Can Kroger's New Wine Shops Actually Scale? | Fast Five Shorts

Kroger is rolling out a new in store wine shop concept at 14 stores in its Cincinnati Dayton division, featuring a curated selection of more than 130 wines and tasting bars staffed by train wine stewards.

Always want to say stewards on the podcast.

According to Grocery Dive, KRoger identified nearly 150 locations across its banners last fall where customers were seeking a more robust win premium wine selection and is starting the concept rollout at 14 stores.

The shop and shop format includes tasting bars staffed by trained wine stewards as I mentioned before and features wine from quote, acclaimed and emerging producers.

End quote.

Brandon is a curated 130 bottle wine shop with tasting bars.

The vino veritas Kroger needs to chart a new direction in its business.

You know, I'm actually pretty bullish on this idea, Chris.

Are you?

Oh my God.

Why?

Yeah, I mean I would say a. I love the idea of testing.

Right.

Like retailers should constantly be testing new ideas.

Right.

If you're a retailer and you're not testing new things all the time, like you need to be thinking through your strategy.

Second.

Right.

When you look overall at the grocery market, like we're seeing a pretty clear bifurcation.

Right.

Like a lot of the, the value focused retailers are winning, you know, like the Walmart's, all these, the costcos of the world.

You also see like really strong growth among kind of like the natural specialty retailers and the guys in the middle are starting to get squeezed.

So I think for someone like Kroger who already has a lot of scale starting to push, especially in kind of like the right stores with higher income into creating differentiation within their stores makes a lot of sense.

You know, I've been in a lot of Kroger's where they have a large wine selection.

It seems really, really busy.

So I think for the, for the right stores and the right markets, you know, create that stickiness with the customer, it's not going to be a panacea everywhere.

You know, maybe it's a few hundred stores that, that it makes sense but you know, love to see the results on how it works out.

Got it.

So you're kind of bullish on this.

You think they could get to the 150 stores that they're, they're, they're, they're, they're talking about in the, in the press release.

Yeah, I mean I think like when you look nationally.

Yeah.

I mean there's definitely some Krogers, high end Krogers in the, in the right markets where.

Or makes a lot of sense.

Okay, got it got it.

Okay.

And.

All right.

Wow.

All right, so, okay, so I agree with, I mean, I agree with you.

I applaud the effort.

I think that I would agree.

The one thing I fundamentally agree with you is I think the test is worth running.

The one thing I'm a little, little dubious about is I said, like, I hate when I see, like I hate when people use a rationale like it's a test.

And it's okay because I think there are some things that are bad tests that you shouldn't do.

But I think this is one where, yeah, let's prove out the hypothesis.

Like, it could go either way.

You know, it's like putting your finger in the way and be like, hey, which way is this test going to go?

But I don't know.

I, I disagree with you, Brandon.

I don't, I don't know that, I don't know that this is going to scale and it's going to be worth the effort.

Because I, like, I was thinking about this in Ralph's, you know, because I go to Ralph, I go to California, I go to Ralph's and like, it's Kroger's largest owned subsidiary, for example.

And I have trouble seeing a wine steward operating in Ralph's.

Maybe in the right market, the right environment, maybe, but it just doesn't feel aligned to the Kroger experience to me.

But then again, you know, I think the other question that this headline raises is what is the differentiating part of the Kroger experience is what is what you were getting at, Brandon?

Right.

Like you've got to move up market to differentiate yourself.

And so I guess they have to start somewhere, but I kind of doubt this is it.

And the other point I'd make is, and Alex, I'm curious to get your take on this as well.

How lost Kroger is in terms of trying to find their identity will be foretold to me by how much they talk about this in their next earnings call because it's still 150 stores, even if it rolls out.

But if they're like really stumping this, it's like, whoa, they got a lot of issues.

That's my take.

But Alex, what do you think?

Look, I'm actually positive in some ways on this, which is are you proven concept?

You look at H E B, they have a very similar concept.

They've rolled across lots of stores.

They've been very successful.

Kroger's done a similar thing with Crowbar.

Actually, I live in Atlanta, so they have a Couple of these bars in their stores here been successful.

I don't think it's a solution for all their stores.

And actually I think it needs to go with a set of localized options across different stores.

And so if you think of it as part of a broader localization strategy, I'm, I'm enamored with it.

If I think of it as the, you know, the panacea for all ills, I'm not.

Right, right.

So it's, so you basically are saying like on the margins it'll be good in the locations where it's deployed, but at the end of the day it's not going to reverse the overall sales trend.

At Crude Kroger, you know, it, it allows for stores where it makes sense to have something extra.

And I'll tell you, I grew up around the corner from a store that had a very extensive wine selection, sold 100 bottles of wine, 500 bottles of wine.

They did very successful.

So I think in those kind of stores it adds something extra.

It allows for a very profitable product to get sold in any greater extent.

But they need to add it to a number of, it can't be the only bowl in the gun.

Right.

Need to have a number of bullets in the gun.

It's just one of them.

Right, right, right.

Brandon, any final thoughts here after we, we just wrapped up this discussion?

Yeah, I mean, I, I, I agree in, in terms of like Kroger has a number of, of challenges that it's facing.

You know, I'm thinking, you know, Greg Faran is their new CEO.

Yeah.

And when you look what he did at Walmart, like he fixed a lot of the, the basics.

Right.

Like he focused on prices, he focused on in store execution and, and getting really clean, efficient, well run stores.

You know, I'd imagine he's taking that playbook to Kroger and this move to the specialty.

I'd imagine we're not going to hear a ton about it in their next earning call, but interesting to see like, you know, how much they talk about it.

Right.

Hopefully they get back to a lot of like those fundamentals and driving a great customer experience.

Yeah.

And it's funny, I mean that's kind of why I do, what I do is like point these things out where like if you do see it, then you have to raise an eyebrow.

It's kind of like one of those things where you don't want to see it because you want it to work like you guys are saying.

But if you start talking about it too much, then it tells you.

That's the only thing you have to talk about, Right?

So that's that.

That.

That's the fascinating thing about why we do this show every single week.