2020 Grocery Innovation Outlook
Innovation in food retailing is everywhere and advancing at a pace so rapid that companies that are considered disruptors question whether they’re moving fast enough, while others wonder whether they can catch up.
- Technology is changing every aspect of how food retailers operate, while fast-moving trends related to consumer behavior, product preference and spending motivations are having a huge impact on sales.
- Drones, omnichannel, robotics, electronic shelf labels, cashierless stores, artificial intelligence and gamification are among the tech developments that grocers should keep an eye on.
- The rising popularity of plant-based foods, ensuring the local provenance of products, and the ongoing importance of sustainability are among the consumer trends that supermarkets must contend with.
Wherever a company is on its innovation journey, retailers of all types have awoken to the reality that disruption never sleeps and is coming at them on two fronts: Technology is changing every aspect of how food retailers operate, while fast-moving trends related to consumer behavior, product preference and spending motivations are having a huge impact on sales.
With more change ahead, Progressive Grocer offers its 2020 Innovation Outlook to help retailers get ahead of what’s next.
One thing that’s abundantly clear when looking across the food retailing landscape is that there’s innovation as far as the eye can see. Entrepreneurs and startups intent on disrupting the food retailing world are dissecting every touchpoint on the shopper’s path to purchase, looking for pain points they can solve. Meanwhile, established retailers are doing the same, but with a heightened sense of urgency in recognition of the fact that their survival is at stake.
Retailers have learned — some the hard way — not to be dismissive of a particular technology or trend that initially appears absurd, insignificant or impossible to profitably scale. Look at drone deliveries and plant-based proteins, for example. Both were relative novelties just a few years ago, but not anymore. Plant-based startups, most notably Impossible Foods and Beyond Meat, sport billion-dollar valuations, major CPG companies are racing to launch new brands, and retailers such as Kroger are right with them in rolling out store-brand options.
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Meanwhile, drones have entered retailers’ supply chain planning conversations, moving beyond an “if” to more of a “when” stage as a legitimate fulfillment option. When is now for some retailers. Deerfield, Ill.-based drug store chain Walgreens conducted its first drone delivery from a store in Christiansburg, W.Va., on Oct. 18 in partnership with the Wing subsidiary of Google’s parent company, Alphabet. Not to be outdone, fellow drug store operator CVS Pharmacy completed its first drone deliveries in Cary, N.C., on Nov. 1, in partnership with UPS Flight Forward.
“CVS is exploring many types of delivery options for urban, suburban and rural markets. We see big potential in drone delivery in rural communities, where life-saving medications are needed and consumers at times cannot conveniently access one of our stores,” says Kevin Hourican, president of Woonsocket, R.I.-based CVS Pharmacy.
“Changing rules and federal guidelines will also put a greater demand on product labeling and attributes. And then there’s the consumer — today they shop, eat and prepare foods differently than the way traditional supermarkets are set up, which may require different packaging, labeling or added content to get the shopper’s attention.”
It’s understood that as sources of data have proliferated, unlocking value from the information can occur only by applying artificial intelligence (AI) to identify patterns and behaviors. What’s less understood is that AI isn’t a new phenomenon, but its potential hasn’t been unlocked until now.
“AI has been around since before the 1950s, but there hasn’t been the computing power to take the data sources available and leverage it. But now there is,” explains Jeff Smith, founder and head of corporate development at Revionics, an Austin, Texas-based provider of price and promotion optimization solutions. “Ten years ago, if you talked to somebody about AI, they’d kind of freak out. Now everybody’s talking about AI, and you need it in your business, so it’s fully accepted and embraced.”
Make Shopping Fun Again
With digital natives entering their prime spending years, retailers unable or unwilling to blend the physical with the digital and infuse both with elements of gamification risk losing an entire generation of shoppers. Witness the popularity of gaming, which has coincided with the rise of the smartphone. Video gaming has exploded in the past decade, with the global games market valued at nearly $150 billion in 2019, according to Netherlands-based gaming intelligence provider Newzoo. The firm projects that the gaming market will expand to $189.6 billion by 2022.
This flexitarian or “reducetarian” eating pattern will translate to product assortment at grocery and in the ratio of ingredients in various types of prepared meals. The next meat case, for example, will have an array of meat and poultry items as well as plant-based alternatives, while the prepared food sections will have dishes that include meat as an ingredient in selections also packed with vegetables, legumes and whole grains.
In many consumer surveys, people indicate a penchant for locally sourced products, from produce to meat to dairy, among other ingredients. “Local,” though, can be a relevant term. While the Nielsen research found a consensus that locally sourced products come within a 50-mile radius, there are some products that U.S. consumers regard as local “as long as they come from the U.S.” Other times, local means regional.