The Case for Share of Voice
Kroger’s Q2, the Changing Rules of Grocery, and Share of Voice
As the nation’s largest supermarket chain, Kroger’s recently released Q2 performance serves as an indicator of current trends in food retail for wide swaths of America. Here, the retailer’s strong results speak for themselves. Kroger beat expectations in Q2 to deliver 14% two year-stacked comps growth for the quarter. While quarterly comps fell 0.6% vs. last year, the fact that Kroger has held on to the vast majority of the meteoric gains it made since the pandemic is no small feat. The same pattern occurred in Kroger’s e-commerce platforms, only with more drastic swings. Despite falling 13% year on year, Kroger’s e-commerce sales are still up 114% from two years ago, suggesting that many shoppers’ newly acquired online grocery shopping habits are here to stay. Since 2019, Kroger has doubled its household e-commerce penetration.
These results, both in-store and online, are boosted by Kroger’s strategic priorities which center around several interrelated initiatives whose relevance as retail themes extends far beyond any one retailer. These include improving the fresh assortment, continuing to align with food-at-home trends, expanding private label offers, and, most importantly, making shopping as easy as possible via omnichannel integration.
The Changing Rules of Grocery
During the early days of COVID-19, consumers became less concerned about brand equity and variety for many food products by necessity as unexpected surges in demand caused flash shortages. This volatile environment was an ideal incubator for retailers adding private label products that could help keep categories in stock while taking advantage of shoppers’ recently expanded brand horizons. Kroger’s ongoing investments in its own private label brands, especially those that leverage healthy, organic, and natural characteristics, were well-timed on this front and continue to resonate today.
Even in 2021, out-of-stocks have persisted as upstream supply chain bottlenecks and weather events have rocked the value chain. In fact, out-of-stock problems have been worsening since the start of the year after plateauing in December 2020. Within food and pantry categories, we have seen a steady climb in OOS from 7.7% in January 2021 to 16.7% as of August. At the same time, internal data suggests that cost-per-click levels for sponsored products have been steady at about $1.50. Managing your online inventory and ad spend efficiently is more important than ever as out-of-stocks threaten to eat away at your revenue. Overall, replenishable out-of-stocks are up 86% and actual out-of-stocks are up over 200% since the start of the year.
This challenge is only becoming more intense. Brands must now manage grocery assortments and in-stocks across in-store, online, and 3P delivery platforms as shoppers buy online. They must also regionalize their online assortments by individual market in more granular ways than is possible at the store level. The integration of store assortments with online platforms is one particularly large opportunity for Kroger. Grocers must optimize the in-store offer and backroom operations to accommodate online sales that use stores as a mini-fulfillment center capable of getting products to shoppers as fast as possible. To that end, Kroger is leveraging its Instacart partnership to create a delivery service called Kroger Delivery Now with deliveries as quick as 30 minutes. Across retail, the shopper is in control. Retailers and brands need to align with shoppers wherever and however they want to shop if they are to succeed, but aligning with shoppers online requires navigating much more complex and ever-changing decision matrices than is present in brick-and-mortar. Making the most of your online business is only truly possible with automation tracking and decision-making capabilities.
Increased at-home food consumption also means that many shoppers are more concerned with the quality of their fresh produce. Expanding and upgrading the fresh department both in-store and online is among Kroger’s top priorities, and the category remains a key traffic driver. Thus, the company is expanding its number of ghost kitchens that can offer on-demand meal pickup and delivery with better quality ingredients. The push for healthy foods goes beyond the produce aisle or landing page, and many brands that successfully identify as healthier food alternatives are positioned to win the future of grocery.
Which Brands are Winning Online?
So what’s the status of select food categories online at Kroger right now? To answer, let’s take a deeper look at CommerceIQ’s Share of Voice metrics for key categories like bars, canned vegetables, cereal, and mac and cheese at Kroger and compare it with Walmart.
For reference, Share of Voice at Commerce IQ is a metric used to determine how much presence a brand has online based on a weighted percentage of total product listings spaces that it occupies for a given search term. In this instance, Category Share of Voice is itself an aggregate of Share of Voice for many relevant search terms within that category.
Please note that this data only represents Walmart and Kroger for these categories and does not represent online grocery as a whole.
Share of Voice for Bars category online
Share of Voice for Canned vegetables category online
Share of Voice for Cereal category online
Share of Voice for Mac and Cheese category online
Interesting trends emerge from this data. Versus Kroger, Walmart tends to have a more centralized Share of Voice with the top brand or brands taking a larger share of the total. These brand standouts either tend to be highly recognizable brand names (e.g. Kraft) that further Walmart’s goal to be a house of brands for its shoppers or tend to be Walmart’s private labels (e.g. Great Value) that it is actively expanding to provide low-cost alternatives to those same name brands for its shoppers. The one exception is the bars category that Walmart is using as a healthy food category destination.
Kroger, on the other hand, still has a significant Share of Voice dedicated to top brands, but, when compared to Walmart, has proportionately more Share of Voice going to healthier and alternative brands like Annie’s. Of special note, Kroger’s own Simple Truth brand breaks the top 5 brands by Share of Voice in several categories, even if these categories tend to be more decentralized than the corresponding top brands would be at Walmart. Many of Kroger’s private-label efforts in food aim to lift the company’s image as a source of high quality and healthy foods, as opposed to Walmart where private label initiatives tend to focus on lowering the price for shoppers.
Rising out-of-stocks, high levels of demand, and unreliable supply chains mean that ad spend optimization on Share of Voice is more crucial now than ever before. Whether it’s at Kroger, Walmart, or beyond, CommerceIQ can help maximize your Share of Voice online. By efficiently allocating your advertising spend toward the keywords and search terms that matter most, your sponsored products can bring in significant incremental revenue for your business. Share of Voice, in contrast to ROAS, is a leading indicator of sales and can help you better forecast future growth. Companies that use CommerceIQ’s automated technology show a 20% improvement in Share of Voice after only several months. Contact us today and request a demo!