The Grocery Store Conundrum

Foodservice Solutions® Grocerant Guru® Steven Johnson was asked recently” how do legacy grocery stores deal with the ongoing conundrum of market share capitulation”?  Drilling down on just what the components of the conundrum are Johnson discovered three concerns:

1.       Loss of Market Share to Dollar Stores / Drug Stores / C-stores

2.       Increased competition from Restaurants

3.       Lower priced competitors the ilk of Aldi, Lidl, and WinCo Foods finding success

Johnson was puzzled that the questioner was  not concerned about Amazon’s market share land grab in the On-line ordering / delivery space?  The reply was simple On-line sales are just minnow in a large ocean? 

That kind of mind-set thinking reminded Johnson of the old adage ‘if the rate of change outside of your company is greater than the rate of change inside your company the end is nearer than you think’.  One bright spot recently as a side note was Walmart buying Jet.com.  Outside Eyes will make a difference and Jet if left alone could help drive change and On-line success for Walmart.

Johnson believes that legacy food retailers that continue to sell food to fill a panty are on the wrong side of the consumer stating “Yesterday’s strategy will not drive tomorrow’s sales”.  He continued saying they will face difficult times within five years as the rate of consumer adoption to non-traditional retail locations offering Ready-2-Eat and Heat-N-Eat fresh prepared food continue to open new outlets garnering more and more customers.

The Foodservice Solutions® team believes those legacy retailers opening innovation centers trying to drive innovation from a platform yesterday, looking for today’s relevance are two steps behind already.  The consumer is agile, mobile, and Ready-2-Eat. The mindset of yesterday, and today are not platforms tomorrows foodservice.  Why?

Remember that back in 1900 there were 2.9 restaurants for every grocery store in the United States. Today there are 25 Restaurants for every legacy grocery store open. My friends that is customer migration from one retail format to another.  Consumers love buying Ready-2-Eat or Heat-N-Eat fresh prepared food and denial is not justification for a micro-incremental status quo change.

Using the crutch that food safety is an over ridding issue and a key reason to move forward slowly does not sell with consumers.  One more time there are 25 restaurants for every grocery store. Yes, food safety is important.  It can be done right. The grocery industry is positioned for disruption and in need of Macro-change in-order to drive meaningful customer relevance and stop customer migration according to our own Grocerant Guru®. Like it or not change is on the way.

Dollar stores are moving into fresh grocery items and fresh foods.  The dollar store sector has garnered a lion’s share of the pantry business so grocery stores should take notice and not continue in the denial.  C-stores including 7-Eleven are testing and / pushing new fresh food options to customers daily.  Companies the ilk of Sheetz, Wawa, and QuickChek are continue to garner top line sales and bottom line profits leveraging fresh food as the bait to garner new customers.  Walgreens Duane Reade is a prime example of fresh food urbanization and grocery store capitulation.

On the West coast WinCo Foods continues to grow while becoming the low price leader in many markets. All the while Aldi now has over 1,800 stores in the US and is the low price leader in most every market.  This brings us to Lidl which is currently investing $ 3 Billion in the United States to open new retail outlets.  The first units set to open in 2017 and set to garner share from legacy retailers.  Lidl is a low price leader.  When combined with Aldi, and WinCo the competitive landscape will be forever changed.

Legacy grocery retailers that were once the low price leader or middle market players are today maintaining sales due to deflation of CPG food staples and simultaneously reaping increased sales and profits due to SNAP customers buying more items as prices drop.  That is a is not a platform for long term success.

Remember research found that SNAP customers stated that McDonald's is an aspirational brand to them!  That clearly is BAD for legacy grocery stores as most have Kids as they come off SNAP they simply want to treat their KID to a Happy Meal and one meal away from the kitchen!  With a rise in the minimum wage and inflation sure to return relying on SNAP customers for growth is not going to work.

 How do you solve the grocery store conundrum? When the facts change industries need to change. The facts are clear family size in 1900 was 4.73 today the number is 2.54 per household. That change is dramatically.  The number of Americans single over the age of 18 years old and older in the US has now reached 50%.  That change is dramatic as well.

In a world filled with new facts there is a new reality and retailers must change.  After all how many of the single adults need or want to buy 10 pork chops, 6 steaks, or 8 chicken breast at a time when shopping? Simply put grocerant niche Ready-2-Eat and Heat-N-Eat fresh prepared food that is consumer focused, interactive, and participatory is driving change in the foodservice sector. Does your company look more like yesterday than tomorrow?

Invite Foodservice Solutions® to complete a grocerant program assessment, grocerant ScoreCard.  For brand, or product placement assistance our Grocerant Guru® has the skill-set you are looking for.  Since 1991 www.FoodserviceSolutions.us  of Tacoma, WA has been the global leader in the Grocerant niche. Contact: Steve@FoodserviceSolutions.us or 253-759-7869