Marketing Paper

Kroger's Private Selection Black Walnut Ice Cream

By; Ca'Sandra Girn

Dr. Montgomery

MKT 600

December 1, 2006

1. Describe the nature and scope of the company with a brief history.

It all began in 1883 when Barney Kroger decided to take his life savings of $372 and open up a grocery store in downtown Cincinnati. He set out to establish one thing and that was to " Be particular and, never sell anything thing that he would want to buy". The company now ranks as one of the nation's largest retailers. Barney Kroger became the first grocer in the country to establish in-store bakeries and sell meats and groceries under the same roof. The company operates on three basic business principles: service, selection and value.

Since Kroger's came to be in 1883, they have been innovators in the Supermarket industry. In the 1930's Kroger's was the first grocery chain to routinely monitor product quality and test foods offered to the customer. In 1972, Kroger became the first grocery retailer in America to test an electronic scanner. In the 1970's the company became the first grocer to formalize consumer research.

Kroger's Co. now has evolved into 290,000 employees with 2392 supermarkets, warehouses, multi-market stores and financial services. They have over 750 convenience stores, 41 processing plants and 420 jewelry stores. There are over 1900 pharmacies located in most of their stores which are located in 31 states in the U.S. The company holds #1 or #2 spots in 35 of the 44 markets that they operate in. This position has helped the company gross over $60.6 billion last year.

2. What environmental trends have affected the industry/firm and what is the relative importance of those trends?

There are several trends that Kroger's and other in the ice cream industry must follow to stay in business. These include socio-cultural, technology, competitive, political/legal, and demographics just to name a few.

The socio-cultural environment has affected the ice cream industry in a significant way. There has been a sudden change towards healthier foods in the last decade. More and more people are opting out for products that are not a detriment to their health. These consumers want their food and beverages to reflect these changes. Most companies have developed low fat or no fat ice creams. They have also started developing ice creams with low and no sugar ice creams to keep up with the ever evolving customer base.

In order for ice cream to be called ice cream the manufacturers have to follow certain legal regulations set in place by the Food and Drug Administration. Ice Cream manufacturers must adhere to such regulations as: the ice cream must contain 10% butterfat, sugars, sweeteners, milk proteins stabilizers and emulsifiers. The FDA Labeling and Education Act of 1994 separated the link between light and non-fat ice cream. The government also states that ice cream has to have at least 1.6% of total solids and weigh not less than 4.5 lbs to the gallon. The FDA also states that ice cream has to have an official symbol identifying it as ice cream. If the ice cream does not these standards it shall not be called ice cream and has to be recognized as another frozen novelty.

Demographics play an important role in the ice cream industry. Many manufacturers have begun to expand their product lines to reflect all ages of the consumers who eat their ice cream. Kroger's not only has private selections ice cream that appeals to the older age group, but they also have popsicles and bomb pops to appeal to children. These children are the consumers who account for 35% of the consumers of their ice cream. Kroger's also has low and non fat ice cream. They also produce sugarless ice cream for their health conscience customers.

There is also a huge competitive environment among supermarkets. Kroger's two biggest competitors are Wal-Mart and Albertson's, respectively. Wal-Mart has their own upscale private label by the name of Sam's Choice. Albertson's also has a private label by the name of Essensia. Both of these private labels bring in the company millions of dollars annually in sales. All three of the supermarkets are keeping an eye on the competitions as to not fall to far behind in the private label industry.

Kroger's has to keep up technologically also in the ice cream market. They have begun to invest significant amounts of capital to ensure their information systems and logistics network work efficiently. The company has invested in new point of sales, self check-out registers and computer assisted ordering. The self check-out registers has one cashier operating up to four registers which helps reduce labor costs and speed up check-out times. Computer assisted ordering aids in keeping the shelves stocked with products. It lets a manager scan items with a scanning gun and sends an order to the local warehouse, so that the products can be shipped out on the next product truck coming to the store.

3. How these trends will impact the firm and its competitors.

Wal-Mart, Kroger's Co. and Albertsons' are the top three grocery retailers, respectively, says Reader's Digest. All three brands have been profitable for the

company over the years. Each company owns several processing plant in which they use to process their goods. The two major players, Kroger's and Wal-Mart, are buying up plants to exploit the processors economies of scale. With over 2,000 food processing plants in the United States alone, the ice cream industry is expected to continue consolidating as new entrants attempt to respond to the ice cream's market great demand.

Many heavy hitters in the frozen novelties have had to adjust their recipes to meet the standards that the FDA has set forth. The government has such strict rules and strict penalties for violations of these regulations. None of the companies want to pay those fines which can exceed the range of $1000.

Kroger's Co. and Wal-Mart rely heavily on their perceived image to sell their products. Lots of money is spent on advertisements to make the public aware of the companies' in-store private label. More money is allocated to spending on advertisements for Wal-Mart rather than Kroger's. Wal-Mart's has national television commercials that run everyday, all day. Kroger's just advertises regionally