Grocers can drive greater sales and loyalty by helping shoppers seek solutions — not just food items — for meal purchases.
It may take you by surprise, but most people entering a supermarket aren't really looking for groceries. What shoppers most want is help pulling together meals. Not knowing that difference could cost grocers $11,000 in incremental sales for a store making $500,000 a week.
That's the bottom line revealed in the Coca-Cola Retailing Research Council's (CCRRC) latest study, "Eating In: Growing Sales by Helping Customers Eat at Home More," conducted by the NPD Group.
"Certainly, other reports have suggested that supermarkets encourage people to eat at home more often," says Michael Sansolo, former Food Marketing Institute SVP and incoming CCRRC research director. "But two things differentiate this study and make it particularly important. First, the size of the prize. It really breaks it down as to how much retailers have to gain by shifting their mindset and actions. We're talking about a lot of money — and I think the $11,000 a week may be conservative. That's a lot of motivation. Second, this research deeply examines shoppers' attitudes, and based on those findings, grocers can take action to fulfill a variety of consumer needs and to capture a greater percentage of their food dollars."
With the exception of the past 18 months of economic turmoil, the industry's share of consumer food dollars has been on a 25-year decline. Current economic conditions, coupled with recognition of the value of family mealtimes, offer supermarkets an opportunity to recapture — and grow — market share.
Americans want, and are trying, to eat at home more often. According to Joe Derochowski, executive director, business development food & beverage at the NPD Group in Port Washington, N.Y.: "The winning formula for retailers is to help consumers effectively connect their daily decisions about what to eat with their planning efforts, as well as with the way they shop for groceries." So, what's the answer to this challenge? "It's a focus on meal solutions that satisfy occasions, not on products," Derochowski affirms.
To succeed, supermarkets must use this new consumer-centric revelation to redirect their marketing, sales training and displays to sell solutions, not just food. If stores deliver meal solutions that make it quicker and easier for consumers to plan, prepare and eat meals at home, grocers will see an uptick in sales.
As Sansolo sees it: "The 'Eating In' study is unique because it tells retailers why — and, more important, how — to evolve their operations to build sustainable growth." Through fresh perspective and comprehensive insights into how consumers now approach meals, along with dozens of sales-building ideas, the CCRRC's most recent initiative educates grocers about how to generate a paradigm shift to garner greater profits. And there's more good news: suggested strategies can significantly increase sales in a short period of time with minimal capital investment.
The biggest hurdle may be changing your perspective.
How Big is the Enchilada?
There's significant incremental business to capture. Grocery stores can boost food sale profits by 3.2 percent. For a supermarket with $500,000 in weekly sales, there's a chance to garner an additional $1,700 from breakfast foods, $4,100 from lunch items and over $5,100 from dinner ingredients.
Assuming that food represents 70 percent of total store sales, the opportunity could translate into a 2.2 percent increase in total store sales, or $2.2 million for a retailer achieving $100 million per year. Let's put it another way: add another dollar per customer if sales per customer are $35.
Got your attention? The upside potential is clear. Yet, there's a downside for those who don't make a commitment. Supermarkets need to reposition themselves from being considered sellers of food ingredients (product pushers) and reframe their role as places where solutions can be found for quick, convenient, cost-efficient meals. If retailers fail to take advantage of this opportunity, they'll likely be playing defense well into the future.
The economy and demographics are working in favor of the eat-at-home movement. The food preparer (usually Mom) wants to eat at home for several reasons. Almost 70 percent of respondents to the NPD Group's Cooking Skills and Habits Survey said the primary reason for preparing/cooking a meal at home was cost. Their motivation: the average cost per person of an in-home meal is $2.36, vs. $6.27 from a restaurant, according to the NPD Group's "Eating Patterns in America" report.
In addition, 92 percent of those in charge of meal planning believe home-cooked meals are healthier than eating out, and slightly more rank sharing meals as the best way to connect with family on a regular basis. In response to such values, consumers will likely continue eating around the kitchen or dining room table long after the economic landscape improves.
Population trends also affect buying behaviors. Our largest generations — baby boomers and Gen Yers — are facing pivotal changes. Many boomers are retiring, and 20-somethings are earning good wages and starting families.
"Boomers are changing from empty nesters to senior citizens who are prone to eat out, as do the Gen Yers, who seek convenience provided by restaurants," explains Sansolo. "Right now, new-found frugality and the two biggest demographic groups are converging. This is an ideal time for grocers to gain a better understanding of and attract these significant market segments. And, dinner is the ultimate brass ring. If a store wins them at dinnertime, breakfast and lunch will follow. It's the prize in so many ways."
"It's simple," Derochowski adds. "Customers want meals that are easy to prepare, cook, eat and clean up. Therefore, it is critical for retailers to constantly think about ways to help consumers with this process." If they don't find that at a grocery store, they'll go elsewhere. But, eating at home doesn't have to mean cooking from scratch. Today's definition of "home-cooked" is elastic, with ready-to-eat, ready-to-heat and ready-to-cook items accepted options. According to the NPD Group's CCRRC custom survey, almost half of consumers consider a ready-to-eat main dish a home-prepared meal.
Other factors support today's eat-at-home trend. Simpler menus, technology that streamlines food preparation, and access to cooking information make it easier to fix meals. Convenience and meal selections that please everyone rank as important among consumers, with the NPD Group's "Dinner-time MealScape 2009" report noting that 41 percent of those surveyed cited convenience as the main reason for deciding what to eat for dinner.
This modern-day consumer mindset translates into purchasing behavior: almost 60 percent of decisions about what to serve are made within an hour of a meal, 26 percent are determined on that same day, and decisions about what to buy can be made days earlier. What's more, only 24 percent of meals are completely planned before a shopping trip.
Rodney McMullen, president and COO of the Kroger Co. in Cincinnati, notes: "We use valuable insights from the CCRRC's study to help us segment Kroger customers based on their shopping missions. Making it easy and affordable for families to prepare and eat more healthy meals at home is a fundamental part of our business."
The Big Aha
Backed by CCRRC research, we know that each meal is driven by different needs, priorities and emotions. We understand that consumers weigh their desire for affordability, healthy selections and strengthened family ties against the allure of convenience offered by restaurant dining and takeout options. So, how can grocers nudge customers in their direction? By no longer thinking of their operations as stores with products on the shelves that people buy — ingredients and price are only part of the story. Consumers think in terms of meals, not grocery lists. So should supermarkets.
"We find the study extremely helpful," observes Marc Poulin, president operations, Quebec region for Stellarton, Nova Scotia-based Sobeys. "It inspired us to develop a number of initiatives, including a partnership with our coffee producer to sell k-cup coffee machines at cost. Realizing the importance of coffee in the breakfast occasion, this effort was designed to increase penetration of the machine with our customers, as well as to convince consumers to brew at home rather than stop at a restaurant on their way to work."
Savvy retailers can customize their approach, providing meal solutions and differentiating their offerings from other supermarkets and foodservice providers. And, while all dayparts are important, dinner clearly offers the greatest chance for grocers to grow their business. Dinner drives consumers' selection of shopping venues, providing retailers a gateway to becoming the shoppers' choice for purchasing other meal solutions. It's a must-win opportunity.
Providing further insight into how to "own" this critical meal, the "Eating In" study takes a novel approach, determining how people make dinner decisions and what factors are most relevant to this meal occasion. As opposed to dividing consumers into groups based on household characteristics, the CCRRC research project identifies "Seven Faces of Dinner" (see related sidebar at left). By understanding and reaching out to customers — including those labeled Last-minute No-brainers, Thrifty Repeats, Tasty Creations, Nourishing Fare, Kids' Delights, Family Entertaining and Hearty Fuel — retailers can develop business-generating strategies that align with consumer need-states.
"This study is fascinating because it shifts the way we think about customers," says Sansolo. "We traditionally pigeonholed shoppers in one category and tried to sell them things. Now, we recognize one person can reflect multiple opportunities."
What's a Store to Do?
Industry innovators will:
- Shift their focus from a product category orientation to a solution orientation by looking at meals from the customer's point of view
- Provide a framework for connecting the daily decisions people make about what to eat with the way they shop for groceries
- Equip their operations to deliver greater value from the customer's perspective
An action plan can include:
- Posting holiday meal ingredients and identifying where items can be found
- Printing shopping list templates in circulars, helping customers organize what they want to buy
- Creating circulars around meals rather than products
- Displaying ingredients needed for a meal in one location
- Devoting promotional space to displays of ready-to-heat, ready-to-eat and ready-to-cook products
- Offering specialized meal-planning services — even at a fee
- Providing better staff training and reap additional sales. This could be a gold mine, as 26 percent of shoppers rely on advice from meat department personnel, while 20 percent turn to deli counter staff
- Leveraging Web site planning tools
- Using social media tools to communicate about sales, promotions and menus
- Conducting cooking classes, after surveying customers to determine what they want to learn about meal preparation and how they define satisfactory and exceptional learning experiences
- Competing with carryout establishments by offering fresh, prepared, ready-to-eat foods that can be picked up without entering the store; considering drive-through, drive-up or deliver-to-the car capabilities
The full study is available at www.ccrrc.org.
Editor's Note: This is the first of a two-part series by Bill Bishop, research director for the Coca-Cola Retailing Research Council (CCRRC). Part 2 of the "Eating In" study will feature insights into dinner, lunch and breakfast opportunities.
The Seven Faces of Dinner
By better understanding the different needs of shoppers, you can make their dinner experiences easier and more satisfying, and your store more profitable.
1. Last-minute No-brainers: They want quick and filling food now — no thinking or planning. If it's not in the cabinet or the fridge, they'll turn to a restaurant for sustenance
- Use merchandising and marketing campaigns that help consumers plan for these nights
- Provide ready-to-eat foods that position your store as the destination of choice based on food and convenience
- Remind customers to prepare meals ahead of time, and encourage them to buy enough to generate leftovers or create a second meal
2. Thrifty Repeats: It's about food that doesn't cost a lot or should be used before it spoils
- Publicize the cost per serving vs. away-from-home cost of dinner
- Promote best-if-used-by dates for select dishes, providing stickers to guide timely use of leftovers
- Expand awareness of low-cost-per-serving supermarket-sourced meals built around carb-based center-store products that create leftovers
3. Tasty Creations: Fun-seekers want to nurture and experiment with food
- Occasionally promote more expensive entrees as treats
- Provide recipes for tasty, fun dishes
- Offer cooking classes, encouraging trial of new recipes
- Promote complete, quality ethnic meals for special occasions
4. Nourishing Fare: Serious about health and nutrition; diet, weight management and medical conditions are top drivers
- Offer recipes with portion size, calories and fat per serving, designed to support a healthy weight and lifestyle
- Use circulars and/or a Web site to promote good-for-you meals made from sale items
- Teach how to build healthy choices into planning, shopping and food consumption
5. Kids' Delights: Centered on meals that everyone likes, especially kids
- Publicize meals with high kid appeal
- Show Mom how to engage children in planning, preparing and the fun of cleanup
- Promote meals to keep on hand that enable the cook to surprise and delight anytime
6. Family Entertaining: Remember dinner at Grandma's house? It's all about bringing the family together, caring and serving comfortable favorite foods
- Highlight the benefit of families eating together
- Showcase right-for-this-occasion meals via in-store merchandising and Web site features
7. Hearty Fuel: Supports those craving large portions of hot, freshly made or doctored food to feed people who may eat at different times
- Offer fresh-prepared casseroles in service and self-serve refrigerated cases
- Provide recipes for popular casseroles in circulars
- Seize the opportunity to sell large sizes
- Co-merchandise with packaging that promotes storage and makes food easy to reheat