'Healthcare is complicated': Kroger's complex journey at the intersection of food and health

In recent years, Kroger Health, the health and wellness division of grocery giant Kroger, has established a leading reputation in nutrition, health, and wellness within the grocery industry.

Leveraging Kroger's supermarket operations, Kroger Health aims to offer customers a range of health and wellness services and tools, including proprietary nutrition food ratings, pharmacy services, and in-store clinics.

The company positions its efforts as a win-win: helping customers navigate the complex healthcare system while driving its own profitable growth.

"We know that grocery customers who are also pharmacy customers are more loyal to Kroger and spend more," Kroger CEO and Chairman Rodney McMullen recently told investors. "While the pharmacy industry is going through a period of transformation and disruption, we have a unique opportunity to help customers live healthier lives while gaining market share."

Kroger's focus on healthcare within the grocery industry comes as other companies—from Instacart to regional chain Heinen's—are also ramping up personalized health and wellness services for consumers.

However, the intersection of grocery and health is a difficult area to operate in. Kroger Health faces an inherent tension between its "health and wellness" mission and its role as a grocery company selling everything from organic apples to sugary yogurts.

Additionally, according to interviews with several Kroger Health executives, the division faces a range of challenges—from regulatory hurdles to technical difficulties—as it advances its strategy.

Part of that strategy is the OptUp tool, integrated into the Kroger app, which allows users to scan product barcodes to view proprietary nutrition ratings and recommendations for better-scoring items. OptUp also provides an overall purchase score (which Kroger calls a "basket score") so each user can see how the nutrition of their purchases compares over different time periods.

The tool is designed to simplify shopping, offering customers a convenient way to digest nutrition labels and understand them holistically, said Laura Brown, Kroger Health's director of nutrition. The algorithm is trained to "think statistically like a registered dietitian."

During a tour of a store near Kroger's Cincinnati headquarters, Brown scanned a product's barcode to demonstrate how consumers can use OptUp to access nutrition information: "It's in the orange zone, meaning it's very good for you. Your cart should be 40% orange items. But can you improve and get into the green zone? Just choose apples with peanut butter."

Executives note that the basket score enables Kroger to get a snapshot of healthy purchasing behavior by store, helping identify populations that may need assistance improving health outcomes.

However, during the in-store demo, some scanned products had incorrect or incomplete OptUp scores—highlighting that some of Kroger Health's initiatives are still being refined. Since launching OptUp in 2018, Kroger has worked to include more products in its proprietary nutrition rating system and has migrated the tool from a standalone service into its grocery shopping app.

Consumers often feel confused and frustrated when navigating healthcare and making healthier choices, said Meggen Brown, chief nursing officer for Kroger Health and The Little Clinic, in a recent interview at Kroger Health's headquarters.

"Healthcare is complex," Meggen Brown said.

Beyond groceries

Kroger Health was established in 2017 when the grocery company brought together its clinics, pharmacy operations, and dietitians to work collaboratively across the company.

Beyond corporate employees and a chief medical officer, the division has expanded to include pharmacists, pharmacy technicians, nurse practitioners, dietitians, physician assistants, and licensed practical nurses. Kroger Health now offers a variety of medical services, from in-store clinics to pharmacy services to OptUp and other nutrition tools.

"We used to be the 'cold clinic.' The pharmacy—they used to just dispense medications," Meggen Brown said.

Kroger Health now positions its health and wellness, pharmacy, and nutrition services as complementary to traditional U.S. healthcare, emphasizing disease prevention, executives said. The division has made progress in recent years but still faces a significant amount of work.

But health and wellness is a crowded and confusing space for people, Kroger Health executives noted. To stand out, the division focuses on providing a consistent level of service.

"I think the number one currency we have is trust," said Dr. Marc Watkins, chief medical officer at Kroger Health. For example, when someone comes in for a multi-dose vaccine, it's important to schedule the next appointment right away and provide automated text reminders about upcoming appointments, pharmacy pickups, or delivery notifications, Watkins said.

Another way Kroger Health tries to differentiate itself is by spending time with patients and not rushing them out of the clinic.

"A typical visit in a doctor's office is usually 8 to 10 minutes, but we consider 15 to 20 minutes because we want to be personalized," Meggen Brown said.

With more than 2,700 stores, over a dozen grocery banners, and an online business, Kroger is able to leverage its national reach and expertise.

For example, virtual nutrition consultations with its dietitians can "demystify the side panel of a package, explain what it really means, what foods you should eat, and what foods you might want to avoid," said Bill Shinton, vice president of health and wellness operations at Kroger Health.

"Look at Kroger's locations—our pharmacists, nurse practitioners, and dietitians are very accessible to the public," Shinton said.

To serve non-English-speaking customers, Kroger Health seeks bilingual employees and has a virtual translation program covering more than 170 languages, including sign language, available on employees' iPads and handheld devices, Meggen Brown said. This helps Kroger reach communities like the many Afrikaans-speaking communities in Columbus, Ohio.

Navigating challenges

Shinton said Kroger Health is filling healthcare gaps in communities, such as offering vaccines and testing, noting the company has nearly 2,700 certified technicians qualified to administer them. In some states, pharmacists can work with patients on oral contraceptives or other types of medications.

Although pharmacists were temporarily allowed to provide more services during the pandemic, new laws are needed to ensure they can continue these services, Shinton said.

"We want to continue to ensure that our pharmacists, technicians, nurse practitioners, and dietitians are allowed to do what they are trained and competent to do," Shinton said.

But Kroger Health has a tug-of-war with regulators, such as state pharmacy boards and the federal government, as the company pushes for its employees to "practice at the top of their license," meaning they can provide all services legally allowed, he said.

Kroger Health also faces legislative hurdles, navigating state and federal laws and regulations. Its biggest advocacy effort centers on Medicare, urging Congress to pass legislation improving pharmacy reimbursement, Shinton said. Traditional reimbursement has focused mainly on hospitals and physicians, even as non-traditional healthcare has grown during the pandemic, including the range of services provided by pharmacists, nurse practitioners, physician assistants, and dietitians.

Kroger Health also faces the task of making consumers more aware of its health and wellness services.

"I always find it amazing that about a third of customers don't even know we have a pharmacy, and we've been in this business for at least 30 years," McMullen told investors in March.

Finding the right formula

Kroger Health has numerous goals on its to-do list, from expanding access to clinical trials to exploring in-store merchandising of healthy foods. In some cases, the division has pivoted to achieve these goals.

For example, Kroger Health initially planned to have nutrition technicians in many stores by 2020, but later shifted to virtual nutrition consultations due to the pandemic. Four years later, Kroger Health still sticks with virtual appointments.

"Do we want every customer to have a dietitian accompany them while shopping?" Shinton said. "We do. But it's not feasible for us right now."

Earlier this year, Kroger sold its specialty pharmacy business, a decision that interim CFO Todd Foley told investors would allow the company to better focus on its "health and wellness strategy around the retail pharmacy."

Once OptUp is ready for prime time, Kroger will have room to increase marketing efforts for the tool, said Jim Kirby, chief commercial officer at Kroger Health.

Kroger plans to expand the number of items with OptUp scores. So far, about 80% of items representing about 95% of Kroger's sales have scores, Kirby said.

Then, Kirby wants to explore merchandising opportunities and in-store tests to determine whether dedicated sections or end caps for OptUp items are more effective than keeping them mixed in displays.

As Kroger Health grows, its executives continue to dream big.

One item on Kirby's wish list: technology-driven "food prescriptions," where dietitians and patients develop personalized food plans, and then those specific items are automatically added to shoppers' online carts.

Kroger is "actively developing" a way to personalize OptUp so consumers can find products suitable for specific health conditions like diabetes or heart disease, Kirby said.

Kroger is also developing a tool that allows suppliers to test how changing a product, such as adjusting salt and sugar content, would affect its OptUp score, Kirby said.

Given consumers' sensitivity to price, Kirby expressed interest in exploring a rewards program that encourages choosing higher-scoring OptUp items through gamification or incentives, working with manufacturers to offer coupons and incentives.

"These are things we want to do in our dream world, but we have to test because we don't know what will resonate," Kirby said.

Kroger Health executives are careful to note that the company's services, like OptUp, are not meant to dictate purchasing decisions but to provide information.

"We don't want to tell people not to eat certain foods," Meggen Brown said. "We just want them to have healthier options. We're not saying don't eat that Oreo cookie, but there are options that are better for you."