A vision for 2020

Food retailing continues to undergo major changes. Some of the industry’s top executives offer insights and opportunities.

Predicting the future can be a tricky business. Perhaps the world’s best-known prognosticator, Nostradamus, was wrong more than he was right. The Mayans seemed to miss the mark as well.

With what appears to be unwavering confidence, Grocery Headquarters’ panel of industry experts attempts to decipher the tea leaves and figure out where the food industry will be in the year 2020. Will they be on target? We will let you know in seven years. Here is what they had to say:

Tim Hassett, senior vice president–sales
Campbell North America
We are standing at the crossroads of emerging technology and changing demographics, two major trends that will shape the way we communicate and interact with shoppers and consumers in the future.

Manufacturers will need to continue to build relationships with existing consumers; however establishing a connection to new ones—finding products that appeal to traditional and non-traditional households, will become increasingly important. Finding ways to connect with Millennial and Hispanic shoppers, for example, will provide the industry with access to profitable segments. Changing demographics will continue to influence packaging, communications and certainly products.

Emerging technology is giving way to e-commerce, a revolutionary change in the CPG retail landscape that is dramatically changing route-to-market models. E-commerce goes beyond a fast emerging channel of trade; it also means digital capability to better connect with customers and shoppers. Mobile technology is changing the expectations that consumers of all ages have about how they interact with companies and their brands. Creating a mobile presence and partnerships will continue to reshape the landscape for both manufacturers and retailers.

Virginia Morris, vice president of consumer strategy and insights
Daymon Worldwide
A global recession, a shrinking food supply, and locally-focused consumers are just a few of the realities challenging the retail food industry in 2020. To remain profitable, successful retailers will need to play a more interactive, genuine role in providing consumers with authentic and personal connections in the ways they eat, shop and gather around food.

As we evolve into an eating versus a shopping culture, increased snacking between meals has significant impact on consumer health/wellness. Food retailers can help consumers rethink their eating habits by providing healthy snacking options geared to replace rather than supplement meals. The nucleus of the family gathering around the dinner table also needs to be reconsidered. Breakfast or late-night snacking may be more realistic time slots for busy families who still want to reap the benefits of sharing meals.

Information overload will fuel consumer cravings for more personal, local connections to their food. Stores that provide seasonally fresh, community-sourced options will inspire loyalty. Fresh grab-and-go sections will dominate retailer store space in nearly every format, from convenience stores to restaurants and discount/mass market outlets.

The difference between organic and natural products will be more clearly defined and pricing will reach national brand levels, making them more affordable and accessible.
The mobile-app mania that is dominating brand to consumer communication will continue but must be applied with a more personalized, reward-based approach in mind.  If retailers expect consumers to engage, they need to provide tangible and relevant rewards.

With preventative health and wellness top-of-mind, we will see increased availability of in-store clinics linked to local doctor offices and a rise in homeopathic foods and solutions for common ailments.

Smart retailers will find trustworthy ways to engage moms and Millennials as store and brand ambassadors. Mobile applications should approach these targets with usable, easy-to-access information.

Leslie G. Sarasin Esq., president and CEO
Food Marketing Institute
Extending the lines of existing trends into the years ahead allows a profile of 2020 food retail to emerge. The contours of this developing image are marked by a focus on fresh categories; and capitalizing on private label offerings as an enhanced means of differentiation. The grocery store will play an increased role in national health and wellness as consumers look to their trusted neighborhood supermarkets for information and help regarding healthy eating. The aisle delineations marking a distinction between food and pharmacy will continue to blur with the growing consumer awareness of the medicinal qualities of particular foods and the ways diet can influence some prescribed drugs.

Both consumers and retailers will continue integrating digital technology into all aspects of their being, especially as it facilitates the shopping experience.  Food retailers will deepen their use of technology’s data-capturing capacity to offer more individualized attention to their customers before, during and after they shop. Technology driven innovations will help food retailers stock smarter, thereby reducing overhead; become more innovative with fact-driven, intuitive item placement; and provide a wider range of customer–engaging product, store and shopping information available online. The online experience of the store will be deemed as important in cultivating and retaining customer loyalty as the in-store experience.

As food retail becomes increasingly multi-channel functional, we will see more store format experimentation, especially as some companies seek to get bigger by thinking smaller. Traditional delineations that drive store design—such as center-store, checkout location and periphery shopping—will get challenged with creative layouts and more integrative imaginative store arrangements.

Nick Lake, senior director, category management national accounts
Heineken USA
If the past decade is any indication, food and beverage retailing will continue to evolve as we head towards 2020. At Heineken USA, we are keenly focused on planning for the future and continuing to accelerate against our strong performance in 2012.

Upscale beer is more popular than ever, growing 1.5 times as fast as mainstream and value combined. The multicultural and Millennial demographics are critically important within the upscale segment. Millennial consumers represent a rapidly growing and increasingly influential upscale consumer base and an estimated 70% of beer category growth up to 2020 is expected to come from the multi-cultural segment. Wherever beer is growing, upscale is driving that growth, and within upscale, imports are driving a greater share of the growth and driving it much more efficiently than crafts.

Retailers can win with upscale by mixing and matching upscale brands all year round. The optimal strategy is to lead with the biggest scale brands, then fill-in with high-lift growth brands.

Our approach is unique to the industry. We are talking to consumers to gather insights that will bring clarity to retailers on how they can compete across channels, and how they can impact decisions before, during and after purchase. By taking the retailer’s perspective, we will be able to provide proprietary solutions that work now and throughout the decade to come.

Timothy LeBel, vice president of sales-grocery/value/military
Mars Chocolate North America
As chocolate becomes increasingly popular around the globe, demand is quickly outpacing supply. Chocolate buying trends indicate a 2% growth each year, prompting the International Cocoa Organization to predict a cocoa deficit as early as 2012 and a drop in cocoa bean production by as much as 8%.

Mars firmly believes we can meet the long-term demand for chocolate by creating a sustainable cocoa sector, requiring the participation of our industry peers, governments, certification organizations and NGOs. Billions of dollars will need to be invested for agricultural research, third-party certification and technology transfer to farmers, ultimately improving the supply and economic opportunities for cocoa farmers.

The good news is several manufacturers are already working hard to ensure that there is a sustainable cocoa supply for future generations. In 2009, Mars Chocolate was the first global chocolate company to commit to sourcing 100% of our cocoa from certified sustainable sources by 2020. The company invested approximately $30 million in cocoa sustainability efforts in 2011, after spending more than $20 million annually in the previous two years.

Steve Mehmert, president
Mehmert Store Services
As we continue forward in store planning and design, I see the future continuing to divide retailers into three primary categories. There will be those that will continue to pursue a low price format. Some will be combination stores providing food and general merchandise going toe to toe with the super centers as they battle for high volume. These stores will continue to merchandise in low labor cost formats including large pallet displays, self-serve in as many categories as possible and run a relatively low variety in perishables. In this same low cost approach there will be the smaller stores focused on limited assortment, super low prices and no service departments located in smaller buildings with the goal of simplifying the shopping experience.

Our next category will be those that work hard to differentiate themselves from the low-price leaders. These stores will move hard toward fresh and service in every category. I believe we will see expanded delis, bakeries, prepared foods, specialty cheese, seafood and meat, specialty foods including larger ethnic sets as well as specialty beer and wine. Fresh foods will include a variety of food bars for fresh salad, olives, hot food ready-to-eat along with dessert bars. Substantial value added merchandising will occur in key departments to create a successful cooking experience at home and staff will be abundant to provide services as well as guidance and suggestions for meals.

I also see a modified traditional category returning to the design scene. This group of retailers will look to the rural markets for smaller, full service conventional stores that may combine food, hardware and a fast food component all under one roof with one operations team.

Peter J. Larkin, president and CEO
National Grocers Association
Consumers’ reliance on technology will likely be a dominant force as the food retailing industry looks to the year 2020. More than ever, consumers are demanding instant information, whether it is locating their favorite coffee or wanting more details on a particular product.

Forward looking retailers will continue to embrace new media tools to market to the individual consumer, capitalizing on technology and information that breaks down traditional barriers between the consumer and merchant. The non-face to face interaction between consumers and food retailers will only increase and new issues of consumer privacy must be addressed.

The key in the payments arena will be whether innovators are able to develop platforms that break the barriers of today’s dominance by the major card brands and especially the current interchange system. Mobile payments have the ability to become much more commonplace.

Our ever-changing environment will continue to impact on the world’s food supply, especially as weather continues to have a greater impact on food availability and food prices. Food retailers must continue to focus on sustainability initiatives that benefit both the environment and bottom line.

Consumer expectations and standards for food retailers are likely to increase and they will reward those food retailers who are able to not only meet but consistently exceed expectations.

Sandy Skrovan, U.S. research director 
Planet Retail
Transition and transformation is underway in grocery retailing. The result will be a landscape that looks vastly different in 2020 than it does today. Past and current market leaders may not necessarily be the growth-minded retailers of tomorrow. Growth could come from smaller regional grocers and non-traditional channels and new formats, which may only be in experimentation mode today. This fragmentation—along with big retailers increasingly operating portfolios of many store formats—will result in more fragmented growth ahead, which means an increasing level of complexity for both retailers and suppliers to navigate and manage.

In the future, grocery shopping will not mean big stock-ups, big stores or even stores at all—as online and other digital commerce continue to make inroads. Today’s big-boxes may require reconfiguration of space and assortment to accommodate quick trips, immediate needs and other shopper solutions. As an increasing amount of regularly replenished goods moves online, the retail landscape will be left cluttered with an abundance of unnecessary retail space and the need to reinvent and reconfigure remaining space and assortments. Large-format stores in particular will be forced to find solutions for superfluous space.

Brian Sharoff, president
Private Label Manufacturers Association
The year 2020 will be here in seven years and we can pretty well project what things will be like: mostly more of the same. Some household retailer names will have disappeared. Some new one’s will have emerged.

The big difference in food retailing will come from the demographics. By 2020, it is estimated that 40% of the population will be 30 years old or younger. This will mean a heavy emphasis on what children and young parents of children want to buy as well as greater attention to single young men and women who have a habit of creating new fads almost monthly. Their use of smart phones, mobile money and tablets means online transactions will grow significantly. If Internet shopping is 3% of total sales now, it could easily reach 10% to 12% by 2020.

On the other hand, those 65 years of age and older will still be around and will represent at least 17% of the population. This will mean food retailing will simultaneously have to cater to more established shopping habits and empty-nest households. The importance of this group, of course, is that they will have the largest amount of discretionary income to spend.

One of the biggest factor in food retailing’s future will be the ever-increasing domination of the marketplace by ubiquitous mega-retailers. From supercenters to warehouse clubs, from limited-assortment to specialty fresh food chains, they will define the consumer market. From the store brands point of view, this will mean greater assortment, innovation, and quality, which in turn will contribute to increased popularity and market share of store brands.

Richard J. George, Ph.D.
Chair and professor of food marketing, Haub School of Business
Saint Joseph’s University
The traditional approach to center of store (COS) will continue to be challenged. Walmart and the other value retailers will escalate their share of these products, that at one time were the purview of traditional supermarkets. Online purchases of COS products will also grow to new, unforeseen levels. For example, does anyone need to visually inspect paper towels, soup, ketchup, cereal, diapers and the like before purchasing?

I envision a day when COS is significantly diminished. Many of the COS products will be purchased online from the “bricks-and-mortar” retailer and delivered to the store for direct placement into a consumers vehicle. This will then free up consumers to shop enhanced and exciting perishable departments, than proceed to a designated area and have their online purchases placed into their vehicles.

What does this mean for food retailers?  I suggest that the deadly COS, which was designed to make it easy for food retailers to stock and monitor and boring for customers to navigate and buy, will be replaced by stores that customers would actually look forward to visiting.

One vision that I have is of a store with its current perimeter expanded and romanticized, similar to the European street markets with stalls/displays of delicious fresh fruits and vegetables; along with gourmet cheeses, artisan breads, fresh flowers, as well as today’s lunch or tonight’s dinner. This multi-sensory experience would be balanced by drive up locations in which the pre-ordered COS items are loaded into the vehicle. Then off the customer goes to blend the COS essentials with the fresh ingredients to make or enjoy an already prepared delicious meal.  Does this not represent a more enjoyable shopping experience than the present options?

Joseph T. Hansen, president
United Food and Commercial Workers International Union
As we work toward 2020, strengthening the middle class is essential to rebuilding our economy, and retail employers must lead the way in making sure that retail jobs are good jobs with benefits so that more retail workers have a pathway to the middle-class.
In supermarkets across the country you will find United Food and Commercial Workers International Union members stocking the shelves, working the deli counters and cash registers, and carefully bagging groceries.

Despite the fragile economy, retail food jobs are growing and these jobs are setting the working and living standards for thousands of American workers. Moving forward, it is critically important that all employers in this industry compensate workers with the kind of pay and benefits that allow them to live in the middle class.

Academic studies, including a recent report by Demos, provide quantitative evidence that retailers, workers and the U.S. economy can benefit if retail companies invest in their workforce. According to the Demos report, raising wages for full-time retail workers at the nation’s largest retail companies (those employing at least 1,000 workers) would result in improving the lives of more than 1.5 million retail workers and their families who are currently living in or hovering above poverty.

Ray Gilmer, vice president issues management and communications
United Fresh Produce Association
It is no accident that the first things shoppers see when entering a supermarket are the big, bright displays of fresh produce—offering a treat for the senses with color, aroma and tastes that create excitement for the entire shopping experience. That merchandising strategy will continue to grow in the future as food retailers use fresh produce to convey positive attributes of freshness. And retailers will increasingly use store-branded produce to associate their banners with freshness.

We are already seeing that consumers increasingly expect information and choice in their food shopping. In the next few years, more retailers will build consumer loyalty by providing insights about the food they offer, such as production standards or the location and history of the farm or ranch that produced it. We are already seeing how discerning shoppers are taking advantage of POS signage and packaging to learn more about the food they buy for their families.

What’s more, as more consumers use their phones as shopping tools, retailers and food producers will be able to tell the story behind their products, run sales promotions and share meal ideas.

No matter what retail format consumers in 2020 will demand variety and information about the food they buy, along with an exciting shopping experience. It is a tremendous opportunity for retailers and food suppliers to work together for a profitable future.

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