Inside the War for Fresh Food Sales

How does format and store size contribute to success in fresh? Chicago-based data provider IRI explored the topic in a webinar this week.

“Shoppers are expanding their consideration set when shopping for fresh foods to smaller and more niche outlets,” said Jonna Parker, principal, IRI Fresh Center of Excellence, during the "Balancing the Store Size Pendulum" webinar. 

Across all outlets, grocery has the lion’s share of perishable and perimeter food sales (64%), but IRI sees that margin eroding as purchases shift to other channels, such as convenience/gas, dollar stores and digital.

IRI reports that 23% of households purchased fresh foods from dollar stores, 19% from convenience/gas and 10% from Trader Joe’s in the 52 weeks ending March 31. Ten percent of households also purchased fresh foods online.

Consumers, particularly those in their prime spending years of 40-54, say they are buying more fresh at smaller format stores and online, according to IRI, which “fully expects” to see dollar and convenience stores continue to expand fresh food sales year over year.

But while competition is accelerating, the growth rate of fresh sales has slowed, Parker noted. 

“The fight for fresh dollars is more fierce than ever,” she said, adding that grocery is “almost at war” with the competition.

Last year was the tipping point in fresh sales, which had seen growth of as much as 5% earlier in the decade, but grew only 1% this past year—3% less than in 2014. Fresh is still growing, however, adding $7 billion in sales since 2014.

Convenience Trumps Price

IRI asked consumers to name the main reason they shopped for fresh at their preferred outlet and found that while price is important, convenience is vital.

“Convenience is actually trumping price,” said Sally Lyons Wyatt, EVP, center of store and produce, for IRI. She said that with smaller format stores, shoppers feel that they can run in and get what they need quickly and conveniently.

A number of larger format retailers are banking on the need for quick and convenient, investing in smaller footprint locations.

Minneapolis-based Target is reportedly launching some 30 small-format stores in urban areas and college campuses each year for the next few years. Global discount supermarket chain Lidl opened a 1,000-square-foot Express earlier this year, and Giant Food Stores of Carlisle, Pa., celebrated the opening of its 9,500-square-foot Giant Heirloom Market in Philadelphia in January, the first of four planned in that city.

“Many large retailers are opening smaller formats, but don’t make it a mini-me of your larger formats,” Lyons Wyatt said. The right format size often feels like a tug of war between fresh selection and store size, so understanding and customizing to neighborhoods is important.