Has Kroger Given Up on Ready-2-Eat and Heat-N-Eat Fresh Food?

 

Standing back and looking at the trial an error’s made by the team at Kroger over the past 15 years dealing with grocerant niche Ready-2-Eat and Heat-N-Eat fresh prepared food one could speculate that Kroger failed at integrating Mariano’s, QFC both of which excelled at Ready-2-Eat and Heat-N-Eat fresh prepared food.

Kroger time and time again spent millions on testing new fresh food format stores and closed the concepts soon after.  What went wrong in the minds-eye of Steven Johnson Grocerant Guru® at Tacoma, WA based Foodservice Solutions® was they were so tied to legacy grocery metrics, operations, and procedures they simply could not get out of their own way.  They focused on the past, not the present or the wants and needs of the customers.

Now enter Kitchen United, who started out as ghost kitchen but now may in fact become a Kroger foodservice solution.  The team at Foodservice Solutions® says, “don’t bet big on that”.

Kitchen United is the digital food hall provider that is planning to lean into its partnerships with grocers and convenience stores as it expands, believing there is more opportunity in that business than in stand-alone, delivery-only ghost kitchens and food halls. 

So let’s be clear, Kitchen United (KU) will still operate restaurant pickup and delivery hubs. But it prefers to put those hubs inside grocery stores like Kroger, where it sees a symbiosis that can benefit both sides.

Here is what we know from a recent article, “Spearheading this strategy is new CEO Atul Sood, who co-founded KU and has spent the past six years as its chief business officer. He replaces former chief Michael Montagano, who left in August to become CEO of the Dog Haus restaurant chain.

Under Sood, Pasadena, California-based KU has taken a fresh look at its priorities and determined that its path forward runs squarely through retailers.

“There is so much opportunity in retail and grocery,” Sood said in an interview. “We have tapped probably 5% to 10% of the opportunity that’s out there.” 

Investment fuels retail growth

That opportunity is backed by a $100 million investment last year that included contributions from Kroger, Circle K parent Alimentation Couche-Tarde and Restaurant Brands International, the owner of Burger King, Tim Hortons and Popeyes. 

KU’s partnership with grocery titan Kroger is already underway. It currently has locations in eight Kroger stores in Los Angeles, Texas, Ohio and Indiana. Each of those locations houses multiple restaurants, and customers can mix and match from all of them by ordering online, on an app or in person for delivery or pickup. 

The idea is that customers can get groceries for the week and dinner for tonight, all in one visit, Sood said. KU benefits from a steady stream of foot traffic as well as Kroger’s large parking lots, which provide plenty of space for delivery drivers. Down the line, it could also start selling groceries and other products from those Kroger hubs. 

“It is possible in three to five years that when customers want fresh prepared food, hot delivery to their door in 30 minutes or less, they might also want a few other items,” like beer or soap, Sood said. 

As part of this new approach, KU is rebranding its grocery outlets as Mix Food Halls, a slight change from their original name, Kitchen United Mix. 

“The words Kitchen United are meaningless to the end consumer,” Sood said. The company itself will still be called Kitchen United.

The rebrand includes a new consumer-facing website, MixFoodHall.com, that emphasizes one of KU’s key features: the ability to combine different cuisines into a single order.

“Explaining that in an ad is complicated,” said CMO Katie Wollrich. The new site looks to ease that confusion with an image of food from multiple restaurants going into one bag. “That seems to be resonating with people,” she said.

There is so much opportunity in retail and grocery. We have tapped probably 5% to 10% of the opportunity that’s out there. -- Kitchen United CEO Atul Sood

Focusing on convenience stores, catering

A second part of KU’s new strategy is an initiative with Circle K, the 7,000-unit convenience store giant. Sood could not share many details about that program, but said it will differ from what KU is doing with Kroger. 

He noted that many people use c-stores for nourishment as well as gasoline, but that the food could be improved. “You’d be surprised at how much food convenience stores sell,” he hinted. That program will launch in October or November. 

As KU embraces these hybrid formats, it will move away from the stand-alone “kitchen centers” that today make up a good chunk of its 25 locations. Those centers are expensive to build, Sood said, especially compared to the Kroger sites.

“If you can reduce capex and go to a capex-light model, you’ll be a lot more investable,” he said. “You’ll probably see less of those.”

Sood takes the reins at a challenging time for ghost kitchens. Established players like Reef and CloudKitchens have struggled, as have delivery-only restaurant concepts like MrBeast Burger and Nextbite. 

Part of the problem, Sood said, is that they rely too much on delivery, which has shown signs of slowing recently. 

“You cannot run a restaurant on delivery revenue alone. It’s not possible in the U.S. market,” he said. “You need to employ takeout and, importantly, you need to employ catering.”

Kitchen United already does quite a bit of takeout, and it is now planning to invest more in catering as well. “Catering is an underleveraged part of almost every restaurants’ business plan with the exception of Panera,” Sood said.

Another issue with ghost kitchens is that many expanded too fast and too wide—KU included. Four years ago, the company said it expected to have 500 kitchens in 50 sites, a goal it has yet to reach. 

“We shouldn’t be announcing these things,” Sood said, “and I don’t intend to.”

That doesn’t mean he’s not bullish on the concept. “It just needs a moment to pause,” he said. “So we’re in that lull right now.” 

One thing that won’t change under Sood is Kitchen United’s strategy for its restaurant partners. From the beginning, the company’s pitch to operators has been that it can help take small brands regional, regional brands national, and national brands into new markets.

“We still believe all those three to be true,” Sood said. But it has found a sweet spot with those smaller, emerging brands like Dog Haus and Hawaiian Bros, KU’s most successful operator and “a sleeping giant in the industry,” according to Sood.

These are brands that want to grow fast but don’t have the same resources as their larger competitors. Kitchen United offers them a way to expand more quickly and affordably. 

“It’s really the growth brands that we’ve found do best in our sites,” Sood said. “We intend to be the growth engine for the next wave of up-and-coming brands.”  Here is the team at Foodservice Solutions® problem; outsourcing the number one driver of customer frequency within the grocery sector is like outsourcing your brand, you will either lose focus or control.

Foodservice Solutions® team is here to help you drive top line sales and bottom-line profits. Are you looking a customer ahead? Visit GrocerantGuru.com for more information or contact: Steve@FoodserviceSolutions.us Remember success does leave clues and we just may the clue you need to propel your continued success.