Kroger’s ad business sees most profit growth since 2021

Foran brought up e-commerce and retail media within the first few sentences of Friday’s earnings call, before any mention of traditional merchandising. The fact that retail media profits are coming up as a central point in a major retailer’s earnings conversation shows how important the sector has become in retailers’ overall strategies.

In a statement, a Kroger Precision Marketing spokesperson said the division has grown thanks to an increase in on-site customer traffic, as well as new opportunities for brands such as shopping assistant ads and collaborations across social media and programmatic advertising.

“Stronger collaboration between our merchandising and media teams expanded advertising inventory, and optimization efforts improved visibility and conversion for our brand partners,” Foran said.

This summer, Kroger included advertising functionality within its AI assistant on the websites and mobile apps of most of its grocery banners, Modern Retail reported last month. Shoppers can use the assistant to plan meals, find recipes and build a cart around budgets or dietary needs. Other assistants like from Walmart and OpenAI did not have advertising immediately at launch but have since implemented it on their platforms to varying degrees.

In March, Kroger Precision Marketing announced it partnered with Google to allow advertising managers to use Kroger data to build campaigns across YouTube and YouTube TV in Google’s Display & Video 360 platform. In June, Kroger partnered with TikTok so advertisers can use TikTok’s self-service advertising platform to reach Kroger shoppers.

“What’s fascinating to me about how Kroger seems to be approaching this is they’re thinking about it as an ecosystem, that retail media is not just an ad in Google or Meta or in a product listing ad, that there are many players that can benefit from association with transactional data,” said Drew Cashmore, chief strategy officer for retail media software company Vantage. “Kroger is thinking about all of the components of media, be it TikTok or CTV or Google Ads or on-site, that culminate in driving a better customer experience and better path to purchase.”

Sean Crawford, managing director of North America for retail media firm SMG, said Kroger’s moves to expand its advertising inventory is an example of how retailers are needing to prove value against other channels in which brands may invest their brand dollars, such as social media advertising.

Retailers are having to find ways to leverage their first-party data into different off-site or digital offerings, Crawford said, “to create revenue opportunities that maximize the value of their data, but also create something that advertisers feel is worth paying for and that they can’t get elsewhere.”

Crawford expects Kroger’s digital screen network to fuel additional growth. next year. Last year, Kroger launched video screens in the wine-and-spirits departments of almost 600 stores nationwide. Earlier this year, the company said it was working with Barrows Connected Store to bring screens to end caps, but declined to share the number of screens or stores. The Kroger spokesperson told Modern Retail that the company’s digital screens have been expanding throughout the U.S. this year but that it hasn’t released the total store count yet.

Foran previously led Walmart U.S. for six years until 2019. Cashmore, a former Walmart Connect leader, said he worked with Foran in building Walmart Connect, which launched in 2019. Cashmore said Foran was a “staunch advocate for retail media,” adding that Foran at Walmart would emphasize the connectivity between merchandising, media, operations and marketing in understanding how brand investments are allocated.

“The connectivity between those key functions was a catalyst for growth,” Cashmore said. “He spearheaded that within the organization, so I think that gives a good signal in terms of where [Kroger] is going to go.”