Conventional supermarkets have to fight to win back center store sales and market share from other classes of trade.
By Richard Turcsik
A War zone. It is the only way to describe the supermarket section of a Target store late on a Sunday afternoon. Vast stretches of shelves are laid bare of any product, except for the occasional haphazard can or box. Freezer cases do not fare much better; more than half of them are empty. A glance at the checkout line reveals the reason for the sparse shelves. Big red cart upon big red cart is overflowing with cases of Coke, Bounty paper towels, Charmin and Up & Up private label bath tissue, Stouffer’s and Bertolli dinners, multiple boxes of Big G cereals, cans of tuna fish and dozens of other staples.
A visit to Walgreens or CVS reveals a similar scenario, albeit with tinier carts and fewer frozen products. Meanwhile, the parking lots of Dollar General, Dollar Tree, Family Dollar and Aldi are overflowing as consumers stock up on groceries at bargain prices. Plus, an increasing number of consumers—perhaps too time-pressed or just plain lazy—are ordering goods online directly from the manufacturers.
Therein lies the problem. A few years ago just about all of these sales would have come from the center store of the supermarket.
“Channel shifting for the shelf-stable seafood category has been occurring for more than 10 years with the emergence of mass merchandisers, club stores, dollar stores and drugstores,” says John Sawyer, senior vice president, sales and marketing, at San Diego-based Chicken of the Sea International. “These channels are offering pantry-oriented staple items at ‘everyday low prices’ to generate traffic and fuel the growth related to channel shifting,” he says.
That is a different tactic than most traditional supermarkets, which use center store categories to generate traffic by offering sale prices to get consumers in the door with the hopes that they will then buy other value-added items, Sawyer notes.
The alternate channels enjoy the benefits that non-perishables offer. “Most canned goods have a three-year shelf life, so it is something that doesn’t have to turn very quickly,” says David Brown, director, retail sales, at Allens, Inc., based in Siloam Springs, Ark.
Grocery retailers can counteract some of the lost center store sales by sharpening their merchandising skills, manufacturers say.
“Because canned and frozen vegetables are such good staples and mainstays in center store, I haven’t seen a trend of decline in supermarkets,” Brown says. That is partly because supermarkets are doing a better job of cross-merchandising, he notes. “Many supermarkets are displaying canned goods with an entrée item, like a meat product,” he adds.
“Some retailers, specifically H-E-B in Texas and Meijer in the Midwest, have done a great job of battling Walmart effectively on price,” says Darren Palmet, senior brand manager, Lipton, at Englewood Cliffs, N.J.-based Unilever. Those stores also know their customer, he says. “In Texas they have a big Hispanic population and H-E-B has done a really great job in making sure that they know that customer.”
In addition to their familiarity with consumer demographics, supermarkets can leverage their larger footprints, observers say. “A lot of these other channels really don’t have the room to display frozen, but a supermarket can put a frozen green bean right next to the frozen lasagna and you have a meal right there,” Brown says. “And the best part is it is not something that the consumer has to cook today or tomorrow. They can put it in the freezer and plan ahead.”
Grocers can also fit a lot more variety into that space, which is something they should tout, says Domonic Biggi, executive vice president for Beaverton Foods, a Beaverton, Ore.-based manufacturer of specialty mustard and other condiments. “There are still consumers out there looking for value,” he says. “That doesn’t mean cheapest. You can have a very premium product, but you have to figure out how to add value to it. Is it a flavor, package or marketing campaign? There’s a lot of different ways of looking at it because there are 300 million consumers out there and not all of us are the same.”
Part of center store’s problem stems from the fact that many supermarkets have decreased their presence in traditional dry grocery and nonfoods categories in recent years, but that tide is starting to shift, manufacturers say.
“To a certain degree, traditional supermarket retailers are trying to minimize/reduce the variety of products offered, while other channels are increasing their variety,” says Sawyer. “However, supermarkets need variety, innovation and service to use as point of differentiation versus the mass merchandisers, club, dollar and drug channels.”
“In the past couple of years a number of grocery retailers have refocused on winning in center store and on key categories, like pet, to help them anchor center store and make the customer’s experience better than ever before,” says Paul D. Cooke, vice president/director, industry development, at St. Louis-based Nestlé Purina PetCare. Cooke is also a member of Grocery Headquarters’ Center Store Institute (CSI), an online portal that seeks to educate and inform retailers on the latest trends, products and research in the center store area.
Sharp pricing, value, variety and in-stock merchandise all contribute to strengthening that customer experience, Cooke says. “In pet, that includes natural, organic and specific- needs products,” he says. “Grocery has done a much better job with that in the past couple of years. Many retailers have changed the shopping experience as it relates to key categories.”
Among those retailers is Giant Eagle, which is treating pet differently in its newer stores. “They have low-profile gondolas that create an experience that allows the consumer to browse as opposed to go down what I call the traditional bowling alley-type store,” Cooke says. “What we found out from consumers is that they said they can’t browse in those types of aisles because they are in people’s way. These departments that have expanded space—not necessarily square footage—so that people can more easily shop have done a tremendous job.”
Where mass merchandisers get points in pet is that they are usually in-stock on key items, Cooke says. “People will leave your establishment if you don’t have what they need,” he says.
That is also true in beer, where supermarkets are facing increased competition from the drugstores, which have rapidly increased the number of units selling beer.
“The beer category is one of the largest categories for many retailers and we’re always recommending new and innovative ways to make our products stand out for consumers,” says Mike Potthoff, vice president, supermarket channel for St. Louis-based Anheuser-Busch and also a CSI member.
Like canned goods, beer sales can be increased by cross-merchandising, where legal, Potthoff says. That can also give them a leg up on competing with the Walgreens of the world. “By pairing beer with snack foods or pizza the retailer can merchandise two destination categories to drive traffic, market basket and revenue for the beer category,” he says. “Implementing custom center-store displays that thematically pair beers with food products to create complete meal or snack solutions is a great opportunity for retailers to increase the marketing and promotion of the beer category.”
Supermarket operators should also turn to their supplier partners for assistance in combating competition, Potthoff suggests.
“Anheuser-Busch recommends industry-leading best practices to help supermarkets meet their needs and the needs of consumers,” Potthoff says. “Through our best-in-class insights, we help in identifying the best ways to connect with beer-drinking consumers by utilizing market-level data to analyze the store’s competitive market. We then take that data and provide actionable recommendations and solutions to our retail customers. This information helps us identify recommended opportunities to use specific brands and packages to create the best assortment for the retailer to meet the demand within that market.”
The center store is also being impacted by technological developments in some key categories such as coffee. Thumb through the circulars from Macy’s, Bon-Ton, Sears and Bed Bath & Beyond. It is almost inevitable that a Keurig or Tassimo home coffee brewing machine and its corresponding K-Cups and pods are featured on sale.
“Grocery actually came a little late in our channel development, but we’re now seeing that grocery is the growth driver,” says Sandy Yusen, director of public relations, Specialty Coffee Business Unit, at Green Mountain Coffee Roasters (GMCR), the Waterbury, Vt.-based maker of K-Cups for the Keurig System.
To boost supermarket sales, GMCR developed a 12-count box of K-Cups. “In department stores, they are usually 18-count and online we have 22- and 24-counts,” Yusen says. “The 12-count box is a space efficient option that fits well on grocers’ shelves and is geared well towards consumer frequency of purchase at grocery. They are going in to grocery stores every week. They are buying other food and want to buy their coffee there as well.”
“Since consumers have so many choices of where to buy their coffee, it would certainly be advantageous for supermarkets to offer them a wide variety of different products to keep them in their stores, rather than let them shop different channels,“ says Chris Hillman, vice president of marketing for Melitta USA, Inc., based in Clearwater, Fla.
Dennis Crawford, senior marketing manager for Massimo Zanetti Beverage USA, the Portsmouth, Va.-based roaster of Chock full o’Nuts, Hills Bros., Chase & Sanborn and MJB coffees, takes an opposing viewpoint. “While there are certainly some consumer trends out there that need to be represented on the shelf, let’s not let it take over the shelf,” he says. “Ground coffee in canisters still commands a huge portion of the dollars and unit sales in the supermarket. While some of the new formats certainly should be represented, you have to be careful not to give it too much shelf space,” he says.
Biggi of Beaverton Foods says retailers can also win back market share by improving customer service and the shopping experience. “Provide an excuse for the customer to come into your store,” he says.
And hopefully while they are there they will pick up a six-pack, a can of peas and a jar of mustard.