News Cycle Gobbled Up By Grocery, Food Reports

The end of the year always brings a lot of retail news activity.

Back to school is winding down, but speculation, news and analysis about the upcoming holiday season is already in full swing.

Curiously, however, news stories about holiday deals and hot products are being eclipsed by news from the grocery and food sectors. Mainstream media and specialty publications alike have been reporting on grocery innovations and disruptions including pickup and delivery services, the effort to improve healthy food availability and the proliferation of discount grocers.

Here’s a snapshot of some of these recent stories:

 

Grocery Pickup and Delivery

Wal-Mart Stores Inc. recently announced its plans to expand its grocery pickup service test in the Northwest Arkansas area. Residents are now able to order groceries via Walmart.com and then pick them up at one of five Neighborhood Market locations in Fayetteville, Springdale, Bentonville and Rogers. New locations have been added in other test markets, including Denver and Phoenix.

Online ordering and pickup isn’t the only grocery news. Target recently announced a pilot partnership with Instacart, a third-party personal shopping and delivery service.

Amazon continues to test its Amazon Fresh grocery delivery service, and recently launched Prime Now, a Prime-member-only service that delivers a variety of products, including groceries, within a one- to two-hour window.

 

Healthy, Organic and Natural Foods

The demand for healthy, organic and natural foods is the result of several economic and social trends.

These include:

Concern for how food is grown and sourced. Consumers increasingly want to know that their foods have been grown without the use of unnecessary chemicals, resulting in a strong demand for organic products. As Ed Fryar of Forester Farmer’s Market said on a recent episode of “Focus on Suppliers:” “People are becoming more and more interested in free foods … free in terms of additives — no antibiotics, no animal byproducts, no hormones, no steroids.”

Many consumers have also become aware of labor practices among food growers and manufacturers. Customers want to know that the workers who harvest and prepare their food are being paid fairly and treated well.

Animal rights has become a hot topic, and Walmart made headlines last year when it strengthened its animal welfare standards for suppliers of meat, eggs and dairy products. Antibiotic use is a particular concern among consumers. “That plays a big role in some of the consumer testing that we’ve done. Antibiotic-free comes out as one of the top call outs that people are looking for,” Fryar said.

Many people have become aware of the problem of childhood and adult obesity. There is a new demand for healthier foods that are nonetheless tasty and convenient to prepare.

Until recently, consumers often had to pay a premium price for organic produce and humanely raised animal products. Driven by market demand, however, more and more grocers and discounters are beginning to provide healthy, sustainable foods at reasonable prices.

 

The Discounter Invasion

While many traditional grocers and big-box stores are working hard to improve their omnichannel sales and healthy food options, a new threat has emerged.

German discount grocer Lidl recently announced its plans to expand into the U.S. by 2018. Aldi, once considered an extreme discounter that catered only to financially challenged populations, has reinvented itself and is planning to expand into California.

Even Whole Foods is getting in on the discounter bandwagon.

“Whole Foods has come under fire for overcharging customers lately,” Brad Tuttle wrote for a recent article published in Time magazine. “More problematic for the upscale grocery brand is that it may have exhausted the number of U.S. locations that are wealthy and ‘foodie’ enough to host a thriving supermarket where customers will happily pay top dollar for kale and organic everything.

“These are among the reasons why Whole Foods is launching the inexpensive, Millennial-friendly brand called 365, or rather ‘365 By Whole Foods Market.’ Whole Foods announced the new store model this past summer, and the first stores will open in 2016 in the Silver Lake area of Los Angeles, as well as Santa Monica, Houston, and Portland, Oregon.”

 

The Millennial Factor

What’s driving all this innovation and disruption in the grocery sector? Some analysts believe that socially conscious, cash-strapped Millennials are a huge factor in these changes.

Millennials want organics and sustainably grown produce, but their huge student debt loads make it difficult to afford the prices at Whole Foods or specialty markets. Walmart is set to benefit from these social and economic trends. A recent article published at the investment research website Seeking Alpha explains why:

“Walmart should benefit significantly, though, from an aging Millennial population that is both entering peak home owning/renting age and simultaneously burdened by tremendous student debt. The housing market should pick up as a result of this aging demographic, as more than one out of every four Americans is a Millennial, but the market’s buyers will be significantly strapped for cash given the high-level of student debt.”

In other words, Millennials who hope to purchase homes will be forced to consider price when making decisions about where to shop for groceries. Walmart’s continued efforts to enforce sustainability standards, improve its fresh selection, and incorporate more healthy and organic foods into its assortment will make the retailer attractive to Millennial shoppers looking for high quality at value prices.

 

Looking to the Future

As the grocery and food industries continue to grow and change, Walmart and other retailers will have to demonstrate flexibility in how they source, market and sell edibles. We are already getting a taste of what grocery omnichannel looks like with online ordering, drive-thru pickup, and Walmart’s increasingly popular mobile app that is now ranked number three among retail apps, just behind Amazon and eBay.

Still, high-tech approaches may be accompanied by high-touch services such as in-store cooking classes and knowledgeable associates who can help customers select healthy, delicious foods. Whatever innovations may come, they will have to address the myriad social, financial and cultural factors that influence how families and individuals select, prepare and consume food.