New Kroger store brand to lure 'foodies'

by Monica Watrous
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Kroger plans to launch Hemisfares, a store brand aimed at millennials and foodies.
Kroger plans to launch Hemisfares, a store brand aimed at millennials and foodies.

CINCINNATI – The Kroger Co. is launching a new store brand called Hemisfares. Billed as a “journey of epicurean proportions,” the brand is expected to appeal to millennials and foodies, said Rodney McMullen, chairman and CEO of Kroger.

“Hemisfares brings only the best food finds from around the globe to our food-curious customers for an amazing authentic eating experience,” McMullen said during a Sept. 11 earnings call with financial analysts. “It’s a guided tour of the best tastes on the earth. Imagine landing in a country known for its incredible food and experiencing the finest examples of its regions’ most famous and delectable eats. Every Hemisfares product is curated from the source and imported directly to our stores. The most exciting part is that no one else has a brand like this.”

Kroger’s stable of corporate brands, led by Simple Truth and Private Selection, contributed to sales growth in the second quarter. Net earnings attributable to Kroger were $433 million, equal to 44 cents per share on the common stock, up 25 percent from $347 million, or 35 cents per share, for the year ago period.

Sales were $25.54 billion, up 0.9 percent from year-ago sales of $25.31 billion, as a result of lower retail fuel prices. Excluding fuel, sales increased 5.7 percent over the comparable quarter.

Operating profit advanced 20 percent to $774 million from $644 million the year before.

The company reported identical supermarket sales growth, without fuel, of 5.3 percent during the quarter.

“Our multi-tiered corporate brands portfolio has always been a powerful differentiator for Kroger,” McMullen said. “Simple Truth continues to see explosive growth. Private Selection remains a vibrant billion-dollar brand that is growing in the double digits and developing unique offerings in many categories.”

Hemisfares will be positioned as a premium brand, but executives expect the products will have broad appeal.

“…when you really step back and dissect a lot of customers, there are many customers who on some items are a budget shopper (but) wind up splurging on particular items,” said Mike Schlotman, executive vice president and CFO. “And these can be the kinds of items those folks wind up splurging on, while in other departments they’re perfectly happy with an entry-level price point or a banner brand that’s a lower price point for them.”

Kroger has seen "explosive" growth in the company's Simple Truth brand.
Kroger has seen "explosive" growth in the company's Simple Truth brand.

Added McMullen: “We find customers are increasingly becoming foodies, and it’s really trying to figure out, how do you find great products that will satisfy that foodie need experience they want in a way that is actually a very affordable price?

“If you look at the quality of this product, if you would go to a restaurant and eat something of this quality, it would cost four or five times as much as what it costs with us. So customers get to experience something that’s very unique, that’s outstanding quality.”

Because products are procured or manufactured abroad, some of the items will have limited production, McMullen said.

“It will be very specific on the packaging where the product’s from,” Schlotman said. “The folks at our corporate brands (team) who procured this actually have met with and visited with and helped with the folks who manufacture this product or produced the product on-site in their home country.”

Based on strong year-to-date performance, Kroger has raised its guidance for identical supermarket sales growth, excluding fuel, to a range of 4 percent to 5 percent for fiscal 2015, up from its previous range of 3.5 percent to 4.5 percent.

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