With 135% Growth, Kroger’s Ad Business Aims to ‘Set the Bar’ for Media Accountability

Lately, business has been good for the Kroger Company in more ways than one. With restaurants closed and more Americans eating at home during the pandemic, Kroger’s sales reached $132.5 billion during the 12-month period ending Jan. 31, 2021, an 8% hike compared to its prior fiscal year. Digital revenue increased 116% to more than $10 billion in the same period, making it one of the nation’s top 10 ecommerce retailers, according to estimates from eMarketer. Amid all this activity, the grocer’s retail media unit, Kroger Precision Marketing (KPM), has undergone its own growth spurt. With millions of loyalty card members, Kroger's ability to tie campaigns to sales is proving attractive to brands. "We want to set the bar with respect to media accountability," Cara Pratt, svp of KPM, told Adweek. Launched in October 2017, KPM, which sits within Kroger’s 84.51-degree data analytics arm, saw revenue climb 135% last year. This helped contribute $150 million in incremental operating profit to the company. KPM also worked with more than 1,300 brands, which on average spent 200% more compared to Kroger’s 2019 fiscal year. With nearly 2,800 locations in 35 states operating under local names such as Ralphs, Mariano's, Fred Meyer and Pick 'n Save, Kroger claims to have loyalty card members in 60 million homes—nearly half of all U.S. households. Target, by comparison, has 1,900 brick-and-mortar stores across the country. This reach provides Kroger with a trove of first-party sales data, both in-store and across all of its owned and operated online properties. The retailer can use these figures to measure the performance of its ad inventory, whether that’s search, email, display advertising or push notifications. “We don't need to model behaviors or outcomes nearly to the degree that many other organizations do,” said Pratt, who explained loyalty card members account for 96% of all purchases at Kroger. She also noted 85% of brands that worked with KPM in 2019 continued to do so in 2020. "They're liking what they see," she added. Retail media keeps rising Kroger, of course, is far from alone in developing its own advertising business. In recent months, Walgreens, Walmart and Instacart have all made moves to either build or advance their own networks. Talk of retail media in the press has also spiked, hitting 174 news mentions in December 2020, according to figures from market intelligence firm CB Insights’ “State of Retail Tech” report. With Google planning to block third-party cookies from its Chrome web browser in 2022, the acceleration of people buying groceries online during quarantine and brand safety on the mind of many marketers, experts expect retail media to continue its upward trajectory. “I don’t see any other media channel with retail media’s combination of high-quality audience targeting, granular sales measurement and resilience to changes in the identity landscape,” Geoffroy Martin, evp and general manager of ad-tech company Criteo’s growth portfolio, told Adweek. Criteo’s retail media business grew 53% last year, generating $400 million in advertising revenue for retailers. It currently works with more than 100 retailers, including CVS, Target, Macy's, Costco and Best Buy. “We are on the cusp of a paradigm shift and retail media will only become more valuable,” Martin added. Marketers are also boosting retail media's ascent. Half of media buyers and planners intend to increase their focus on driving more ecommerce sales in 2021, according to survey results from the Interactive Advertising Bureau. Additionally, two-thirds of respondents said they were committed to using more performance marketing. Last year, KPM partnered with TV streaming service Roku to supply the streaming platform with data to improve ad targeting and help CPG marketers link impressions to sales. Kroger has similar relationships with social media platform Pinterest and music streaming service Pandora. “It's been a great couple of years and it's still early days," Pratt said. Marketers Want Precision Targeting With CTV, and They’re Getting It