Welcome to Kroger Country
How Kroger dominates the Lexington and Louisville markets
If Kroger Co. had its way, all of its markets would resemble its position in the Kentucky cities of Louisville and Lexington.

 

Here, the Cincinnati-based retailer has forged a dominant position that has driven away not only chain competitors but many independents as well. It's the kind of hometown dominance enjoyed by Publix Super Markets in parts of Florida, by Stop & Shop in some New England communities and by Safeway in Northern California.

The markets and Kroger's behavior there illustrate a chain at the top of its game. Observers say Kroger has taken particular care to protect and grow its market share, including aggressive moves to renovate and relocate stores, while emphasizing an array of new formats and footprints. Its focus on shoppers in the meantime is motivated in part by the footsteps of Wal-Mart Stores, which is the second-leading food retailer in both markets and like Kroger operates multiple formats there.

Grand Rapids, Mich.-based supercenter operator Meijer Inc. runs a distant third in both markets, according to recent figures from Metro Market Studies, Tucson, Ariz. (see tables). Beyond those top three, small chains and independents fight for shares of less than 4% in both Lexington and Louisville.

Jim Buchanan, chief executive of London, Ky.-based Laurel Grocery, a supplier to independent stores in Kentucky and Indiana, said there is no secret to Kroger's dominance in those markets. Kroger is good, he said. They typically have the best facilities in the markets where they compete. They are marvelous at pricing. They give a good price image without being real cheap throughout the store. They know how to run grocery stores.

Kroger's success in Lexington and Louisville also says a few things about the markets themselves, local sources say. Although the cities, about 60 miles apart, have significant differences, shoppers in both markets are strongly influenced by price. Convenience of a one-stop-shopping experience also ranks high considering the multidepartment stores operated by Wal-Mart and Meijer, with Kroger also looking to expand its Marketplace stores in both markets.

The strength of the larger players has forced many small chains and independents out of the Bluegrass State, while the remaining players have had to be creative to survive, they said. Many, however, said they see an opportunity for differentiation in their respective markets.

Holding Up in the Recession

The Louisville metropolitan statistical area is home to more than 1.2 million, and includes nine counties in Kentucky and five across the Ohio River in neighboring Indiana. Around half reside in the city-county known as Louisville Metro after a 2003 merger of city government with Jefferson County.

Kroger Co. is No. 1 one in market share in Louisville and Lexington, Ky.