Welcome to the Future of Foodservice

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Welcome to the Future of Foodservice

By Mike Troy - 10/02/2020
Welcome to the Future of Foodservice

Between displaced demand from restaurants, constant innovation, and new safety and operational challenges, the retail foodservice industry has been through more in the past six months than in the prior six years. Throw in continued uncertainty regarding consumer behavior and COVID-19 this fall, and impossible sales comparisons in the spring, and food retailers are faced with a set of circumstances unlike anything they’ve dealt with before.

For many of those seeking insights into what the future holds and how to navigate the uncertain retail foodservice landscape, the solution was to attend Progressive Grocer’s Retail Foodservice Innovation Summit, held Sept. 30-Oct. 2. The first-of-its-kind event featured 35 speakers and 25 sessions designed to enhance the industry’s knowledge of a highly dynamic market and reveal new strategies and solutions consistent with PG’s value proposition of “ahead of what’s next.”

See What You Missed

The views shared in this article are a small sampling of the unique perspectives and insights presented by the 35 speakers who participated in the Retail Foodservice Innovation Summit. Replays of all of the sessions are available online through the end of October. Catch the on-demand version of the event.

Understanding what’s next in food retailing and retail foodservice, let alone getting ahead of it, is a challenging proposition with many layers. Accordingly, speakers presented an array of viewpoints on daily themes of insights and innovation, safety and foodservice solutions, and transformation trends and 2021 disruption, all with an emphasis on retail foodservice innovation.

“Foodservice at retail was on a great trajectory prior to the pandemic,” said Rick Stein, VP of fresh at Arlington, Va.-based FMI The Food Industry Association, in a summit presentation. Stein noted that the pandemic-driven safety considerations that affected retail operations led to a surge in dinners prepared at home and changes in preparation methods, with the concept of semi-scratch growing in popularity. “Ready-to-cook is making a big comeback during the pandemic,” Stein explains. “Going into the pandemic, meal kits were dead, but what’s come out of the ashes of meal kits is meal bundles.”

Rick Stein, FMI
Rick Stein, FMI

Stein shared insights from FMI’s fifth annual “Power of Foodservice report,” which included a consumer survey conducted in late July and early August. At the time the survey was conducted, 40% of people said that  they were avoiding foodservice offerings such as grab-and-go, salad bars and hot bars, but 60% indicated that they desired those products. Another 67% indicated that they were OK with retailers opening self-serve as long as precautions were in place and safety measures were communicated.

Beyond the basics of safety measures, the big opportunity going forward, according to Stein, is to elevate awareness of prepared foods and digitally integrate the offerings so they are available for pickup or delivery.

One retailer that has led in that regard is Casey’s General Stores. The Ankeny, Iowa-based operator of 2,200 convenience stores is well known for its prepared foods and pizza: It’s the nation’s fifth-largest pizza chain, and recent enhancements to its digital experience and loyalty program bode well for further growth.

Art Sebastian, Casey's
Art Sebastian, Casey's

Art Sebastian, Casey’s VP of digital experiences, described how Casey’s launched a mobile app last year that features appetizing product visuals, along with great functionality that makes it easy to order and reorder. The app is integrated into Casey’s loyalty program, so relevant offers can be served.

“We want to create frictionless digital experiences,” Sebastian said.

Casey’s efforts with prepared foods are representative of the larger trend in convenience retailing which involves companies looking to play a larger role in consumers’ “what’s for dinner or lunch” conversations.

“Convenience channels seem like they are able to win meal occasions because the stores are convenient and they are elevating their offerings,” said Scott Aakre, VP of consumer insights and corporate innovation at Austin, Minn.-based Hormel Foods. Aakre noted that the inverse of that opportunity exists for grocers that are already good at prepared foods and store experience, but could become more convenient.

Scott Aakre, Hormel Foods
Scott Aakre, Hormel Foods

Aakre was a participant in a panel discussion on “The Intersection of Change: Foodservice, Grocery, E-Commerce and Restaurants,” along with futurist Garrett Law and fellow Hormel executive Jeff Frank, VP of foodservice marketing.

The topic of the blurring of traditional channels was a recurring theme throughout the summit as major food industry players increasingly compete with one another in new ways.

Constant Pivoting With Prepared Foods

“The prepared foods business has always been about presenting the best of the best, and understanding that consumers eat with their eyes first,” said Juan Romero, founder and CEO of api(+), a Tampa, Fla.-based retail design, branding and architectural firm. “Now retailers are turning prepared foods into packaged foods, so packaging is becoming more critical.”

So, too, is where foodservice is located in the store. Romero envisions food retailers positioning foodservice nearer store entrances to aid with convenience, and also to facilitate carryout service. He additionally foresees drive-thru lanes becoming part of new store designs.

Gina Acosta, Progressive Grocer
Gina Acosta, Progressive Grocer

The newest Wegmans Food Market store that recently opened in West Cary, N.C., didn’t have drive-thru lanes, but the highly regarded provider of prepared foods did include dedicated parking spaces for customers picking up orders. PG Executive Editor Gina Acosta highlighted grocers’ innovation during her presentation, “A Case Study of Excellence in Action at Wegmans Food Markets and Lowes Foods.” Both retailers have extensive foodservice operations, with Rochester, N.Y.-based Wegmans devoting about one-third of its new store to foodservice and Winston-Salem, N.C.-based Lowes devoting one-fourth of its store in a nearby market to prepared foods, according to Acosta.

Rachel Shemirani, Barons Market
Rachel Shemirani, Barons Market

Meanwhile, on the other side of the country, the nine-store Barons Market chain in Southern California offered innovative wrinkles of its own. Rachel Shemirani, an SVP with the Poway, Calif.-based company, which is highly regarded for its prepared foods, described a situation of constant pivoting and making large decisions very quickly as the pandemic unfolded. That’s a situation that all grocers have dealt with, and in the case of Barons, it meant converting the self-serve food bars to full-service and adjusting product offerings. The company also converted its self-serve bulk food area to a pre-packaged program that was so well received that Shemirani questioned whether it makes sense to bring back self-service once the pandemic is over.

On the other side of the planet, Retail Foodservice Innovation Summit attendees heard from Xulin Guo, chief of staff and business assistant to the CEO of Alibaba’s grocery business, which operates under the brand Freshippo. There are currently more than 200 Freshippo stores in more than 20 cities in China, and they were designed with the purpose of integrating the online and offline shopping experience.  The stores incorporate all kinds of cutting-edge technology, including robotics, unique services, overhead conveyor belts, prepared foods, 30-minute delivery, and new types of payment methods that provide a glimpse of what innovations could come to the United States.

Xulin Guo, Alibaba, Freshippo
Xulin Guo, Alibaba, Freshippo

During his presentation, Guo said that 75% of Freshippo sales are digitally enabled.

One area of innovation touched on during the three-day virtual event involved ingredient transparency, preparation methods and product discovery. For example, Emma Ignazewski, a corporate engagement strategist with The Good Food Institute, in Washington, D.C., noted that as plant-based products have gained popularity, that has created new expectations among shoppers, who are looking for plant-based options among retailer’s prepared food offerings.

Opportunity Abounds in Prepared Foods

As FMI’s Stein observed, prepared foods were on a solid trajectory prior to the pandemic. That trajectory could resume and accelerate in the years ahead, according to Brian Doyle, managing director and global Future of Food lead with Dublin, Ireland-based Accenture, and Jeremy Dawkins, global head of design with ?What If!, an innovation consultancy acquired by Accenture 18 months ago.

“We believe there is a $1 trillion opportunity for food at home to give people back what has been lost,” Doyle said. “The home is going to be the place where people socialize over the next six months.”

Brian Doyle, Accenture
Brian Doyle, Accenture

Doyle also believes that the work-from-home trend will stick, with one-third of employees working from home regularly, which he described as a conservative estimate, but that phenomenon influences where people eat meals.

Looking ahead at the demand environment for retail foodservice, several speakers shared views about how economic conditions are likely to unfold and the implications for how America eats.

José Gomes, the Chicago-based president of dunnhumby North America, sees competition heating up in the fall as supply chains have recovered somewhat and demand has begun to normalize. As a result, he sees a heightened promotional environment, with a significant round of price investment coming as grocers look to build back trips and generate store traffic. He also envisions a double-dip recession as dunnhumby’s proprietary “worry index” remains elevated.

Catherine Lee, Wolfe Research
Catherine Lee, Wolfe Research

Consumers are worried, and until a COVID-19 vaccine and widespread immunization happen, traditional food spending patterns will remain disrupted, according to Catherine Lee, co-head of consumer at New York-based Wolfe Research. Speaking on the topic of “Wall Street’s View of the Competitive Food Landscape,” Lee offered two key takeaways about how investors are viewing food retailers’ unusual near-term situation and 2021 outlook.

“We think that sales will remain elevated through the balance of 2020, up at least 5% industrywide, and while 2021 comps will be negative, they should still be up mid-single digits on a two-year stack basis,” Lee said.

That view is supported by the fact that restaurants are still operating at reduced capacity, resulting in displaced demand, and winter weather is going to make outdoor dining impractical in most parts of the country. Those factors will benefit food retailers’ sales this fall and winter. However, comps will turn negative in the spring, according to Lee, as retailers lap the pantry- loading effect and the impact of restaurant closures that began in March.

Once a vaccine emerges, food retail sales growth will slow, “but we don’t expect an immediate snap back to restaurants,” Lee predicted. “We think there will continue to be some individuals who are concerned about the virus, and there will be pockets of consumers who do not get the vaccine.