ARLINGTON, VA. — More than 80% of retail food industry leaders say they’re adding additional floor space, product offerings, and/or staff to their fresh food departments.
That’s among the findings of a recent report by FMI-The Food Industry Association and Deloitte, A Fresh Take for Fresh Food.
“Sales of fresh food at retail stores continue to stay elevated in 2021 compared with prepandemic levels, despite the continued recovery of the restaurant food service sector,” according to the report, which surveyed 29 food industry companies. “But fresh food retailers and product suppliers won’t be able to just coast on their recent success. They are already facing new challenges. Explore the results of our survey of industry executives to see what’s coming next.”
So far, according to FMI and Deloitte, it appears that the shift toward eating at home is here to stay, which is great news for the retail grocery industry. Most companies rate the fresh category as having the highest strategic importance to their overall revenue growth plans during the next one to three years.
Attracting labor and maintaining safety are the top-ranking priorities for the industry, according to the report. Retailers are also asking for more from their product suppliers. Given the shortage of labor, suppliers are being asked to take on more preprocessing and value-added work prior to product entering stores.
They are also being leaned on to provide richer digital content to fuel e-commerce shopping, as well as to provide taste and packaging innovation.
When it comes to strategic and competitive themes, retailers prioritized three areas:
Reenergizing the fresh experience:
With consumers increasingly returning to retail outlets, brick-and-mortar continues to be the preferred channel for fresh food; 70% of consumers shop for fresh food in-store. To beat the competition, retailers will likely need to focus on creating an energized shopping experience, and six in 10 are investing to make it happen. Retailers believe these efforts will drive revenue growth, not just in fresh, but also across categories.
Top-ranking measures for improving the experience include increasing the responsiveness of store associates, remodeling the physical space, and creating strong in-store themes. For eight in 10 retailers, however, recruiting and retaining skilled labor is a major challenge to successfully employing these tactics.
Building fresh in e-commerce:
When lockdowns and safety restrictions disrupted in-store shopping amid the pandemic, e-commerce provided consumers with an alternative. More than a year later, it continues to be popular. While growing in-store sales continues to be the higher priority, fresh executives acknowledge the critical role that e-commerce plays. But controlling cost and making online more profitable has always been a struggle. Only three in 10 expect the profit margin on e-commerce to be the same or better than that of traditional in-store sales in the next two years.
As a reflection of its strategic importance and the need to overcome the profitability barrier, more companies are taking e-commerce in-house. Over the next one to three years, six in 10 retailers in our poll plan to rely more on their own e-commerce channels, as opposed to those offered by third parties. They are investing in a variety of fulfillment options, including home delivery, in-store pickup, and curbside pickup.
Offering fresh meal solutions:
Customers’ lives may still be home-centered, but that doesn’t mean those lives aren’t becoming increasingly hectic. Consumers are looking for faster meal solutions and more variety in what they prepare at home.
Among retailers, nine in 10 said that fresh meal solutions are an important growth segment. A similar number said they are investing in offering fresh meals, especially grab-and-go meals, build-your-own meals, and self-service salad bars. A critical component for success is to create greater awareness among consumers around fresh meal solutions. Retailers are inclined toward the use of in-store signage, recipe suggestions, and digital media advertising to market them.