Supermarket Trends

As the frantic pace of the American lifestyle continues to accelerate, food retailers are scrambling to catch up in the $450-billion supermarket market.

The supermarket came into being during the post–World War II migration to the suburbs as a utilitarian venue to buy fresh and packaged foods for home meal preparation. Today, most families have a hard time gathering around the dinner table. For this reason, the definition of the supermarket has been reengineered. Supercenters—giant retail environments that offer low-cost pricing and a wide selection of goods from blue jeans to frozen dinners—are proliferating around urban centers. Wal-Mart plans some 1,400 nationwide by 2004, Meijer is expanding its Midwest base, and Target recently announced the completion of its test phase and has plans to open 200 supercenters over the next decade. Kmart also has reorganized its business strategy around supercenters.

These stores are big and usually open 24 hours a day, seven days a week. But they’re not for everyone. On the other end of the retail spectrum, niche stores like Whole Foods and Byerly’s are gaining ground with service, amenities, and specialty items that the supercenters just can’t deliver.

In the process, food channels have become increasingly blurred. Consumers today are just as likely to buy food at a restaurant and take it home for a family dinner as they are to buy a sandwich at the supermarket to eat for lunch on the go.

“Consumers on the go will be buying food in every place imaginable and at all hours of the day,” stresses C. Manly Molpus, President of the Grocery Manufacturers of America. “Where they get that food will become less important than how it meets their lifestyle needs. Companies will be shifting their focus from a channel-centric emphasis to a customer-centric emphasis.”

The food terrain is crowded with choices: expanded convenience stores selling gas, groceries, and fast food; airport food malls; souped-up school foodservice; home delivery; Internet shopping; warehouse clubs; health club lunch counters; book store cafés; and mall kiosks.

To meet the competitive challenge, supermarkets are adding new formats that make the shopping experience faster, friendlier, and more fun. According to the Food Marketing Institute, almost half of all consumers use or purchase ready-to-eat or takeout foods such as chicken, sandwiches, and hot pizza at least once a week. More than 80% of U.S. supermarkets sell ready-to-eat or takeout foods, and nearly a quarter of consumers surveyed say they most often go to the supermarket for takeout food.

Since two-thirds of consumers also say that they still eat the majority of their meals at home, home meal replacements represent a difficult challenge with a huge potential. Home meal replacements offered by both restaurants and supermarkets will reach $110 billion in annual sales by 2002, according to Kallorama Information, a market research firm based in New York City.

Nearly all supermarkets feature in-store bakeries and delis, according to FMI. Other amenities increasingly important to consumers include salad bars, organic foods, and home delivery. Cooking classes, valet parking, enhanced customer-service desks, more efficient in-store printed and electronic information, drive-through pickup, and new store layouts in which products are grouped by meal occasion or demographics also are gaining ground.

One of the pioneers and leaders in offering upscale amenities is Minneapolis-based Byerly’s. Each store has a culinary specialist to field customer questions about special diet needs, recipes, and party planning, at no charge. The St. Louis Park School of Culinary Arts in the Twin Cities offers classes by nationally recognized chefs. Additional services include post offices, banks, espresso shops, and pharmacies. Byerly’s also promises customers that they won’t have to touch their groceries from the time they enter the checkout lane until they arrive home. Byerly’s will unload the customer’s cart, package the groceries, and place them in the customer’s vehicle at the covered drive-through pickup area.

Many U.S. supermarkets also are speeding the checkout process with self-service systems. Customers scan their food and pay by credit or debit card. While some require self-bagging, most have employees to do the chore.

From Internet shopping to just-in-time distribution of perishables, technology is the enabling power behind these trends. Integrating bar-code data with individual consumer preferences and purchasing patterns helps supermarkets fine-tune inventory and offer more personalized product offerings and service. The Internet not only permits consumers to shop online, clip coupons, and glean information, but also has revolutionized business-to-business transactions. “Paper-based orders will likely disappear, which will create new efficiencies and improve supplier/distributor relations,” states Michael Sansolo, FMI’s Senior Vice President. “The result should be enormous cost savings and a better ability to gear product mix to different niche markets.”

In the home, the marriage of high-speed Internet access, bar codes, and “smart” appliances is fast approaching. “Many American consumers will commonly use at-home pantry scanners to order their groceries. Home delivery will be commonplace once again,” predicts John Block, President of Food Distributors International.

Future food marketing will be aimed not just at target groups, but also at individuals. “One of our primary focuses today,” states Tres Lund, President and CEO of Byerly’s, “is helping our customers find an easier and better answer to the daily question: What’s for dinner? Because so many families have two working parents, because there are a number of working singles and active seniors, we need to offer a much broader and more interesting selection of prepared foods and groceries.”

Consumers will determine who wins the hotly contested battle for share of the American stomach.

by PIERCE HOLLINGSWORTH
Contributing Editor