By Jessica Wohl
CINCINNATI, Oct 10 (Reuters) - Kroger Co. (KR.N: Quote, Profile, Research), the largest U.S. grocery chain, is focusing on what customers want as a growing list of rivals ranging from Wal-Mart to restaurants keep encroaching on its market, its chief executive said on Tuesday.
Chairman and CEO David Dillon told investors at a dinner meeting that Kroger's projections assume that the market will remain "very competitive," maybe even intensely so.
The U.S. grocery industry has faced several changes in the past few years, such as the vast array of places to buy food. While traditional grocery stores were the standard years ago, consumers now can shop everywhere from supercenters like Wal-Mart Stores Inc. (WMT.N: Quote, Profile, Research) to dollar stores and drugstores, and spend more on meals at restaurants.
The growth of alternative outlets has put pressure on the grocery industry, Dillon told investors and analysts. His comments were also broadcast over the Internet.
The pressure on mainstream U.S. grocers is expected to rise further with Britain's Tesco Plc's (TSCO.L: Quote, Profile, Research) planned entry into the market.
Kroger, which runs about 2,500 stores under such names as Kroger and Ralphs, kicked off its first investor conference in years with a dinner on Tuesday night at the National Underground Railroad Freedom Center in Kroger's hometown of Cincinnati. Meetings are also scheduled for Wednesday morning.
The conference comes four months after rival Albertsons Inc. was split up and sold to a consortium of buyers, with Supervalu Inc. (SVU.N: Quote, Profile, Research) buying Albertsons' main grocery assets and vaulting to the No. 2 U.S. grocery spot behind Kroger.
Earlier on Tuesday, Supervalu posted a quarterly profit that almost
quadrupled, boosted by its purchase of Albertsons, and raised its
full-year profit forecast.
Analysts have suggested that the grocery sector could be ripe for more
consolidation, particularly of small, regional players. Kroger itself
merged with Fred Meyer Inc. in a $13 billion deal in 1999, forging the
No. 1 U.S. grocer.
Kroger has remodeled stores, improved its lineup of perishable goods, lowered prices and added gas stations to help stave off tough competition. It faces pressure on the low end from the likes of Wal-Mart, which sells more food than any other U.S. retailer, and from high-end chains such as Whole Foods Market Inc. (WFMI.O: Quote, Profile, Research), which cater to shoppers looking for natural items and prepared meals.
In September, Kroger said it still expected to invest $1.7 billion to $1.9 billion on capital projects such as new stores and remodeling this year, up from $1.3 billion in fiscal 2005.
That spending forecast excluded any acquisitions. Kroger continues to look for deals but will only bid when the price makes sense, executives said in September.
