FMI Connect gathered food retailers and suppliers in Chicago. Four actionable growth drivers distinctly stood out from the various conferences held at the June 2016 event.
1- Millennials, the consumer segment driving retail growth
“Millennials GPS the future of retail,” shares Leslie Sarasin, FMI-Connect CEO. Latino Millennials (18 to 37 years old) set the pace in the U.S.; they already lead shopping trends and drive volumes ($200 million buying power as per Forbes). They are fully connected online and consume a higher range of fresh prepared food.
Seeking ‘simplified value’, Millennials over index in private label penetration. However, grocery stores do not yet convert Millennials at the same rate as Generation X or Boomers. The opportunity up for grabs for food retailers is estimated at $6 billion dollars, reported Jon Springer, Penton retail editor and Supermarket News writer.
At the same time, Millennials expect access to the real story behind their food: no blind consumption. 82% of Millennials areconcerned about the nutritional content of the food they consume. This is the highest level, equaled by Mature shoppers (71 years old plus).
- Retailers play a key role in consumers’ food confidence, as they are seen as a primary source for information and quality assurance in food shopping.
- Convenience of online and shared shopping prevails. Shared shopping means that now 85% of adults share the responsibility of grocery shopping in their household.
- This red thread is found in consumer food shopping trends: Get fresh food, search less processed food, know the story, have time to plan.
2- Fresh produce, the category driving retail growth
Fresh produce is everywhere (checkout, vending, drug, dollar, airport channels). Anne-Marie Roerink, 210 analytics Principal, shared key metrics in retail:
- Fresh produce drives demand in supermarkets: 11% of total store sales, 99. 8% penetration, +4% $ growth and +3% value growth, $61B in the U.S.
- Produce is a supermarket stronghold accounting for 63% of supermarket channel choice (vs 61% for grocery).
- In a context where shopping frequency in store is a challenge (-1.4% trips vs a year ago), produce acts as a basket size builder. The average basket’s value is $41, whereas baskets with produce average $62.
- 61% of consumers are interested in more local items (vs 58% in 2015), local is to be defined (i.e. within a defined radius in their state).
- Organics drive volumes: 8% of produce sales, +13% of $ growth and +15% of volume growth. Their penetration grew significantly: 60% of consumers purchased organics in past 3 months, up from 1/3 in 2009.
Local and organics are sustainable shopping trends, underlined by a concern for environmental impact, a request of transparency and a generalized GMO concern in the U.S.
Altogether, Fresh benefits moved from ‘weight management’ to ‘feel good’, and from ‘now on and beyond’ to ‘functional’ benefits as per Nielsen and Datassential’s trend framework (MAC). All these require technology to communicate these new attributes to consumers.
Furthermore, produce accounts for only 0.8% of online food purchases. Experts assess its fair share to be 10% online in the future. The market share opportunity gain is huge for food retailers who will be technically equipped to boost produce sales online.
Deli should also be included in those developments, additional business and sources of innovation are open there for food retail.
3- New technology, the capability driving retail growth
By the high frequency of shopping visits, the wide range of food categories and the increasingly shared shopping role in household, food retailers keep growing the data they generate. Self shoppers and sole shoppers make up 42% of all shoppers (2016 FMI Research). Mass market initiatives are no longer sufficient.
Automation (enabled by Machine Learning in many cases) is both accessible and required to turn data into scalable personalized actions towards consumers.
Furthermore, consumers, store associates and brands are hyper-connected. Retailers need to rethink the way they access and mobilize their own data. Data internal silos per department, non-user friendly content and tools, and non-manageable former architecture act as obstacles to connect with shoppers, or worse, prevent shoppers from connecting with their banner.
- Food online sales have already reached 3% to 4% market share in the U.S. as per Leslie Sarasin, FMI CEO, and will reach double digits within the next decade. Selling online implies store operations efficiency, allows targeted personalized selling and fosters consumer-minded behaviors in retail organizations.
- In that race for leveraging the appropriate new technology capabilities in retail, Shelly Palmer, Palmer Advanced Medi CEO, highlighted the need of “strategies for adopting the right technologies that can empower competitive differentiation”.
4- Partnership, the way of working to drive retail growth
Steve Case, AOL co-founder and CEO of Revolution LLC, the motivating thought leader for startup entrepreneurs, was interviewed by Todd Morris, Catalina Marketing CEO. He fully inspired the retail industry at FMI Connect: “Hyphens will disappear. E-mail will become mail.E-commerce will become commerce.”
Everyone will have in mind his guiding principles to win in food retail: passion, curiosity and partnership. As Steve Case says, “250 years ago, America was a startup”. Now, food retail is in the same mood. Retail is about creating an experience, informing on product origins and nutrition and helping consumers to understand food impact (on their health, but also on their environment). Furthermore, technology is to remain top of mind. Its main mission is to drive for convenience.
- Companies need to maintain balance between being attackers and defenders. Retailers have to change their mindset from managing to imagining in a way that is adapted to their industry (i.e. complex organizations, driven by scale and volume and operations driven). Steve Case made it clear: the winners will find the right balance between optimizing where they are and imagining where they want to be.
- How to get it done? Case makes another strong statement that resonates in the retail industry: partnership is a Must-Have for retailers (learning from new tech industry). “If you want to go quickly, go alone. If you want to go far, go together.”
Hence, key takeaways from FMI Connect 2016 for the food retail industry and their partners are: Millennials, Fresh, New Tech and Partnership. And the growth added value attributed to each of them is measurable, in quality as well as quantity, for retailers as well as for consumers.