“Grab and go” and fresh/prepared food options are shaking up the food business, with significant implications for marketers, real estate professionals, and store designers. Operators on the forefront of these demand shifts stand to make gains in revenue, “share of stomach”, and margin.
For grocers, as center store revenue growth slows, growth in fresh and prepared options continue to accelerate. Store resets that put ready to eat options up front, expanded selections that go beyond salad and fruit bars, and a keen focus on the shopping experience are less and less differentiators, and more and more table stakes.
Marketers must respond to this continuing shift by moving beyond basic shopper segmentation approaches to understand how consumer behaviors differ both by how the shopper wants to buy, but how that same shopper wants to buy differently across different categories and different competitors. For fresh and prepared foods in particular, grocery marketers need to consider how convenience stores are positioning themselves. Speed of checkout is a key driver of satisfaction for fresh and prepared purchases, and convenience stores are increasingly viewed as a much faster and easier option than grocery stores.
The pressures on margins created by the rise in demand for pick-up and delivery options means operators will of necessity move beyond the traditional large box and explore different formats. Amazon Go is only the most notable example of a radically different format and experience. Is it a grocery store or a convenience store? Small format stores accounted for a substantial portion of the 30% growth in new store openings last year.
Bottom line: in this rapidly moving space, the implications of shifting consumer preferences and accelerating category growth requires a far-sighted perspective on how your brand should compete, a laser-like focus on the customer, and a nimble approach to driving change.