History In The Making

June 2017 may very well go down as one of the most transformative months in the history of the grocery industry.

The biggest shocker came on June 16, when e-commerce giant Amazon revealed plans to acquire Whole Foods Market for $13.7 billion in cash. The bulk of speculation surrounding the deal centers on Amazon’s plans to use Whole Foods’ network of 460 brick-and-mortar stores as a springboard to further grow its e-grocery business, and its e-commerce business in general. Its stores can serve as convenient pick-up points for Amazon Prime customers to not only get their organic groceries, but also the cookbooks, pots and pans, utensils and appliances to prepare them with, too.

The news of the bombshell deal caused stock values in the traditional supermarket sector – including for the market’s stalwart performer, The Kroger Co. – to plummet, at least momentarily, as Wall Street questioned what the impact means for the future of shopping, and indeed the survival of the supermarket industry as we currently know it. Also taking a beating were the stocks of publicly held REITs, many of which own supermarket-anchored strip centers. The fear is that if the supermarkets close, so too will the small mom-and-pop ancillary shops, leaving gaping holes along highways and main drags across the nation.

Amazon’s surprise announcement coincided with – if not overshadowed – the other big industry-changing story of the month: Lidl’s long-awaited U.S. debut on June 15.

The German hard discounter opened the first nine of 100 initial stores it plans to open along the Eastern Seaboard by the end of next year, with hundreds more reportedly set to follow in ensuing years. The stores opened to great fanfare, attracting throngs of shoppers on opening day, and are said to be a more upscale version of fellow German arch rival, Aldi.

I attended a media open house that Lidl officials hosted in New York in mid-May, about a month before the first stores opened. Held in a loft space, stations were set up around the room, allowing press attendees to sample just some of Lidl’s extensive selection of private label products. Company officials pointed out that many  – including most of the cheeses and the wines – are award winning, and upon sampling, it was easy to see why.

Servers passed around hors d’oeuvres made with Lidl private label products that were created by celebrity chef, Amanda Freitag.

“I’ve shopped Lidl in Europe and asked myself, ‘Why can’t we have that here?’ Well, it’s coming!’” she told the audience. Among her hors d’oeuvres sampled were scallop ceviche made with MSC-certified wild jumbo East Coast scallops and crostini made with store-baked artisan bread topped with thinly sliced aged Black Angus ribeye, onions and Gruyere cheese.

“Some grocery stores have an elitist quality to them, and I think it is really important to get these beautiful quality products at an affordable price,” Freitag said. “Everybody is a foodie nowadays. People watch the Food Network and are cooking all the time. They see us talking about all of these great products and they want to be able to get them. I think Lidl is going to change the face of the grocery store and make it accessible for everyone. I am really excited about that,” Freitag said.

Freitag’s hors d’oeuvres – and everything sampled that evening, including the croissants and fancy chocolates – were indeed delicious. I think shoppers will initially be excited by Lidl stores, but it remains to be seen whether the limited assortment of SKUs, lack of national brands, and bare-bone atmosphere and services – including requiring shoppers to bring their own bags or having to buy one, for instance – will be a long-term sustainable hit with shoppers.