Trends in Grocery RetailAuthored by Steven ConwayDate: 2008

Then…

And Now

Evolution of Retail

Grocery retail very much different vs. ten years ago• Organics and “all natural” products permeate all shelf space• International food exposure drives demand for products at retail

Manufacturers and retailers develop new retail environment• Time crunch drives ready-made growth• Lux touches go mainstream with specialty sections (i.e. cheeses,

wine, olives).• Desire to be destination of choice in increased competitive food

retailing drives lifestyle store formats

Consumer behavior drives grocery retail

4. Environmentally Aware

5. Economic Pressure

Private LabelGo Green Initiatives

3. Health Conscious

Education

2. Variety Desired

Niche Aesthetics

1. Convenience Key

Quick Trip SolutionDisplay

Ready-Made Semi-Homemade Digital

Convenience Key

1. Convenience Key

Quick Trip SolutionDisplay

Ready-Made Semi-Homemade Digital

Consumers look for DIFM alternatives

Consumer behavior: Overscheduled, seek ready-made foods to alleviate pressure of cooking

Retail challenge: Fighting for share of meal dollars against takeout and restaurants

Retail solution: Ready-made meals & sides to accommodate

lifestyles– Example: Whole Foods, Tesco Fresh and

Easy Market, Safeway’s Citrine Bistro, and Lund’s Market.

Source: Progressive Grocer, August 2007 Iconoculture

Whole Foods Salad Bar

Consumers want short cuts - retail delivers solution

Consumer behavior: Lack of time for meal planning, tired of defaulting to same old standby meals

Consumer challenge: Finding new meal ideas, gathering ingredients

Retail solution: Solutions displays—multi-category promotions ideas from meals to spring cleaning

– Example: Fresh Express, ready-to-eat salads, works with retailers & thirty other brands to bundle together meal solutions

Source: IRI. Times and Trends. August 2007

Fresh Express bundle meal solutions

Consumers think of “homemade” in a new way

Consumer behavior: Desire to control what family eats, but lack of time and know-how to make multi-faceted meals

Consumer challenge: Shortcuts to make prepared + fresh = homemade

Retail solution: Dinner assembly sessions

– Example: Publix Apron’s Make-Ahead Meals, customers register for sessions, create meals using retailers ingredients and selection of recipes

Publix Apron’s Kitchen Line

Source: TheLedger.com, November 2007

Consumers want streamlined shopping experience

Consumer behavior: Limited time, want to get in and out of grocery stores

Retail challenge: Desire to interact with consumers and provide better shopping experience

Retail solution: Create programs that make shopping easier i.e. text messaging coupons, touch screens, smart carts

– Example: Kroger links consumer cell phone with bank accounts for quicker check-out.

– Example: Microsoft MediaCart navigates consumers around store and check them out

Source: IRI- August, 07, www.mediacart.com

ShopRite MediaCart

Consumers low on time refill on quick trips

Consumer behavior: Time crunched, gathering staple items on the fly via quick trips – mission shopping for essentials i.e. bread, milk, juice

Retail challenge: Convenience stores grocery section

Retail solution: Offer essential items typically found at the back of the store in the front

– Example: Retailers create secondary milk displays in front of store.

Source: IRI. Times and Trends. August 2007

Variety Desired

Aesthetics4. Environmentally

Aware

5. Economic Pressure

Private LabelGo Green Initiatives

3. Health Conscious

Education

2. Variety Desired

Niche Aesthetics

Consumers shopping needs vary, retail goes niche

Consumer behavior: More needs & higher expectations: variety, specialization, price—ALL factors—no one stop fits all

Retail challenge: Consumers shop by need state, average 3.6 stores

– Retailers roles: Wal-Mart= broad variety of goods, Costco= bulk food items, Trader Joe’s = unique items, Jewel= staple food items, plus bakeries and butchers on rise

Retail solution: Increase breadth of offering to satisfy consumer needs and drive floor traffic

– Example: Retailers transition from offering staple only items to greater breadth and higher-end products & services

Source: Speciality Food Magazine. “Supermarkets Go Specialty” May 2006 The Wall Street Journal. “Business Insight, Dec. 2007

Consumers multi-shop shopping, competition to be destination of choice

Consumer behavior: More needs and more retail options, no need to default to traditional grocers

Retail challenge: Be the destination of choice for consumers

Retail solution: “Lifestyle” stores, compete with higher end stores and

discount retailers– Example: Safeway Lifestyle stores: increased prepared

foods, locally sourced, natural and organic products, sushi stations, larger delis, cooking demonstrations, full service butcher, Starbuck’s & Jamba Juice Safeway’s Perishables Display

Source: Speciality Food Magazine. “Supermarkets Go Speciality” May 2006 Associated Press, December 2007

Consumer don’t want to be bombarded

Consumer Behavior: Consumers want a less intrusive retail environment while shopping

Retail Challenge: Balance satisfying merchandisers and consumers

Retail Solution: Create a cleaner retail environment which creates a better shopping experience

– Example: Restricting number, size, & configuration of in-store displays

Variety Desired

4. Environmentally Aware

5. Economic Pressure

Private LabelGo Green Initiatives

3. Health Conscious

Education

2. Variety Desired

AestheticsNiche

Consumer seek clarity on “healthy”

Consumer Behavior: Health conscious, overwhelmed with competing information

Retail Challenge: Taking back control, providing added value by educating consumers

Retail Solution: Act as an authoritative source, create systems that identifies better for you foods

– Example: Hannaford supermarkets rate the nutritional value of their items on a scale of zero to three stars.

– Example: Kraft’s line of sensible solutions educates consumers on choosing healthier ingredients

Source: New York Times ( 11/2006, 9/2007)

Environmentally Aware

4. Environmentally Aware

5. Economic Pressure

Private LabelGo Green Initiatives

3. Health Conscious

Education

2. Variety Desired

AestheticsNiche

Consumers become environmental advocates

Consumer Behavior: Increased concern & education about greener and sustainable products

Retail Challenge: Consumers seek out environmentally consciousretailers and products

Retail Solution: Retailers and brands adopt green practice

– Example: Wal-Mart opens high efficiency stores. Whole Foods offers “A Better Bag”

Source: Agri-Food Canada. Going Green: The Future of the Retail Food Industry, July 2007

Economic Pressure

4. Environmentally Aware

5. Economic Pressure

Private LabelGo Green Initiatives

3. Health Conscious

Education

2. Variety Desired

Aesthetics

Consumers increase preference for private label

Consumer Behavior: Consumers seek high quality but demand lowprices

Retailer Challenge: Private label has been perceived as low quality and poor imitations of national brands

Retailer solution: Drive innovation in overall quality, packaging, and ingredients

– Example: 70% of consumers think private label products are as good, if not better, than national brands

Source: Mintel. Organic Foods - October 2007

Consumers taste profiles expand

Consumer Behavior: Consumers demand unique flavor offerings andorganic products

Consumer Challenge: Finding these products on a wide scale across multiple product offerings

Retailer solution: Evolve private label to branded status, elevate consumers trust and increases awareness

– Example: Only 56% of consumers could identify Target’s “Archers Farms” as a private label brand.

– Example: Safeway’s O Organic line anticipates $300 million in sales for 2007

Source: Mintel. Organic Foods - October 2007

Thank You