Latest news with #C&S
Forbes
5 days ago
- Business
- Forbes
What The Cyberattack On UNFI Reveals About The U.S. Grocery Industry
Empty shelves at a Texas Whole Foods store. Errol Schweizer On June 5th, a cyberattack crippled United Natural Foods (UNFI), a $30 billion grocery wholesaler and Whole Foods Market's largest supplier. UNFI also services 15,000+ other supermarkets, cooperatives, health food stores and chain stores, and is not yet sure when their ordering and replenishment systems will be able to fully supply their retail customers. Grocers have scrambled to access product from other wholesalers, putting pressure on supply chains throughout the industry. While the cyberattack earned headlines for its impacts to shoppers and store operations, the disruption highlighted the role of wholesalers in ensuring a functional U.S. food industry, showing that when a wholesaler like UNFI sneezes, the grocery industry catches a cold. Wholesalers are the vital connection between producers, manufacturers and retailers and command significant market access and work hand in glove with grocers on a daily basis. While many retailers still do some of their own wholesale distribution, third parties like UNFI are essential to feeding many Americans. Wholesalers handle millions of cases of product per day. They are large, complex, fast-paced work environments. They have very thin margins. UNFI gross margins typically hovers around 13.5%, a fraction of what retailers and manufacturers run on. Besides UNFI, major wholesalers include $23 billion C&S, which supplies thousands of independent and chain store supermarkets on the East coast, and $50 billion McLane, wholly owned by Berkshire Hathaway and a major supplier to Walmart and Wawa, as well as Spartan Nash, partially owned by Amazon, and UNFI rival KeHe, an employee owned behemoth that services Sprouts, HEB and thousands of independent natural foods and specialty food stores. The retail value of the products such wholesalers supply is easily north of $300 billion a year, yet they are mostly invisible to consumers. Wholesalers like UNFI and KeHe typically have 'primary' relationships with grocers like Whole Foods and Sprouts, in that they distribute the lion's share of their center store, beverage, dairy and frozen packaged food products. Grocers sometimes also use direct service snack and beverage operators like Frito-Lay, Pepsi, Snyder's, Rainforest or Dora's Natural, or family owned specialty distributors like Chex Foods, as well as new item innovation focused start-ups like Pod Foods to diversify their supplier base. But the vast ranges of empty shelves at Whole Foods and other stores illustrates the reach that 'primary' wholesalers like UNFI have with their retail partners. The retailers typically dictate what the wholesaler sells to them, based on their contractual obligations, their category management strategies, new product launches, private label programs and overall assortment blend by store, region and enterprise, all of which is typically specific to each warehouse location of the wholesaler. The wholesaler in turn controls much of the market access for the thousands of brands and suppliers approved by retail buyers to sell into their stores. This is especially the case when a wholesaler is 'primary' with a grocer. In exchange for a low cost-plus markup, the retailer requires most of its suppliers to go through the wholesaler and drive large sales volumes, therefore justifying the low markup. The wholesaler typically guarantees product placement, inventory prioritization and better delivery schedules for its primary customers, especially during weather-related events or other disruptions. This relationship consolidates product distribution, creating a monopoly on supplying products into the grocer's packaged food and beverage departments. UNFI truck on the New Jersey Turnpike. Errol Schweizer Wholesalers also tend to manage day to day relationships with suppliers on a much more hands on basis than grocers. When retailers approve placement of a product line into their stores, brands see it as a triumph that they got into the grocer. But this is really just the beginning. They must now not only keep the grocer happy, and fulfill their promotional and inventory commitments and achieve sales and velocity hurdles to stay on shelf, but they must stay on the good side of their wholesale buyers. The wholesaler needs to make a profit and has their own margin model, their own marketing programs, fees and assorted expenses that suppliers must cover out of their gross margin and trade and marketing spends. The markups wholesalers charge retailers are typically well below their cost of doing business. Retailers are under enormous pressure to compete with Walmart, discounters and dollar stores that are growing in market share and siphoning customers away. UNFI's gross margin is usually in the 13-14% range. Their contractual markup to their largest customer, Whole Foods, is in the 6-7% range and even lower for Whole Foods' store brand products. On the surface, this means UNFI is losing 6-7 points for every case of product it sends to Whole Foods. UNFI must cover this spread in one of two ways in order to stay operational and earn a profit to keep shareholders happy. One way is by charging disproportionately higher markups to smaller independent retailers who are not part of an advantageous agreement that would bring their markups down. Such one-off independent stores sometimes pay 20-30% markups on the same items that a cost-plus retailer with larger scale pays 6-10% for. It behooves independents to join together and negotiate cooperative cost-plus agreements with wholesalers. Otherwise, it could mean that the retail prices at chain stores such as Kroger or Walmart could be lower than the wholesale cost that an independent grocer is paying, even before they add on their own retail markups. Such revenue streams include strict payment terms, such as a 60 day non-payment window when a product line is launched into retailers, as well as free fills and slotting fees, and various promotional discount models that suppliers must fund, such as MCBs (manufacturer charge backs), Off Invoice discounts, as well as forward buys and bridge buys, where inventory is bought during discount periods and held to sell at regular prices after discounts periods are over. And then there is a range of obscure, confusing and frustrating accounting and payment practices to suppliers, such as invoice deductions, upcharges and billbacks for unsold, lost or damaged products, or outsourced labor fees for moving products around or between warehouses, called lumper fees. These are all major 'inside' revenue streams for wholesalers that cover the spread between cost-plus markups and their gross margins, and are not discussed on earnings calls or CNBC segments. More empty shelves at Whole Foods. Errol Schweizer MCBs are a discount structure taken off the inbound cost of the product once it hits the wholesaler's dock. Unlike Off Invoice (OI) discounts, which transparently flow from supplier to wholesaler and on to the retailer and the end consumer, the MCB is billed back to the supplier at an additional retail markup, called the 'full wholesale price'. On paper, this inflates the cost of the supplier's product, thereby also inflating the value of the discount that the wholesaler can grab and the supplier must pay, essentially applying a markup on the markdown. A supplier taking 20% off their list cost could end up being billed back for 35-40% of the cost of their product. Many retailers, such as Whole Foods and Sprouts, have gotten wise to MCB practices. But instead of disallowing such markups on supplier markdowns, they just contractually require wholesalers to rebate a portion of their cut back to the retailers, called a 'true-up'. Most items on sale at grocers that pull from UNFI or KeHe are funded by MCB monies. But many suppliers actually prefer the MCB discounts because OI discounts can be worse. Wholesalers and retailers can require suppliers to do regular OI-funded promotions, because they discount the value of the inventory sent to retailers and the accounting is easier. But OI discounts can mean that wholesalers can forward buy large amounts of product on discount just as a sale period is ending, allowing them to sell much of it at a regular price at much higher margins. Or the wholesaler can bridge buy between promotional periods, loading up on enough inventory at the end of one sale period to carry through until the next sales period a few weeks or months down the line, so they never have to buy products at regular cost from suppliers, eating into supplier margins, and all the while selling the products to retailers at a higher margin and not reflecting the discounted inventory to their retail customers or end consumers in the form of in-store sale prices. When a supplier is covering the wholesaler's bridge buy or forward buy, on top of funding aggressive promotions, such as the 'BOGO' (buy one, get one) offers heavily marketed at Sprouts, it can be devastating to their business. And suppliers will see littke to no return on investment (ROI) on these trade dollars, unless they count not running afoul of their wholesalers as a good use of funds. Fear is also currency. And eventually, this fear translates into higher costs for consumers, as suppliers can only squeeze so much out of their margins before they pass those costs on down the line to consumers, or they can go out of business. In the 19th century Joseph Schumpeter heralded capitalism as creative destruction. He had no idea how creative that destruction could get. There are plenty of other common wholesaler practices that suppliers, especially independent and family-owned emerging brands, deal with regularly: being charged the same fees twice; being paid late and receiving early payment deductions in spite of this; systematically being withheld payment; paying warehouse activation fees or listing fees/discounts that are not contractually required; getting billed for monthly specials and flyer programs they did not agree to pay for; erroneous deductions with no backups to review, sometimes for thousands of dollars at a time; vague and confusing deduction and billback documentation for shrink or damages; being billed for out of temp product the wholesaler sent to a retailer, especially when the retailers refuse product and send it back to the wholesaler; being billed for free fills and slotting even when retailers have waived such fees; and paying for a highly essential cottage industry of forensic accountants who specialize in billback and deduction audits, dispute resolution and chasing refunds, some of whom are even familial relations to former executives at the very same wholesalers. Such practices have become more commonplace as the wholesaler marketplace has further consolidated into fewer and larger enterprises, such as UNFI's acquisition of SuperValu, which in turn was encouraged by investors spooked by Amazon buying up UNFI's largest customer, Whole Foods. Scale begets scale. Suppliers have little say in these matters, except for the occasional eruption of bad PR that is quickly quelled by wholesalers' supplier relations staff. Retailers are contractually obligated to push suppliers into their primary wholesalers in order to reap the rewards of cost-plus agreements that shave 5-10% in savings on wholesale costs. This savings is material to their pricing strategy, customer retention and profitability. And by controlling market access to select, high profile retailers, wholesalers can make the rules and charge brands whatever this constricted market will bear. And it bears a lot. Empty shelves at Whole Foods. Errol Schweizer There are few alternatives that can offer the broad range of goods at the low costs retailers are demanding to stay price competitive, especially as climate and trade war inflationary pressures are pushing up costs on key goods like coffee, cocoa, beef, European specialties, imported produce and packaging materials like steel and aluminum. Wholesalers like UNFI and KeHe have swallowed up many independent and cooperative competitors, and wholesale is now one of the most consolidated sectors of the food industry. Some retailers, like HEB and Kroger, still self-distribute high volume packaged food products or have internalized wholesaler operations, such as Stop & Shop and Giant's parent company Ahold-Delhaize. Some lean on higher cost but more customer-service oriented wholesale operators that provide essential services, such as importation, product sourcing, private labeling, category management and in-store sales and merchandising support. And many retailers have banded together to form wholesale cooperatives that leverage collective scale to access products at competitive prices, such as the Greater Austin Merchants Association, Associated Wholesale Grocers or Twin Cities Co-op Partners. Wakefern, based in New Jersey, is the largest such cooperative, with nearly $20 billion in annual sales via hundreds of independent owner-operated stores such as Fairway and ShopRite. The New York City metro area is uniquely abundant with a number of independent and cooperative wholesale and retail operators. But most U.S. metro areas are not so lucky, dominated not only by a handful of large grocery chains such as Walmart, Costco, Kroger and Albertsons, but also lacking in a diverse array of wholesalers that can supply the wide range of packaged foods that they sell every day. Scale begets scale; market concentration is a self-fulfilling prophecy. And since market concentration also means pricing power, the costs of doing business are passed onto farmers, food workers, small businesses, emerging food brands and cash-strapped consumers, in the form of wage stagnation, higher food prices and draconian fees and invoice deductions. UNFI, after all, is still accountable to its institutional investors and shareholders, who want to see ongoing, profitable growth, no matter what. If grocery market consolidation had a mascot, it would be Robin Hood in reverse. So while UNFI will hopefully recover quickly from the cyberattack and adopt better cyber security measures to ensure that millions of consumers have access to the food the eat everyday, the grocery industry lives with an ongoing structural dilemma. In an era of cybercrime, trade wars, climate change, pandemics and social upheaval, is a consolidated and opaque wholesale grocery sector the best way to stock grocery shelves and keep America fed? We won't have long to wait for an answer. The next supply chain crisis is only a matter of time.
Yahoo
28-05-2025
- Business
- Yahoo
AGS and C&S Join Forces to Provide Grocery Retailers Optimized Wholesale and Supply Offerings
MIAMI, May 28, 2025--(BUSINESS WIRE)--Atlantic Grocery Supply (AGS), the grocery division of Pompano, Florida-based Sun Commodities Inc. (Sun Group), and C&S Wholesale Grocers, LLC, (C&S) an industry leader in wholesale grocery supply and supply chain solutions in the United States, are partnering to provide wholesale supply solutions to retailers in the Caribbean, Central and South America. Sun Group has a deep history of supplying retailers throughout the Southeast region and the Caribbean. AGS, Sun Group's grocery division has continued to expand over the years. In this agreement with C&S, export customers will be supplied with the most competitive pricing and a vast grocery assortment of more than 40,000 items. Christopher Miller, President, AGS said, "We're excited to partner with C&S and leverage their strong national scale to offer the same competitive supply to all our export customers. With the combined offering of our leading produce supply along with the entire grocery assortment of C&S, we're able to provide the export market with an unparalleled offering." The new partnership will operate out of C&S's one-million square foot warehouse in Miami, Florida — with C&S and AGS partnering on sales to Florida-based independent retail customers and AGS leading sales to export customers. The Sun Group will continue to service produce to retailers and food service customers throughout the Southeast of the United States and the Caribbean. "We look forward to working with AGS and leveraging our strong capabilities to provide a superior assortment and service experience. Together, C&S and AGS will create an optimized supply chain model that brings unparalleled value to AGS's customers," said Eric Winn, Chief Executive Officer, C&S. "C&S is committed to growing our customer base and building on our quality and service legacy of braggingly happy customers." About Sun Group:The Sun Group is one of the nation's largest wholesale produce distributors with locations throughout the Southeast. Founded in 1995, Sun has a long history of servicing customers in the Southeast of the United States and the Caribbean. Sun has expanded over the years to include divisions supplying retailers, export, and food service customers. In 2018 Sun added the Atlantic Grocery Supply (AGS) division to provide grocery items to its customers in the US and abroad. Recognized by its customers for its high level of dedicated service, AGS and Sun have continued to expand their geography, sales channels and product offering, today servicing thousands of customers. About C&S Wholesale Grocers, LLC:C&S Wholesale Grocers, LLC is an industry leader in supply chain solutions and wholesale grocery supply in the United States. Founded in 1918 as a supplier to independent grocery stores, C&S now services customers of all sizes, supplying more than 7,500 independent supermarkets, chain stores, military bases and institutions with over 100,000 different products. C&S also proudly operates and supports corporate grocery stores and services independent franchisees under a chain-style model throughout the Midwest, South and Northeast. We are an engaged corporate citizen, supporting causes that positively impact our communities. To learn more, please visit View source version on Contacts Sun Group Contact:Erika HankarMarketing@ C&S Media Contact:Lauren La BrunoSenior Vice President of Communications & MarketingC&S Wholesale Grocers, LLCCSComm@ C&S Investor Relations:Julie DrakeVice President, Assistant TreasurerIR@ Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Business Wire
28-05-2025
- Business
- Business Wire
AGS and C&S Join Forces to Provide Grocery Retailers Optimized Wholesale and Supply Offerings
MIAMI--(BUSINESS WIRE)--Atlantic Grocery Supply (AGS), the grocery division of Pompano, Florida-based Sun Commodities Inc. (Sun Group), and C&S Wholesale Grocers, LLC, (C&S) an industry leader in wholesale grocery supply and supply chain solutions in the United States, are partnering to provide wholesale supply solutions to retailers in the Caribbean, Central and South America. Sun Group has a deep history of supplying retailers throughout the Southeast region and the Caribbean. AGS, Sun Group's grocery division has continued to expand over the years. In this agreement with C&S, export customers will be supplied with the most competitive pricing and a vast grocery assortment of more than 40,000 items. Christopher Miller, President, AGS said, 'We're excited to partner with C&S and leverage their strong national scale to offer the same competitive supply to all our export customers. With the combined offering of our leading produce supply along with the entire grocery assortment of C&S, we're able to provide the export market with an unparalleled offering.' The new partnership will operate out of C&S's one-million square foot warehouse in Miami, Florida — with C&S and AGS partnering on sales to Florida-based independent retail customers and AGS leading sales to export customers. The Sun Group will continue to service produce to retailers and food service customers throughout the Southeast of the United States and the Caribbean. 'We look forward to working with AGS and leveraging our strong capabilities to provide a superior assortment and service experience. Together, C&S and AGS will create an optimized supply chain model that brings unparalleled value to AGS's customers,' said Eric Winn, Chief Executive Officer, C&S. 'C&S is committed to growing our customer base and building on our quality and service legacy of braggingly happy customers.' About Sun Group: The Sun Group is one of the nation's largest wholesale produce distributors with locations throughout the Southeast. Founded in 1995, Sun has a long history of servicing customers in the Southeast of the United States and the Caribbean. Sun has expanded over the years to include divisions supplying retailers, export, and food service customers. In 2018 Sun added the Atlantic Grocery Supply (AGS) division to provide grocery items to its customers in the US and abroad. Recognized by its customers for its high level of dedicated service, AGS and Sun have continued to expand their geography, sales channels and product offering, today servicing thousands of customers. About C&S Wholesale Grocers, LLC: C&S Wholesale Grocers, LLC is an industry leader in supply chain solutions and wholesale grocery supply in the United States. Founded in 1918 as a supplier to independent grocery stores, C&S now services customers of all sizes, supplying more than 7,500 independent supermarkets, chain stores, military bases and institutions with over 100,000 different products. C&S also proudly operates and supports corporate grocery stores and services independent franchisees under a chain-style model throughout the Midwest, South and Northeast. We are an engaged corporate citizen, supporting causes that positively impact our communities. To learn more, please visit
Yahoo
03-04-2025
- Business
- Yahoo
Kroger alleges C&S misconduct in Albertsons deal
This story was originally published on Grocery Dive. To receive daily news and insights, subscribe to our free daily Grocery Dive newsletter. Kroger claimed in a recent legal filing that C&S Wholesale Grocers is not entitled to the $125 million merger termination fee it is seeking to collect because it breached its contract with the grocer during the battle with regulators over its proposed combination with Albertsons. Kroger alleges that C&S disparaged the divestiture deal to regulators, secretly talked with Albertsons employees about the merger plan, failed to make disclosures to Kroger and didn't follow contractually required steps to prepare to run divested stores, according to papers the grocer filed Monday in response to a lawsuit filed earlier this year by C&S. This marks the latest legal salvo by Kroger as it battles lawsuits from C&S and Albertsons a few months after its proposed merger fell through. Kroger alleges that C&S, which was set to acquire hundreds of stores from Kroger and Albertsons if their merger got approved, didn't engage in good faith with the grocer during the regulatory review process and subsequent litigation by federal and state regulators. As the companies worked to overcome regulators' concerns about the deal, C&S secretly communicated with Albertsons about the merger strategy and then failed to disclose these exchanges to Kroger, Kroger alleges. Kroger said it was 'shocked' when an Albertsons executive disclosed C&S's communications with the company during the trial over the Federal Trade Commission's efforts to block the merger. 'Nothing excuses C&S's failure to disclose to Kroger during trial preparation its highly relevant communications with Albertsons, which were so relevant that some of them were ultimately cited in the Washington Court's decision enjoining the Merger,' Kroger said in the filing. Kroger also claims that C&S tainted regulators' perception of the divestiture deal. 'Critiquing and diminishing the divestiture package that C&S knew was critical to securing regulatory approval for the Merger was a flagrant and material breach of C&S's contractual obligations, and C&S's conduct predictably caused the regulators to view C&S as an inadequate divestiture buyer regardless of the scope of the divestiture package,' Kroger said its filing. Kroger claims C&S's parent company 'repeatedly refused to provide basic financial information' to certain landlords who requested guarantees for the leases for the assets set for divestiture. Kroger also says C&S didn't apply for thousands of licenses and permits necessary to operate the divested stores, claiming that by September 2024, C&S had submitted applications for only a third of the 18,000 licenses it would need. A spokesperson for C&S disputed Kroger's claims. 'Kroger's response to C&S's complaint only highlights that it has no good faith defense to its breach of its agreement with C&S that required Kroger to pay $125 million as a termination fee,' the spokesperson said in an emailed statement. 'C&S looks forward to prevailing in court and holding Kroger to its unequivocal contractual promise to C&S.' C&S became part of the Kroger-Albertsons merger proposal when the wholesaler agreed to acquire stores and assets the grocers had planned to divest to win regulatory approval for their combination. After the initial divestiture deal faced criticism and scrutiny by state and federal regulators, C&S, Kroger and Albertsons agreed to an enhanced divestiture plan, under which C&S would have bought 579 stores and additional non-store assets such as infrastructure and access to the Signature and O Organics private brands. After judges in state and federal courts blocked the merger at the end of last year, Kroger terminated the agreement with C&S, according to legal filings. Earlier this year, C&S sued Kroger over its failure to pay the wholesaler the $125 million termination fee the two companies had agreed upon as part of the divestiture plan. Kroger claims C&S cannot substantiate its allegations that Kroger breached its contract with the wholesaler. Kroger's battle with C&S comes as the grocer also fights a lawsuit from Albertsons, which says it was denied its own $600 million termination fee and claims Kroger breached the merger contract between the two companies after experiencing 'buyer's remorse.' Kroger has also accused Albertsons of souring the deal's success, alleging that Albertsons secretly worked to undermine Kroger's strategy to secure regulatory clearance for their proposed merger. Recommended Reading Pardon the Disruption: Kroger and Albertsons court filings detail epic power struggle over failed merger
Yahoo
02-04-2025
- Business
- Yahoo
Kroger's road ahead runs through its past, analysts say
This story was originally published on Grocery Dive. To receive daily news and insights, subscribe to our free daily Grocery Dive newsletter. The last time Kroger brought on a new CEO was in January 2014. At that point, the company was riding high in the grocery industry: It was just about to close on its $2.5 billion acquisition of Harris Teeter, the tumult of the COVID-19 pandemic was still years away and Walmart had yet to assume the commanding role it now plays in the U.S. food retail sector. A lot has changed over the past decade. As Kroger looks for a successor to Rodney McMullen — who departed abruptly in early March after more than 11 years as the company's chief executive — the grocer faces much less favorable circumstances that have industry experts wondering whether it can regain its former glory. Some of those conditions, like the enormous reach of competitors like Walmart, Costco and Amazon, are beyond its control, while other challenges are a direct result of decisions Kroger made when McMullen was in charge, according to analysts. 'The golden age of Kroger was before Rodney took over,' said Scott Mushkin, CEO of R5 Capital, referring to Kroger's approach to the grocery industry under David Dillon, McMullen's immediate predecessor as Kroger's CEO. 'If you just look at the business … I would say they're kind of bumping along, kind of hanging on a little bit rather than thriving.' Kroger's challenges include recovering from its unsuccessful effort to merge with Albertsons — a transaction McMullen crafted and championed as CEO. The company faces lawsuits from Albertsons and C&S Wholesale Grocers, which had agreed to acquire nearly 600 divested stores in connection with the deal. Albertsons and C&S both allege that Kroger is responsible for the deal's demise under pressure from regulators. In its suit, filed in December, Albertsons claims that Kroger damaged the companies' chances of winning approval for the merger because it was unwilling to develop more robust divestiture plans. Kroger responded with its own allegations, claiming that Albertsons worked secretly with C&S on a 'misguided campaign' that led to the disintegration of the deal. Albertsons and C&S are also demanding that Kroger pay them termination fees of $600 million and $125 million, respectively. Kroger has refused to do so, claiming that Albertsons and C&S forfeited the fees. Under Dillon, Kroger focused heavily on basic operational details, like the length of checkout lines, customer service and store cleanliness, all of which helped the company maintain its position as a leader in the grocery space, Mushkin said. But more recently, Kroger has been less effective at communicating its value proposition to consumers than rivals like Sprouts Farmers Market and Publix, he added. 'It's very difficult when you're multi-banner, multi-regional, with different go-to-market strategies, to define what you are,' said Mushkin. 'It's the challenge for whoever takes over Kroger: Why, as a consumer, should I shop you beyond location?' A key issue for Kroger as it plots its future course is that its prices look more expensive to consumers than other retailers, a contrast that is exacerbated by Kroger's dependence on promotions while Walmart has an everyday low-pricing model, said Karen Short, managing director and head of consumer and retail research for Melius Research. 'They've gotten themselves completely out of whack on pricing relative to their competitors,' Short said. 'And I don't know how you dig yourself out of all of that, because Walmart is increasingly giving you a reason to not go to Kroger.' One way for Kroger to counter the perception that it charges more than Walmart for groceries would be to sacrifice its earnings for a while in order to invest in bringing down prices, Short said. However, that could prove to be a hard sell to investors given that the company's operating profit and sales have been under pressure. While Kroger's stock price grew at a significantly faster clip than Walmart's between 2013 and 2015, the trend reversed starting in 2016, with Walmart widening its lead during the past year, according to a research note Short and fellow Melius analyst Jacob Aiken-Phillips issued on March 14. On Tuesday, Short and Aiken-Phillips downgraded their rating of Kroger's stock to 'sell,' citing Walmart's surging strength in grocery, Kroger's leadership void and the legal actions brought by Albertsons and C&S as reasons investors should unload their shares. Short also said Kroger's search for a replacement for McMullen presents it with a unique opportunity to change course, adding that the company — which is currently under the leadership Ronald Sargent, who is serving as chairman and interim CEO — should look outside for a new leader. 'I think Kroger is rudderless, and they need somebody who is going to bring new blood and new life and new thought,' she said. Speaking during an earnings call on March 6, Sargent said Kroger intends to consider candidates to replace McMullen from within its ranks and outside the company. A new leader could likely help Kroger move past issues such as the failed combination with Albertsons and instead focus on reframing its relationship with consumers, said David Halliday, associate teaching professor of strategic management and public policy at the George Washington University School of Business. 'The time to do that is when a new CEO comes in. A new CEO can set a long-term plan, [while] an existing CEO is going to have a harder time making tough decisions like trading off profits for a viable long-term pricing strategy,' Halliday said. 'The pricing strategy can't just be selling cheap food … but something that viably connects with customers and gives customers more value than they're getting now. Short said Kroger's efforts in recent years to double down on its data operations and invest in the multibillion-dollar network of automated fulfillment centers it has developed with Ocado are also weighing Kroger down at a time when it needs to find ways to stand out. Short added that Kroger's efforts to invest in alternative profit businesses, which include its data analysis and third-party media operations, have distracted attention from weaknesses in its core grocery business. In addition, the Ocado project has cost much more than expected, she said. As Kroger considers whom to hire to lead it going forward and how it should adjust its strategy, the company would do well to stay grounded in its roots as a supermarket operator, said Doug Munson, head of advisory services business development for retail intelligence provider RetailStat. Although the pressure to compete head-to-head with major competitors is intense across areas like e-commerce, pricing and non-grocery revenue streams, Kroger should focus more on improving the quality and distinctive value of its core grocery business, Munson said. Kroger is 'not going to beat the Wiincos and the Walmarts on pricing, but the narrative should be, 'When you come here, this is where you get your staples. This is your fundamental grocery store,'' Munson said. More immediately, analysts will be looking for Kroger to clarify its vision about where it fits in the grocery landscape, said Michael Infranco, assistant vice president of Retailstat. 'We haven't had the clearest strategies overall, the top-to-bottom strategy of what they want to be,' Infranco said. 'We need that from a new leader: to be a little more specific about what the end game is.' Recommended Reading Pardon the Disruption: Kroger and Albertsons court filings detail epic power struggle over failed merger Sign in to access your portfolio
