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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 itsshoppers’ meals at home but a larger ambition to fulfill each and every one of the 35to 45 times its customer eats every week.

Lidl, which has plans to bomb the East Coast with 100 stores in its first year, will doso behind a plan to address “compromises” in price, quality and convenience that its

NW  > RTAIL & FINANCIAL

Conumer toda want food freher, cheaper and eaier

hoppers want all of the aove, and retailers can’t a�ord to let them down

on an count

Jon pringer | Mar 29, 2017

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

These days it’s long past the point where shoppers are satisfied getting eitherpremium quality or low prices; low prices or good service; convenience or selection.They want it all: fresher, cheaper and easier. While food retailers have alwayscompeted on those aspects to some degree, it’s the combination of them that seemsto resonate with consumers

today.

These higher expectations are driven by an intersection of broad consumer lifestyletrends toward wellness, customization and convenience, while business conditions —namely an oversupply of stores using food to lure in shoppers, increased competitionfrom foodservice and e-commerce and what some analysts believe is slackeningconsumer demand — have increased the stakes.

“Consumer expectations of food retailers absolutely havechanged,” said Greg Smith (left), head of retail marketingfor 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 andcage-free no matter where they are shopping. Consumershave [also] seen the retailers who led the way in higherfood quality take advantage with high prices andcomplicated shopping experiences. So now, retailers likeWalmart, Aldi and Food Lion are delivering on foodquality expectations, but improving by doing so with less

exotic, contrived details.”

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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 onearea or more may be losing share. Whole Foods (fresher but not necessarily easier orcheaper) and Save-A-Lot (cheaper but not necessarily fresher), to name twoexamples, saw sales and share decline last year and are now at work to broaden theirrespective offerings.

“In the past there were more limited options and you could decide your strategicimperative and go after that piece,” said Laurie Demeritt, CEO of the HartmanGroup. “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 tofocus on so much in the past.”

Fresher: At the end of a streamlined supply chain, Walmart employs “freshoperations experts” to underpin an initiative to sell food as fresh as possible.

Fresher

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It’s no mystery that fast-shrinking sales and profits in center store — categoriesincreasingly falling to e-commerce providers like Amazon — have pressured retailersto compete harder on perishable quality. But that’s only the beginning of the need toimprove fresh, sources say. Consumers are demanding more and better fresh foodsas a result of the booming health and wellness megatrend, and most of them begin inthe produce aisle.

“The biggest thing going on in food today is consumer desire for products that are asfresh, real and minimally processed as possible,” Demeritt said. “That’s an umbrellaplatform that’s applicable across all sorts of consumers. The extent to whicheveryone is able to act on those desires differs based on access – where they are inthe country, their budgetary constraints and so on – but that desire is there. We seevery few customers today who say, ‘I want my food processed and packaged.’”

Retailers are responding by expanding variety and shop space devoted to fresh fruitsand vegetables, and at the same time working behind the scenes on ways to improvethe performance of those departments. Walmart, for example, has implementedinitiatives that officials say cut a day out of the supply chain: That pays off in betterpresentations in-store and less spoilage in the consumer’s home, which bolsters trustin the store. Food Lion has added chilled “garden cooler” rooms at some storesseeking similar benefits.

Mark Heckman, president of Mark Heckman Consulting, Bradenton, Fla., saidretailers with eyes on truly executing behind fresh can’t afford to cut corners orconsumers 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 intraining, programs, nutrition and fixtures to truly be viable,” Heckman said. “Manythink there are shortcuts to being a purveyor of fresh foods and home mealalternatives.”

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Fresher also carries connotations of newness, cleanliness and excitement.

Consumer-focused new formats like Whole Foods’ 365, Ahold’s bfresh and Kroger’sMain & Vine are all aimed at tackling fresh affordably, conveniently. Companies arealso more prepared today to capitalize on flavor and ingredient trends than theyonce 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 showin March, encouraging would-be suppliers to “pitch us first.”

Dave Harvey, VP of thought leadership of Daymon Worldwide, said he recentlytoured 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 freshdepartments make such an impact at the entry underscores how critical it is to makethat connection.”

Cheaper: Value­priced natural/organic Lucky’s engaged a “Wowza” factor to callcustomers’ attention to good deals in its new Plantation, Fla., store.

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Cheaper

Last summer, a wave of deep food deflation reached the retail level and promotionalintensity flared up in various pockets of the country, but some shoppers barelynoticed.

“It’s fascinating,” Kroger CEO Rodney McMullen related then. “In our research, mostpeople 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 workthey’re putting into pricing and reiterated that perception matters when it comes toprice.

A strain of the “flight to value” forged in the recession has been slow to subside inmany places. Independent conventional retailers are increasingly experimentingwith efficient cost-plus formats that abandon the typical margin-mix approach for astraight cost-plus-10% pricing scheme dependent on volume. Successful cost-plusformats 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,’” explainedNicole Peranick, director of global consumer strategy at Daymon.

“Consumers want to be able to stretch their limited dollars, but they are alsochoicefully spending up on the things that matter to them while paying a little lessfor the things that are less important to them, and that all depends on the lifestylethey are leading,” she said. “Some will pay more for convenience, others will paymore for experience. People want a good deal, but they also need to feel they’re notcompromising on their needs and values.”

This phenomenon is encouraging companies with strong price perception — like Aldiand Save-A-Lot — to expand their once-basic product selections with trend-right

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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 spokesmanfor 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 payfor. Whether it’s the distance we move a pallet in our stores or warehouses to how wemerchandise our produce, we measure waste and minimize it everywhere socustomers 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 competitiveon known-value items and by relying more on private brands, using the latter trendto concurrently make strides toward meeting the natural/organic needs of theirshoppers. They are also utilizing customer data to provide deals that are relevant toshoppers.

“Oftentimes, private brands come with a price value, but they’re also linked to acertain lifestyle and a solution across categories,” Peranick said.

While retailers have to be in range of leaders on items that drive trips, Heckmancautioned that across-the-board pricing cuts can be difficult to achieve, and advisedinstead that retailers look at selections with an eye on better highlighting the valuethey can offer.

“Lowering prices while becoming better at fresh and service is a very tough balancingact,” he said. “I'm not convinced that cutting prices, unless you are woefully out ofline with the market, is the answer for many. I can see retailers of all stripes taking along 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 arenot overwhelmed with choices at the expense of not finding the 200 to 300 items

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that drive the majority of sales for any food retailer,” he continued. “When it comesto price, these are the items that must be competitive.”

Easier: Daily deals to help Food Lion customers choose what’s for dinner addsmeaning 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 theingredient level to snacks and full-service restaurants. These are all evidence of abooming consumer demand for convenience arising from hectic lifestyles and thenew possibilities of a digitally connected world providing expectations ofcustomization, sources say.

“I think one thing that’s dramatically changed in the industry is the lack of planningamong consumers,” Demeritt said. “That’s one of the reasons foodservice is seen asso competitive [to grocery stores] today.”

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According to Hartman, in 63% of all eating occasions, consumers don’t know whatthey’re going to eat until under an hour before consumption. “The last minuteness ofdecision-making regarding what you’re going to eat or drink is something thatretailers should really be thinking about,” Demeritt said.

McMullen of Kroger sees the company competing not just among supermarketstoday but as a competitor in the $1.5 trillion business of food overall. This hasconsiderably widened Kroger’s competitive set but has led to investments inspecialty food purveyors like Murray’s Cheese, the addition of in-store restaurantsand e-commerce through click-and-collect and Vitacost.

“I think that’s a wise move,” Hartman said. “We’ve been saying for years that mostconsumers aren’t really thinking anymore, ‘Should I go to a restaurant for dinner orshould I go to the prepared food at the grocery store? Can get a sandwich at Krogeror at Panera?’ It’s almost like those options are all the same. Foodservice shouldreally be thought of as a face-off competition to grocery because so many morepeople are relying on supermarkets for prepared meals.”

Retailers on to this prepared foods trend include Hy-Vee, Wegmans, ShopRite andPrice 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 apremium on service as a convenience — for example, store-cut fruits and vegetablesgiving shoppers valuable prep time back.

“In this store, we do more in-store prep work – cutting and juicing to order fruit andvegetables, hand rolling sushi, baking artisanal breads and cutting meat in-store,”said Kurt Schertle, COO. “Customers can tell the difference, and they appreciate thequality, which translates into a better shopping experience and increased sales.”

Wegmans, whose gigantic stores will never be the fastest to shop, is instead using itsfresh variety as a means of enabling customization, another element of theconvenience equation for shoppers, Peranick said. She pointed to a cherry tomatodispenser allowing shoppers to fill a basket with the tomatoes of their choice.

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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 tounderstand, or in the case of new formats like Whole Foods 365, simplerinterpretations of its brand.

While “fresher” and “cheaper” have always been straightforward determinates of astore’s fortune with customers, “easier” is rapidly evolving, added Harvey.

“There’s been a redefinition of convenience, with digital entering the equation soforcefully,” he said. “But also, as stores get smaller and smaller, the effort requiredby retailers to make the shopping experience quick and easy is becoming more andmore important.”

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