Kroger's timing for entering Florida looks better than ever
By Ashley Gurbal Kritzer
Tampa Bay Business Journal
Published: Jan 7, 2022

In 2021, Kroger Co. became a player in the Florida grocery market — without opening a single store.

The Cincinnati-based grocery giant opened the second of its U.S. e-commerce fulfillment centers — Kroger calls them “sheds” — in Groveland, north of Orlando, in 2021. Kroger’s grocery delivery service uses a hub and spoke model; in Florida, the Groveland center serves as the hub, and Kroger confirmed a “spoke” facility in Tampa in June.

In July, the Kroger C-suite flew to Florida to celebrate the opening of the Groveland center with a clear message: Kroger is coming for Florida grocery shoppers. And by December, CEO Rodney McMullen said the warehouse was exceeding Kroger’s expectations.

As of Jan. 3, Kroger (NYSE: KR) employs 900 people between the Groveland facility and spoke warehouses in Tampa and Jacksonville, a spokeswoman for the grocer told the Tampa Bay Business Journal. It will expand the delivery service to South Florida in 2022.

Kroger’s arrival in Florida had been rumored for decades; in 2016, it took a significant stake in organic grocer Lucky’s Market, backing its expansion in the Sunshine State, but divested in 2019.

But its e-commerce Florida entrance may be perfectly timed: Kroger began offering grocery delivery here after many companies switched to online grocery shopping because of the Covid-19 pandemic. The grocer also came to Florida alongside hordes of new residents — many from the Midwest, where Kroger is the hometown grocer.

Before the pandemic, online grocery sales in the U.S. represented less than 2% of the total weekly grocery spending; as of November 2021, the share was seven times larger at nearly 14% on a national level, according to Brick Meets Click, which tracks digital grocery shopping trends. Online grocery spending was between 11% and 15% of all U.S. grocery spending throughout 2021, according to Brick Meets Click.

In November 2021, online grocery sales in the U.S. totaled $8.6 billion, up from $8.1 billion in November 2020, according to Brick Meets Click.

On a December earnings call, McMullen addressed the opportunity to snag new Florida residents as customers. The Florida market is growing so much, he said, that he doesn’t look at new Kroger customers as market share the grocer took from a competitor.

“So far, we feel good about the opportunity in Florida,” he said. “And as everybody knows, the population growth in Florida and the economic growth in Florida is just mind-boggling relative to an awful lot of the country. So it’s an incredible opportunity for all grocery retailers in Florida. Obviously, the offering we have is unique in the market and we are very proud of what we’re getting done there.”