Dive Brief:

• Kroger announced its largest one-year price investment in company history, which will include price cuts in store categories across its Columbus division, according to Own Brands Now. 
• The price cuts include nearly 2,000 products across the company’s 25 different store brands, including specialty label Private Selection and natural and organic brand Simple Truth.
• Kroger also is lowering prices on national brands across departments, as well as in produce. The retailer says it carefully studied its product lineup to determine the most relevant items to consumers.

Dive Insight:

Although these price cuts only apply to one division, they indicate the pricing pressure Kroger is facing from Wal-Mart, discounters and from online competitors such as Amazon.

As the country’s largest grocer, Kroger has done a good job staying ahead of conventional competitors. Its ClickList online ordering service has quickly expanded; it offers varying formats, from large-scale Marketplace stores to fresh-focused convenience stores; its private label selection is one of the most robust in the industry; and it executes very well at the store level.

The company also has managed to keep pace with specialty competitors thanks to its growing selection of local items and natural and organic products. But with Wal-Mart slashing prices, Amazon expanding its grocery reach and discounters Aldi and Lidl moving in, Kroger clearly sees a need to compete on price. Can the company actually compete with any of these players on price? No, but it can make meaningful reductions on key products that will further incentivize customers to shop its stores.

Kroger said it carefully tracked product sales and usage to target items that will have the most impact for the company. This includes many everyday products, like Kroger brand peanut butter, which will drop from $1.99 to $1.49 for a 16-ounce jar, according to the Columbus Dispatch, and Private Selection bread, which will drop from $2.69 per loaf to $1.88. An eight-pack roll of Kroger’s Home Sense brand paper towels will drop from $12.19 to $7.99.

The company proclaims these cuts are a way to save customers money, and the retailer will no doubt see a sales lift from the effort. But make no mistake: Kroger would rather not make another deep price investment, especially since it’s already lowered prices considerably in recent months amidst price deflation. The company will no doubt closely track results from these price reductions. If it grows market share, Kroger may expand the cuts to other divisions.

Earlier this year, Wal-Mart took aim at Kroger in the Midwest, lowering prices at stores throughout Michigan, Indiana and Kentucky. Kroger, in response, is spending what Wolfe Research analyst Scott Mushkin estimates to be $450 million over the course of this year to stay competitive in the region. With the continued race to lower prices to stay competitive, further cuts are all but inevitable, and it's the consumer who will end up as the ultimate beneficiary.