Dive Brief:

• Kroger CEO Rodney McMullen announced during the company’s first quarter earnings call Thursday morning that the company is expanding its Boost membership program nationwide over the next few weeks.
• The program, which launched in November and offers unlimited no-fee deliveries on orders over $35 along with double fuel points, promoted higher delivery sales and customer retention in four pilot markets, McMullen said. 
• Digital sales declined 6% year-over-year in the first financial quarter of 2022, the company announced Thursday, but it expects sales to accelerate as Boost rolls out and the company continues to expand its Kroger Delivery network.

Dive Insight:

As Kroger extends its proprietary delivery network, the grocer is adding promotional fuel to the rollout by quickly expanding its new membership program.

Kroger Boost, which is part of the Kroger Plus loyalty program, offers two membership tiers. For $59 a year, users can get unlimited no-fee delivery within 24 hours on orders over $35. Members who pay $99 annually can get unlimited no-fee delivery within two hours with the same minimum order amount. Boost also offers double fuel points for every dollar spent at the grocer, along with other perks.

Kroger launched Boost a little over seven months ago in its Cincinnati; Atlanta; Indianapolis; and Columbus, Ohio divisions. Each of those areas offers Kroger’s new proprietary delivery service, Kroger Delivery, which is powered by the company’s large, automated customer fulfillment centers (CFCs) and smaller spoke sites, along with its own fleet of refrigerated vans that carry up to 20 orders at a time. It’s unclear at this point how the company will integrate Boost in markets where it doesn’t currently offer Kroger Delivery.

During Q1, Kroger and technology partner Ocado began delivering orders from CFCs in Dallas and Pleasant Prairie, Wisconsin, bringing its total active CFC count to five. Kroger also opened three new spoke facilities, in Columbus, Ohio; Louisville, Kentucky; and Miami.

McMullen also said during the earnings call that Boost has increased customer retention rates by 600 basis points across its test markets.

“This next generation loyalty program is deepening our relationships with customers as they continue to look for value and convenience,” McMullen said.

With Boost, Kroger joins a growing number of grocery companies rolling out membership programs that offer no-fee delivery and other perks. On Wednesday, Instacart announced a refreshed subscription program, Instacart+, which offers new benefits like account sharing.

Kroger also reported Thursday that the number of “digitally engaged” households across its network increased by more than half a million in Q1.

The nation’s largest supermarket chain reported robust topline sales growth during the quarter that beat Wall Street expectations. Same-store sales increased 4.1% while identical sales in fresh increased 5.2% and private label sales under the same metric rose 6.3%. Kroger raised its full-year guidance, noting it now expects same-store sales minus fuel to rise 2.5%-3.5% and earnings per share of $3.85-$3.95.

Those benefits didn’t trickle down to the bottom line, however, as Kroger, like other retailers, is investing heavily in pricing and managing supply chain disorder. Gross margins declined 26 basis points to 21.6% of sales.