Grocerants Make a Comeback as Food Markets Look for New Sales

As consumers seek increasingly convenient food options, restaurants are finding their place in grocery stores.

In an interview with PYMNTS, Atul Sood, chief business officer at Kitchen United, the ghost kitchen and virtual food hall company behind grocery giant Kroger’s in-store multi-brand pickup and delivery restaurants, spoke to the consumer demand for more hot food options at the supermarket.

“What we had as an initial hypothesis was that when consumers do shopping for the week, they don’t necessarily want to cook that night,” Sood explained. “That seems to be really clicking with consumers. As soon as they get educated about the option of ordering from restaurants in a grocery store, that repeat orders tend to be very high and consumer retention tends to be very strong.”

He noted that while prepared meals have been an option at the grocery store for decades, name-brand restaurant options are a newer innovation, posing a major opportunity for grocers to capture some of the consumers’ dining spending and an opportunity for those restaurant brands to reach additional customers.

In fact, buying prepared meals at the grocery store is on the rise. For instance, research from PYMNTS’ study “Digital Economy Payments: Consumers Buy Into Food Bargains,” which drew from a July survey of a census-balanced panel of nearly 2,700 U.S. consumers, found that 37% of consumers had bought prepared food on their most recent grocery trip, up 7 points from the 30% of consumers who had done so back in November 2021.

“Consumers are taking to it very quickly,” Sood said. “As soon as they realize it’s an option for them, to use a pun, they really just eat it up.”

He added that once consumers try the brand’s in-Kroger virtual food halls, they return once a week or more.

Overall, online ordering may continue to lag well behind more traditional channels in terms of the total share of diners’ restaurant spending. However still, the majority of consumers engage with restaurants via digital channels at least some of the time, according to PYMNTS data.

Specifically, just 16% of consumers primarily order food via restaurants’ direct digital ordering channels such as their website or their app, according to data from PYMNTS’ study “The 2022 Restaurant Digital Divide: Restaurant Apps And Websites In The Spotlight,” which draws from a survey of nearly 2,000 U.S. consumers. Moreover, only half of that share (8%) stated that they mainly order food via third-party aggregators.

Yet, more than half of consumers have adopted digital channels. Research from PYMNTS’ recent study “12 Months Of The ConnectedEconomy: 33,000 Consumers On Digital’s Role In Their Everyday Lives,” which draws from responses from tens of thousands of U.S. consumers, notes that 57% of consumers place orders from restaurants’ websites and/or apps each month, as of November. Plus, 42% order from aggregators.

Sood noted that while millennials and Gen Z consumers have been the quickest to adopt digital channels, the company has seen engagement across older generations as well.

“What the pandemic did was expose the different generations of consumers to the capabilities for delivery, and we’ve seen those continue to rise,” Sood said.

From a technological perspective, one of the challenges is enabling the multi-brand ordering that Kitchen United powers at these locations, so consumers can purchase from different restaurants in one order with one payment. However, Sood noted that these capabilities are key to meeting families’ demands, with parents ordering each from a different brand and kids choosing a more child-friendly option.

Looking ahead over the next several years, he expects the technology to become more common across the country, given that it is already proving popular.

“The economics are there or the consumers, the use case has been proven for the grocers, and I think this will be something you see more and more in the grocery industry,” Sood predicted.