Saturday, October 11, 2014

Is a Grocery Shake-Up or Shake-Out on the Way?

There is a battle for the food on your table top brewing and for a greater share of your stomach.  While legacy grocery retailers the ilk of Kroger, Safeway, and Publix combined ring in $165 billion a year in sales the undercurrents of change is brewing.  That change is coming from both traditional and non-traditional retailers.

Let’s face it a $165 billion is a large number and many have their eye on the prize.  Let’s start with some non-traditional star-ups like Hello Fresh which is only 2 years old but sold 1 Million meals last quarter alone.  Those are meals that simply were not sold at a grocery store.  It’s a drop in the bucket in dollars today but there are four or five start-up just like them rolling out across the U.S. all going for a larger share of
Whole Foods can hardly be called a start-up with $12.5 billion in sales.  When you compare that to $165 billion they are small and have been discounted as a serious player by legacy grocery stores for years.  Legacy grocery retailers scoffed saying Whole Foods is too expensive, too small a niche (organic) to be a threat.  That all changed when Whole Foods sales sored while they were building smaller stores, filled not with legacy groceries, or 100% organic foods, but with Ready-2-Eat and Heat-N-Eat fresh prepared food. 
Today, with less than 20% of a Whole Foods store allocated to Ready-2-Eat and Heat-N-Eat fresh prepared food that sector contributes 35% of sales and close to 40% of overall profits.  That’s a threat in how food retailing is evolving.  But wait there is more.
In Chicago the fastest growing grocery store is Mariano’s.  Mariano’s allocates 50% plus of its square footage to grocerant niche Ready-2-Eat and Heat-N-Eat fresh prepared food and high quality perishables. Some legacy industry insiders still consider Mariano’s and ‘upmarket’ urban store.  I don’t, because they are growing in the suburbs of Chicago.
 Mariano’s is a disruptor.  They are focused not on legacy CPG grocery products but on Ready-2-Eat and Heat-N-Eat fresh prepared family mix and match meal components the hallmark of the grocerant niche.  Should Publix, Safeway, and Kroger worry? I say yes more than they have been.
Other non-traditional food retails are taking their shot at the grocery sector as well.  Most important is the vast assortment of food and fresh food items, finding their way into dollar stores all targeting the price-conscious grocery shopper.
Then there is the retail drug store sector.  That is a well funded competitive a sector with two companies alone with sales over $150 billion a year. The fresh prepared food found at Walgreens is outstanding.  Boston, New York, too LA Walgreens is creating a platform for fresh food sales success.
Small footprint convenience stores are selling at ever increased rates siphoning customers from grocery stores from coast to coast.  In fact they are growing fresh food sales at a rate three times higher than grocery stores. Noted retail consultancy Willard Bishop, reports that Trader Joe’s is the emblem of success in the limited assortment category: With its low prices and a tightly-edited collection of products, the store is pulling down $1,723 in sales per square foot,  compared to $552 per square foot at Publix or $496 at Kroger. That’s clear disruption. So, how do you deal with footprint malaise or brand compliancy?
Is a Grocery Shake-Up or Shake-Out on the Way?  I think so.  However the undercurrents of a changing consumer will drive the change fast than I.  That consumer is dynamic not static. 

Since 1991 retail food consultancy Foodservice Solutions® of Tacoma, WA has been the global leader in the Grocerant niche for more on Foodservice Solutions® or for a Grocerant Scorecard visit,  Email:

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