Foran arrived from Walmart in February as Kroger’s new CEO
Kroger halted Red Bull orders around the beginning of August after the energy-drink brand sought to raise its prices for the grocer while offering a cheaper arrangement to a rival, The Wall Street Journal reported. WSJ reporters Sarah Nassauer and Patrick Thomas, writing in the newspaper’s CMO Today newsletter, said Red Bull displays have been pulled from Kroger stores and that negotiations between the two companies remain at a standstill.
The standoff follows the February arrival of Greg Foran as Kroger’s CEO, a hire from Walmart where he previously ran the discounter’s U.S. business, the Journal reported. Foran wants Kroger to move away from its high-low pricing strategy, which the newspaper described as relying heavily on temporary marketing promotions, and toward Walmart-style generally low prices every day.
Nassauer described the Red Bull halt as not unheard of in retail — Walmart and other chains occasionally stop ordering from a brand to press a pricing point — but as rare between large retailers and major suppliers. “Suppliers want their goods on the shelf and retailers are wary of disappointing shoppers,” Nassauer told the newsletter. The tactic is taken, she added, when “one side has dug in their heels and feels disappointed customers are worth the risk to offer lower or higher prices.”
Thomas said Kroger views abandoning its promotional playbook as the best way to compete with Walmart, Amazon and discount grocers such as Aldi. The change carries risk because the high-low model hasn’t been Kroger’s playbook historically, Thomas noted, adding that under the existing approach, Kroger’s category managers have bargained separately over individual product categories like chips and soda, or beef and chicken, even when the products are sold by the same company. That fragmented bargaining weakened Kroger’s leverage with suppliers but gave the chain flexibility to offer targeted sales, Thomas said. Moving away from it, he added, puts the chain in “uncharted waters.”
Nassauer pointed to additional risks. Loyal Kroger shoppers are generally drawn in by the chance to stock up on short-term deals, and a shift to everyday low prices could confuse them, she said. There is also typically a delay between the moment a retailer lowers prices and the moment shoppers give it credit, according to Nassauer. “It can take time for price impressions to evolve,” she said.