Consumers today want food fresher, cheaper and easier



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3/30/2017

Consumers today want food fresher, cheaper and easier

http://www.supermarketnews.com/print/84603

1/11


Food retailers are working hard to satisfy consumers’ increasing demand for food experiences that are easier

(Hy­Vee), cheaper (Winn­Dixie) and fresher (Whole Foods).

Kroger officials late last year began discussing a goal not just to be the source for its

shoppers’ meals at home but a larger ambition to fulfill each and every one of the 35

to 45 times its customer eats every week.

Lidl, which has plans to bomb the East Coast with 100 stores in its first year, will do

so behind a plan to address “compromises” in price, quality and convenience that its

NW  > RTAIL & FINANCIAL

Conumer toda want food freher, cheaper and eaier

hoppers want all of the aove, and retailers can’t a ord to let them down

on an count

Jon pringer 

Mar 29, 2017




3/30/2017

Consumers today want food fresher, cheaper and easier

http://www.supermarketnews.com/print/84603

2/11


officials maintain too many typical food stores offer. Companies ranging from Wal-

Mart Stores to Food Lion and Hy-Vee to Aldi are investing millions not only to lower

prices but also to upgrade freshness and service at the same time.

These days it’s long past the point where shoppers are satisfied getting either

premium quality or low prices; low prices or good service; convenience or selection.

They want it all: fresher, cheaper and easier. While food retailers have always

competed on those aspects to some degree, it’s the combination of them that seems

to resonate with consumers

today.

These higher expectations are driven by an intersection of broad consumer lifestyle



trends toward wellness, customization and convenience, while business conditions —

namely an oversupply of stores using food to lure in shoppers, increased competition

from foodservice and e-commerce and what some analysts believe is slackening

consumer demand — have increased the stakes.

“Consumer expectations of food retailers absolutely have

changed,” said Greg Smith (left), head of retail marketing

for Partners + Napier, a Rochester, N.Y.-based agency.

“They expect to have options like local, organic, no GMO,

no antibiotics, no steroids, no preservatives, grass-fed and

cage-free no matter where they are shopping. Consumers

have [also] seen the retailers who led the way in higher

food quality take advantage with high prices and

complicated shopping experiences. So now, retailers like

Walmart, Aldi and Food Lion are delivering on food

quality expectations, but improving by doing so with less

exotic, contrived details.”




3/30/2017

Consumers today want food fresher, cheaper and easier

http://www.supermarketnews.com/print/84603

3/11


In general, successful food retailers today are those finding a way to dovetail

“fresher,” “cheaper” and “easier” elements, while those perceived to be lacking in one

area or more may be losing share. Whole Foods (fresher but not necessarily easier or

cheaper) and Save-A-Lot (cheaper but not necessarily fresher), to name two

examples, saw sales and share decline last year and are now at work to broaden their

respective offerings.

“In the past there were more limited options and you could decide your strategic

imperative and go after that piece,” said Laurie Demeritt, CEO of the Hartman

Group. “Whereas now, you’re feeling pressure from so many different areas, I think

[retailers] feel they have to address all of those in the way that’s best for their chain.

The retail environment has changed dramatically because of all the forces at play,

and it is putting pressure on them to execute on things they didn’t previously have to

focus on so much in the past.”

Fresher: At the end of a streamlined supply chain, Walmart employs “fresh

operations experts” to underpin an initiative to sell food as fresh as possible.

Fresher



3/30/2017

Consumers today want food fresher, cheaper and easier

http://www.supermarketnews.com/print/84603

4/11


It’s no mystery that fast-shrinking sales and profits in center store — categories

increasingly falling to e-commerce providers like Amazon — have pressured retailers

to compete harder on perishable quality. But that’s only the beginning of the need to

improve fresh, sources say. Consumers are demanding more and better fresh foods

as a result of the booming health and wellness megatrend, and most of them begin in

the produce aisle.

“The biggest thing going on in food today is consumer desire for products that are as

fresh, real and minimally processed as possible,” Demeritt said. “That’s an umbrella

platform that’s applicable across all sorts of consumers. The extent to which

everyone is able to act on those desires differs based on access – where they are in

the country, their budgetary constraints and so on – but that desire is there. We see

very few customers today who say, ‘I want my food processed and packaged.’”

Retailers are responding by expanding variety and shop space devoted to fresh fruits

and vegetables, and at the same time working behind the scenes on ways to improve

the performance of those departments. Walmart, for example, has implemented

initiatives that officials say cut a day out of the supply chain: That pays off in better

presentations in-store and less spoilage in the consumer’s home, which bolsters trust

in the store. Food Lion has added chilled “garden cooler” rooms at some stores

seeking similar benefits.

Mark Heckman, president of Mark Heckman Consulting, Bradenton, Fla., said

retailers with eyes on truly executing behind fresh can’t afford to cut corners or

consumers will sniff them out. Walmart, for example, last year hired hundreds of

“fresh operations experts” to oversee stores are that executing fresh every day.

“If fresh is truly an important point of distinction for the retailer, they must invest in

training, programs, nutrition and fixtures to truly be viable,” Heckman said. “Many

think there are shortcuts to being a purveyor of fresh foods and home meal

alternatives.”



3/30/2017

Consumers today want food fresher, cheaper and easier

http://www.supermarketnews.com/print/84603

5/11


Fresher also carries connotations of newness, cleanliness and excitement.

Consumer-focused new formats like Whole Foods’ 365, Ahold’s bfresh and Kroger’s

Main & Vine are all aimed at tackling fresh affordably, conveniently. Companies are

also more prepared today to capitalize on flavor and ingredient trends than they

once might have been, sources say. Kroger for example hosted a series of five-minute

“pitch slam” meetings with entrepreneurs at the Natural Products Expo West show

in March, encouraging would-be suppliers to “pitch us first.”

Dave Harvey, VP of thought leadership of Daymon Worldwide, said he recently

toured Lidl’s “store of the future” in Europe — a likely blueprint for its coming U.S.

stores — and was impressed by a bakery and produce display as customers enter.

“The fact that these discounters are doubling down on how they are making fresh

departments make such an impact at the entry underscores how critical it is to make

that connection.”

Cheaper: Value­priced natural/organic Lucky’s engaged a “Wowza” factor to call

customers’ attention to good deals in its new Plantation, Fla., store.



3/30/2017

Consumers today want food fresher, cheaper and easier

http://www.supermarketnews.com/print/84603

6/11


Cheaper

Last summer, a wave of deep food deflation reached the retail level and promotional

intensity flared up in various pockets of the country, but some shoppers barely

noticed.


“It’s fascinating,” Kroger CEO Rodney McMullen related then. “In our research, most

people are saying their basket of goods costs more money, but we in fact know that it

[doesn’t].”

The remark highlighted the challenge of retailers to “get credit” for all the hard work

they’re putting into pricing and reiterated that perception matters when it comes to

price.


A strain of the “flight to value” forged in the recession has been slow to subside in

many places. Independent conventional retailers are increasingly experimenting

with efficient cost-plus formats that abandon the typical margin-mix approach for a

straight cost-plus-10% pricing scheme dependent on volume. Successful cost-plus

formats can be competitive on price with giants having superior buying power,

although they come with sacrifices to attractions like service deli and bakery.

Elsewhere, consumers are undergoing “a shift from ‘value’ to ‘values,’” explained

Nicole Peranick, director of global consumer strategy at Daymon.

“Consumers want to be able to stretch their limited dollars, but they are also

choicefully spending up on the things that matter to them while paying a little less

for the things that are less important to them, and that all depends on the lifestyle

they are leading,” she said. “Some will pay more for convenience, others will pay

more for experience. People want a good deal, but they also need to feel they’re not

compromising on their needs and values.”

This phenomenon is encouraging companies with strong price perception — like Aldi

and Save-A-Lot — to expand their once-basic product selections with trend-right




3/30/2017

Consumers today want food fresher, cheaper and easier

http://www.supermarketnews.com/print/84603

7/11


items, organic produce and indulgent formulations.

Hard discounters are also casting their efficiency as a value in itself.

“We look at waste differently” than other grocers, said Will Harwood, a spokesman

for Lidl, the German discounter expected to open its first U.S. stores this summer.

“It’s all excess that adds extra cost to a product that a customer isn’t willing to pay

for. Whether it’s the distance we move a pallet in our stores or warehouses to how we

merchandise our produce, we measure waste and minimize it everywhere so

customers can pay for the product in their cart rather than waste within the system.

Through this, we don’t pass along extra costs to our customers.”

Conventional retailers are responding to lower price demands by being competitive

on known-value items and by relying more on private brands, using the latter trend

to concurrently make strides toward meeting the natural/organic needs of their

shoppers. They are also utilizing customer data to provide deals that are relevant to

shoppers.

“Oftentimes, private brands come with a price value, but they’re also linked to a

certain lifestyle and a solution across categories,” Peranick said.

While retailers have to be in range of leaders on items that drive trips, Heckman

cautioned that across-the-board pricing cuts can be difficult to achieve, and advised

instead that retailers look at selections with an eye on better highlighting the value

they can offer.

“Lowering prices while becoming better at fresh and service is a very tough balancing

act,” he said. “I'm not convinced that cutting prices, unless you are woefully out of

line with the market, is the answer for many. I can see retailers of all stripes taking a

long look at the number of SKUs they carry and how many are actually selling.

“I would also recommend enhancing the store presentation to ensure shoppers are

not overwhelmed with choices at the expense of not finding the 200 to 300 items




3/30/2017

Consumers today want food fresher, cheaper and easier

http://www.supermarketnews.com/print/84603

8/11


that drive the majority of sales for any food retailer,” he continued. “When it comes

to price, these are the items that must be competitive.”



Easier: Daily deals to help Food Lion customers choose what’s for dinner adds

meaning behind the Southern chain’s “Easy, Fresh and Affordable” motto.

asier


Grocery stores are getting smaller, more are offering some means of e-commerce,

checkouts are getting faster, and selections are evolving to include foods from the

ingredient level to snacks and full-service restaurants. These are all evidence of a

booming consumer demand for convenience arising from hectic lifestyles and the

new possibilities of a digitally connected world providing expectations of

customization, sources say.

“I think one thing that’s dramatically changed in the industry is the lack of planning

among consumers,” Demeritt said. “That’s one of the reasons foodservice is seen as

so competitive [to grocery stores] today.”



3/30/2017

Consumers today want food fresher, cheaper and easier

http://www.supermarketnews.com/print/84603

9/11


According to Hartman, in 63% of all eating occasions, consumers don’t know what

they’re going to eat until under an hour before consumption. “The last minuteness of

decision-making regarding what you’re going to eat or drink is something that

retailers should really be thinking about,” Demeritt said.

McMullen of Kroger sees the company competing not just among supermarkets

today but as a competitor in the $1.5 trillion business of food overall. This has

considerably widened Kroger’s competitive set but has led to investments in

specialty food purveyors like Murray’s Cheese, the addition of in-store restaurants

and e-commerce through click-and-collect and Vitacost.

“I think that’s a wise move,” Hartman said. “We’ve been saying for years that most

consumers aren’t really thinking anymore, ‘Should I go to a restaurant for dinner or

should I go to the prepared food at the grocery store? Can get a sandwich at Kroger

or at Panera?’ It’s almost like those options are all the same. Foodservice should

really be thought of as a face-off competition to grocery because so many more

people are relying on supermarkets for prepared meals.”

Retailers on to this prepared foods trend include Hy-Vee, Wegmans, ShopRite and

Price Chopper, now in the process of flipping its fleet to service-focused Market 32.

Weis Markets in February debuted a new store prototype in Enola, Pa., that puts a

premium on service as a convenience — for example, store-cut fruits and vegetables

giving shoppers valuable prep time back.

“In this store, we do more in-store prep work – cutting and juicing to order fruit and

vegetables, hand rolling sushi, baking artisanal breads and cutting meat in-store,”

said Kurt Schertle, COO. “Customers can tell the difference, and they appreciate the

quality, which translates into a better shopping experience and increased sales.”

Wegmans, whose gigantic stores will never be the fastest to shop, is instead using its

fresh variety as a means of enabling customization, another element of the

convenience equation for shoppers, Peranick said. She pointed to a cherry tomato

dispenser allowing shoppers to fill a basket with the tomatoes of their choice.




3/30/2017

Consumers today want food fresher, cheaper and easier

http://www.supermarketnews.com/print/84603

10/11


Source URL: http://www.supermarketnews.com/retail-financial/consumers-today-want-food-fresher-cheaper-and-easier

Retailers are also making a virtue of simplicity, with values that are easy to

understand, or in the case of new formats like Whole Foods 365, simpler

interpretations of its brand.

While “fresher” and “cheaper” have always been straightforward determinates of a

store’s fortune with customers, “easier” is rapidly evolving, added Harvey.

“There’s been a redefinition of convenience, with digital entering the equation so

forcefully,” he said. “But also, as stores get smaller and smaller, the effort required

by retailers to make the shopping experience quick and easy is becoming more and

more important.”




3/30/2017

Consumers today want food fresher, cheaper and easier



http://www.supermarketnews.com/print/84603

11/11

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