American grocery stores throw away roughly 30 percent of their food every year, a loss some experts peg at nearly $18.2 billion. Kroger, the nation's largest supermarket chain by store count, is betting that artificial intelligence can turn at least part of that waste into revenue, expanding an app-based discount platform to more than 100 additional stores this month while leaning on data-driven pricing across its business.
The push comes as years of high inflation and a recent spike in gas prices have squeezed household budgets. Shoppers are hunting for deals harder than ever, and grocers who fail to compete on price risk losing them to discounters and warehouse clubs. Kroger's answer: use AI to identify perishable items nearing their best-by dates and mark them down through a third-party app called Flashfood before they end up in a dumpster.
The strategy matters beyond Kroger's bottom line. It sits at the intersection of two pressures bearing down on every American family, food costs that refuse to come down and a retail industry scrambling to figure out what AI is actually good for. If the early numbers hold, Kroger may have found one of the clearest real-world uses for artificial intelligence in consumer retail: pricing perishable goods so they sell instead of rot.
Flashfood connects shoppers with local grocery stores to buy discounted food nearing its best-by date. Customers browse deals on the app, pay through it, then pick up their orders at a designated "Flashfood zone" fridge inside the store. The platform already spans more than 2,000 locations across North America, partnering with chains including Piggly Wiggly, Loblaws, and Gelson's in addition to Kroger.
The company says its grocery partners have reduced shrink, the industry term for inventory lost to spoilage, damage, or theft, by an average of 27 percent. CNBC reported that Flashfood frames the model as converting shrink into incremental revenue rather than simply absorbing the loss.
The numbers Flashfood cites on shopper behavior are worth noting. App users make nearly four additional trips per month on average, and they spend about $28 more per visit on full-priced items beyond their discounted purchases. If those figures are accurate, the platform does not just salvage soon-to-expire products, it drives foot traffic and basket size.
Those claims come from the company itself, and independent verification of the methodology behind them has not been published. But the logic tracks with what grocers have long understood: get a customer through the door with a deal, and they will buy more at full price while they are there.
Kroger Chairman Ronald Sargent made the company's position plain on its most recent quarterly earnings call. He told investors:
"We see AI as a meaningful opportunity to both improve the customer experience and drive productivity across our business."
Sargent added that the company is "already seeing results from more competitive pricing." The exact AI systems Kroger deploys beyond Flashfood were not detailed, but the chairman's language suggests the chain views data-driven pricing as a broad operational tool, not a one-off experiment.
That framing matters as lawmakers in states like New Jersey have begun pushing to ban algorithm-driven grocery pricing at major retailers. The political fight over whether AI pricing helps or hurts consumers is only getting started, and Kroger's expansion of the practice will draw more scrutiny.
The competitive landscape has shifted sharply against traditional supermarkets. A Deloitte study found that 89 percent of people are shopping for discounts and deals. Numerator data shows shoppers are visiting 23 percent more retailers to buy their groceries, a sign that brand loyalty is eroding under the weight of sticker shock.
Discounters like Dollar General and warehouse clubs like Costco have gained market share in this environment. Flashfood CEO Jordan Schenck described the stakes bluntly.
"Not only is everyone now a value shopper, but shoppers have the information and resources available to find the best deal."
Schenck added that this "raises the stakes in terms of competition between grocers, because they're now competing with value-specific retailers." The implication is clear: traditional chains that do not find ways to offer targeted value will keep bleeding customers to competitors who already built their brands around low prices.
Dollar General, for its part, has been pursuing its own AI strategy, rolling out AI-generated audio ads in thousands of stores as part of a broader technology push. The race to deploy artificial intelligence in retail is not limited to pricing; it is reshaping how stores communicate with customers inside their own walls.
For all the promise, AI-driven grocery pricing carries a trust problem. Shoppers already suspicious of rising food costs may not distinguish between an algorithm that marks down expiring yogurt and one that quietly raises the price of ground beef based on local demand data. The technology is the same even if the applications differ.
New Jersey legislators have proposed fines of up to $20,000 for retailers caught using algorithmic pricing in ways that disadvantage consumers, a sign that regulatory pressure on this front is real and growing.
Roth Capital Partners analyst Bill Kirk offered a more optimistic read on Kroger's data advantage. He noted that grocery stores sit on some of the best personalized data in retail but that not all chains know what to do with it.
"Kroger has been at the forefront of recognizing the importance of their data and the insights that can be derived."
Kirk carries a buy rating on Kroger stock with a $78 price target, a healthy premium over the company's Thursday closing price of $67.77. His confidence rests partly on Kroger's willingness to use its data rather than let it collect dust.
Consumer skepticism, meanwhile, is not abstract. Individual shoppers have already flagged pricing inconsistencies at Kroger locations, including discrepancies between labeled and scanned prices on meat packages. Whether those incidents reflect AI-driven errors, human mistakes, or something else, they feed the perception that technology in grocery pricing does not always work in the customer's favor.
Several questions remain unanswered. Flashfood's claims of a 27 percent shrink reduction, four extra monthly trips, and $28 in additional full-price spending per visit all originate from the company itself. No independent audit or peer-reviewed study was cited to back them up. The methodology behind those figures has not been disclosed publicly.
It is also unclear which specific AI systems Kroger uses beyond Flashfood, or where exactly the 100-plus new Flashfood-equipped stores are located. Sargent's earnings-call remarks pointed to AI as a broad initiative, but the details remain thin.
The broader retail sector is experimenting with AI in ways that go well beyond pricing. Discount chains are testing AI audio, new store formats, and operational tools that could reshape the shopping experience from the ground up. Kroger's Flashfood expansion is one piece of a much larger shift.
The conservative case for what Kroger is doing is straightforward. A private company identified an $18.2 billion problem, food rotting on shelves, and deployed technology to fix it without a government mandate, a new regulation, or a taxpayer subsidy. Shoppers get cheaper groceries. Stores recover revenue they used to write off. Less food goes to waste.
That does not mean the technology is above scrutiny. Consumers deserve transparency about how algorithms set the prices they pay, and lawmakers asking hard questions about AI-driven pricing are not wrong to do so. But the instinct to ban first and understand later, the instinct driving some state legislatures right now, risks killing a tool that is doing exactly what free markets are supposed to do: matching supply with demand, cutting waste, and rewarding efficiency.
When a grocery chain can sell you marked-down chicken before it spoils instead of throwing it in a landfill, that is not a problem. That is the market working the way it should, and Washington would do well to stay out of the way.