Kroger 2012 Annual Report Download - page 64

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A-6
ME R C H A N D I S I N G A N D M A N U F A C T U R I N G
Corporate brand products play an important role in the Company’s merchandising strategy. Our
supermarkets, on average, stock approximately 12,000 private label items. The Company’s corporate brand
products are produced and sold in three “tiers.” Private Selection is the premium quality brand designed to be
a unique item in a category or to meet or beat the “gourmet” or “upscale” brands. The “banner brand” (Kroger,
Ralphs, King Soopers, etc.), which represents the majority of the Company’s private label items, is designed to
satisfy customers with quality products. Before Kroger will carry a banner brand product we must be satisfied
that the product quality meets our customers’ expectations in taste and efficacy, and we guarantee it. Kroger
Value is the value brand, designed to deliver good quality at a very affordable price. In addition, the Company
recently introduced two corporate brand lines, Simple Truth and Simple Truth Organic. Both brands are free
from 101 artificial preservatives and ingredients that customers have told us they do not want in their food,
and the Simple Truth Organic products are USDA certified organic.
Approximately 40% of the corporate brand units sold are produced in the Company’s manufacturing
plants; the remaining corporate brand items are produced to the Company’s strict specifications by outside
manufacturers. The Company performs a “make or buy” analysis on corporate brand products and decisions
are based upon a comparison of market-based transfer prices versus open market purchases. As of February 2,
2013, the Company operated 37 manufacturing plants. These plants consisted of 17 dairies, nine deli or bakery
plants, five grocery product plants, two beverage plants, two meat plants and two cheese plants.