Target’s food and beverage chief: Grocery offers ‘gateway to the rest of the store’

The grocery category isn’t just bringing more shoppers to Target Corp., but it’s also creating more dedicated customers, according to Rick Gomez, executive vice president and chief food and beverage officer.

At Minneapolis-based Target, food and beverages are a growing business, expanding from 19.4% of sales in fiscal 2021 to 21.3% in fiscal 2022, or $22.92 billion. Year over year, food and beverage sales climbed roughly 12% for fiscal 2021 and then about another 13% for fiscal 2022. So far for fiscal 2023, even with inflation relaxing, food and beverage sales were up 5.7% to $11.39 billion for the first half ended July 29.

“Food and beverage has taken on a different role. I think, for many years, food and beverage at Target was a bit of a pain point, and our results were a little bit lackluster. And then, over the last several years, we have been investing in the business,” Gomez told Winsight Grocery Business at a Target event on Monday in Manhattan. “What we’ve seen is not only has the business started to grow and to drive traffic, but it’s actually appealing to our most loyal guests.”

Rick Gomez, EVP and chief food and beverage officer at Target. / Photo courtesy of Target

Indeed, it’s tough to overstate grocery’s importance to Target’s multi-category shopping formula, which spans apparel and accessories, beauty and household staples, food and beverages, hardlines, and home furnishings and decor. The retailer has previously said that more than 70% of customers shop for consumables, and these guests shop more often and spend more money.

Related:Inside Target’s push to become a Halloween destination

“We actually see food and beverage as a way to not just drive traffic, but build loyalty among our best guests,” Gomez said. “So it’s almost like food and beverage has become a gateway to the rest of the store.”

Target’s in-store food and beverage offering includes center-store grocery items plus dairy, frozen, drinks, candy, snacks, deli, bakery, meat, produce and foodservice. The grocery department houses a mix of own brands and a curated assortment of national brands and exclusive labels, catering to regular food shoppers, customers stocking up their pantry and those seeking snacks, meal solutions or inspiring recipes. And today, Target’s grocery area serves up more food and beverages than ever before, whether that be traditional packaged groceries or fresh foods.

“Our food and beverage business has been growing. We’ve been opening up more small formats recently, here in Manhattan and college campuses. And what we're seeing is food and beverage represents oftentimes 40% to 50% of the mix,” said Gomez. “And our fresh business is doing incredibly well. We’ve made big changes to specifications and quality control to deliver better, fresher product.”

Related:Target doubles down on grocery for the holidays

Growing along with Target’s food business has been another fresh category: floral.

Good & Gather provides catalyst

“One of the businesses that has taken off for us is floral, whether it’s pumpkins, flowers or poinsettias, we’re seeing a 20% comp year on year in floral,” Gomez said. “And this is fresh—fresh flowers, plants, pumpkins, etc.”

Still, leading the way for Target in grocery is its Good & Gather own brand, launched in September 2019. The four-year-old brand—spanning nearly every category in food and beverages—took less than a year to top $1 billion in sales, passed $2 billion after two years and, according to Gomez, is now well over $3 billion and on its way to $4 billion.

“It has become the largest own brand at Target,” he explained. “I would say a lot of our [food and beverage] growth is because of Good & Gather. In some ways, it has become a little bit of the crown jewel of our portfolio. It really represents Target at its best—high quality, on-trend products at an affordable price. I mean, that’s Target, and that’s what Good & Gather delivers.”

Related:Target adds baby, toddler snacks to Good & Gather brand

In fact, Good & Gather has become a brand family, including Good & Gather Plant Based, Good & Gather Signature (a premium line of foods), Good & Gather Seasonal, Good & Gather Organic and Good & Gather Kids. Target also offers Favorite Day, a premium, indulgent food brand.

“What we just launched this fall, which I’m very excited about, is Good & Gather Baby and Toddler,” Gomez said. “That is taking Good & Gather to a whole new life stage. Families with young kids are so important to Target, and to have handheld snacks, teething bars, fruit pouches, etc., all under Good & Gather is a great for the brand.”

Target, too, has bolstered grocery on the merchandising front. “What we’re doing now is getting better at storytelling in food and beverage cross-category,” Gomez said. “So now, when you go into a Target, you’ll see us have a fall statement with pumpkins, cider and pine cones, and it’s a full cross-category seasonal statement. That’s new for us, really showing up with visual merchandising in food and beverage like we do in the rest of the store.”

Food and beverages have been a driver of curbside pickup traffic as well. In the summer of 2020, Target began enabling customers to order fresh produce, dairy, bakery and meat plus frozen items via Target.com or the Target mobile app and then pick them up at a store.

“What happened during the pandemic is our food and beverage business through digital skyrocketed, and we continue to see strong growth in our food and beverage digital business. We saw a lot of traction with Drive Up, and during the pandemic we expanded it to fresh, frozen and adult beverages,” Gomez said. “And we’re continuing to see growth in Drive Up. I’m actually really excited because we’re continuing to innovate in that space. This month, we just launched Drive Up with Starbucks. So when you come and get your groceries or whatever you want from Target, we’ll ask you, ‘Would you like to get a Starbucks with that?’ And you can now order a hot or cold Starbucks with your Drive Up.”