Dare to Differentiate | Retail Loyalty Congress 2019 | Amsterdam September 24 & 25th

What the shift towards fresh means for retail 

What does the healthy food trend mean for supermarkets?

What the <strong>shift towards</strong> <strong>fresh</strong> means for retail&nbsp;
What the <strong>shift towards</strong> <strong>fresh</strong> means for retail&nbsp;

In recent months, Kellogg’s – the maker of Keebler cookies, Frosted Flakes, Pop-Tarts and Pringles –posted a 2.5% decline in second-quarter sales due in part to a consumer shift toward fresher, healthier foods. Kellogg’s wasn’t the only big-food brand to see its sales slip: Kraft Heinz, General Mills and Pinnacle Foods (Duncan Hines, Birds Eye) did as well. What does this trend towards healthier food mean for supermarkets?

Making way for a healthier diet
Consumers are now starting to demonstrate a preference for more natural foods – a change in behaviour which has been facilitated by supermarkets themselves. Many stores are choosing to dedicate more space to healthier options, including wholesome prepared meals, private labels and in-store dining, all of which are putting a squeeze on the middle aisle. Few events may accelerate this change as dramatically as Amazon’s recent acquisition of Whole Foods. Through Amazon and its Prime two-day delivery programme, Whole Foods could sell more of its shelf-stable goods, including its 365 Everyday Value brand, online. This could free up more in-store space for restaurants, fresh prepared meals and natural foods. Other supermarkets are paying attention, and many are likely to follow its lead.Wall Street agrees. Shares of stocks in packaged food companies fell more than 11% in the last year, while the rest of the index rose by nearly 14%, according to a report by CNBC.

Dining is in; processed is out 
For major food manufacturers, renovation may mean adding a new kitchen – in the supermarket. A growing number of grocery chains, including Whole Foods, are upping their investments in takeaway and dine-in experiences:

  • H-E-B opened its first restaurant drive-through (a BBQ spot) in August 2017.
  • The natural-foods chain Sprouts Farmers Market offers a variety of dishes that can be ordered, including fresh fruit trays, vegetable trays, and sushi trays.
  • Kroger plans to open a store in 2019 that will include a second-floor bar, a food hall, a variety of restaurants operated by third parties, and ready-to-eat items provided by vendors

As more square footage is dedicated to dine-in and takeaway foods, the shopper dollar will be similarly allocated. Chains that focus on healthier fare are already at an advantage – sales at stores that sell more fresh foods rose by 4% in 2016, compared with 1% for other stores.getting in on the game too. Recently, Kraft Heinz partnered with Oprah Winfrey on a line of comfort foods, called O, That’s Good, all of which are free of artificial flavours and colouring. Similarly, many big-food companies are creating or buying up healthy labels. General Mills has bought Annie’s Homegrown; Pinnacle Foods now owns Evol and Earth Balance; and Unilever, owner of Ben & Jerry’s, is investing more in natural ingredients. Still, with so many supermarkets controlling their own healthy-eating options, packaged foods makers are at a disadvantage. They need to catch up faster. But to go where? If the middle aisle is shrinking, where will these healthier options be stocked?

The solution may be a new merchandising categorisation that blends all health foods - packaged and fresh - to reflect the shopper's path. Bryan Pearson, President and CEO of LoyaltyOne

Private labels are cleaning up
Big food manufacturers face their toughest competition on the same shelves, where they are all fighting for attention. Private label foods, which are becoming a staple for an increasing number of major retailers, are penetrating the packaged-food aisle in greater numbers and with more natural ingredients, threatening to shoulder out big-food brands. In-store brands now account for 14% of all grocery sales, according to a UBS analyst interviewed in a report by American business news channel CNBC. Kroger’s private-label portfolio, which includes its growing Simple Truth and Simple Truth Organics lines, represents more than 14,000 items at a store, according to its annual report. Whole Foods’ exclusive brands, led by 365 Everyday Value, accounted for 15% of its sales in the 2016 tax year. Most grocers – in fact, 72% of them – see healthier foods as a gateway to private-label expansion, according to the Food Marketing Institute’s 2017 Report on Retailer Contributions to Health and Wellness. So it’s not surprising that retail observers expect Amazon to extend its private-label offerings through the Whole Foods 365 brand. If so, more of these items would be available online, with two-day free shipping for Prime members. Should sales of 365 goods shift significantly to Amazon, there could be a good reason to reduce the number of them on Whole Foods’ shelves, and ship them directly from the warehouse instead.

Blends of fresh solutions
Packaged food makers are also scrambling to adjust, so they’re getting in on the game too. Recently, Kraft Heinz partnered with Oprah Winfrey on a line of comfort foods, called O, That’s Good, all of which are free of artificial flavours and colouring. Similarly, many big-food companies are creating or buying up healthy labels. General Mills has bought Annie’s Homegrown; Pinnacle Foods now owns Evol and Earth Balance; and Unilever, owner of Ben & Jerry’s, is investing more in natural ingredients. Still, with so many supermarkets controlling their own healthy-eating options, packaged foods makers are at a disadvantage. They need to catch up faster. But to go where? If the middle aisle is shrinking, where will these healthier options be stocked?

Customer-centric pathways
I think the solution may be a new merchandising categorisation that blends all healthy foods – packaged and fresh – to reflect the shopper’s path. Think of the refrigerated salad dressings in the produce aisle. All-natural cereals can be displayed near organic milk and berries; sugar-free condiments near the fresh meat case; and canned soups near wholegrain, fresh bread. Those labels that make the cut will simply meet the shopper’s desire for honest nutrition at a fair price. It would require a complete shake-up of the food store format, and such change might not be well met, but small-format stores can serve as tests. After all, smaller food footprints will likely become by-products of the transition to fresher food. 

The solution may be a new merchandising categorisation that blends all healthy foods - packaged and fresh - to reflect the shoppers' path. 

More about our company

Learn more about our vision and our loyalty family, including Alliance Data and Loyalty One. 

Go to overview
More about&nbsp;<strong>our company</strong>?&nbsp;

Want to receive Hearts and Wallets?

Hearts and Wallets is available to you digitally or in print, to add your name to the distribution list contact us below

Request Hearts and Wallets