Kroger CEO Says Half of Its Customers Are Financially Strained by High Inflation

Eggs and dairy products are seen in a Kroger supermarket in Atlanta, Ga., on Oct. 14, 2022. Elijah Nouvelage/AFP via Getty Images

Kroger CEO Rodney McMullen said half the chain’s customers are under “a lot” of financial strain due to high inflation.

The retail chain has been working with its manufacturers on how they can work together to reduce costs as its customers remain under financial strain, said McMullen at a conference on Jan. 16, reported Fox Business.

“About half of our customers are under a lot of strain from a financial perspective … Their wages haven’t kept up with the inflation they’ve incurred,” said the CEO at a keynote session at “NRF 2023: Retail’s Big Show,” in New York City.

McMullen said that Kroger is planning on how to make things affordable and accessible for its struggling customers, as they reel from inflation, which he predicts will moderate or flatten toward the end of 2023.

“Our expectation is that early in the year, inflation will continue to be higher than what it had been a couple of years ago, but as you get later in the year, we do expect some moderation there,” McMullen told CNBC on Jan. 11.

“But it’s still going to be a while before it takes some pressure off the customer, and we’re doing everything we can to make sure that we minimize that impact.”

While inflation fell to 6.5 percent in December compared to its historical high in June, it is still three times higher than the pre-pandemic average.

The tripling of inflation rates, particularly in food prices, has been a major financial burden on many shoppers.

“Our expectation is as you get later in the year, you start seeing quite a bit of moderation in inflation or flat inflation,” McMullen told his audience at NRF 2023.

“We still don’t see much deflation now,” he continued, despite a year-over-year slowdown in the past several months.

Egg Prices Are a Major Concern for Many Shoppers

Eggs in particular have soared in price in recent months, due to a bird flu outbreak, soaring feed, fuel, and labor costs, and mysterious fires which have destroyed millions of chickens and their eggs.

The price of eggs has almost doubled in price since last year, rising above $7 in, for example, parts of California.

McMullen said that a new batch of chickens will quickly come along and lay eggs, gradually easing the crisis.

“You should start seeing some deflation in a few categories, but not a lot,” he said at the keynote session in New York City.

Kroger’s Merger With Albertsons Will Hopefully Allow Prices at the Chain to Fall

McMullen told reporters over the past several days that Kroger’s merger with Albertsons likely will help its efforts to cut down on expenditures and lower prices for its customers.

The Cincinnati-based chain bought out rival Albertsons for $24.6 billion last October. The merger will affect 710,000 workers and nearly 5,000 stores across 48 states and Washington, D.C. This would allow Kroger to become a serious rival to companies such as Whole Foods, Walmart, Target, and Costco in the grocery business.

McMullen told the attendees at the New York conference that the merger with Albertsons would “create a tremendous amount of synergies.”

The company said in a statement in October 2022 that it planned on reinvesting $500 million of cost savings from synergies to reduce prices for shoppers, according to Fox Business.

“Every store that we keep, we know we will begin lowering prices day one,” McMullen said at the conference.

He noted that Kroger was able to reduce prices by more than $5 billion since 2006, on an annual basis.

CEO Says That Coupons Are Allowing Its Customers to Stay Afloat, While Store Brands Rise

“If you do what’s right for the customer, you do what’s right for the associates, and you support your communities, the shareholders get the benefit of that,” said the CEO.

For now, McMullen said that the retailer has been depending on online coupons to help customers survive through the ongoing inflation crisis.

Kroger has started to noticed that some of its own store brands are “gaining meaningful share” of the market, according to McMullen.

“What we find is customers switched to our brands, initially to save money … When they switch, they stay with us, even when their budget gets a little less strained,” he explained.

The Associated Press contributed to this report.