Feeling Good

About Being a
Grocer
 According to Progressive Grocer’s
84th Annual Report of the Grocery
Industry, total 2016 sales for stores
with $2 million or more in annual
revenues increased 3.0% to
$668.68 billion. An increase almost
twice as much as
2015’s 1.7%.
 Sales per store were just shy of
$17.5 million during 2016,
approximately a 3% increase over
2015’s $17.0 million, which only
increased 0.09% from 2014.
 With these results, 45.5% of the
grocers surveyed for the report said
they were more optimistic about the
retail climate for supermarkets
during 2017, compared to 32.9%
who were optimistic for 2016.
 How Will So
Many Stores
Survive?
 Grocers may be optimistic about 2017,
but they are facing a number of
challenges, such as more dollar stores
and pharmacies selling food, continued
deflation of food prices and the
expansion of European-based chains,
ALDI and Lidl, into the US.
 The biggest challenge, however, is
likely to be Amazon’s announcement
during June 2017 of its intention to buy
Whole Foods. Its 431 locations
automatically provide Amazon with
brick-and-mortar outlets to increase its
share of the grocery market.
 If that wasn’t enough to disrupt the
industry, ALDI is planning to have
2,500 US locations by the end of 2022
and Lidl will open 20 stores during
summer 2017 in South Atlantic states,
with plans for a total of 100 in these
states by summer 2018.
 Raging
Competition
 Well-established US grocery chains
must be prepared to fight for market
share, as deep-discount stores’ share
of store-brand (or private label)
products was more than 200% of
major food sales channels’ share for
the 52 weeks ending April 29, 2017.
 According to the Q4 2016 American
Customer Satisfaction Index (ACSI),
competition in the supermarket
channel is fierce, as there was very
little difference in the scores of the top
5: Trader Joe’s, 86; Publix, 84; ALDI,
83; H-E-B, 83; and Wegmans, 83.
 In the latest Market Force survey,
Wegmans and Publix were tied for
first, with Trader Joe’s a close second,
while Morning Consult’s Most Loved
Brands Spring 2017 survey ranked
Kroger first, but Whole Foods was just
a few percentage points behind.
 More Consumer
Choices
Battered the
Industry
 Although only 19% of US Internet users
purchased groceries online during 2016,
Unata and Brick Meets Click forecast a
significant increase to 31% during 2017,
with Nielsen predicting 20% of all grocery
shoppers’ dollars being spent online by
2026.
 Progressive Grocer’s survey of grocers
for its 84th Annual Report of the Grocery
Industry found that 22.5% offer a click-
and-collect service; 18.3%, curbside
delivery; 16.9%, third-party home delivery
(e.g. Instacart); and 14.1%, store-
supported home delivery.
 According to Cardlytics, consumer
spending on meal kit services (Blue
Apron, etc.) increased 236% from 2015 to
2016; however, the Cardlytics study
found that approximately 75% of
subscribers cancelled the service within
12 months.
 Trying to Stay
Ahead of
Shoppers
 According to Progressive Grocer’s
70th Annual Consumer Expenditures
Study, 5 factors are driving consumer
shopping: Fresh produce and protein;
healthy-eating; selections for events,
parties and celebrations; on-the-go
convenience; and new, small brands.
 Although 70% of consumers made
meals from “scratch” at home during
2016, 34% chose pre-prepared meals
from a grocery as takeout or to eat at
the store.
 According to 2017 research from The
Hartman Group, 45% of Millennials
said “best prices” and “offers, coupons
and promos” are important factors
when considering a particular grocery
brand.
 Organic
Continues to
Go Mainstream
 The Organic Trade Association
reported that 2016 organic food
sales were approximately $43
billion, an 8.4% increase ($3.3
billion) from 2015, accounting for
5.3% of total US food sales.
 Almost 40% of 2016 organic food
sales were fruit and vegetables,
increasing 8.4%, while organic
meat and poultry registered its
largest-ever annual increase, or
17% ($991 million).
 An April 2017 Morgan Stanley
survey found that more than 67% of
Millennials and 44% of Baby
Boomers said they bought
natural/organic groceries during the
past 3 months.
 Advertising
Strategies
 To remain competitive, independent
supermarkets must seriously consider
curbside delivery, third-party home
delivery and/or store-supported home
delivery, any of which can be
promoted with a free or discounted
first delivery on TV and social media.
 Other competitive opportunities for
independent supermarkets and local,
small chains are highlighting
selections for events, parties and
celebrations and new brands of
specialized and/or gourmet-type food
items.
 Clearly, the market for organic foods
is growing, and with much more room
for growth. Local, organic
supermarkets/groceries must promote
themselves aggressively, as more of
the major chains add organics, and to
highlight locally-sourced organic
foods.
 New Media
Strategies
 With pre-prepared meals from
supermarkets increasing in popularity,
stores may want to shoot and post
videos that show their “chefs” or those
preparing the meals using locally-
sourced food, how they make them
fresh and healthy, herbs instead of
salt, etc.
 With major supermarket chains
generating millions of YouTube views,
independents and local chains should
take advantage of consumers’ interest
in supermarket YouTube content and
create their own that distinguishes
their store and selection from the
major chains.
 Independent and organic grocers
must be conscious of new
technologies, such as Infarm’s vertical
farming system that can be placed in
a store with fresh, growing herbs, for
example, that shoppers pick, and add
these technologies to gain a
competitive advantage.