US Grocery Market Trends

Part
01
of five
Part
01

Short Term Grocery Store Trends/Projections

Use of new technologies such as warehousing automation, blockchain technology, and artificial intelligence; physical stores adding digital experience to their repertoire; focus on giving personal experience to the customers; the rise of social media and internet pictures and video-based commerce are some short term trends for the grocery market industry in the next 2-5 years. Other identified trends include the rise of smartphone app-based shopping; the evolution of creative partnerships; mergers and acquisitions; and a transformation to speedy and seamless delivery experience.

Grocery market industry trends

Trend #1

Use of new technologies

  • Technologies such as warehouse automation, blockchain technology, and Artificial Intelligence are being used to improve supply chain management and to ensure traceability.
  • Food Navigator reported in an article, that the technology-driven online grocery market will have a revenue of $200 billion by 2023 and will have an annual growth rate of 20% in the years preceding 2023. This also reflects the shift of customers from brick-and-mortar shop grocery buying to online buying.
  • E-Fresh an AI-supported digital grocer and Ocado, another online grocer in the UK pioneered warehouse automation and AI in this sector. Also, Kroger, a US-based grocer partnered with the British grocer, Ocado, to install high-tech warehouses where machines will handle grocery orders.
  • Grocery retailers, Carrefour, and Auchan, have begun to use blockchain technology to ensure traceability of their products.
  • All these points to technology adoption is becoming a prevalent trend in grocery industry.

Trend #2

Physical stores adding digital selling to their repertoire

  • Recently, brick-and-mortar grocery stores are adding shopping-cart attached digital devices and smart phone apps to their shopping experience in order to make easier, the aisle navigation and product-finding, for the customer.
  • Also, sensors are being used on shelves so that an automatic bill is ready by the time the customer reaches the billing counter.
  • Another example could be that of Il Viaggiator Golosa, an Italian grocer, installing electronic shelf-edge labels which show customers online reviews and quality and feedback scores, of the products. These changes also suggest that customers are enjoying the experience of digital shopping.

Trend 3

Focus on giving personal experience to the customers, both online and offline

  • The grocers are trying to use shoppers' data to develop a more personalized shopping experience. While personalized shopping is in its early stages both online and offline, there are many examples that show that grocers are eagerly trying to adopt it.
  • The US grocers like Stop&Shop, Cub Foods, Hy-Vee, and Aldi have added restaurants, burrito bars, and popcorn vending machines to their offline stores.
  • Customer data sets, in-store machine learning, and AI devices are used to develop new modes of this personalized engagement.

Trend #4

The rise of social media based commerce is predicted

  • Social media based commerce is set to render both conventional online and offline grocery buying obsolete.
  • When a customer sees a picture or video of a product on Instagram or Facebook or anywhere on internet, the customer will be enabled to add that product to a virtual shopping cart just by clicking on it and selecting the buy option. So the shopping happens as the customer is doing all other things and there will be no need to set aside time for shopping.
  • This reflects the wish of the customer to save time on shopping and make grocery shopping a seamless experience.

Trend #5

The rise of smartphone app based shopping

  • Kroger, a US grocer, has started enabling digital shelf panels that can interact with the smart phones of the shoppers. Also, Kroger has brought out a health app called OptUp which can compare and recommend products based on their nutritional value.
  • According to eMarket report, the grocery shoppers' app usage was projected to grow by 50% in 2018. The report also noted that by 2022, there would be 30.4 million grocery shoppers in the US who will use at least one grocery app on their smartphones at least once a month. This is a steep rise from the 12 million figure for 2017.
  • Trend #6

    The evolution of creative partnerships between grocers and mergers and acquisitions

  • To compete with the rising presence of retail giants like Amazon, grocers have started making creative partnerships. Examples of such partnerships include Kroger and Walgreen who partnered to set up Kroger's mini grocery parlors inside the Walgreen stores. Also, Aldi and Kohl entered into similar partnership like that of Kruger and Walgreen.
  • Kroger also partnered with the British grocer, Ocado, to install high-tech warehouses where machines will handle grocery orders.
  • Amazon acquired Whole Foods, a US supermarket chain, in 2017.
  • Ahold, the Netherlands based grocer merged with Delhaize Group.
  • In 2018, Lidl, the US discount supermarket, acquired 27 stores of Best Market in New York and New Jersey.
  • Similarly, the SpartanNash acquisition of Martin’s Super Markets and Stop & Shop's decision to acquire King Kullen happened only recently. All these suggest the grocery industry is reshaping itself to meet the challenges posed by Amazon, through new mergers and acquisitions.

  • Trend #7

    The transformation to speedy and seamless delivery experience

  • The entry of last-mile experts such as Instacart, Shipt, Deliv, DoorDash, and Postmates into grocery is a sign of the focus shifting in grocery sector to speedy and seamless delivery.
  • It has been reported that Uber is also entering the scene.
  • Kroger is developing high tech warehouses where machines handle packing and product-selection as per orders.
  • In line with this, giant retailers like Amazon and Walmart are also working to improve their delivery solutions.
  • A study by CommonSense Robotics, as cited by a Grocery Dive article, has shown that if there is no difference in price and quality, 80% consumers would prefer door delivery to offline store pickup. Walmart and Kroger are also trying out drive less delivery in Arizona area.
  • All these show that speedy and seamless delivery is a rising trend of customer concern as well as a grocer priority area.
  • Research Strategy:

    To determine the trends/projections for the grocery market industry in the next 2-5 years, your research team searched through industry reports, press releases, news articles, media publication, and market research websites. We were able to identify from Food Navigator, an article on the upcoming trends in grocery industry. Also, we found another publication by Grocery Dive which listed the trends to watch in 2019 for the grocery industry. This corroborated those listed in the report by Food Navigator. Again, we found on eMarket website, a recent study which provided specific trends/projections related to customer buying behaviors with respect to a few of the listed trends. We have therefore, used the information found from the above sources to compile the list of 7 trends/projections for the grocery market industry in the next 2-5 years.
    Part
    02
    of five
    Part
    02

    Long Term Grocery Store Trends/Projections

    Changing consumer habits and preferences, the rapid growth of the online grocery shopping segment, the frozen food products market growth, the influence of the multicultural consumers, and the possible shrinking of big grocery stores were identified as some of the major trends that will shape the grocery market industry in the next 5 years.

    1) Online grocery shopping growth

    • In 2025, online grocery sales will make up 20% of the total grocery retail sales, reaching $100 billion in sales.
    • To become successful, an online grocery retailer needs a structural shift, from producing and distributing products to delivering a valuable and personal experience to the customers.
    • 7,000 grocery stores could close if online grocery shopping rises to 10% by 2026.

    2) Changing consumer habits and preferences

    • Half of the US millennials rarely prepare meals at home. By 2026, up to $700 billion in revenue will be transferred from traditional grocery retailers to other formats and channels.
    • More consumers are buying ready-made meals. In the United States, food services are growing faster than food-at-home consumption.
    • It is predicted that by 2026 the grocery retail segment will be primarily split between traditional grocery shopping (20%-50%), convenience retail (25-30%), and other channels (25-40%) such as discounters, online retailers, clubs, and direct-to-consumer sales.

    3) Frozen food products growth

    • The U.S. has a high percentage of working females, which is predicted to contribute to the market growth of the frozen food industry.
    • Consumer inclination towards supermarkets and hypermarkets is the highest due to the availability of a huge variety of frozen food products and the freedom to choose between multiple brands.
    • It has also been reported that U.S consumers are more inclined to buy frozen food products rather than fresh products.
    • The frozen food market is projected to reach $442.46 billion globally by 2026.

    4) Multicultural consumers changing grocery shopping

    • The US population is expected to increase by 98 million people until 2060. The growing multicultural population will drastically impact the grocery industry.
    • Over the next several decades, the U.S. grocery retail experience will be shaped by multicultural consumers.
    • Multicultural shoppers recognize the link between food and their health and are more likely to buy natural, organic foods even though they are expensive.

    5) Grocery stores are shrinking

    • Physical grocery stores will become much smaller in the near future (between one third and one half of the size they are today), offering products designed to fit local neighborhoods.
    • It is predicted that larger stores will be transformed into mini-malls, featuring several third-party vendors.

    Part
    03
    of five
    Part
    03

    Successful Grocery Players

    Three established, successful players in the U.S. grocery market industry are Aldi, Amazon, and Albertsons. Three emerging, successful players in the U.S. grocery market industry are Sprouts Farmers Market, Lidl US, and Fresh Thyme Farmers Market.

    FINDINGS

    1. aldi

    • Aldi is an existing, currently successful player in the U.S. grocery market industry.
    • Aldi is considered successful because it is striving to have the third-most grocery stores among all grocery chains within the United States by 2022.
    • To achieve that, Aldi has been working to increase its store count from 1,600 in 2017 to 2,500 by 2022. Aldi announced that $3.4 billion would be invested by the company to create those new stores.
    • Factors that are contributing to Aldi's success are its discounted prices which the company states can be 50% below what other grocers charge, plus its expanded organic produce and healthy, fresh product offerings.

    2. amazon

    • Amazon is an existing, currently successful player in the U.S. grocery market industry.
    • Amazon is considered successful because it's projected to become the leading ecommerce grocery retailer in 2019 with a forecasted 32.7% market share.
    • Factors that are contributing to Amazon's success are its acquisition of Whole Foods in 2017, the introduction of its savings program for Amazon Prime members for Whole Foods stores, and its offering of expedited grocery delivery through its Prime Pantry program.

    3. albertsons

    • Albertsons is an existing, currently successful player in the U.S. grocery market industry.
    • Albertsons is considered successful because it achieved an 83% increase in ecommerce sales in 2018 and it expanded its pickup and drive-up service to more than 250 stores at year-end in 2018.
    • Factors that are contributing to Albertsons success are the investments that the company has made in digital marketing, loyalty programs, and ecommerce, its expansion of digital marketing, loyalty programs, and ecommerce efforts, and the growth of its organic brands (Open Nature and O Organics) for which sales increased by 13.6% in 2018 compared to 2017.

    4. Sprouts farmers market

    • Sprouts Farmers Market is an emerging, currently successful player in the U.S. grocery market industry.
    • Sprouts Farmers Market is considered successful because it achieved a 12% increase in 2018 net sales compared to 2017, achieved a 50% increase in delivery sales in 2018, and in 2019 will be expanding its delivery sales to all markets in which the company operates.
    • Factors that are contributing to Sprouts Farmers Market's success are the company's continual focus on customer experience, product innovation, the continual development/training of its employees, and the addition of fresh food options within its stores (such as a salad bar) as part of a new store prototype which has helped the company attract millennial customers.

    5. lidl us

    • Lidl US is an emerging, currently successful player in the U.S. grocery market industry.
    • Lidl US is considered successful because in 2018 it acquired the grocery chain Best Market, as the company expanded its operations into New York. Lidl announced that the acquisition would include the purchase of 27 Best Market stores. The acquisition marked a significant growth initiative by Lidl, which prior to the acquisition, had a store count of three across the entire Northeast U.S. region.
    • Factors that are contributing to Lidl US's success are its ability to attract cross-shopping customers (those who shop multiple stores for the best deals) and its customer advocacy efforts.

    6. fresh thyme farmers market

    • Fresh Thyme Farmers Market is an emerging, currently successful player in the U.S. grocery market industry.
    • Fresh Thyme Farmers Market is considered successful because it began operating in 2013 and now has expanded to 11 states with 75 total locations, achieved 2018 growth in the double digits, and by 2020 projects that it will open 100 additional grocery stores.
    • Factors that are contributing to Fresh Thyme Farmers Market's success are its keen focus on partnering with customers to assist with their health needs, hiring employees who reside near their stores to bolster its community ties, its 2018 partnership with grocery delivery company Instacart, and its support of local initiatives as a show of its commitment to the communities in which it operates.

    YOUR RESEARCH TEAM APPLIED THE FOLLOWING STRATEGY:

    We identified three established, successful grocery retailers by looking for articles about such companies that have recently achieved significant growth and have a large share in the U.S. grocery market industry. Some of the sources we used for those articles included Business Insider, Supermarket News, and eMarketer. Those articles also provided us with the additional, requested information about the companies (why they are successful and factors contributing to their success). We identified three emerging, successful grocery retailers through this article titled "5 Emerging Grocery Leaders and What Makes Them Successful" and this article published by the National Retail Federation which describes the significant, recent growth of Fresh Thyme Farmers Market. Some of the additional, requested information about the grocery retailers was included in those articles, though we also consulted other industry sources for additional details about such, including Progressive Grocer. Together, this research process allowed us to identify successful players in the U.S. grocery market industry and compile the requested information about those companies.
    Part
    04
    of five
    Part
    04

    Failing Grocery Players

    Players in the grocery market industry that are currently failing are Sears, Family Dollar, Freds, Southern Grocers, Bon Ton and the 99 cents only grocery.

    Players in the grocery market industry that are currently failing

    1. Sears

    2. Family Dollar

    • The company is considered failing due to its intentions to close 390 Family Dollar stores in 2019.
    • Their failures are contributed by what shoppers have pointed out that they are more often than not disappointing destinations because the chains usually have empty shelves and messy stores.

    3. Freds

    • Considered as failing due to two waves of closure that they are currently conducting: closing of 104 stores in addition to 159 it had earlier announced thus reducing its store count by nearly half.
    • Its failures are attributed to their struggle to find a working strategy.

    4. Southeastern grocers

    • Considered as failing due to plans to close Harvey's, Winn-Dixie and 22 Bi-Lo supermarkets. The move comes almost nine months after the company filed for bankruptcy under Chapter 11. This was based on a restructuring plan which involved closing 94 stores.
    • Their failure is attributed to under performance.

    5. Bon Ton

    • Considered as failing because Ben Ton stores agreed to sell its assets to a group of debt holders and liquidators with approximately 250 stores under various brands owned by the company set to be closed.
    • Its failures can be attributed to its lack of customer service and failure to be innovative in today's changing markets

    6. 99 cent only grocery

    • Considered to have failed due to its increasingly empty shelves that preceded its eventual failure to renew their lease upon expiry and its subsequent closure.
    • Part of its failures can be attributed to its location in a low-income census tract where a significant number of residents are more than a mile from the nearest supermarket.
    Part
    05
    of five
    Part
    05

    Industries Impacting the Grocery Industry

    Industries impacting the grocery industry are the IT industry, marketing industry, packaging industry and the transport industry

    industries impacting the grocery industry

    1. IT INDUSTRY

    • It has a positive impact on the grocer in that the grocer can make a purchase online from the comfort and convenience of their home using websites and mobile apps then have it delivered to them thus avoiding the discomfort of a journey to the store or the long queues associated with it.
    • With just a few clicks, the grocer can view a broad assortment of products while saving himself the time he would have used to physically search for the items.
    • IT enables prime customers to also be able to take advantage of free shipping on eligible products on offer.

    2. TRANSPORT INDUSTRY

  • The transport industry impacts the grocery market in that the way Americans get their groceries is changing and more and more people have developed a preference for goods delivered to them which in turn increases the online grocery sales.
  • The ability of online retailers to deliver orders the same day that customers place those orders has positively impacted the efficiency with which online grocery buying and the associated grocery supply chain are delivered.
  • Modern transport systems helps a retailer deliver what a customer wants, when that customer wants it while spending as little money as possible in the process.
  • 3. MARKETING INDUSTRY

  • Marketing impacts a customer by influencing their purchase decisions as more people look online before and during grocery store trips.
  • Through marketing the retailer is able to promote their products to customers, including those who are afar away thus creating a greater impact of increasing the chances of more goods being sold.
  • Marketing helps drive awareness and gives inspiration to both the retailer and consumer.
  • 4. Packaging INDUSTRY

    • The global shift towards circular packaging solutions impacts the grocery industry in terms of a more sustainable and environmentally friendlier solution being sought to the packaging involved in grocery sales.
    • Packaging waste can be re-used as raw materials in the manufacturing of other products or can be reprocessed infinitely.
    • The sustainable model of packaging is good not just for environmental reasons, but it creates an impact by helping generate business value as well.
    Sources
    Sources

    From Part 02
    Quotes
    • " Although online shopping is just 2.0 - 4.3% of the total $641 billion U.S. grocery market, a study by the Food Marketing Institute predicts online grocery sales will make up 20% of total grocery retail and will reach $100 billion in sales by 2025. "
    • "To survive and even thrive, grocery retailers need to recognize and act on three trends that are emerging and will shape the industry for the next five to ten years."
    • "According to dunnhumby research, 70% of the online basket is populated from a customer’s usual in-store spend. By using this kind of customer intelligence, retailers can make the migration from brick-and-mortar to online easier for the customer and more profitable for their business."
    • "Yet, the grocery stores of the future will be one third to one half of the size they are today with a more limited, locally curated assortment of products designed to ‘fit’ the local neighborhood. Look for larger footprint stores potentially becoming mini-malls with third-party vendors within."
    • "At the same time, the physical store and e-commerce will become an increasingly connected omnichannel experience, and the role of the store itself will become more experiential."
    Quotes
    • "Our analysis suggests that, by 2026, between $200 billion and $700 billion in revenues from traditional grocery retailers could shift to other formats and channels—further hurting sales productivity and aggravating space overcapacity "
    Quotes
    • "This trend has resulted in reduced demand for traditional food products in the country. Based on distribution channel, supermarkets & hypermarkets dominated the market in 2017. Consumer inclination towards supermarkets & hypermarkets is the highest due to the availability of a huge variety of frozen food products and the freedom of choosing from multiple brands."
    • "North America and Europe are matured markets for frozen food. Consumers in these regions are more inclined towards the consumption of frozen food products compared to fresh food products, which is a key factor driving the growth of the frozen food market."
    • "Global Frozen Food Market Projected To Reach US$ 442.46 Bn By 2026."
    Quotes
    • "Assuming online sales’ share of total retail sales in the U.S. grows to 25% by 2026, from 16% today, roughly 75,000 more retail doors, excluding restaurants, need to close, analysts Jay Sole and Michael Lasser said. That means for every 1% increase in online penetration, roughly 8,000 to 8,500 stores need to close. A lot of that growth is being fueled by Amazon, which is expected to account for about half of the U.S. e-commerce market."
    • "It added about 7,000 grocery stores could close if online grocery penetration rises to 10%, from 2%, by 2026."
    Quotes
    • "Over the next several decades, the U.S. grocery retail experience will increasingly be shaped by multicultural consumers, based on population growth and current shopping behaviors, new research from CPG sales and marketing firm Acosta finds."
    • "Net U.S. population growth is estimated at 98 million from 2014 to 2060, with the Hispanic population projected to rise by 64 million in that time, according to Acosta’s first “Multicultural The Why? Behind The Buy” study, released in April. "
    • "Growth is forecast at 22 million for the Asian-American population and 18 million apiece for the African-American and multi-racial segments, while the Caucasian/Non-Hispanic population is expected to decline by 16 million."
    • "New York is a majority minority market and our store owners are 100% multicultural entrepreneurs who know their consumers are a reflection of the American future."
    Quotes
    • "The research indicates that in as few as five-seven years, 70% of consumers will be grocery shopping online. Now, the estimated $100 billion spend, which is equivalent to every U.S. household spending $850 online for food and beverage annually, will occur by 2022 or 2024."
    From Part 04
    Quotes
    • "Sears is planning to close another 40 stores, the company said Thursday. The closings, scheduled for February, are in addition to the 142 stores that Sears plans to close before the end of the year. The company filed for bankruptcy in October, after years of closing stores and selling off assets following crippling sales declines."
    Quotes
    • "This week, Dollar Tree Inc., the parent company of the budget stores Dollar Tree and Family Dollar, said it will close 390 Family Dollar stores in 2019."
    Quotes
    • "Discount chain Fred's is closing 104 more stores by the end of June. The Memphis-based retailer said Thursday the closures are in addition to the 159 stores it said in April it was closing. Between the two waves of closures, Fred's (FRED) is reducing its store count by nearly half."
    Quotes
    • "Southeastern Grocers (SEG) next month plans to close 22 Bi-Lo, Winn-Dixie and Harveys supermarkets, which the retailer described as “underperforming.”"
    • "An SEG spokesman said Friday that the stores are slated to close on or before March 25. The move comes nearly nine months after the Jacksonville, Fla.-based company emerged from Chapter 11 bankruptcy under a restructuring plan that included the closing of 94 stores."
    From Part 05
    Quotes
    • "Amazon has a distinct advantage when luring customers to the online grocery buying experience. Nearly all new online grocery buyers have had experience buying other goods online. And Amazon practically owns that little corner of the internet—online shopping. Therefore, it's an easy transition for online shoppers from buying toothpaste online to buying bread online."
    Quotes
    • "The way Americans get their groceries is changing. According to Statistica, U.S. online grocery sales amounted to about $14.2 in 2017 and are expected to rise to nearly $30 billion by 2021. "
    Quotes
    • "Deloitte recently released the The Grocery Digital Divide and Grocery Experience report which was based on surveys commissioned by Deloitte that featured more than 4,000 U.S. consumers. "
    • "The report shows major shifts in the way people use online marketing to help them make decisions at the grocery store. According to Deloitte, since 2013, digital's influence in-store across all retail sectors has grown a dramatic 300 percent, from 14 percent of all transactions to 56 percent in that timeframe."