Five ways grocers are adapting to modern tastes

 —  Article by JLL Staff Reporter
woman shopping in supermarket
Image credit: Shutterstock

Few people have time to visit numerous shops to collect all the ingredients they need for a fresh, high quality dinner.

Instead, they’re increasingly relying on the grocery industry to do the hard work for them, whether it’s a DIY salad in a convenience store, a healthy pre-prepared dish or even a meal kit delivery.

“Grocers are trying to keep up with shifting demand by making it easier for people to get what they want,” says James Cook, Director of Retail Research at JLL. “In recent years consumer demand for convenience has permeated the food retail industry, rewarding grocers that can offer quality with convenience.”

As such discounters and convenience store grocery sales grew by more than 5 percent globally between 2011 and 2016, while other grocers experienced growth of just 2 to 3 percent.

More than size counts, however, in the race for more customers and more loyalty. Here are five ways the grocery industry is adapting to deliver convenience, quality, and value.

1. Grocery or grocerant?

Some new entrants to the grocery scene are not actually full-fledged grocery stores, but grocerants. A hybrid of a restaurant and a grocery store, a grocerant offers the prepared-food section of a full grocery store. Conveniently located, grocerants make it easy to stop in on the way home to grab dinner that is already made.

In response, conventional grocers like H-E-B, Hy-Vee and Kroger are all investing more in prepared foods. Last year, Kroger launched a partnership with Lucky’s Market, a specialty grocery chain with a strong prepared foods department, to stay ahead of the food delivery services.

Also in 2016, Whole Foods launched its 365 by Whole Foods store concept to capitalize on the popular salad bar and prepared foods section in grocer’s traditional stores. The 365 stores not only offer lower prices, but also provide fresh and healthy food options.

2. Making cooking easy with meal kit delivery

Demand for fresh, healthy and fast meals generated 2016 sales of approximately $1.5 billion for meal kit delivery services in the U.S. like Blue Apron, Plated and HelloFresh. Europe is also developing a taste for having a helping hand with meal preparation; 72 percent of Italian, 67 percent of Spanish, and 57 percent of French consumers have used chilled meal kits, according to research from Mintel. And now, traditional grocers are eager to join the fray.

“Meal kit delivery services might not put traditional grocers out of business, but their rise shows how consumers prioritize food shopping,” says Cook. “The instant convenience that meal kits provide is extremely appealing to shoppers. Clearly, the grocers that respond with prepared foods will be the best equipped to compete with the meal delivery concept.”

3. New players and new formats in the market

Dollar and discount stores are making inroads into the grocery market. In recent years, Dollar General and dollar stores have stocked fresh produce, along with packaged sandwiches and salads, and frozen meals.

Last fall, Dollar General announced its plan to open up to 8,000 locations of DGX, a new, smaller store concept aimed at Millennial shoppers in urban settings. Next to grocery items and prepared foods, DGX will also offer a coffee station and grab-and-go sandwiches.

“DGX is an example of retailers serving customers in an urban core,” says Cook. “We expect see a continued focus on cities, with grocers experimenting with new store concepts with smaller footprints and vertical layouts that are fit into urban mixed-use projects.

4. Food meets technology

Some grocery stores are turning to technology to streamline the customer experience while also cutting overheads. Take Näraffär, the unmanned shop that recently opened in Sweden and that requires purchases to be made by an app on their Apple or Android devices.

Traditional supermarkets have also been experimenting with new tech. Walmart’s “Scan and Go” mobile app allows shoppers to bypass the checkout line by scanning bar codes on their phones as they shop, and then paying using the app. The concept is being piloted in a single store, but it may be available later this year in more stores.

Similarly, shoppers at 365 by Whole Foods can use their iPads to order food to go and find the perfect wine.

“While you may not see iPads replace people in every grocery store in 2017, expect for more and more grocers to experiment with mobile ordering technologies that link to curbside pickup or deliveries,” predicts Cook.

5. Focus on fresh and healthy products

Around the world, demand for healthy food continues to grow. The International Food Information Council found that sales rose 13 percent last year for foods labeled with a health attribute, compared with relatively flat sales on other items.

Healthy and affordable food is also making its way into more grocery stores, creating new competition for Whole Foods. Aldi and Lidl, the ultimate discount grocery stores, are expanding their organic, gluten-free and additive-free brands—but at a lower price than Whole Foods.

Fresh and healthy eating, it seems, has never been more convenient.

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