Kroger faces a difficult battle as it competes with giants that don't actually need to make money selling groceries.
Walmart, Target, and Amazon can all use groceries as a loss leader, a way to enhance their connection with their customers that helps them sell other, higher-margin merchandise. That puts the squeeze on a grocery chain like Kroger, which already has to deal with the notoriously low margins that grocery chains have traditionally made on food sales.
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In most cases, even after it completes its $24.6 billion merger with Albertsons (ACI) -), Kroger won't have the lowest prices. If that deal closes, the combined company will have increased buying power which will help level the playing field with Amazon, Walmart, Target, and Costco but it won't change that the new company is still at its heart a grocery store.
Walmart, Target, and Amazon can leverage their customer relationships to sell high-margin items like electronics or toys. Costco makes most of its profits from selling memberships, not merchandise.
That means that Kroger (KR) -) needs to give its customers a reason to visit its brick-and-mortar stores. Doing that, when your rivals not only deliver but in many cases have a delivery-based relationship with their customers, is not an easy sell.
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Kroger tries to drive in-store traffic
While many people still like to shop for groceries in brick-and-mortar stores, many of those customers also like the convenience offered by Target and Walmart. If you visit those stores, you can tick off more items on your to-do list by buying things that simply aren't sold at Kroger.
To combat that, Kroger has worked to give customers reasons to visit. It has tested restaurants and food halls, but its most effective tactic might be offering exclusive products. Now, the grocery chain has partnered with Frito-Lay, a division of PepsiCo. (PEP) -), to offer a new flavor of Doritos that will be exclusive to Kroger (and the other brands the company operates under).
Dubbed "Late Night Loaded Taco Doritos" the new snack chip is a limited-time offer.
"The new taco-flavored Doritos carry the following marketing line: 'Taste the night — day or night -- with the bold crunch of Doritos Late Night Loaded Taco Flavored Tortilla Chips' and 'Late Night Flavor with a Bold Crunch,'" Brand Eating reported.
Doritos have a fan base (ask Taco Bell)
While it's hard to know if taco-flavored Doritos will drive customers to Kroger, a similar recipe did power the most successful fast-food collaboration of all time. Yum Brands (YUM) -) Taco Bell Doritos Locos Taco have not only sold over 1 billion tacos (as of 2019), it has also led to countless spinoff products and copycats.
Various Doritos items move on and off the Taco Bell menu while the chain has made the core Doritos Locos Taco a permanent menu item. The success of what was planned as a limited-time offer suggests that there may be near-endless demand for Doritos variants. The idea may not be novel anymore, but that does not mean that Doritos fans won't want to try the new flavor, which will force them to go to Kroger.
Prices will vary for the new limited-time snack chip offer based on market and other factors.
Kroger also operates supermarkets under the Ralph's, Harris Teeter, King Soopers, and Smith's names. The company's deal with Albertsons is being challenged by multiple states on the grounds that it will lessen competition in the grocery space.
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