As a frequent shopper and retail industry veteran with over two decades of experience, I‘ve watched the grocery store landscape evolve dramatically. But one company that continues to impress me with its staying power and strategic savvy is Kroger. With a history dating back to 1883, Kroger has grown to become the nation‘s largest supermarket chain, with 2,800 stores operating under two dozen banners. Of all those brands, though, the one that shoppers ask me about most is Fry‘s. It‘s a fair question: Does Kroger actually own Fry‘s? And if so, how does Fry‘s fit into the larger Kroger growth story?
The answer is that yes, Kroger does own Fry‘s—but the full history is more nuanced than you might think. Fry‘s has been part of the Kroger family since 1983, but not through a direct acquisition. To really understand the Kroger-Fry‘s connection, we need to rewind 50 years and bring another once-prominent grocery chain into the picture: Dillons.
The Fry‘s Origin Story
The Fry‘s story doesn‘t actually begin with Kroger, but rather the Fry family. In 1954, two brothers named Donald and Charles Fry started their own grocery store in Richmond, California called Fry‘s Market. The store specialized in offering high-quality perishables at competitive prices, and it quickly gained a loyal following.
After a decade of steady growth, the Fry brothers set their sights on expansion. They decided to open a second store in Contra Costa County in 1968. But California‘s grocery market was already highly competitive, dominated by the likes of Safeway and Lucky Stores. The Frys realized they needed a different strategy to scale.
Their big breakthrough came in the early 1970s, when the brothers identified Arizona as a prime growth opportunity. The Phoenix area was booming with new housing developments and transplants from the Midwest and California seeking sunshine and more affordable living. Yet the grocery store market there was fragmented and ripe for consolidation.
So in 1972, Fry‘s made the bold decision to sell its California operations to Dillons, a prominent Midwest grocery chain, and use the proceeds to move to Arizona. That same year, the first Fry‘s Food Store opened in Glendale, AZ. The store was an instant hit, offering a wide selection, friendly service, and low prices that resonated with cost-conscious Arizona shoppers.
Over the next decade, Fry‘s grew rapidly in the Grand Canyon State, expanding from a single store to over 50 locations by the early 1980s. Its formula of focusing on fresh produce, quality meats, and affordable prices helped it stand out from rivals and build a loyal customer base. With its strong Arizona foothold, Fry‘s had grown into an attractive acquisition target for larger chains looking to enter the market.
The Kroger Connection
Enter Kroger. In the early 1980s, Kroger was in the midst of a major expansion push, seeking to build a true national footprint. The company saw promising growth opportunities in the Western U.S., but it lacked a beachhead there. That changed in 1983, when Kroger seized an opportunity to acquire Dillons, the same grocer that had bought Fry‘s California stores a decade earlier. With the Dillons deal, Kroger gained over 180 stores across 10 states, including Fry‘s 50+ locations in Arizona.
So in effect, Kroger backed into owning Fry‘s through its acquisition of Dillons. It was a complementary pickup, giving Kroger both an established Midwest presence in Dillons and a fast-growing brand in Fry‘s. In fact, Fry‘s was the crown jewel of the deal, providing Kroger with a leading market share in Arizona and a platform for further expansion.
Kroger opted to maintain the Fry‘s banner in Arizona, recognizing the brand equity and customer loyalty it had built over the previous decade. It was a wise move, as Fry‘s continued to thrive under Kroger ownership. According to Progressive Grocer, Fry‘s store count surged from 67 locations at the time of the acquisition to 123 by 2000, nearly doubling in size.
Today, Fry‘s operates over 120 stores throughout Arizona, with a particular concentration in the fast-growing Phoenix and Tucson metro areas. It‘s the dominant grocer in the state, with a market share approaching 30% according to industry data from Chain Store Guide. That‘s nearly double the share of the next closest competitor, Safeway/Albertsons.
The Kroger Playbook
Kroger‘s light-touch approach with Fry‘s is emblematic of its broader strategy of growth through acquisition. Over the past two decades, Kroger has significantly expanded its footprint and store base by scooping up leading regional grocers. The company now operates nearly 2,800 stores across 35 states under two dozen distinct local banners.
Some of Kroger‘s most notable acquisitions have included:
| Banner | Stores | Key Markets | Year |
|---|---|---|---|
| Ralphs | 190 | Southern California | 1998 |
| Fred Meyer | 132 | Pacific Northwest | 1999 |
| Harris Teeter | 260 | Southeast & Mid-Atlantic | 2014 |
| Roundy‘s | 150 | Wisconsin & Illinois | 2015 |
Source: Kroger Investor Relations
Rather than rebrand these regional chains as Kroger stores, the company has leveraged their strong local identities and customer bases to drive growth. Today, over half of Kroger‘s supermarkets operate under banners other than Kroger, with those stores generating 36% of total sales in 2021 according to company filings.
But Kroger‘s "house of brands" approach is about more than just stitching together a national footprint. The strategy also enables Kroger to reach a wider range of shoppers. For instance, Harris Teeter caters to higher-income customers with a focus on prepared foods and international products. Meanwhile, Food 4 Less and Ruler Foods serve more price-sensitive consumers.
Fry‘s falls into a sort of middle market territory, known for offering affordable prices on a wide selection of goods. With its strong emphasis on perishables and private label products, Fry‘s most closely resembles Kroger‘s eponymous banner. But it still maintains its distinct Arizona flair and community roots.
Integrating Fry‘s
Importantly, Kroger has been able to weave its stable of store brands together to achieve significant operational synergies. For example, Kroger has a single national loyalty program across all its banners, including Fry‘s. Shoppers who sign up for the Fry‘s VIP Rewards program can earn Fuel Points on grocery purchases and redeem digital coupons, just like at a Ralphs or Harris Teeter. They can also pay with a Kroger Gift Card.
In recent years, Kroger has also rolled out online ordering and pickup services across its banners to create an integrated "seamless shopping experience." When Kroger launched its Ship direct-to-home service, Fry‘s was among the first divisions included, offering over 50,000 shelf-stable groceries and household essentials to customers. Similarly, Fry‘s stores were early adopters of Kroger‘s "Scan, Bag, Go" platform that allows shoppers to scan and bag their groceries as they shop for a streamlined self-checkout.
Behind the scenes, Fry‘s and its sister banners benefit immensely from Kroger‘s purchasing power, logistics network, and data analytics capabilities. According to company reports, Kroger captures shopping data on 60 million households nationwide through its loyalty program. Fry‘s can tap into those customer insights to optimize merchandise selection, pricing, and promotions at the store level.
Kroger has also been upgrading Fry‘s stores as part of a broader store remodeling program. Kroger and affiliates invested $3 billion in "Restock Kroger" initiatives between 2018 and 2021, including sprucing up hundreds of stores with new décor, lighting, signage, and expanded fresh and grab-and-go food sections. Fry‘s prototype in Phoenix features a wine and craft beer bar, Murray‘s artisan cheese shop, and self-checkout lanes, bringing some of the best of Kroger to the local market.
A Trip to Fry‘s
So what‘s it actually like to shop at a Fry‘s Food Store today? Based on my recent visits to several Phoenix area locations, I‘ve been impressed by the consistency of the experience. Fry‘s stores are typically well-maintained, brightly lit, and easy to navigate. They strike a nice balance between offering competitive everyday prices and compelling promotions to drive traffic and basket size.
Fry‘s really shines in its fresh departments, which feature an expansive selection of colorful produce, quality meats and seafood, and chef-prepared deli fare. Weekly specials and Kroger-branded products are prominently featured on endcaps and in high-traffic areas to entice shoppers. The service, while not quite at the level of a Publix or H-E-B, is generally friendly and efficient, especially at checkout.
But perhaps what I appreciate most about Fry‘s is that it hasn‘t lost its local personality under Kroger‘s stewardship. The stores still feel very much like an Arizona institution, from the Southwestern décor touches to the ample selection of regional products like prickly pear salsa and Sonoran spices. Even the shopping carts and name tags bear the classic Fry‘s logo, without an overt Kroger reference in sight.
At the same time, Fry‘s clearly benefits from the consistency and innovation of the Kroger operations playbook. The stores have the "look and feel" of a sophisticated, data-driven retailer, with refined category assortments, disciplined shelf tags, and personalized offers powered by the Kroger loyalty engine. As a shopper, you get the best of both worlds: The familiarity and community rapport of a local grocery brand with the advanced capabilities of the nation‘s largest supermarket chain.
Competitive Headwinds
Of course, Fry‘s and Kroger face no shortage of competitive threats in Arizona and beyond. The state is a microcosm of the intense rivalry and market fragmentation taking place across the grocery industry.
On the one hand, Fry‘s must contend with national chains like:
- Walmart, the low-price leader that now generates over half its U.S. sales from groceries
- Costco, the membership club known for its treasure hunt experience and bulk value
- Albertsons, which has a substantial Southwest presence through its Safeway banner
- Amazon, the e-commerce juggernaut making an aggressive push into grocery
At the same time, Fry‘s is battling it out with a host of other regional and local competitors, including:
- Bashas‘, a family-owned chain with deep Arizona roots
- Sprouts Farmers Market, a fast-growing natural foods store founded in Phoenix
- WinCo Foods, a no-frills, employee-owned discounter based in Idaho
- Aldi, the German hard discounter that entered Arizona in 2020
- Neighborhood ethnic markets like Food City, 99 Ranch Market, and Pro‘s Ranch Market
In this dog-eat-dog environment, Fry‘s will need to lean heavily on Kroger‘s resources and expertise to stay ahead. Of particular concern is the growing threat of Amazon, which has been investing heavily in grocery delivery and pickup services, putting pressure on Fry‘s margins. Kroger has responded by partnering with the UK‘s Ocado to build automated customer fulfillment centers that can facilitate next-day and same-day delivery. The first "spoke" facility supporting Fry‘s is set to open in Phoenix this year.
Looking Ahead
As I peer into my crystal ball, I‘m bullish on Fry‘s prospects under the Kroger banner. With its unrivaled scale and store footprint, Kroger is well positioned to keep expanding Fry‘s presence in Arizona and potentially beyond. I wouldn‘t be surprised to see Fry‘s enter adjacent states like Nevada and New Mexico, either by opening stores or converting underperforming locations. The Fry‘s name is an asset that Kroger can leverage in markets where it lacks strong customer awareness.
To stay ahead of the competition and drive growth, I recommend Kroger take the following steps with Fry‘s:
- Double down on fresh departments and prepared foods, which are Fry‘s key points of differentiation. Shoppers are increasingly seeking out convenient, healthy meal solutions, so further elevating Fry‘s perimeter offerings could deepen loyalty.
- Expand Fry‘s digital services, particularly in the online ordering and delivery arena. With Amazon bearing down, Fry‘s needs to make e-commerce a seamless extension of its in-store experience. Promoting Kroger‘s Boost membership program, which offers free grocery delivery and fuel discounts to subscribers, could be a good start.
- Remodel and modernize older Fry‘s locations to keep pace with Kroger‘s latest prototypes and competitors‘ flagships. Integrating next-gen technology like electronic shelf labels, AI-powered product recommendations, and smart shopping carts could make Fry‘s stores more efficient and engaging.
- Invest in personalization and targeting to better cater to Arizona‘s diverse demographics. Fry‘s has an opportunity to use Kroger‘s rich shopper data to tailor its assortment, pricing, and promotions to the neighborhood level and drive trip frequency.
- Cement Fry‘s local ties through community events, charitable giving, and an emphasis on homegrown products. Supporting Arizona suppliers and causes will enhance Fry‘s hometown credibility and emotional bond with shoppers.
The Bottom Line
So in the final analysis, Kroger‘s acquisition and stewardship of Fry‘s offers a compelling case study in strategic growth. For nearly 40 years, the company has successfully nurtured Fry‘s to become an Arizona grocery powerhouse, with a 30% market share in Phoenix and respectable profit margins. It‘s a testament to the strength of the Fry‘s brand and operating model, as well as Kroger‘s approach of preserving local banners while integrating them into the larger organization.
Looking ahead, I‘m confident Fry‘s will remain an integral growth driver for Kroger in the Southwest and beyond. The company has the scale, resources, and expertise to help Fry‘s fend off competitive threats and keep innovating to meet changing shopper needs. As long as Kroger continues to invest in Fry‘s unique identity and Arizona roots while leveraging enterprise capabilities, this venerable hometown grocer is poised to thrive well into the future. And I, for one, can‘t wait to see where Fry‘s and Kroger go next.
