Originally published on LinkedIn on December 18, 2020
The COVID-19 pandemic has elevated the humble, ubiquitous grocery store to hero status with grocery workers bravely stocking shelves and staffing checkout stands, managers scrambling to locate goods displaced by shattered supply chains, and owners scurrying to put in place safety and sanitation protocols. More aptly, grocery stores became temporary havens, filling the food needs of those who used to depend on restaurants, company cafeterias, and fast-food enterprises for many of their meals.
According to Instacart, the leading online grocery platform in North America, the events of 2020 have forever changed how Americans shop for groceries and household goods. Consumers have become more adventurous in what they cook, leaning towards alcohol-free spirits or low-calorie beverages, and more selectively choosing the stores they frequent and brands they buy.[1]
Even before the pandemic, grocery stores were evolving to better meet customers’ shifting predilections, such as shopping and delivery services. As of April 2020, online grocery sales were up 233% with nearly a 200% increase in customers.[2] During November, U.S. online grocery sales hit $8.1 billion in sales with 60.1 million U.S. households placing on average 2.9 orders during the month.[3] And once again, with COVID-19 continuing to surge, consumers are stockpiling essential items, including toilet paper, cleaning supplies, hand sanitizers, medical items, and pet supplies.
Conversely, with people being laid-off and unable to work, there’s been a dramatic increase in visits to “dollar” stores like Dollar General, Dollar Tree and Family Dollar, which offer cheaper groceries and household items. Dollar General, the largest in the category with nearly 5,500 stores reported a 17.3% increase in sales in the third quarter of 2020 with a 57.3% increase in operating profits.[4]
The manufacturers whose products are featured in dollar stores equally benefit from the expanded exposure, reach and sale of their products. While the availability of cheaper foods and goods helps those, who need to stretch their purchasing power, dollar stores can create unwelcome competition for traditional grocery stores who operate on razor thin margins. In a survey of rural grocers in Minnesota, 54% cited dollar stores as their key challenge behind operating costs.[5]
Unfortunately, when there is no money to even afford the groceries at a dollar store, the only option is food pantries and soup kitchens. This year, 22.5% of food distribution centers had to either turn away people, decrease food amounts or cut distribution hours.[6]
Flexibility the new business model
The solution for growing food insecurities and consumers turning to dollar stores and food marts isn’t an issue that can be solved by food and household food manufacturers and distributors. These enterprises along with grocery stores, however, need to acknowledge what’s occurring, and seek ways to creatively and cost-effectively meet consumers’, and to a larger extent, communities’ needs.
With meat processing plants operating at reduced capacity or closed due to COVID-19, plant-based options are becoming more common. The plant-based meat market is expected to grow at a compound annual growth rate of 19.4% from 2020 through 2027, bolstered by people adopting vegetarian and vegan diets.[7]
Scientific and technology innovations are facilitating the mass production of plant-based products. Numerous start-ups, including Perfect Day, Hampton Creek Foods, Beyond Meat, and Impossible are rapidly grabbing market share, paving the way for meat and dairy substitutes that are more sustainable and earth friendly.
In the same vein, there’s been an unexpected surge in toilet paper start-ups. Who Gives A Crap, which produces paper products, including toilet paper, from bamboo and recycled materials, saw a 110% increase in demand at the start of the pandemic.[8] Not only does the company offer sustainable products, but donates 50% of their profits to help build toilets and improve sanitation in the developing world.
With restaurants, school and business cafeterias, and hospitality, event and conference centers closed, there’s an abundance of food, which was formerly sold to these enterprises. Food processors and packagers are pondering how to revamp their operations to increase what they sell to grocery stores and other food distribution channels. For instance, roughly 70% of commercial fish is consumed by restaurants.[9] Instead of distributing whole fish, distributors may need to portion and package fish for retail or direct sale to consumers.
Similarly, anticipated, and potential chinks in sourcing could motivate some food manufacturers to change the formulation of their products to more readily available or cheaper ingredients or those from local suppliers. They may also consider revising their offerings to support placement in convenience and dollar stores or displays and endcaps in grocery stores.
The packaging of gum is an interesting study in adaptability. Depending on where you shop, gum might be in single rectangular packs with sticks of gum, boxes with blister-packed rectangular gum, cubes of gum in small containers, or packages of multiple packs, boxes, or tins.
Along with the challenge of retooling to support smaller portions and cheaper ingredients is the risk of impacting one’s brand. For instance, the “grated topping with parmesan” offered at dollar stores lists dairy whey, food starch, and casein as the first three ingredients with parmesan as the fourteenth. The pseudo cheese isn’t associated with a national brand, a wise business decision.
Strengthening the appeal of grocery stores
Recognizing the continuing preference (and need) to prepare and eat home-cooked meals, food manufacturers, suppliers, and grocers have an opportunity to rally around promotions that support easy-to-cook meals, meal kits, meal planning, virtual cooking classes and recipes. When I lived in Texas, my grocery store of choice was H.E.B. because of their weekly meal-deals.
Every week, if you buy two or three advertised items, you received three to four items for free. While I ended up with items I didn’t need or like, such as fish fry batter, my meals often centered around their deals.
Recently, H.E.B. was recognized as “Grocer of the Year” based on its pandemic preparations and response.[10] An article in TIME magazine noted the Texas-based grocery chain usually spends November preparing for the city of Houston’s annual Thanksgiving parade, but this year collaborated with the Houston Food Bank to orchestrate a massive food-distribution event.
Their response to the pandemic began in January with their efforts to keep shelves well-stocked via their own manufacturing plants and strategically placed warehouses and continued to improvise, partnering with local restaurants to serve pre-packaged meals, part of its Meal Simple Collection.
Another consideration is the rapid growth of grocery delivery services, which could foreseeably transform formulations and packaging. Easy to deliver, concentrated flavor syrup pods for in-home beverage dispensers, such as SodaStream, could replace bulky 12-packs of carbonated beverages.
Campbell’s has risen to the challenge of creating easy-to-prepare soups, some of which can be heated in their packaging and even include toppings that can be added before serving. Their Kid’s soup—fittingly for children sequestered at home—feature pasta in entertaining shapes from alphabet to stars, castles, and paws.
Microwave-in-bag foods like rice, grains, vegetables, soups, and main courses take up less space and require less packaging, and often don’t require refrigeration, making them ideal for delivery services.
Redefining grocery shopping
Presently, grocery stores are grappling to define how they expeditiously and cost-effectively capture fulfill and deliver orders. Options span same hour to same day and next day delivery, curbside store pick-up to pick-up hubs, in-house fleets to delivery services like Instacart, and crowdsourced Amazon Flex. Some grocery chains are exploring using robots and autonomous cars to deliver groceries within a defined, typically urban, region.
Within stores, robots are being used to pick customers’ online orders, and stage them for delivery. Other grocery stores are creating micro-fulfillment centers and mini-warehouses with automated fulfillment, replacing brick-and-mortar stores where customers shop in person.
Disquiet of obtaining food can’t be overlooked
COVID-19 has been a disruptive factor, which has upended many aspects of people’s lives. Within weeks, with people scrambling to purchase toilet paper and other necessities, the importance of the humble grocery store became undeniable. Simultaneously, it exposed disparities in obtaining food with people losing their jobs, food programs ceasing operations, and restaurants and other food establishments closing.
To overcome these challenges the grocery and food industry need to evolve, adopting technologies that improve their resilience and sustainability, and can help counteract growing, and increasingly widespread food insecurities and scarcities. For 54 million Americans and 18 million children it could be a matter of life or death.[11]
Thank you to Ph B for his fabulous photo on Unsplash
Read other articles I’ve written on “Marketing from the Grocery Aisle”
[1] Instacart Releases First “New Year, New Cart” 2021 Grocery Trends Report Forecasting The Food Trends & Grocery Shopping Habits For The Year Ahead
[2] 2020 Online Grocery Shopping Statistics: Pre and Post Covid-19
[3] Online grocery sales continue growth, hitting $8 billion again in November
[4] How Dollar General is driving profitable growth
[5] Rural Grocers Stare Down Competition From Dollar Stores
[6] Thanksgiving is increasingly bleak for many food pantries this year — here’s why
[7] Plant-based Meat Market Size, Share & Trends Analysis Report By Source
[8] Toilet Paper Social Entrepreneurs See New Spike In Demand
[9] Fraying Food System May Be Our Next Crisis
[10] H-E-B recognized as ‘Grocer of the Year’ by Grocery Dive for pandemic response
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