Lines continue to blur in food sector thanks to changing consumer behaviors

Consumer attitudes about food and meal occasions continue to change leaving food manufacturers, restaurants and grocery retailers struggling to figure out where and how they fit into the grow pie, according to Laurie Rains, retail commercial strategist for Nielsen.

Rains conducted a recent webinar to discuss the changing complexity of food retail, and providing insights into what is driving the change and how businesses involved might better understand and navigate toward the future.

As consumers have more food and beverage options than ever before she said it’s imperative for grocers and other food providers to view everyone as competition. Total U.S. food and beverage expenditures are $1.6 trillion, with $793 billion spent eating at home and $800 billion is food prepared away from home, according to the U.S. Department of Agriculture. The percentage of spend toward food away-from-home increased 94% since 2003, with food at home sales up 59%.

Rains said the pie is growing but there are more companies wanting their piece with the expansion of subscription meal kits and third-party meal delivery services like Uber Eats or Grubhub. Both of the new business segments allow consumers to eat at home, but the spend is not in a traditional grocery, mass merchant or club. For that reason, Rains said retailers from convenience stores to regional grocers like Wegmans and mass merchandisers like Wal-Mart are broadening their food offerings to include cook at home meal kits, ready-to-eat foods and in-store restaurants.

She said Wegmans, a large grocery chain in the northeast, is doing a good job positioning itself for the changes taking place in meal occasions and food sales.

“I just saw where Wegmans was opening a new store in central Massachusetts that has a Mexican food restaurant inside. Working with this restaurant they have also launched a new line of Mexican products in their stores under a private label. The company has also added meal kits which are sold in the retail store, Wegmans is positioning itself to appeal to several types of customers and various meal occasions,” Rains said.

Likewise, she said Whole Foods has offered this kind of experience for years and she expects to see more grocers follow suit as consumers are more willing to go between restaurant and grocery for their meal occasion needs. She said more retailers are adding restaurants and more foodservice venues are selling their brands in retail blurring the lines for consumers. Rains said there are opportunities for grab and eat meals that consumers are favoring for lunch.

“People are no longer taking 3-hour martini lunches. The Mad Men days are long gone,” she said. “Consumers are often eating at the desks or on the run.”

This past summer Wal-Mart touted its effort to offer more freshly made sub-sandwiches, salads and wraps in its store delis. The light meal options under the Marketside private label are a quick grab and cost under $5. The retailer also began selling fresh pizza to cook at home or in some stores they are hot and ready to eat. The retailer is out to capture part of the $200 million fast food sales in the U.S. each year.

Rains said grocers like Wal-Mart are not the only ones trying to get more of the fast-food sales. Convenience stores are offering more on-the-go foods. From Quick Trip to Casey’s this sector is active in expanding on-the-go foods. This is another trend Wal-Mart is following with its new convenience store proto-type which sells ready-to-eat pizza, hot dogs and sandwiches.

Sam’s Club is also seen as a fast-food lunch option with made-to-order sushi at a value price. Consumers don’t have to be a Sam’s Club member to eat at the Sam’s Club Cafe.

Rains said the sweet spot is the intersection of location (where the meal is consumed) occasion (breakfast, lunch, dinner or snack) and experience (healthy, competitively priced, tastes good). She said retailers, restaurants and vendors that play in that sweet spot will win.

Rains also described four kinds of shoppers that cross gender and age, and to some extent, income demographics. She said food companies, whether retail or food service or manufacturer, need to be aware of the differences between these four groups to ensure their business are reaching more than one of them. Following are the four groups.

TRADITIONALIST
37% of U.S. adults making up 28% of food dollars spent
$310 is the monthly average spend on food and beverage
66% of food and beverage spend occurs in grocery, mass merchandisers, or clubs
9% of the food budget is spent eating in fast food, casual or fine dining restaurants
9% is also spent in convenience and small formats
6% of the spend is on meal-kit subscriptions
This group is older, more likely to be retired and have no children at home.

RESTAURANT PREFERENCE
31% of U.S. adults which make up 31% of food dollars spent
$405 is the monthly average spend on food
32% of the food and beverage spend occurs at fast food, casual or fine dining
28% occurs in traditional food stores, grocery, supercenter or clubs
7% of the spend occurs in convenience or small formats
5% occurs on meal-kit subscriptions
This group is ethnically diverse, suburban dwelling, less likely to have young children.

DIGITAL ADOPTER
9% of U.S. adults making up 17% of total food spend
$705 is the monthly average spend on food and beverage
26% of the food and beverage spend occurs via digital engagement
37% of spend occurs in brick and mortar grocery sector
15% spent eating out in restaurants
6% occurs in small formats or convenience stores
7% of the spend occurs on meal-kit subscriptions
This group is younger, higher educated and higher income, urban dwellers with children at home.

MULTI-CHANNEL ADOPTER
23% of U.S. adults, comprising 24% of food dollars spent
$415 is the monthly average spend on food – looking for value over convenience
55% of the grocery spend is done is traditional grocers, clubs of with mass merchants
17% of the food budget is spent dining out at restaurants, 7% on food truck purchases
8% of the food spent is in convenience or small formats
3% of food spend is done via digital means
1% of the spend on meal-kit subscriptions
This group is mostly Caucasian, tend to be older and have received a higher education.