Kroger has launched a new multi-year plan to win over customers amid a challenging economic climate, and it involves a significant change that will cost the company $5 billion.
The grocery chain, which owns regional supermarket brands such as Smith’s, Fred Meyer, and Ralphs, has ramped up its efforts to attract price-conscious customers in recent months.
In March, it began offering customers extra gas savings and updated its loyalty rewards program with simpler offers. By May, Kroger revealed plans to lower prices on thousands of items in its stores.
Despite these efforts, Kroger has struggled to dramatically turn around its sales as customers tighten their budgets. The company’s identical sales (excluding fuel) rose only 0.2% year over year in the second quarter of 2026, its most recent earnings report revealed.
Kroger plans to invest $5 billion to lower prices, add value for customers
As sales growth remains challenged, Kroger executives announced at the company’s 2026 Investor update that the company aims to become “America’s favorite grocer” and is targeting 3% comparable sales growth in 2029 (excluding fuel and pharmacy).
One of the strategies Kroger plans to use to reach this goal is to invest $5 billion in value and lower prices for customers by 2029 through cost savings.
“We’ll make a $5 billion investment in customer value using an entirely self-funded model,” said Kroger Chief Financial Officer David Kennerley during the event. “We’ll improve our value position market by market in lockstep with the cost savings and productivity work that funds it.”
“Importantly, we will pace this rollout,” he continued. “As we take cost out of the business, we reinvest in customer value. If costs come out faster or we see stronger results from our investments, we may choose to accelerate.”
Kennerley said that next year, Kroger will make customer-value investments in approximately 450 additional stores, up from roughly 250 that will be in place this year.
Related: Kroger loses $12 billion as customer behavior takes a turn
As the company rolls out this plan, Kroger CEO Greg Foran said customers should expect “sharper everyday prices and simpler promotions.”
Kroger’s decision to double down on offering value to customers comes as more Americans are struggling to afford groceries due to rising prices.
Billy Roberts, a food and beverage economist at CoBank, warned in a July press release that rising food prices are significantly impacting consumer behavior.
“Cumulatively, food price increases are proving to be the definitive, everyday stressor for consumers and they’re responding decisively by choosing lower-cost options like private label brands, shopping at discount retailers or simply buying less,” said Roberts.
According to a Bain & Company analysis in July, grocery prices have been increasing by 2% to 3% year over year since February, roughly in line with food-at-home inflation.
Amid this trend, 80% of Americans are trying to spend less on groceries, with 56% buying lower-priced brands, 49% purchasing fewer items, and 44% using more coupons and promotions. Also, 22% are exploring more retailers to find the best deals.
How Kroger plans to cut costs to reinvest in shoppers
As Kroger aims to invest in customers, it plans to cut costs in multiple areas of its business.
“By 2029, we’re targeting $4 billion of annualized cost savings, spending less where the customer does not see value so we can invest more where the customer does,” said Foran.
“We’re going after every available margin dollar across the business, sourcing more directly, buying smarter in cost of goods, reducing indirect spending, and moving repeatable work into a more scalable operating model through the Kroger Capability Center,” he continued.
Foran said Kroger will rely on technology such as robots and artificial intelligence to generate cost savings.
“We’re investing in digital shelf labels, RFID, robotics, and AI, helping us to act faster and update the shelf more accurately,” he said. “Supply chain modernization and automation will improve flow, freshness, and availability. Every single one of these actions has the same goal, take cost and complexity out, put the savings back into customer value and execution, and expand margins over time.”
Kroger will also roll out fewer promotions to customers, which will also help it cut costs and reinvest in lower prices.
“Today, we rely heavily on promotions, but to be clear, we will not abandon promotions,” said Mary Ellen Adcock, executive vice president of Kroger, during the investor event. “They are an important way of how customers shop. We will be more selective about our promotions through reducing complex offers, eliminating unproductive offers.
“We will keep the ones that are working and make them more productive and gradually phasing out the ones that are not,” she continued. “Sharpening our everyday prices both in store and online. Going forward, we will reallocate value from the promotions into everyday shelf prices across the store and online.”
Kroger outlines key in-store changes to elevate the customer experience
In addition to offering lower prices, Kroger will enhance the customer experience through several in-store changes.
Adcock said that one of these changes includes adding more fresh food offerings in its stores.
“Fresh is where the basket starts, and customers build the rest of the basket around these areas,” said Adcock. “Today, fresh already makes up 37% of the basket. When we win in fresh, we win more than just the fresh department. Customers who trust us shop us more often. This is why we’re investing in quality standards, innovating in fresh offerings, and improving product quality both in-store and online.”
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She also said that Kroger will expand its prepared meal options as it aims to become “the ready-meal destination.”
“Meals are an exciting opportunity for us as we better answer the question customers still ask every day, what’s for dinner? We grow frequency and grow loyalty,” said Adcock. “It’s a great opportunity for growth, and Kroger is creating exciting meals like never before at Kroger.”
Additionally, Kroger plans to add more space in its stores for food, meals, and e-commerce fulfillment. It also aims to improve its stock availability, roll out new store formats, and give customers more ways to earn and redeem membership points.
The company will expand access to this improved customer experience by opening 110 new stores in attractive, high-return markets through 2029.
Kroger CEO admits the company has made mistakes and has new priorities
During the investor event, Foran emphasized that Kroger has made four mistakes that contributed to its past weak performance.
- Its execution became inconsistent as “the store experience varied too much.”
- Operating costs grew faster than sales.
- The company’s value position did not keep pace as its promotions became overly complicated.
- It made capital investments that did not produce the expected returns.
“We did not build enough new stores at a time when much of the industry was expanding quickly,” said Foran. “The result is we lost share.”
Foran said that Kroger is now focusing its attention and investing resources “behind the things that matter most. We are prioritizing our core grocery, e-commerce, store, and media assets. We are stepping away from non-core activity and complexity that does not improve the customer experience or earn an attractive return.”
Last week, Kroger revealed its plan to cut roughly 3,000 corporate jobs across multiple departments over the next three years. Foran emphasized at the investor event that the company is evolving its operations.
“We are also changing how we work,” he said. “Try things, move quickly. When something works, scale it fast. When it does not, end it fast. These are not easy decisions, but if we are asking the organization to move faster, we cannot keep work, assets, and layers that distract us from building America’s favorite grocer.
“You can see it in the way that we are optimizing our footprint, our focus on item-level merchandising, and store standards and simplified roles,” he continued.
In an Oct. 20 analyst note shared with TheStreet, Robert Ohmes, a research analyst at BofA Global Research, said that Kroger has “a clear path to unit and dollar share gain” as it gets “the flywheel going” through value, merchandising and store growth acceleration.
In light of the grocery chain’s recent investor update, BofA Global Research has reiterated its Buy rating on Kroger stock and adjusted its earnings per share estimates to $5.30 for fiscal year 2028, $5.77 for fiscal year 2029 and $6.76 for fiscal year 2030 to “reflect the midpoint of the updated growth CAGR (compound annual growth rate).”
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