Kroger Aims to Source More Than 10% of Goods Direct

By Marcus Bennett

Kroger aims to source more than 10% of its goods directly, up from less than 1%, EVP and CFO David Kennerley said Oct. 20. That represents more than a tenfold increase over the current rate.

At an analyst and investor day conference, Kennerley said Kroger is buying from producers more frequently instead of paying an intermediary. The grocer expects direct buying to give it greater economic control and visibility over purchasing. Kroger did not disclose a deadline for exceeding 10%, nor did it specify whether the share would be measured by value, volume or units.

What changes in the buying chain?

Kroger has begun moving some fruit purchases upstream. The company sourced about 40% of its fruit for the November 2026 season directly from growers in Peru, Kennerley said, while working with a grape grower there.

“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.”

Beyond grapes, Kroger is working to directly source citrus, shrimp and frozen vegetables, Kennerley said. The Peru result covers one country and one fruit season, so category-level disclosures will be needed to show whether the model scales across the supply chain.

Takeaway: Direct buying has moved beyond a concept, but the disclosed 40% foothold remains concentrated in Peruvian fruit.

How is Kroger building its import network?

Kroger is launching South America and Asia hubs with spokes in key sourcing locations, Kennerley said. The grocer’s first international hire is already in place in South America. It is also building infrastructure to expand into Asia in 2027.

“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.

The stated destination is a fully owned import distribution model over time, but Kroger has provided no completion date, capital figure or expected savings. The 2027 Asian infrastructure work is the only specific expansion milestone disclosed.

Takeaway: Kroger has a stated destination for its import network, while most of the buildout remains undefined.

When did the strategy begin?

CEO Greg Foran first outlined the strategy earlier this year. In June, he told analysts Kroger was leaning on supplier negotiations and prioritizing direct sourcing to reduce the cost of goods. The Oct. 20 update added a measurable direct-sourcing goal to that earlier plan.

Takeaway: The October target formalizes a sourcing shift the CEO described in June.

What systems support the shift?

Kroger is building logistics, sourcing, workforce and payment capabilities to move closer to producers and “take layers out of the chain,” Kennerley told investors. The company is also working closely with suppliers to maintain prices, he said.

The grocer wants better data to give buyers clearer views of volume, demand, performance and alternatives when dealing with suppliers, according to Kennerley. Kroger did not quantify expected savings, price changes or supplier-performance gains from those efforts.

“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.”

Takeaway: Kroger is adding procurement discipline alongside direct buying, but it has not put numbers on the financial payoff.

The next proof point is whether Kroger can move beyond its sub-1% direct-sourcing base while building Asian infrastructure in 2027. The Peru fruit activity and supplier price work provide the current baseline, but the briefing disclosed no savings or performance target for either.