3. Foodservice at Retail
Americans’ eating behavior altered dramatically over the course of the pandemic. People stuck at home throughout 2020 and much of 2021 ate more meals at home, discovered the art of cooking and propelled grocery sales to record levels. The pandemic undid more than a decade of market share losses that had seen food away from home overtake food at home as the preferred meal solution for the majority of Americans.
Grocers were in the right place at the wrong time for the foodservice channel when the share-of-stomach pendulum took a huge swing, but that’s all changed. Americans are dining out again, and in numbers that exceed pre-pandemic levels. Further, they’re ordering takeout from their favorite restaurants in a big way, too, as evidenced by delivery statistics shared by leading platforms such as Uber and DoorDash.
The extent of the competitive challenge that grocers now face can be seen in the recent sales trends of food wholesalers and mid-tier chains that vie for the same dollars as grocers with prepared foods and meal solution offerings.
For example, leading wholesaler Sysco said that sales for its quarter ended Oct. 2 increased 39.7% versus the same period the prior year and 8.2% compared with the same quarter in 2019. Bloomin’ Brands, the operator of 1,450 restaurants under such banners as Outback Steakhouse, Carrabba’s and Bonefish Grill, saw its third-quarter same-store sales increase 9.5% compared with the same (pre-pandemic) period in 2019. During the comparable time frame, Brinker International’s Chili’s brand posted a 6.5% comp increase at its nearly 1,100 U.S. locations. Dine Brands Global, the parent company of Applebee’s, said that same-store sales for its quarter ended Sept. 30 increased 12.5% versus the comparable period in 2019. What’s notable about the performance of Applebee’s nearly 1,700 restaurants is that roughly 27.5% of its sales were off premise.
The big swing back to food away from home was inevitable. Americans clamored to be out and about, and that was reflected in the sales numbers of key operators. What happens next in 2022 is in the hands of grocers that can choose their destiny through increased innovation, enhanced offerings of on-trend prepared food offerings and increased online integration.
The prospects for success are encouraging because, although there has been a swing back to restaurants, Progressive Grocer research shows shifting consumer perceptions. For example, home cooking is perceived better than restaurant food by 45% of Americans who participated in the second installment of PG’s exclusive research series, “What’s Next For the Way America Eats.” Convenience, taste, quality and cost-effectiveness are top reasons that consumers choose foodservice at retail, and nearly 60% say that it’s more affordable than restaurant food. Restaurants still top retail, however, with 42% of those surveyed of the opinion that restaurants are “far better” than prepared foods from a retail store.
As grocers look to shift those perceptions, they’ll be doing so in an environment where restaurants are challenged with service levels and price perceptions in a highly inflationary environment. Restaurant food may still hold the edge over foodservice at retail when it comes to quality perceptions, but grocers have gained ground. The big advantage that grocers will have in 2022 relates to the affordability issue and increasing to-go order volume with shoppers who are already using grocery pickup with increased frequency.
4. Retail Operations
Buffeted by a lingering pandemic that has exacerbated economic inequality, divided Americans politically and given rise to persistent supply chain shortages, retail employees have had it. That’s the key takeaway from a recent study from learning management system software provider Axonify, which found that workers in the sector reported burnout (63%) as being a more important motivating factor for resigning than compensation (50%), with grocery associates citing 56% burnout.
The study of 2,500-plus front-line employees in the United States, the United Kingdom and Australia in such industries as grocery also found that almost half planned to leave their current jobs, with Gen Z the most eager to quit, at 63%.
In mid-November, the Bureau of Labor Statistics reported that the number of people quitting their jobs in the United States had reached yet another record high in September, with about 4.4 million Americans leaving work behind — especially in retail, where the quit rate was 4.4%. Along with the pandemic, such factors as retiring workers and limits on immigration are contributing to this lack of willing workers, economists have noted. Further, enhanced U.S. unemployment benefits during the pandemic may have played a role in some laid-off employees’ determination not to seek another job right away.
To counter these trends, food retailers ranging from large (Walmart, Dollar Tree, Kroger) to not so large (Big Y Foods, Cardenas Markets, Oliver’s Markets) have been offering various sweeteners at massive hiring events, including bonuses for new and existing employees, funds to cover tuition for associates who wish to further their educations, and additional training and career advancement opportunities. According to an Accenture research study, 48% of retailers have altered/enhanced hiring processes to onboard new recruits faster, 38% have altered/enhanced their training processes to make it faster and easier for recruits to become work-ready, and 34% have changed role descriptions to target and attract different types of candidates.
Shoppers have been affected by the retail labor shortage, too: Supply chain management software and consulting company Blue Yonder found in its annual holiday grocery trends survey that almost half of consumers (46%) said that grocery store associates were less available during the pandemic. Of that group, 39% said that this had an adverse effect on their ability to find an item or request assistance.
When asked by Axonify what would make them stay, although compensation was important, workers also placed emphasis on more flexible scheduling (44.2%), more appreciation (42.6%) and more positive relationships at work (42%). As pandemic restrictions are finally phased out and potential job seekers’ COVID-related fears ease, it’s up to retailers to make the necessary investments to ensure that their associates feel truly respected.
5. Shopper Engagement
What’s the hottest shopper engagement trend in food retail going into 2022? It’s starting or growing a retail media network. According to Forrester, retail media revenue is poised to balloon to $50 billion globally in 2022 as more companies take their ad business in-house in hopes of growing it faster than a third party can. In the past year, food retailers such as Albertsons Cos., Dollar Tree, Cub Foods and Sedano’s have launched media networks that aim to leverage first-party and zero-party data by delivering digitally native, shopper-centric and engaging branded content to shoppers.
Albertsons, for example, aims to use its loyalty program data to differentiate itself by selling local advertising as part of retail media packages. Meanwhile, The Kroger Co. was the first place that Conagra Brands turned to when the pandemic affected every aspect of the grocery industry, from supply chain to shopper behavior. Kroger’s 84.51° data science and media arm helped Conagra make sense of its 2021 forecast, evaluate shopping behavior changes across numerous commodities and predict which new behaviors would stick. The transaction-level data with built-in privacy controls enabled the team to present better demand projections for its portfolio, make more informed assumptions about demand for innovation, and make smarter decisions on production levels, shopper retention efforts and other marketing spend — all of which have helped Conagra attract and retain new brand buyers at disproportionately high numbers, according to Kroger.
At the same time, while targeting shoppers may never be easier, it’s also becoming increasingly challenging due to rapidly evolving privacy regulations and issues related to the collection, usage, storage and sharing of data. As retailers navigate the first-party and zero-party data-privacy waters, they’ll have to persuade consumers that their data is going to be protected, and that it’s worth it for them to hand over their info and get something valuable in return. Only those retailers that gain that kind of consumer trust will be in a position to truly leverage the massive opportunity in digital ad revenue.
6. Store Experience
Once upon a time, shoppers pushed carts through their favorite stores on an aisle-by-aisle route. Now, after a series of seismic shifts across omnichannel, grocers need to up their game to keep customers in the physical store.
While traffic has rebounded at brick-and-mortar locations following a rough couple of years, operating at pre-pandemic levels may not be enough to keep people there, at least at the same rate and pace. Indeed, the store experience has become not just a point of differentiation among competitors, but also a point of retention.
Throughout the country, grocers have deployed a variety of innovative features and attractions to elevate the store experience for their customers.
Co-located stores: By partnering with other retailers for store-within-a-store concepts, grocers are providing more solutions for their shoppers. Whether it’s Target teaming up with Ulta, Hy-Vee working with DSW, or Kroger collaborating with Bed, Bath and Beyond, such mutual brand-building efforts are the tide that lifts all boats. It isn’t just about sharing space for other types of retail products, either: Grocers can offer more services, as they’ve done with banks and health clinics for years. A self-care spa within a store? Why not?
More theater: If the digital market is all about the screen, the in-store experience can include live shows. Hy-Vee’s new store in Grimes, Iowa, for instance, includes a cake studio where customers can watch bakery staff decorate cakes like a boss, while shoppers who walk into the new Dom’s Kitchen and Market in Chicago can watch plant butchers slice, dice and chop plant foods at a food stall strategically located near the entrance.
Multimedia: Live in-person demos can be augmented by video displays set up in various spots around the store, featuring content ranging from recipe demonstrations to “meet the producer” spotlights on suppliers.
Personalization: Putting the “custom” in customer relations, innovation-minded grocers are making the store experience all about the shopper’s wants and needs, beyond table-stakes tailored offerings like made-to-order sandwiches or top-your-own salads.
Reinventing store space for foodservice: Sure, it’s about grocery shopping, but as the rise of grocerants taught us a few years ago, it’s about the spectrum of eating and drinking. Forward-thinking grocers, including indies that are particularly nimble, have turned rooftops into coffee bars and created restaurant-style spaces for party rentals and special occasions catered by the store’s culinary pros.