The International Dairy-Deli-Bakery Association (I.D.D.B.A.), Madison, Wis., recently released What’s in Store 2017, the 31st installment of the association’s annual research report featuring data on retail/market trends, growth and category changes shaping the food industry. The secondary research report is developed through interviews with industry experts and sourcing of third-party data and trends.

Food Business News spoke with Mary Kay O’Connor, vice-president of education at I.D.D.B.A., about this year’s findings.

Food Business News: What is a key takeaway from this year’s report?

Ms. O’Connor: Today’s consumers have a growing selection of food channels to choose from and they are seeking services and experiences in addition to just purchasing groceries. Transparency, social responsibility and traceability will continue to grow in importance in consumer shopping behavior. Retailers in tune with consumer shopping patterns can set their stores apart from other retail channels, enabling them to better compete in the ever-evolving retail market space.

Interestingly, despite the growth of e-commerce in food retail, brick-and-mortar stores are most important to the digital-savvy millennials and Gen Zers, with food retailers being the No. 1 source for convenient meal solutions, outpacing both restaurant delivery and on-line meal/ingredient kit channels. Convenient physical stores, a feature-rich web site with services such as on-line purchasing, and mobile apps are critical to attracting and keeping customers. Retailers must have effective and engaging in-store technology, a 24/7 service mentality, real-time knowledge on current inventory in each store, and price and product consistency to achieve a total retail experience.

 

If brick-and-mortar stores are not going away, how are they changing to adapt to digital-savvy consumers?

Ms. O’Connor: Consumers place a high value on convenience and seamless shopping experiences. According to findings published in the report, traditional supermarkets are placing more emphasis on perishables, fresh-prepared foods and delivery. However, traditional formats continue to lose share to non-traditional retail. In fact, traditional grocery commanded 46% of grocery and consumable product sales in 2015, compared to 90% in 1988. One non-traditional format that is changing is the convenience store.

Today you will find many with extensive fresh-prepared foods departments, especially in urban locations. However, it is the fresh format stores that are experiencing the most growth in the brick-and-mortar space. These stores continue to evolve to best meet consumers’ needs, while unit expansion is also contributing to growth.

Though brick-and-mortar stores are not going away, there’s no denying that e-commerce is booming. The report shows e-commerce to be the fastest-growing retail channel and is projected to grow 23.1% by 2020. 

Pre-made sandwiches
Fresh-format stores often offer pre-made sandwiches behind the deli counter, as compared to the packaged sandwiches convenience stores sell. By being pre-made, they are convenient, and by not being pre-packaged, they suggest “freshly made,” important attributes to today’s consumers. | Source: What’s In Store 2017, I.D.D.B.A.
 

 

Everything you have said suggests that the fresh perimeter — the bakery, deli, meat, produce and seafood departments — of supermarkets is growing. Which departments are driving the growth?

Ms. O’Connor: Research shows that the fresh perimeter represents almost 37% of grocery sales, up from 35.6% in 2013. Prepared deli foods are showing the most growth; however, it is the produce department that has the greatest share of sales.

Produce has more than 43% of dollar sales of the fresh perimeter. Our findings suggest there is a great deal of opportunity with more prepared foods options, especially those that focus on healthy and ethnic recipes. There is also more opportunity for premium services, such as in-store cheese shops and charcuterie departments 

What are the leading trends driving growth in the bakery, dairy and deli departments?

Ms. O’Connor: In the bakery department, there’s been a great deal of innovation in organic products and clean labeling. There are more “free-from” claims, such as gluten-free and lactose-free, showing up on baked goods, as well as more flexitarian options, such as made with egg substitutes and milk alternatives. Health and wellness claims sought by bakery shoppers include: no preservatives; no artificial colors or flavors; made with whole grains; and contains no high-fructose corn syrup.

Trendy bakery product ingredients include functional flours and sprouted grains. Signature and individual portion sizes are growing in importance in bakery products.

As mentioned, the deli is the fastest-growing perimeter department, with convenient, innovative products continuing to be key elements of the department’s success and growth. Deli meat trends include “clean” and “clear” labels; stories behind specialty meats; and merchandising through pairings and tastings. All generations want more natural, organic, antibiotic-free and non-G.M.O. foods. 

Bread options
Bread made with ancient grains, whole grains and sprouted grains attract health- and wellness-seeking consumers to the bakery department. Once there, they might choose to indulge in a freshly baked sweet treat. | Source: What’s In Store 2017, I.D.D.B.A.
 

 

Cheese is sold in the dairy and deli departments, and is as popular as ever. Per-capita natural cheese consumption in the U.S. increased 27% between 1995 and 2014, with Americans eating over 7 lbs more, for a total of 34 lbs per year. Hispanic influence is driving cheese sales, as is simple and clean ingredients. More than half of shoppers prefer cheese with no additives or preservatives and 30% desire organic choices.

U.S. per-capita dairy consumption increased 6% between 1994 and 2014, despite a 22% per-capita drop in milk consumption. Among the current trends in dairy products are bold and spicy flavors, as consumers seek out new taste experiences; athletic tie-ins highlighting the recovery benefits of protein; greater interest in dairy as a snacking option; and renewed interest in fat’s wellness attributes.