Kroger CEO Dillon to retire in January

09/20/2013 9:38 AM

09/20/2013 9:46 AM

David Dillon, the Hutchinson product who figured out how to beat Wal-Mart, announced that he will retire as CEO of Kroger at the end of the year.

Kroger president and chief operating officer W. Rodney McMullen will take over as CEO – part of the company’s long-term succession plan. Dillon will remain as chairman for another year.

Dillon, 62, became president of the country’s largest traditional grocery chain in 1995 and CEO in 2003.

He is a great-grandson of J.S. Dillon, who founded the Dillons grocery chain in Hutchinson in 1920. The chain was famously well-run and came to dominate the state before it was bought by Kroger in 1983.

Dillon started out as a management trainee and worked his way up to president before getting the call from Cincinnati, Kroger headquarters.

He said Friday that it’s been a tumultuous era in the industry. He arrived as traditional grocery chains were coming face to face with Wal-Mart. Most found they couldn’t compete because their prices were too high and they didn’t know how to lower them.

Dillon and the Kroger team hit upon a strategy. They would lower prices closer to Wal-Mart’s – surrendering the price-only shopper – but compete for other shoppers on quality, convenience and selection. Kroger has shortened checkout wait times, expanded its line of store brands and made its loyalty program more sophisticated.

And, critically, Kroger would continue to focus on lowering prices because that’s where it was vulnerable.

Part of that meant cost containment and part of that meant getting bigger to achieve the economies of scale. The company has bought many failing supermarket chains, most recently Harris Teeter, a regional grocer that has locations in eight states. And, Dillon said, the company kept cutting costs and cutting prices to improve its competitiveness.

“We have lowered prices every year for 10 years,” he said. “There is not another retailer on the planet that has done that.”

But Dillon isn’t ready to take a victory lap.

“In my opinion, a retailer can never win that battle because the moment they think they’ve won, they’re vulnerable,” he said.

He said he will fill out the next year with various corporate roles, and then he and his wife, Dee, will move to the Kansas City area to be near their three children. He has a lot of family still in Hutchinson, Wichita and elsewhere in Kansas.

He expects to stay busy – not in politics, he said, firmly – but maybe at the University of Kansas.

“I do love the state of Kansas and the people of Kansas, and I want to stay active and help in some way,” he said.

His has been a long and successful career, but it sure didn’t look that way at one point.

He was an executive at Dillons under his second cousins Ray “Ace” Dillon Jr. and Richard “Dick” Dillon, and his father, Paul Dillon. He hoped to one day become president.

Then, in 1983, they told him that they were selling the company to Kroger.

“When they called to tell me they were selling just a few hours before they announced it to the public, I was speechless,” he said. “I thought it was the end of a grocery career. It turned out different.”

Contributing: Associated Press

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