the material in this case is prohibited unless permission is obtained from the copyright holder.

This document is authorized for use only in Adrija Majumdar, Swanand Deodhar's PGP I (Term 2) : Transforming Business through Information Technology (TBIT) 2021-22 at Indian Institute of
Management - Ahmedabad from Oct 2021 to Jan 2022.
 hard discounters and limited assortment stores, the increasing presence of wholesale outlets and warehouse clubs,
and the meteoric rise of online grocery companies, to the entrance of Amazon in fresh groceries through its
acquisition of Whole Foods. Coupled with the fairly slow industry growth rate (~1% per annum), the impact
of these changes was amplifed. Traditional supermarkets accounted for barely a third of all food purchases in
the U.S., and the hold that traditional grocery stores had on U.S. households in terms of shopping space had
declined from 90% three decades ago to 44% by 2019. As customers experienced far greater variety in retail
formats, they began demanding greater levels of customization to cater to their unique needs.

From Food at Low Prices to Convenience and Experience

Although price and perception of value continued to play key roles in a buyer’s purchasing decision, customers
were attributing a lot more weight to issues such as health and safety, convenience, product quality, and a
seamless customer experience. Customer expectations relating to product availability and speed of delivery had
combined to exert renewed pressures on scalability of the digital models that retailers were experimenting. Tis
trend was accentuated in the pandemic era when online grocery orders received grew by 151% in just four days
between March 12 and March 15, 2020, when the virus lockdowns spread across the country. Te dollar value
of orders grew by an astounding 210% during that same period.3 While these spikes were largely the result of
the pandemic, more fundamental shifts had preceded the pandemic as well. Customers were seeking new and
meaningful shopping experiences and did not see grocery stores as mere places where they could buy food. Tey
expected to be entertained and informed during their visits and appreciated in-store demos, sit-down cheese and
wine bars, even indoor cafes where they could see and sample products. Prepared food, meal kits, expert forums,
contact-less checkout systems, multiple delivery options to suit all tastes such as curbside pickups, personalized
residential delivery, and even “in-fridge” deliveries were being tested.4 Tere was even talk of establishing display-
only grocery stores where customers would be able to see and taste new products that they would then purchase
online.

Te Growth of Online Shopping

Online grocery shopping had taken of in a very big way with companies such as Amazon leading the charge in
home delivery after its acquisition of Whole Foods in 2017. Walmart had also established a leading position in
the online segment and looked to further increase its online revenues. Although the numbers were still fairly small
compared to revenues generated in stores, the proportion of online spending was increasing. It was expected to
account for close to 10% of the overall market by 2025,5 but some analysts believed that the post-pandemic era
might boost those numbers even higher to 21.5%.6 Most of the legacy retailers such as Albertsons, Kroger, and
Walmart were ofering online grocery shopping with ofine delivery using combinations of drive-up services
and residential deliveries to allow the customer a “touchless” shopping experience, a critical requirement that
emerged during the COVID-19 crisis. Even smaller regional and local players were contracting with delivery
service companies such as Instacart to retain customers who were reluctant to visit the grocery store.

Intelligent Aisles and Savvy Shoppers

Te digital realm extended far beyond the boundaries of ecommerce and online shopping. Retailers were using
sophisticated tracking technologies to dispense coupons for special ofers that were personalized in real time as
the shopper strolled through an aisle at the grocery store. Some were using electronic price tags that not only
saved labor costs required to change prices, but also allowed for innovative price ofers when linked with advanced
artifcial intelligence algorithms that predicted customer preferences. Te popularity of loyalty shopping cards had
enabled retailers to deploy artifcial intelligence (AI) and predictive analytics tools that helped craft personalized
shopping experiences. Alibaba, the Chinese consumer conglomerate, had established a chain of grocery stores
under the brand name Hema that portended the future of grocery shopping worldwide. Tese massive stores
served as modern supermarkets that were totally focused on the customer experience while doubling as a warehouse
that allowed pick and deliver operations. Hema stores also ofered a food court that catered to multiple tastes
and cuisines. Te operation included robots that delivered food, smart price tags that doubled as repositories of
product information, cashless payment systems, smartphone-centric transactions, and many more technology-
mediated innovations.

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 Many of the larger U.S. grocery retailers had already started implementing digital strategies, although the
progress had been painfully slow in some cases. Te gap between those who had already implemented carefully
laid out digital strategies and those that were lagging behind was clearly evidenced during the pandemic when
customers were looking for speedier online operations that could provide a seamless store-to-door experience.
Companies such as Amazon and Walmart particularly stood out. Both had made signifcant investments in
their grocery business and were pioneering new ways to enhance the customer experience. While Amazon was
leveraging its voice-enabled grocery shopping experience through Alexa, its own digital interface, Walmart had
partnered with Google to provide a similar experience. It had spent $11.7b on technology investments in 2018
and hired thousands of engineers, data scientists, and product managers to re-engineer the digital experience for
its customers. “It’s no longer acceptable to have a non-digital experience when you go out there, and that means
we have to be integrated across the board and not just in handheld devices but through customer shopping
lists, pickup and more,” said Jeremy King, Walmart’s CTO. In contrast, Kroger had yet to build voice interface
capabilities into its digital strategy.

Amazon’s acquisition of Whole Foods in 2017 for $13.7 billion had set of an arms race among grocery
retailers. Given Amazon’s remarkable prowess in digital platforms, personalization, and customer engagement, it
was clear that the company was well down the path to becoming a major player. By 2019, grocery was Amazon’s
fastest-growing category, and it had already cornered roughly 30% of the online grocery market. It leveraged
signifcant synergies by integrating its Prime membership services with Whole Foods to deliver fresh groceries
within a two-hour window and used its scale advantage to reduce prices to make it a more attractive proposition
to customers. Dunnhumby, a market intelligence company, ranked Amazon as #1 among U.S. grocery retailers
in its annual Retailer Preference Survey for 2021, a frst for Amazon.7 Te report also ranked Amazon as the
top choice in digital and the second-best choice in speed of delivery. Exhibit 4 provides a snapshot of industry
competitors and their salient strategies.

Kroger’s Digital Evolution

All of this [transformation] work starts with our customer-obsession focus. That is why we are building
an omnichannel platform to serve customers with anything, anytime, anywhere. That is why we’re
focused on redefining the experience grocery customers can expect to have in our stores and online….
Rodney McMullen8

Founded in 1883, the Kroger Co., had grown from a small grocery business in Cincinnati, OH to a behemoth
that ranked among the top grocery retailers in the country. Much of its prowess originated in a carefully cultivated
set of core competencies that focused on traditional areas of emphasis, such as cost control and management,
supply chains and inventory management, and astute real estate management. Te company manufactured
between 30% to 40% of its store-label products in company plants while the rest were sourced from suppliers.
Refecting its cost focus, the company had always used market prices as transfer prices to ensure that it made
the right make v. buy decisions. By 2020, the company had over 2,700 stores across 16 diferent brands, such
as Fry’s Food, Harris Teeter, City Market, and Kroger. It emerged as a dominant force in grocery retailing. Like
many of its peers, the retailer had not paid much attention to enabling digital technologies in the pursuit of
more customized oferings or even greater operational efciencies. Much of its eforts were stutter-start moves
designed to test the waters with a technology or two, only to reverse course because the territory was unfamiliar
or for reasons originating in the dominance of its analog culture. Senior management was much more familiar
and comfortable with the linear business model that emphasized the traditional core areas of expertise, such as
supplier and sourcing management, inventory control, product assortment, and national brands and operations
management.

McMullen was a consummate insider at Kroger, having climbed the corporate ladder since he joined the
company as a part-time store clerk and grocery bagger while still in college. Rising through the ranks as an analyst
and later CFO of the company, he was elevated to CEO in 2014. Armed with a head for numbers and a keen
sense of the customer, he focused initially on Kroger’s arch rival, Walmart. Introducing more store-label brands,
reducing prices through more efcient logistics management, and customized sales promotions were pieces of the
stock armory that McMullen had initially deployed to compete against rivals in the grocery business. E-commerce
and digital transformation were far from his mind at that time, although Kroger periodically played at the fringes
of those growth areas. McMullen had himself axed some key digital initiatives that were proposed in those early
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 years in order to run a tight ship. It took the rude shock of Amazon’s entry into the grocery business (August
2017) for Kroger to pivot more seriously toward all things digital. In October 2017, McMullen launched the
“Restock Kroger” initiative that promised to transform the business.

Restock Kroger: A Digital Transformation Unfolds

We understand that today’s marketplace is shifting rapidly. Kroger’s success has always depended
on our ability to proactively address changes by focusing relentlessly on our customers. We have the
scale, the data, physical assets, and human connection to win. Combining our food expertise and
data analytics uniquely positions Kroger to create new and highly relevant customer experiences,
delivered both digitally and in stores. Restock Kroger builds on our strengths and strategically
repositions Kroger to accelerate our customer-centered efforts in order to create shareholder value.
Rodney McMullen, October 11, 20179

Te Restock Kroger initiative was built on four key pillars according to the company: “redefne the grocery
customer experience, expand partnerships to create customer value, develop talent, and live our purpose.”10 Te
strategy was intended to transform the company from a traditional bricks-and-mortar player into a formidable
leader in the world of digital retailing, but it was a transformation that was fraught with challenges. Others,
such as Walmart, had tried this path earlier with mixed results, but McMullen was convinced the time was right
to make a bold move. His confdence was likely bolstered by key assets that Kroger already had in place. It had
acquired most of the ownership interest in dunnhumby, a retail analytics company that was originally a subsidiary
of the U.K. retail giant Tesco. Tat acquisition, completed in 2015, became the core of 84.51°, an internal data
analytics group that Kroger had subsequently established. Kroger had also made an initial foray into e-commerce
with the acquisition of Vitacost, a Florida-based online retailer specializing in health and nutrition products.

Redefning the Customer Experience: Retail grocers were evolving into omnichannel businesses as they
adapted to accommodate how customers wanted to buy their groceries. For example, more time-starved customers
were shifting their grocery buying to online instead of spending time browsing the products on sale at their
local supermarket. Online sales were growing at a heady 40%, while in-store sales had remained fat. Customers
shopping in physical stores were looking for fresh foods and prepared foods, and they were also willing to buy
store brands with greater frequency than before. Tese fundamental shifts in consumer behavior created new
opportunities for Kroger. Addressing these changes required the power of digital technologies to enrich and
enhance the customer experience at every single point of interaction from the physical stores to the digital realm.
“We’re doing this by combining our knowledge of food and our ability to personalize through the use of data
analytics; we’re doubling down on digital, and we’re leveraging new and ongoing partnerships to deepen our
connection with customers and drive revenue,” McMullen observed.11

Data and personalization became a central engine that would elevate the customer experience. Kroger’s
analytics division 84.51º played an instrumental role. By combining infrared and IoT technologies with video
analytics, Kroger was able to track the time of day when customers entered each store and how long their shopping
activity took. Artifcial intelligence (AI) algorithms dynamically predicted and signaled where staf would be in
areas of the store to help customers. Using similar technologies, Kroger was also able to monitor temperatures of
their cold-storage units and warn store personnel of potential problems before they could occur. Te company also
monitored data collected from the aisles to determine sales of its own store brands and national brands to assess
potential switching behaviors. Much of the emphasis at 84.51º was on “supervised learning,” an AI approach
that relied on training algorithms based on labeled data to derive predictions where data were incomplete or
uncertain. When deployed in conjunction with Kroger’s Scan, Bag, Go app, the amount of consumer shopping
data collected was immensely valuable. Shoppers could register their loyalty cards through the app and use it to
scan their in-store purchases and also use the touchless payment system to pay for their groceries. Tis eliminated
the need to stand in line at a checkout counter. Te data collected from the app was also used to personalize
oferings for each individual shopper. Kroger reported that it served about 9 million customers each day and
captured 97% of all the associated transactions through its customer loyalty programs, such as its frequent
shopper cards.12 As the in-store shoppers walked across the aisle with the Kroger app open on their smartphones,
smart-shelves technology was equipped to identify the shopper, sift through past shopping interests, and provide
product recommendations, personal pricing, and digital coupons, all in real time. Te company used over 850
algorithms to analyze customer data and personalize coupons it sent out to over 12 million customers. For

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 example, its analysts were able to identify incredibly nuanced personal consumption patterns such as whether a
customer had started a new diet, or whether a family had downsized, or had newborn children. Exhibit 1 shows
the range and types of data that formed part of Kroger’s personalization database.

While these advances in digital technology, personalization, and predictive analytics were already reshaping
the customer experience, they had an equally powerful transformative impact in the backroom. For example,
Kroger’s consumer packaged goods (CPG) suppliers were clamoring to be featured in Kroger’s online sites, apps,
and in-store digital displays. Kroger also ofered AI-driven Precision Marketing services to its CPG suppliers to
provide extremely valuable data that helped them assess the household-level impact of their marketing programs,
communications pitches, and couponing strategies. Tis allowed suppliers to become more efcient in targeting
the right customers and also use Kroger’s loyal customers as a test group to assess the likelihood of successful
new product launches. Its consumer analytics division 84.51º was also providing consulting services to 1,300
companies, including CPG giants such as Procter & Gamble, General Mills, and PepsiCo.

Kroger turned to Microsoft to implement its Azure AI technology to enhance productivity in the store.
Tis collaboration promised to deliver a “connected store” experience. Kroger and Microsoft established two pilot
stores, each close to one of their two headquarters, to introduce and fne-tune some of these eforts. Te scope of
innovations that were contemplated spread across a wide spectrum ranging from a pick to light system that would
reduce picking time for curbside pickups, a shelving system using digital displays capable of providing personalized
pricing and dietary information, and video analytics to head of stock-outs. McMullen saw partnerships beyond
its 84.51º division as crucial pathways to help Kroger accomplish its lofty transformation goals.

Collaborating to Win: Standing on the Shoulders of Giants

You really have to understand where it is you’re trying to get to, what are the things you are better
off doing on your own and what are the things you are better off partnering with others.
Rodney McMullen13

Kroger and its competitor, Walmart, chose quite diferent pathways to transforming themselves digitally. Walmart
largely attempted to embark on its digital journey using its own assets with a few bolt-on acquisitions. However,
it already had some experience with the use of digital technologies, especially in its supply chain operations.
Kroger was facing a diferent situation. Te company had to build most of its digital technology infrastructure
from scratch. McMullen decided to bet on collaborations to accelerate transformation rather than the plodding
path of building solutions in-house. Automating warehouses for online order fulfllment was a challenge that
required collaboration. Jody Kalmbach, VP-Digital Experience at Kroger, remarked, “E-commerce as a method of
getting things to consumers’ doorsteps has a fundamentally diferent economic model, with an additional layer of
cost beyond what the traditional bricks-and-mortar grocer has to deal with.”14 Kroger’s pickup service required a
sizable staf of in-store employees who picked about 60 items an hour, which translated to roughly $5.00–$7.00 to
fulfll an order. Scaling this approach to achieve a national footprint was a tall order, and a very costly proposition
at best. Kroger would have taken at least 5–10 years to build automated warehousing operations on its own.
McMullen chose to collaborate with Ocado, a UK-based company specializing in warehouse automation, to cut
that development time in half. Kroger owned 6% of Ocado. Voicing his faith in the ability of Ocado to execute a
sound warehousing strategy, McMullen observed, “Ocado is signifcantly more efcient than the way we’re doing
it today, though it will be a couple of years before the warehouses contribute to the company’s bottom line. We
would typically expect a facility to be in year two or year three before it gets to proftability.”15

Here too, Kroger deviated from the established practice of its rival, Walmart, which wrote the book on super
warehouses. Instead, Kroger envisioned warehouses that were smaller but closer to densely populated markets in
order to optimize delivery time. Each warehouse was expected to cost in the region of $55 million. Extending
well beyond warehousing efciencies, Kroger also partnered with Nuro, a company that manufactured driverless
delivery vehicles. Te concept of delivering groceries to customers had been tested using Nuro delivery vehicles
and technologies in Arizona and Texas, although there were no frm plans for expanding the program elsewhere
in the country.

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 Kroger’s collaboration with Microsoft was yet another illustration of the value that the frm placed
on partnerships. Te two companies committed to jointly developing a set of digital tools that they would
commercialize. Called Retail as a Service (RaaS), the suite of products was expected to include Kroger’s Scan,
Bag, and Go system which allowed contactless shopping and payment within the in-store environment. It
included dropdown shopping lists that could be populated by customers at home and activated upon entering
the store. Te app directed the shopper to the items on the shopping lists, and even alerted them to coupons and
ofers that were customized to their needs. It also allowed them to conveniently pay for their purchases through
background payment systems that did not require any extra time in a cashier line before exiting the store. Te
emphasis on digital convenience extended to the back of the store through products such as the Virtual Store
Manager, and comprehensive inventory management system connectors that included both video-based AI to
head of stockout situations, as well as traditional point-of-sale systems that helped manage inventory and supplier
ordering systems. Te companies had already started to commercialize their EDGE Shelf (Enhanced Display for
Grocery Environment), a real-time display management system that was capable of providing just-in-time pricing
information that balanced both online as well as in-store prices, allowed for personalized pricing and couponing,
and also ofered a conduit for carrying advertising as well as nutritional information to help shoppers.16

Driving Innovation: Te Challenge of Change

Despite its torrid pace of digital innovation, Kroger fought hard to bring that same focus and energy to
transformation of its physical stores. Beyond enriching a customer’s experience through updated product oferings,
a host of chef-prepared ready-to-go meals, sample tasting events, in-store cafes and wine bars, the company also
sought to expand its physical retail footprint through partnerships. It signed a deal with Walgreens, the national
drug store chain that operated over 9,000 stores in the country, to ofer a selection of fresh food and groceries
within Walgreens’ stores. Walgreens hoped to beneft from the foot trafc that fresh groceries typically attracted,
and Kroger would be able to expand its footprint without much capital expense. Along similar lines, Kroger
partnered with companies such as Priceline to expand its targeted oferings. Priceline Warehouse, an internet-
based retail platform, allowed customers to bid for groceries online. Customers with winning bids had to pick
up their groceries from Kroger stores. Tis collaboration expanded the traditional reach of Kroger’s bricks-and-
mortar stores into a new marketspace. It had also contracted with the Chinese online retailer Alibaba to sell
Kroger-branded products to a global audience.

McMullen had proven himself to be a champion of change. He engineered a truly massive shift in thinking
at Kroger and helped ensure that customer experience would be a goal that every employee aspired to deliver.
However, the changes were not easy and far from complete. Te established culture within the company had
shown signs of risk aversion. Te Wall Street Journal reported that some would-be partners had walked away from
Kroger after seeing its conservative culture.17 When it acquired Vitacost, an online retailer of natural foods and
supplements, Kroger was very slow to integrate the new company, frustrating Vitacost veterans who felt that
Kroger was reluctant to move into the world of digital commerce and was sticking to its roots in the traditional
bricks-and-mortar business. Kroger also had a reputation for implementing strategy in fts and starts. For example,
Kroger had considered partnering with or acquiring three digital startups that each had the potential to launch
Kroger into the world of digital retailing: Shipt, an online grocery delivery company; Plated, a meal kit company;
and Boxed.com, a bulk e-tailer. However, Kroger was unable to work with any of them; Shipt was snapped up
by Target, Plated was acquired by grocery rival Albertsons, and Boxed walked away from the discussions with
Kroger because it found the terms unattractive and therefore did not pursue a formal ofer.18

Despite the relative infancy of its digital transformation, Kroger witnessed the departure of several key
senior executives. Some believed that this was because of the declining bonuses that were decimated by company
performance. Te bump in performance expected from the early stages of the Restock Kroger initiative had not
materialized, although a ffth of the stores had been remodeled and upgraded. In explaining some of these setbacks,
McMullen explained, “It took us too long to do it. We put too many things on our stores to execute.”19 He seemed
to counsel patience when he observed, “Online investment is still a headwind, but not as much as it was. It takes
three to fve years for a customer shopping online to be as proftable as a customer shopping in a store.”20 It was
clear, however, that Kroger’s investment in digital transformation was impacting the bricks-and-mortar business,
leaving investors concerned. While the company had reported a very solid year at the end of 2020, mostly driven
by the pandemic shoppers, investors worried whether the company could maintain the momentum.

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 Although Kroger customers were becoming familiar with the digital conveniences that the company was
counting on to maintain customer loyalty, much of the actions that it pursued appeared to be tightly locked in
with the bricks-and-mortar stores. Te company reported that the retention rate for customers who shopped
both online and in-store was 98%, underscoring the evolving hybrid nature of the business. As of 2020, Kroger
reported that it had relationships with 60 million households across the country and had engaged in over 1.3
billion interactions across its digital interfaces, a 30% increase over 2019. Its personalization engine appeared to
be clicking since the company reported that it had delivered over 11 million customized recommendations to its
customers each week. However, the perils of the emphasis on digital interactions became evident when Kroger
sufered data breaches in February 2021, exposing some of its HR and pharmacy records. Tis came on the heels
of another data breach in June of 2020 that exposed patient records belonging to over 11,000 customers from
its in-store clinics.

Endnotes
1
Lauchlan, S. 2019. From grocery company to growth company—How Kroger pitches its omnichannel transformation
objectives. Diginomica, July 8.
2
Q4 2018 Earnings call, William McMullen, Chairman and CEO of Kroger.
3
Mounts, D. 2020. Te digital transformation of retail grocery. Forbes.com. https://www.forbes.com/sites/
forbestechcouncil/2020/06/26/the-digital-transformation-of-retail-grocery/?sh=30297d837300.
4
Szatvanyi, G. 2019. 5 trends shaping the grocery store of the future. Grocery Dive. July 3. https://www.grocerydive.com/
news/5-trends-shaping-the-grocery-store-of-the-future/558153/.
5
Begley, S., Marohn, E., Mikha, S., & Retataliata, A. 2020. Digital disruption at the grocery store. McKinsey Quarterly,
February.
6
Mercatus and Incisiv. 2020. eGrocery’s new reality: Te pandemic’s lasting impact on U.S. grocery shopping behavior.
7
Dunnhumby. 2021 Dunnhumby Retailer Preference Index: Grocery channel edition.
8
Lachlan, S. 2019. From grocery company to growth company—How Kroger pitches its omnichannel transformation
objectives, Diginomica, July 8.
9
Kroger Press release. Kroger Outlines Plan to Redefne the Way America Eats and to Deliver Value for Customers &
Shareholders. October 11, 2017.
10
Kroger Factbook, 2017.
11
Russell, L. 2017. Kroger transformation is all about redefning the customer experience. Loyalty360.com. Sept. 12. https://
loyalty360.org/content-gallery/daily-news/kroger-transformation-is-all-about-redefning-the.
12
https://www.krogerprecisionmarketing.com/customers-frst.html.
13
Takker, K. 2019. Kroger and Walmart outline digital transformations. Grocery Dive, January 14.
14
Holthaus, D. 2019. Kroger is primed for battle. Cincinnati Magazine, November 15.
15
Ibid.
16
Walton, C. 2019. Retailers should pay extra special attention to Kroger’s labeling plans with Microsoft. Forbes, February
11. https://www.forbes.com/sites/christopherwalton/2019/02/11/retailers-should-pay-extra-special-attention-to-krogers-
shelf-labeling-plans-with-microsoft/?sh=41487d5125a8.
17
Haddon, H. 2019. America’s biggest supermarket company struggles with online grocery upheaval. Te Wall Street Journal,
April 21.
18
https://www.businessinsider.com/kroger-online-grocery-struggling-2019-4.
19
Kang, J. 2019. Kroger dials back overhaul as sales sputter. Te Wall Street Journal, November 21.
20
Holthaus, D. 2019. Kroger is primed for battle. Cincinnati Magazine, November 15.

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 Exhibit 1. Data Streams Used to Personalize the Customer Experience

Source: Prepared by authors based on data from the Kroger Factbook (2017).

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Management - Ahmedabad from Oct 2021 to Jan 2022.
 Exhibit 2. Illustrative Examples of Data-Driven Decisions

Source: Prepared by authors based on data from the Kroger Factbook (2017).

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This document is authorized for use only in Adrija Majumdar, Swanand Deodhar's PGP I (Term 2) : Transforming Business through Information Technology (TBIT) 2021-22 at Indian Institute of
Management - Ahmedabad from Oct 2021 to Jan 2022.
 Exhibit 3a. Financial and Operating Performance of Kroger 2016-2020
2016 2017 2018 2019 2020
Revenue 115,337 123,280 121,852 122,286 132,498
Growth %, YoY 5 6.9 -1.2 0.4 8.4
Cost of Revenue 89,502 95,811 95,103 95,294 101,597
Growth %, YoY 4.7 7 -0.7 0.2 6.6
Gross Proft 25,835 27,469 26,749 26,992 30,901
Margin % 22.4 22.3 22.0 22.1 23.3
EBITDA 5,913 6,037 5,377 6,218 6,722
Margin % 5.1 4.9 4.4 5.1 5.1
Net Income 2,047 1,583 1,843 1,786 2,693
Margin % 1.8 1.3 1.5 1.5 2.0
Earnings per Share 2.12 2.04 2.11 2.19 3.47
Growth %, YoY 2.9 -3.8 3.4 3.8 58.5
Return on equity % 29.98 27.98 41.98 20.12 28.48
Return on Assets % 5.61 5.17 8.26 3.98 5.51
Number of Employees 443,000 449,000 453,000 435,000 465,000
Number of Stores 2,796 2,782 2,764 2,757 2,742
Source: Bloomberg.

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This document is authorized for use only in Adrija Majumdar, Swanand Deodhar's PGP I (Term 2) : Transforming Business through Information Technology (TBIT) 2021-22 at Indian Institute of
Management - Ahmedabad from Oct 2021 to Jan 2022.
 Exhibit 3b. Financial and Operating Performance of Selected Publicly Traded Companies
in the U.S. Grocery Retailing Industry 2016-2020 (US$ Million)
Financial Overview of the U.S. Grocery Industry (in $US Millions)
2016 2017 2018 2019 2020
Revenue
Kroger 115337 123280 121852 122286 132498
Albertsons 59678.2 59924.6 60534.5 62455.1 69509.4
Walmart 485873 500343 514405 523964 559151
Walmart U.S. 307833 318477 331666 341004 369963
Ahold Delhaize 58282.296 73757.392 73641.2848 77708.5552 87649.208
Ahold Delhaize U.S. 36251.248 45082.432 43933.088 46989.4048 53327.216
Cost of Sales
Kroger 89502 95811 95103 95294 101597
Albertsons 43037.7 43563.5 43639.9 44860.9 49130
Walmart 361256 373396 385301 394605 420315
Ahold Delhaize 42592.5776 54090.7088 53758.8064 56528.96 63393.3584
Gross Proft
Kroger 25835 27469 26749 26992 30901
Albertsons 16640.5 16361.1 16894.6 17594.2 20379.4
Walmart 124617 126947 129104 129359 138836
Ahold Delhaize 15689.7184 19666.6832 19882.4784 21179.5952 24255.8496
Gross Margins %
Kroger 22.4 22.3 22.0 22.1 23.3
Albertsons 27.9 27.3 27.9 28.2 29.3
Walmart 25.6 25.4 25.1 24.7 24.8
Ahold Delhaize 5.1 6.2 6.0 6.2 6.6
Number of Stores
Kroger 2796 2782 2764 2757 2742
Albertsons 2324 2318 2269 2252 –
Walmart 6363 6360 5993 6146 6101
Walmart U.S. 5332 5358 5368 5355 5342
Ahold Delhaize 6556 6637 6769 6967 7137
Ahold Delhaize U.S. 1990 1960 1961 1973 1970
Source: Bloomberg and Company SEC flings.

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This document is authorized for use only in Adrija Majumdar, Swanand Deodhar's PGP I (Term 2) : Transforming Business through Information Technology (TBIT) 2021-22 at Indian Institute of
Management - Ahmedabad from Oct 2021 to Jan 2022.
 Exhibit 4. Business and Digital Strategies of Firms in the U.S. Grocery Retailing Industry
Business Strategies and Positioning
Walmart A traditional mass-market retailer ofering over
130,000 SKUs. Has consistently focused on low
prices and enhanced operational efciencies as the
main pathways to defne its strategy.
Kroger Te largest traditional grocery giant, Kroger flls all
consumer grocery needs with capabilities in analytics,
private labels, and its leading customer loyalty
program. More recent strategy revolving around
Restock Kroger initiative and strategic partnerships to
enhance customer experience.
Albertsons A traditional competitor recently investing in high-
return projects like store remodels. Its “Own Brands”
and “Just for U” loyalty program are advantageous.
Te company is not highly diferentiated, but a
consistent focus on customer experience has driven
recent success.
Whole Foods Whole Foods provides high-quality, fresh, premium
products as a “certifed organic” store. Its narrower
target market includes health and environmentally
conscious customers.
Aldi Tis German hard discounter drives down prices
through its no-frills, self-service model; bulk ordering,
products displayed in shipping boxes/pallets, less
employees, limited product ranges, private labels, etc.
Trader Joe’s Trader Joe’s focuses on variety-based positioning
through selective, private-label products, and small,
neighborhood stores. Its unique products, employees,
and in-store experience have created an extremely
loyal customer base.
Ahold Delhaize Tis Dutch retail group is highly established and
targeted on the Eastern coast of the U.S. with
local brands allowing for centralized resources and
localization. With its “Leading Together” mantra,
the company focuses on customer relationships,
sustainability, and transparency.
Publix Publix is the largest employee-owned company in
the world. Its “people-frst” strategy shows through
its devotion to shareholders, customer service, and
community, as well as high-quality groceries and
prepared food oferings.
H-E-B Tis Texas-based chain topped dunnhumby’s
Retailer Preference Index in 2019, likely attributed
to its “unity” and strong Texan identity. Its in-store
experience is immersive and customers are loyal.
Wakefern Wakefern Food Corp. is the largest retailer-owned
cooperative in the nation. With 51 independently
owned brands, its unique model helps small
businesses succeed and ofers the personalization of
smaller grocers paired with the competitive pricing
and product oferings of a large chain.
Meijer Henry Meijer pioneered the “supercenter” model
years before Walmart was founded. Te company and
its 200,000 sq. ft. stores with up to 350,000 SKUs
have spread throughout the Midwest.
Source: Prepared by case authors.
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Management - Ahmedabad from Oct 2021 to Jan 2022.
Digital Strategies and Plans
Walmart has invested heavily in warehouse automation
and operations with shelf-scanning and stocking robots,
driverless delivery, AI scheduling and routing, and more. It
has also deployed signifcant levels of AI-based personalization
technologies to enhance the customer shopping experience.
Kroger started from behind in the industry’s digital transition, but
the three-year, $9 billion Restock Kroger plan in 2017 focused on
digital partnerships and advanced technologies like EDGE smart
shelves, “Scan, Bag, Go,” the Kroger app, etc.
Albertsons invested $300 million in CapEx and OpEx to
accelerate its digital oferings in 2020. Albertsons is working to
catch up by expanding its successful “Drive Up & Go” program
and utilizing third-party services.
Given its acquisition by Amazon in 2017, Whole Foods enjoys
the digital capabilities of the world’s largest e-commerce retailer.
Aldi’s cost-saving strategy is not as conducive to digital
transformation, but the grocer has announced plans to expand
grocery pickup to more than 1,200 stores and build a new
regional headquarters/distribution center in Alabama.
Trader Joe’s remained frm to its in-store model throughout the
COVID-19 pandemic. It reported a signifcant growth in foot
trafc during the period and announced that it will stick to its
message of simplicity. No major digital investments are expected.
Ahold Delhaize had one of the earliest online presences in the
industry with its investment in Peapod in 1989. Peapod Digital
Labs, a standalone digital division, was established in 2018 to
drive innovation and support its brands’ omnichannel oferings.
While Publix does have a mobile app, curbside pickup, and
delivery options, it remains focused on in-store experience. A new,
larger store prototype places emphasis on convenience and shows
that digital experience is important in stores as well as online.
H-E-B has its own mobile app and now ofers curbside pickup
and home delivery, but has plans to expand digital oferings/
competencies through its own tech startup, H.E.B. Digital.
Many of Wakefern’s brand members have expanded online
oferings and beneft from access to Wakefern’s host of resources.
Wakefern recently expanded its partnerships with Catalina for
data insights and CitrusAd for online retail media.
Its extremely large physical footprint may be a drawback for
Meijer, but the company has satisfed demand for curbside
pickup and home delivery. Te company has begun to use mPerks
Rewards data and other technology to personalize, especially in-
store, experiences.
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