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Dive Brief:

• Kroger is ramping up its direct sourcing efforts by buying directly from producers more frequently instead of paying an intermediary, according to an Oct. 20 analyst and investor day conference.
• To give the grocer more economic control and visibility over its buying, Kroger aims to source more than 10% of goods directly, up from a current rate of less than 1%, EVP and CFO David Kennerley said.
• "We're making good progress, launching South America and Asia hubs with spokes in key sourcing locations to facilitate better sourcing with the goal of a fully owned import distribution model over time,” Kennerley said. Kroger’s first international hire is already in place in South America, and the grocer is currently building infrastructure to expand into Asia in 2027, he added.

Dive Insight:

Kroger is building up its logistics, sourcing, workforce and payment capabilities to get closer to producers and “take layers out of the chain,” Kennerley told investors. CEO Greg Foran first outlined the strategy earlier this year, telling analysts in June that the grocery chain was leaning on supplier negotiations and prioritizing direct sourcing to reduce the cost of goods.

For instance, Kroger is currently working with a grape grower in Peru and has sourced about 40% of its fruit for the November 2026 season directly from growers in the country, Kennerley said. 

“Previously, we would have paid margin to a third party to sit between us and the grower,” Kennerley said. “And by doing this ourselves, we use Kroger's scale to get closer to the grower, which lowers costs, strengthens access to supply and gives us a more direct line to innovation.”

Besides grapes, Kroger is working to directly source other goods, including citrus, shrimp and frozen vegetables, Kennerley said. 

As it leans into direct sourcing, Kroger is also looking to leverage better data to give buyers a clearer understanding of volume, demand, performance and alternatives when working with suppliers. Further, Kroger is working closely with its suppliers to maintain prices, according to Kennerley. 

“We're making good progress against these areas,” Kennerley said. “The focus now is on scaling what is working and embedding these disciplines more broadly into the way we source.”