KANSAS CITY - The pandemic continues to leave its mark on the grocery retail industry, and the evolutions that occur in 2021 will have a lasting impact, retailers, their supplier partners and other industry experts agree.
“Retailers will elevate beyond simply providing products and look to become the preferred meal solutions providers for their shoppers,” said Andrew Moberly, director of category solutions for Stamford, Conn.-based consultancy Daymon Worldwide. “The growth of e-commerce needs, and in-store experience has created a need for an omnichannel strategy that effectively engages the perimeter shopper.”
While consumers will slowly return to restaurants, he added, factors including economic uncertainty and newly acquired cooking skills will persuade a higher percentage of consumers to continue preparing meals at home. Retailers that recognize this and engage these customers should present a product and merchandising mix that simplifies the home meal preparation experience while also keeps them engaged through digital platforms.
Shoprite, for instance, recently launched its “Fresh to Table” concept, which Moberly said was a pioneering approach on how to engage consumers in the meal solutions space.
From an in-store standpoint, the lingering effects of the pandemic will directly impact the merchandising strategies of deli/prepared, Moberly said. While some retailers have re-opened their prepared, hot bar and salad bars, most have decided to permanently remove them or significantly alter their offerings.
“This has led to an increased demand for pre-packaged deli, and subsequently replacing the need for self-serve deli options at many retailers,” he said. “In 2020 pre-packaged deli entrees and side dishes saw an 18% increase in sales, far outpacing the 1% growth the total department has seen.”
And look for pre-packaged deli programs to support e-commerce efforts as UPC based items are easier to virtually merchandise and retailers will want to retain those meal dollars gained during the foodservice shutdowns in 2020.
Perimeter departments gear up for big changes
Rachel Shemirani, senior vice president for San Diego-based Barons Market, said there’s no doubt that the “stocking up” phenomenon associated with the pandemic will lead to continued strong demand for center-store staples.
“I think retailers are going to increase their stock on grocery staples such as pasta, rice, beans, and other canned goods that have longer shelf lives,” she said. “I think this is true for the frozen category as well.”
Barons’ perimeter departments, meanwhile, will definitely look different going forward. Take the self-serve bulk bins that were hit so hard during the pandemic.
“The convenience and safety of pre-packing bulk items has become a real hit with our customers so we’re not sure if we’ll ever go back to self-serve bulk bins,” she said.
Grab ‘n go, pre-packaged entrees, on the other hand, were trending upward before the pandemic, and that should continue post-pandemic, Shemirani said. They were a big hit for shoppers sick of cooking at home but unable or unwilling to go out to eat.
“Customers loved these as quick meals prior to the pandemic and relied on them even more when ‘cooking fatigue’ set in during the pandemic.”
Other areas of the fresh perimeter that suffered disproportionately during the pandemic remain question marks heading into the new normal, Shemirani said.
“We would love nothing more than to re-open our self-serve salad bars, hot bars, olive bars and soup bars,” she said. “If you can believe it, we’ve had customers asking us when they’ll re-open.”
While Barons is expecting to keep its self-serve bars closed and to continue stocking the bars with pre-packaged olives, salads, entrees and other foods, the retailer will wait to take the lead from its customers as to if and when they can reopen them.
“We’re very hopeful that we can reopen the self-serve bars.”
Barons is also responding to manufacturers who are limiting their product selection, which will mean limited choice for the customer — which, Shemirani said, isn’t a bad thing.
“Retailers will have to stock their shelves now on what products are available to them, which will lead to more creative merchandising.”
The pandemic, she added, has challenged the retail grocery industry in so many ways — Barons, she said, has “learned so much while continuing to learn so much.”
Being forced to adapt and change has made the industry more flexible and more nimble, she said.
“While we make efforts to plan for the rest of the year, we know that those plans can change in a moment — and we’ll be ready for it.”
Health to the forefront
Moberly expects to see some retailers increase their labor and staff their hot-bars and salad bars to allow the same level of customizability consumers have previously had, while allowing their employees to serve consumers to ensure a level food safety.
Another area where retailers can engage with shoppers in 2021, he added, is supporting them in their quest to be healthier. While health and wellness are already major factors in consumer decisions (65% of US adults claim to eat healthy foods most or all the time), more consumers will look to adopt healthier habits, especially as it relates to their immune system.
“Immunity support and ‘fortified with vitamins and minerals’ became some of the most popular health claims on new products in 2020,” Moberly said. “Retailers should make this a focus in 2021, leading communications with the health and wellness message, dedicating physical and virtual merchandising space to it, and emphasizing the health benefits of their private brand products.”
One department that will have growing impact on health and wellness, he said, is the meat department.
“Throughout the past 12 months protein departments have experienced some of the most dramatic, and lasting changes. The meat department saw record sales, shortages, oversupply, inflation, and deflation all in the same year.”
However, in the midst of all of this, plant-based protein saw huge growth in 2020, with a nearly 40% increase in volume over the prior year. Plant-based protein will continue to grow significantly in 2021, Moberly said.
“As a lack of traditional protein availability, combined with a wellbeing focus, led to a substantial increase in demand during the pandemic, many consumers have decided to make these products a recurring part of their diet,” he said.
That’s reflected in the percentage of self-identified flexitarians, which grew from 10% to 16% during the pandemic. While plant-based will not be overtaking meat in sales anytime soon, it will begin to command more space and focus on private brand development, he added.
Lingering Effects: A Watchlist for Retailers from Deloitte’s Evan Sheehan
- Heightened competition in the online grocery space. The disruption caused by CPG companies may create pressure on grocery channels for their market share as well as a fight for consumer data to respond to changes in consumer behavior and tastes going forward.
- Sustained category changes: Just as the SARS epidemic in China prompted a sustained shift of health and hygiene habits post pandemic, so may demand continue 24+ months after the epidemic in health-related categories.
- Vocal for local and sustainable: Concerns on hygiene and contamination in grocery items have led consumers to be conscious about product provenance, while local vendors have benefitted from consumers looking for fresh produce and supporting local businesses amid tough times.
- Store model re-alignment: Retailers have been experimenting with new retail models that provide economic incentives amid cash crunches as well as best suit the new consumer needs. Pick-up hubs to avoid queues inside stores, compact convenience for cashier-less entry, and dark stores as fulfillment centers to save real estate costs on large formats are some of the models that are likely to see wider adoption.
- Safety concerns fueling the “contactless concept”: The current scenario does not favor retailers, who have been reliant on cash and have refrained from investing into integrating digital payments. Digital wallet apps and QR payment codes, in particular, that provide a no-touch experience or contactless payment options at stores are expected to be the key contributors to a previously perceived “gradual shift” to an “accelerated” or “seismic shift” toward a cash-free economy.
- Rise of private labels and portfolio consolidation: Rising unemployment rates and uncertain economic growth have led consumers to be careful about their spending patterns and look for value-for-money products. During the initial crisis period, consumers bought more private labels and entry-price products that have now become their go-to choices.
This story was included in the February 2021 issue of Supermarket Perimeter. Read the rest of the magazine here.