The Kroger Co., one of the largest U.S. grocery retailers, is ramping up its direct sourcing efforts by buying directly from producers more frequently instead of paying an intermediary, according to an Oct. 20 analyst and investor day conference.
For decades, grocery retailers have relied on intermediaries to connect them with growers, manufacturers, and suppliers around the world. While these relationships have traditionally helped manage complex sourcing networks, they also introduce additional costs and can limit visibility into product availability, pricing, and supply chain performance.
Now, Kroger is taking a different approach.
To support its direct sourcing strategy, Kroger is establishing a stronger international presence, including sourcing hubs in South America and Asia. These regional operations will help the company develop closer relationships with producers, coordinate procurement activities, and establish the infrastructure needed to manage international sourcing more directly.
“We’re making good progress, launching South America and Asia hubs with spokes in key sourcing locations to facilitate better sourcing with the goal of a fully owned import distribution model over time,” Kennerley told investors.
Kroger has already made its first international sourcing hire in South America and is developing the infrastructure needed to expand its Asian sourcing operations in 2027.
The company also is strengthening its logistics, workforce, sourcing, and payment capabilities to support direct purchasing. The objective is to remove unnecessary layers between Kroger and its producers while building a more integrated and transparent supply chain.
One example of Kroger's strategy is already taking shape in Peru, where the retailer is developing direct relationships with grape growers.
For the November 2026 season, Kroger has sourced approximately 40% of its fruit from growers in the country directly, according to Kennerley. Those purchases historically would have involved intermediaries that added another layer of cost to the transaction.
“Previously, we would have paid margin to a third party to sit between us and the grower,” Kennerley explains. “And by doing this ourselves, we use Kroger’s scale to get closer to the grower, which lowers costs, strengthens access to supply and gives us a more direct line to innovation.”
The initiative extends beyond grapes. Kroger also is exploring direct sourcing opportunities involving citrus, shrimp, and frozen vegetables—categories in which product availability, transportation requirements, and supply chain coordination can significantly affect costs and service levels.
These efforts illustrate how Kroger intends to use its purchasing scale to strengthen supplier relationships and improve its ability to manage sourcing across multiple product categories.
Direct sourcing is only one component of Kroger's broader procurement transformation. The retailer also is investing in better data and analytical capabilities to help its buyers make more informed decisions. By improving visibility into purchasing volumes, demand patterns, supplier performance, and sourcing alternatives, Kroger aims to strengthen its negotiating position and respond more effectively to changing market conditions.
Greater access to sourcing information can also help the company evaluate suppliers, identify potential disruptions, and make more strategic decisions about product availability and pricing.
Kroger is simultaneously working with suppliers to maintain competitive prices, reflecting a broader effort to control the cost of goods.
For food shippers, Kroger's strategy highlights an important evolution in supply chain management: Large retailers are seeking greater control over not only what they purchase, but also how products are sourced, transported, and delivered.
Moving away from intermediary-driven procurement creates opportunities to streamline transactions and improve coordination between producers, transportation providers, and distribution operations. However, it also places greater responsibility on retailers to manage activities traditionally handled by third parties, including international logistics, supplier coordination, import operations, and inventory planning.
Successfully scaling direct sourcing will require Kroger to build the operational capabilities needed to manage these functions efficiently.
The potential benefits extend beyond lower purchasing costs. Closer relationships with producers can provide better visibility into supply availability, strengthen responsiveness to changing demand, and create opportunities for product innovation.
Kroger's immediate priority is to expand the sourcing initiatives already producing results and integrate those practices more broadly across its procurement organization.
“We’re making good progress against these areas,” Kennerley says. “The focus now is on scaling what is working and embedding these disciplines more broadly into the way we source.”
As Kroger builds its international sourcing network, the company is positioning itself to exercise greater control over costs, supplier relationships, and product movement throughout its supply chain.
For the broader food industry, the strategy illustrates how retailers are reconsidering traditional sourcing models in pursuit of greater efficiency and visibility. The opportunity is not simply to eliminate intermediaries, but to create a more connected supply chain in which purchasing decisions, supplier relationships, and logistics operations work together to improve performance from origin to destination.
Now more than ever, professionals consume info on the go. Distributed twice monthly, our "Food For Thought" e-newsletter allows readers to stay informed about timely and relevant industry topics and FSA news whether they're in the office or on the road. Topics range from capacity, rates and supply chain disruption to multimodal transportation strategy, leveraging technology, and talent management and retention. Learn More