So, when you look at — when you shop with us, obviously, we are a promotional merchant. But when you look at the rewards that we offer between fuel rewards and other rewards and our loyal customer mailings, our basket price overall is within less than cents of our biggest competitor. It’s just we go to market and offer a little different way. But it is the reason why loyal shoppers are so important to us because that’s the shopper that really gets the full value equation from us.
Gary Millerchip: Rodney, maybe the one thing I would add to John’s question, too, the second part would be, I think, John, it’s one of the reasons why we do have additional confidence in how we can navigate through the environment is that I think as a combination of our reward program and more customers engaging digitally post COVID, it really does create the ability to channel the dollars in a way that give the customer the most impact and most value while also being able to target it rather than having to sort of peanut butter spread it across in different directions. And I think it’s a different dynamic now compared to maybe five, 10 years ago in the way that we’re able to personalize that value and go to market.
Rodney McMullen: You’ve been — you’ve followed us for a long time and you would have heard us use the word cherry-pickers and really what it is trying to make sure we do is to give value to customers that are loyal to us as opposed to somebody that’s just shopping a discounted item that we’re not making any money on.
John Heinbockel: And then maybe as a follow-up, so it sounds like volume is slightly — is negative, right? I don’t know if it’s negative 1% or a little more than that, but volume is negative. Is that fair, low single-digit? When do you think that returns to positive territory? And is that solely driven — if you looked at the budget-conscious customers, because I know a couple of quarters ago, you broke that out. Is that negativity largely driven by that cohort?
Rodney McMullen: Yeah. If you look, volume would be slightly negative. If you look, we — our trends have improved for four quarters in a row from a trend standpoint. That would be largely driven by the value shopper or customers on a budget. And the half full and half empty, the half empty is obviously that’s being driven by that customer. Some of that’s driven because of the impact from inflation. Part of it’s — or SNAP is down about 30%. The full part is the customers that are loyal, we’re continuing to grow with that customer and that customer’s profitability is meaningfully better than the value shopper. Thanks, John.
Operator: Thank you. The next question goes to Krisztina Katai of Deutsche Bank. Krisztina, please go ahead. Your line is open.
Krisztina Katai: Hi, good morning. So Rodney, I wanted to ask you just a conceptual question on grocery sector and the level of competition, right? Because if we’re thinking about it, why wouldn’t the sector be more competitive as we head into 2024? The consumer remains under pressure. Some of the low end is under increased pressure. CPGs are raising their support, volumes continue to lag. So that is question one, just conceptually, why wouldn’t that be the case? And secondly, how is Kroger positioned in a potentially no inflation to even deflationary backdrop relative to the base case of a normal food-at-home year of low single-digit inflation?
Rodney McMullen: Yeah. If you look at, one of the things that makes this industry a lot of fun is we always assume that the business will continue to be more competitive. And if you look at our fundamental business model over the last five years or 10 years or 15 years, every year, we assume that it’s going to be more competitive. We worked really hard to identify process changes and cost reductions so that we can continue to fund wage increases and invest in lowering prices for the customer. So, when we look at 2024, and obviously, we’ll go into a lot more detail early next year when we give guidance, but right now, we don’t see that environment any different than what we would have felt for the last five years or 10 years or 15 years.
And the positive is customers get a better value every year and they get a better experience every year. And when you look at for us, one of the things that we think is important for the customers, the customer doesn’t have to compromise. So, they get amazing fresh product that will last a long time when they get at home, with amazing friendly associates, with the smile and support that everything in their basket plus a little bit an extra piece of cheese or something they’ve engaged with Murray, so — and not have to compromise from a pricing standpoint. So, when you look overall, we feel very good in terms of how we’re positioned with the customers that really appreciate what we offer.
Gary Millerchip: Maybe, Rodney, one thing I would just add, too, Krisztina, specific to 2024, a couple of things for Kroger that we think are helpful as we look into next year. One is, of course, that we’re cycling the impact of Express Scripts when we get to January and we’ll start to see that flow through in the early periods of the year. And then secondly, one of the things that we’ve seen, as we look at 2023, many states, as you know, reduced the amount of SNAP dollars that were available in the market, and those happened sort of around the middle part of our Q1 last year or this year, I should say. What we’ve seen in one or two markets where we’re cycling those earlier markets where they reduced the SNAP dollars, it certainly starts to create a bit of a different trend in the growth in those markets, too.
So, we do think there’s, for the industry and specifically for the markets that we operate in, as you start to cycle the impact of those SNAP dollars, which perhaps had a bit more of an impact than we were originally thinking they might across the industry, that starts to create some, I think, tailwind in the industry towards next year’s growth as well.
Rodney McMullen: Thanks, Krisztina.
Operator: Thank you. The next question goes to Ed Kelly of Wells Fargo. Ed, please go ahead. Your line is open.
Ed Kelly: Hi, good morning, everyone. Thanks for taking my question.
Rodney McMullen: Good morning.
