Kroger expands personal finance business

CINCINNATI — Weekend grocery-shopping list:

• Milk, on sale at four half-gallons for $5.

• $200,000 fixed-rate mortgage, 30 years at 6.2 percent.

Kroger, the nation's largest traditional grocery chain, has been quietly but steadily expanding its financial-services business since it began a Kroger credit card three years ago.

Stores now market mortgages, home-equity lines of credit and a just-expanded set of insurance coverage, from identity theft to home and life policies.

The company — whose nearly 2,500 stores include Fred Meyer and QFC outlets — has been broadening its offerings at the same time rival Wal-Mart Stores is expanding its financial-services business.

Kroger says it's not a cash cow but a way to boost traffic and shopper loyalty.

"It's about driving more people to the store and bringing them back," said Kathy Kelly, president of the Kroger Personal Finance division formed in 2004.

The chain reaps fees for the services provided with its bank and insurance partners. Kelly said the services are usually priced in the middle to lower end of market averages.

For consumers, they're a convenience, if surprising to find from their grocer, which so far markets them mainly in store displays and brochures.

One of Kroger's initial offerings was pet insurance, through Jeffersonville, Ind.-based PetFirst Healthcare.

Wayne DeLancey of Parkersburg, W.Va., was passing the time while his wife was shopping when he spotted the Kroger rack with brochures about its financial products.

He read through one on pet insurance and soon signed up their beloved Blu, a 5-year-old Siberian husky and German shepherd mix.

"I told my wife if this thing does what they say, this is a pretty good deal," DeLancey recalled.

For $24.95 a month, most of Blu's health-related expenses are covered, including 90 percent of a tumor removal.

"We're real happy with the coverage. I'm glad Kroger did this," DeLancey said.

Wal-Mart, which sells groceries in its Supercenter stores, early this year dropped a bank-license application that drew opposition from critics who said having a bank would give the world's largest retailer too much economic power.

But Wal-Mart is adding a prepaid Visa debit card to its branded credit card and other money services while planning to increase more than fourfold the number of "MoneyCenter" alcoves in stores.

Combining financial services with groceries has been common in countries such as Britain. .

Kroger partnered with Royal Bank of Scotland, which has a joint venture with Tesco, for its personal-finance launch.

Supermarket chains have long hosted bank branches in some locations.

But Kroger has now made financial services a part of its own business.

Kelly thinks financial services will continue to grow in the grocery industry, just as many grocers began having full-service pharmacies and gas stations

Kroger's partner on life insurance, Garden State Life, says it was intrigued by the reach of the grocer, which has stores in 31 states.

"We know Kroger's got a lot of stores and those stores get lots of traffic, so the potential to expose our message to lots of people was certainly there," said John Barrett, vice president of marketing for the League City, Texas company.

He said the company expects to be represented in 2,000 stores by mid-October.