It is common knowledge in the food retail industry that shoppers are spending an increasing amount of their grocery budgets on store perimeters, but there is still more work to be done when it comes to making the most of the sales opportunities presented by the fresh foods that reside on the perimeter. The opportunities available in fresh foods is shaping up to be a major theme this week at the Food Marketing Institute‘s FMI Connect show in Chicago.
Sales on the perimeter of the supermarket are growing at 6%, while the rest of the store experiences a growth rate of about 3%, IRI Executive Vice President Larry Levin told FMI Connect attendees Tuesday.
“Perimeter is the epicenter of growth,” he said.
Levin defined the perimeter as including bakery, cheese, deli, meat and seafood, prepared meals, which he said accounts for about 7% of the perimeter but is driving 12% of growth there, and produce, with produce not only accounting for the largest share of the perimeter, but also holding a great deal of potential. A good produce department is capable of holding shoppers’ attention for more than 10 minutes, while a poor produce department will keep shoppers there for only about a minute, he said.
Levin covered some of the major trends in fresh foods that retailers must account for if they want to make the most of their fresh efforts, the first of which was transparency.
“Consumers want to know anything and everything about their food,” he said. “It’s critically important.”
Chief among the information that consumers are looking for in the foods they buy are certain claims, including organic, natural and free-from claims, Levin said. When it comes to opportunities in fresh foods, growth drivers include sustainable seafood, foods with information about GMOs and food companies that pay fair wages and treat animals fairly. Regardless of the information they are seeking though, consumers just want the opportunity to access information about their food, according to Levin.
“Food transparency really pays off,” he said.
New supply chains, especially regarding local networks, was another trend in fresh foods that Levin covered. Tapping local networks to offer shoppers products from area suppliers has the potential to boost grocery revenues by up to 10%, he said, and adding local produce and other products to the store perimeter is a great way to make connections with consumers.
Convenience was a major trend touched upon by many speakers who talked about the burgeoning opportunities in fresh foods, including Levin.
“Consumers want food that is easy to eat and easy to cook,” he said, pointing out e-commerce, click-and-collect and home delivery as major opportunity for retailers looking to grow their sales on the perimeter.
Today, more than half of consumers eat meals away from home once or twice per week, with millennials eating out three or four times per week, Levin said. And when they do decide to cook at home, it’s a very different experience than it was in the past.
“Cooking is fun. It’s a social event,” he said.
The retail opportunities that come with offering consumers fresh solutions for cooking was part of what inspired Gerry Hays, another speaker at FMI Connect, to start the company DinnerCall. DinnerCall offers a mobile solution and marketplace that connects consumers looking for family dinner solutions with retailers that offer prepared meals and other meal products. At the heart of DinnerCall is the idea that family mealtime is not only an opportunity for grocers to grow their sales and meet the needs of shoppers looking for dinner solutions, but also a major societal benefit that helps families combat dangerous trends like obesity, depression and divorce.
Hays said that members of the food retail industry have to ask themselves how they can get more families to connect and share more meals together, and that’s really where fresh prepared foods and the deli and bakery departments come in.
“There’s a lot of momentum around this,” he told FMI Connect attendees.
However, consumers face a lot of challenges when it comes to consistently pulling together family meals, Hays said, citing the stress of choosing a meal and the difficulty of coordinating busy family schedules, among others. If retailers can deliver easy and affordable meal options that are also healthy and different, they have the opportunity to not only help consumers overcome the challenges associated with family meals, but they can also capture more of the grocery spend.
“It’s not just about the food anymore, it’s about convenience,” he said. “Convenience is the new commodity in our lives.”
Nearly 80% of consumers want to make meals from scratch when they do decide to cook at home, and half of younger millennials embrace what Levin called the “ready-to-heat” category, both facts that point to major opportunities on the perimeter of the grocery store. Levin called out fresh prepared foods as the fastest-growing department on the perimeter, and emphasized the importance of meal kits and other meal prep options as vital opportunities to entice more shoppers to buy at least one more item in a retailer’s store each week, especially considering that 31% of buyers in the prepared food sections are shopping outside their primary grocery chains.
“Opportunities really exist to expand consumption,” he said. “This is an opportunity to build a big partnership with these consumers.”
In Levin’s eyes, the most important trend, not only in fresh foods, but in food retail overall is the connected consumer.
“We’re all connected,” he said. “Connected consumer is really what should sit on top of all of these trends.”
In today’s digital age, consumers spend an average of six hours online every day, and their paths to purchase are completely changing. Retailers’ digital, social and mobile efforts play a huge role in capturing shoppers’ grocery spend, Levin said. And with consumers more likely to check a retailer’s website than a manufacturer’s when planning their shopping trips, retailers must have good digital offerings and manufacturers should look to establish good relationships with their retail partners.
“For the digital-age shopper, make it easy,” he said.
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