Restaurant sector Stifled by Falling Grocery Stores Prices

Retail foodservice disequilibrium continues to grow.   Restaurants and legacy chain restaurant in particularly continue too capitulate customers via year over year customer counts as menu prices rise, labor cost & benefits rise, and grocery store prices fall.  All the while the convenience store sector is expanding the number of locations, adding grocerant niche Ready-2-Eat and Heat-N-Eat fresh food garnering customers from both grocery stores and restaurants as consumers are in search of What’s for dinner. 

Complicating the situation, the US Agriculture Department's, Economic Research Service reports “Prices of supermarket items declined 1.3% last year, compared to the year before that was the first annual decline since 1967.”  While that is good news for consumers discounters the ilk of Aldi, WinCo, and Lidle are positioned to capture a larger share of stomach than 2017 & 2018 as food prices fall, and competition increasing causing incremental consternation at retailers the ilk of Walmart, Albertsons, and Kroger. 

Chain restaurants the ilk of Pizza Hut, Famous Dave’s, Five Pie Pizza, Ruby Tuesday, and Jamba Juice are but a few that have come under increasing pressure to stop the customer count declines, drive top line sale, and bottom line profits. 

What is driving the new competitive pricing food items including Beef, Pork, Chicken, and Eggs according to the USDA, agricultural exports dropped by $17 billion or approximately 11% between 2014 and 2015 alone. Plus new low cost retail competitors Aldi & Lidl. 

According to Bill Bishop chief architect of Brick Meets Click “Hard discounters Aldi and Lidl between them will steal significant share of U.S. food retail sales in coming years, but their influence will exceed their reach.  This will continue to increase the competitive threat for restaurants and legacy grocers according to our own Grocerant Guru®

Bishop projected the German discounters would combine for annual sales in a range of $53 billion to $67 billion, and operate around 3,500 U.S. stores (2,500 Aldi, 1,000 Lidl) by 2021. While doing so they will force existing competitors to confront what makes them different — particularly their low-cost infrastructure, and the spirit of innovation and competition between them that is fueling their growth.

Let’s face it that $53 Billion to $67 Billion will have to come from other retailers?  Without customer relevant grocerant niche Ready-2-Eat and Heat-N-Eat fresh prepared food differentiation restaurants and legacy grocery stores are in for a very difficult five years.  Are you ready for Outside Eyes?

 

Foodservice Solutions® specializes in outsourced business development. We can help you identify, quantify and qualify additional food retail segment opportunities or a new menu product segment and brand and menu integration strategy.  Foodservice Solutions® of Tacoma WA is the global leader in the Grocerant niche visit Facebook.com/Steven Johnson, Linkedin.com/in/grocerant/ or twitter.com/grocerant