The New Consumer: Foodservice blurs with retail

The blurring of foodservice has been embedded as a key trend in U.S. grocery retailing for a number of years. However, the need to better meet changing shopper needs, and particularly those of Millennials (aged between 18 to 34), is accelerating this. Retailers are aiming to win in this space with Millennials through providing more convenience, inspiration around meal solutions, and meeting more of their daily food needs.

But their needs go beyond this. There is also a much stronger interest in discovering and supporting local producers, understanding the ethics and ingredients of the products they are consuming and are more likely to eat out of home, more often.

At Wegmans Food Markets prepared foods, such as freshly rolled sushi, are among the primary traffic drivers.

Many operators, such as Wegmans Food Markets and Whole Foods Market, have been on the front foot in this area, developing store formats where prepared foods are one of the primary traffic drivers. They offer a broad range of food choices and flexible options around where the products are consumed. However, we are now seeing a broader range of retailers starting to test and experiment in this area.

One of the best new store formats I saw last year was Ahold’s bfresh concept. This offers more natural and organic options than a typical supermarket and has meals prepared in-store, using the model adapted from the La Place Dutch restaurant chain. This has enabled the retailer to launch an innovative and differentiated offer in a very urban setting, where younger shoppers are a key target demographic. The concept has been developed with the needs of local shoppers very much front of mind, many of which visit on a frequent basis in search of immediate meal solutions and new ideas.

Millennials are also a key target group for Walmart. Earlier this month, the retailer’s chief merchandising officer, Steve Bratspies, spoke about how quickly the customer is changing, and how significant a group Millennials have become. As a result, the retailer is also having to think differently about its stores. As part of its recent supercenter reinvention program, Walmart has made a dramatic shift with its prepared foods offer, introducing sushi chefs, a new pizza program and BBQ meats. As an alternative to the usual chain restaurant, such as McDonald’s or Subway, the in-store dining experience is run by a local food truck operator.

At Target, bold moves are being made to reinvent the food offer in order to make it more relevant for Millennials. Like Walmart, it is also testing some new ideas around its food-to-go offer, introducing concepts from companies such as Freshii, recognizing that Millennials are also showing a much stronger interest in health and wellness. They are also less interested in traditional fast-food concepts.

But for some retailers it is more than about tweaking existing formats. Earlier this year Kroger launched its “Main & Vine” concept, with prepared foods playing a central role. Gaining capability in this area, and particularly meeting the needs of urban shoppers, was one of the factors behind the recent acquisition of Roundy’s, which also included the Mariano’s chain.

And in what is becoming one of the most anticipated new formats this year, “365 by Whole Foods Market,” will launch in May, a concept that the retailer has described as being a “values-orientated experience geared towards Millennial shoppers.” Given this, and the retailer’s heritage in prepared foods, expect to see something very unique.

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Over the next two to three years, I expect to see a greater number of retailers increase their investment in this area. But this will place new demands on them, and as I have often seen, food retailers do not always make the best foodservice operators. For many, new capabilities will be required, and as a result expect to see more partnerships develop as retailers bring in external expertise and know how. However, the challenge for the foodservice brands, particularly smaller, local companies, is to limit the risk of over-exposure and being seen as just another chain as they partner with larger grocers.

Which foodservice brands would you like to see in a retail environment? Which ones do you think could make a successful transition?