4 Behavioral Declines Set to Disrupt Grocery in 20 Years
Growing up in Hawaii, one realizes quickly that swimming in a pool is vastly different from swimming in the ocean. In a pool, a pretty good swimmer can go wherever they want and doesn’t worry about much except for the other swimmers getting in the way. In the ocean, however, a pretty good swimmer has little choice but to go where the ocean current wants and has many things to worry about.
Unfortunately, grocers — like all businesses — build their plans in controlled and contained pools, but must execute them in the wild, as it were. A few times per year, grocers plan shelf resets, new products, annual plans and long-range plans of a few years.
These plans are unrealistic and short-sighted.
Recently, McKinsey & Co. completed a study across 822 companies for nearly 10 years deconstructing how businesses actually grow. The results show that more than 60 percent of any brand’s individual growth comes from the underlying momentum of the category. Competitive market share gain (e.g., most of advertising, distribution) drives less than 10 percent of a brand’s growth but often occupies 90 percent of a brand's strategy and mindshare.
The far better use of time for both grocers is to assess the health and momentum of the category itself, and use that to make bigger strategic bets. Executives should reframe the question over a 20-year horizon by asking "what must be true" for the category to double or be cut in half over 20 years. It’s important to look for 20-year currents both within and beyond your category. Currents can combine to even further accelerate or destroy a category, or even create new opportunities previously unseen.
Here are a few 20-year currents I am seeing. I derive these from the analytic techniques I describe in my book, “Superconsumers,” and seeing how category Superconsumers’ behavior, demand, and unmet needs and wants are changing over time.
U.S. beef per capita demand could Drop 30 percent over 20 years
Nearly 3 billion pounds of ground beef are sold each year, as it's extremely versatile for consumers, who can use it to make burgers, spaghetti, chili and tacos. Ironically, its greatest strength — versatility as a supporting actor — coupled with a lack of strong consumer brands in ground beef (unlike poultry), make it ripe for disruption by new brands of plant-based meats that can provide texture and also blend into various dishes, but with a much more powerful consumer narrative of animal and eco-friendly production.
Powerful, purpose-driven, Silicon Valley-funded and technology-enabled brands will grow and radically disrupt the meat case and how meat is bought. If that's the case, then the only thing standing in the way of an online-grocery shopping onslaught is produce.
At-Home Cooking Will Continue Decline, Become More Niche
In the past few years, consumer spending on eating out surpassed consumer spending on groceries. Over the past 15 years, I've seen the percentage of households that both love to cook and do it frequently (e.g., cooking Superconsumers) decline from 15 percent to 10 percent. I expect that number to shrink to 5 percent over the next 20 years.
Cooking altogether will become more specialized than generalist. Consumers who cook would rather be famous for making one signature dish than be known as pretty good across many types of dishes.
Fewer Drivers will Help Double Delivery
If you could go back to January 2010 and invest $1,000 in any company, most people would pick a tech stock like Apple, Amazon or Netflix. But if you had put it in Domino’s Pizza (now branded as just Domino's), you would have outperformed them all and have $21,000.
Domino’s success is not just about pizza, but also about its prowess in transforming itself into a distribution and digital powerhouse. Domino’s has a huge profit motive to crack the code on autonomous driving and drones for delivery purposes — and will speed its progress.
Per the University of Michigan, the percent of 16-year-olds with a driver’s license is half of what it was in 1983. The hassle of grocery shopping will increase without a car, so more cities in America likely will become more like Seoul, where you can get nearly anything delivered, anytime and anywhere.
College Enrollment Will Decline; Graduates Will Grow More Diverse
Good news if you're sending kids to college: Tuition prices are no longer rising at the insane pace they were for decades. The reason: College enrollment is down about 1 million students from 2010 to 2015. Interestingly, there are nearly 2 million fewer white Americans attending college and 1 million more Hispanic and multiracial students.
Why does this matter to grocery? It matters because food preferences are shaped in college, and the impact of multicultural students will be more important and more complex. The growth of Hispanics is nothing new, but the second fastest-growing group is made up of folks who are more than one race. Most companies are still getting up to speed on Hispanic marketing and innovation. What do you do if a consumer is both Hispanic and Asian, or Asian and African-American? How do you change your assortment and merchandising? What about store locations?
Those who are good at multicultural marketing now must be ready to learn it all again. And those who are still catching up in Multiculturalism 1.0 must prepare to be overwhelmed by graduate-level courses in multicultural demand.
All grocers would benefit by knowing what's coming down the pipeline over the next two decades. But take it from someone who's learned the hard way: Never turn your back on the ocean, and swim with the current — never against it.