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Business Observer Thursday, Jul. 29, 2021 2 months ago

National grocer, after Tampa debut, plots expansion to other parts of Florida

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Kroger CEO and Chairman says Florida is a prime market for the grocer's delivery service
by: Louis Llovio Commercial Real Estate Editor

The Kroger Co., which only recently began delivering groceries in several Florida cities, including Tampa, now plans to expand into the biggest metro region in the state: Miami. 

Andrea Colby, e-commerce corporate affairs and communications manager for Florida, says that “at this time we do not have a start date.” But several employees at Kroger’s new 375,000-square-foot fulfillment center in Groveland, Lake County, say they’ve been told the center is getting ready to begin delivery service in Miami later this year.

Whenever service actually begins, it's another indication that Kroger sees Florida as the perfect place for expansion — and early results support that. On Thursday, Kroger’s Chairman and CEO Rodney McMullen, speaking at  an official ribbon cutting of a Groveland distribution facility, says Florida is a prime market for the grocery company and that he sees a bright future in the state.

One big reason is name recognition. McMullen says company research found that more than 50% of Floridians were familiar with the company, either because they’d shopped at a Kroger store themselves or visited family members who did. 

The Cincinnati chain, founded in 1838, is one of the largest grocery companies in the country with more than 20 brands operating 2,800 stores in 35 states, posting $132.5 billion in sales in 2020. That dwarfs the Florida king of grocery, Publix, which posted just under $45 billion in revenue in 2020.  

Rather than open physical stores, Kroger launched its delivery service earlier this year in Tampa, Jacksonville and Orlando.

“We’ve got to give a great customer experience, and that will drive our ability to expand.” Rodney McMullen, Kroger’s chairman and CEO.

The reason for coming into such a competitive market with delivery rather than physical stores, McMullen says, is Kroger sees an opportunity, especially since the pandemic changed many shoppers’ habits and that its e-commerce initiatives in recent years have been successful.

He believes the company is poised to capture a large chunk of the grocery market looking for delivery because of its ability to deliver the same level of service and product to a person’s door as it does at its brick-and-mortar stores.

McMullen says Kroger plans to expand in Florida slowly so as not to sacrifice either.

“We’ve got to give a great customer experience, and that will drive our ability to expand,” he says, adding that “I don’t even know when that it is because we have to be driven by how good a job we do…we will earn our right to continue to expand.”

He did say that physical stores “are not on the agenda right now.”

Kroger has had a presence in Florida before. Lucky’s Market, an organic and natural food chain out of Colorado, which blitzed Florida with more than a dozen stores starting in 2016 through an investment from Kroger, filed for bankruptcy last year.

McMullen was in Florida Thursday for the official ribbon cutting of a facility that many in the company believe allows Kroger to duplicate its service and quality offerings in a van rather than a store.

The Groveland facility, built in an office park just west of Orlando in the Lake County city, opened earlier this year and is the hub for what Kroger plans to do in the state.

The three floor, state-of-the-art distribution center is basically a massive grocery store, complete with separate sections for perishables, non-perishables and frozen foods. Rather than being packed with shoppers, the shed, as it’s known, is manned by both employees and robots who’s job is to prepare grocery orders for customers.

On the shed’s second floor, pickers work to pack order as they come in from what look like giant vending machines, separating, inspecting and bagging specific items and then shipping them down the line to the next station.   

One floor above the pickers is the hive. This is a massive grid were robots swarm on tracks to pick items below them. The bots stop above the designated spot and take the items into what can best be described as their bellies. There are what seem like hundreds of these bots, shooting back and forth, picking a 50-item order in five minutes or less.

Once all a shopper’s items are picked and combined, grocery bags are placed either into the back of tractor trailers or vans for local deliveries. The trucks are unloaded and reloaded unto vans for deliveries up to 90 minutes away.

Orders destined for Tampa and Jacksonville come from smaller facilities that are supplied by the shed.

In all, the shed operates 19.5 hours a day and can process 22,000 orders each day.

Orders are tracked from placement on the app to the customers front door using bar codes.

McMullen believes the Groveland facility and the success of the early roll out will give it the competitive advantage it needs to take on competitors with deep ties in the state, particularly  Publix. But, he says, Kroger is not trying to steal business from anyone, and its focus is only on the work it does.

“We don’t look at it as we’re going to go and take (Publix’s) Florida’s market share away,” he says. “We look at, here’s what we offer uniquely and we’re going to do an incredible job serving an individual customer. And then we’ll earn the business over time.”

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