Kroger CFO: Harris Teeter's "Express Lane" online ordering system could be tested here

Q&A with Mike Schlotman on Harris Teeter purchase

CINCINNATI -- The Kroger Co. will quickly export pharmacy management software and Que Vision technology to Charlotte. Harris Teeter Supermarkets Inc. will send its online ordering technology and perhaps some Southern hospitality back to Cincinnati.

Those are just the first steps Kroger will take now that its $2.5 billion acquisition of Harris Teeter has been completed, according to Chief Financial Officer Mike Schlotman, the Kroger executive who led the merger process. Schlotman talked to WCPO Business Reporter Dan Monk about the deal Wednesday.

Here are excerpts:

Q: What Harris Teeter secrets are you hoping to learn now that the deal has closed?

A: We'll look at the training programs they have, why their associates get high marks on ‘friendly.’ Our associates are very productive, very task oriented. Sometimes when a produce clerk is out stocking apples, they may think of their jobs as, ‘I’ve got to get 10 apples a minute stacked.’ If a customer stops with a question, they worry they’re going to get off their productivity number vs. answering a question. We just have to figure out how (Harris Teeter associates) get their job done and provide good quality service to the customer.

Q: What can Harris Teeter learn from Kroger?

A: The queuing system (Que Vision) that helps the front-end manager decide how many check lanes need to be open at a time. Harris Teeter’s check out time is pretty good but ours is better. So, they’re very intrigued to learn about our system and how we can get that into their stores quickly. Another one is pharmacy. They have a rather antiquated pharmacy system that’s kind of running out of juice and people aren’t going to support the system any more. We have a state of the art system … It doesn’t cost us any more to put it into a couple hundred stores except the hardware.

They want it fast. (Que Vision) and the pharmacy system are two of the systems that they want to get as fast as they can. What we’re trying to do is, the things that’ll be significantly beneficial to their business, we want to address those first.

Q: When will we see Harris Teeter’s "Express Lane " (online ordering system) here?

A: It is clearly one of the things that our digital folks, it wouldn’t surprise me if they’re already on their way to Charlotte to figure it out. We actually had been working on our own pilot before we started working on this merger. Rather than create things from ground zero we kind of put our own development on hold because we think we can leverage some of the infrastructure they have to roll it out a little faster than trying to develop it from ground zero. It wouldn’t surprise me if in a relatively short period of time, you’d see us test that in a market outside of the Harris Teeter footprint. Whether it would be in Cincinnati or not hasn’t been decided. I know there’s a lot of people here at 1014 Vine that want one here so they could see it. We will try to expand it pretty quickly.

Q: Between the time this deal was announced and completed, Harris Teeter grew by 15 stores. Will that continue?

A:  It won’t surprise me if they open 10 to 15 stores a year. We’re very excited about the markets they’re in. Charlotte, the D.C. area, Baltimore area, fast-growing markets, a lot of customers, the kind of customers that are in Harris Teeter’s sweet spot. We would expect them to grow a little faster than they would have been able to grow on their own because we have a bigger balance sheet than they had.

Q: Will you use the Harris Teeter deal to expand into Florida or north to New England?

A: We don’t have specific plans to do either. We have a lot of opportunity just in the Washington, D.C./Baltimore area, to get those markets built out. But clearly, this gives us a very nice footprint all along the eastern seaboard. I’m not sitting here announcing either one of those.

Q: Outside of Harris Teeter markets, have you passed on expanding in Chicago?

A: There aren’t any markets out there where we’d say, ‘We’re not going to go there.’ If you’re referring to Dominick’s and those assets, they just aren’t assets that we would have a desire to own. There are things that come up for sale like Harris Teeter that are high-quality assets. There are other things that come available because they’re distressed. We don’t buy distressed assets unless we can convert them to Kroger quickly. So, Chicago doesn’t have a big red X on it. We are there for the value food format, Food4Less, but not with traditional supermarket.

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