Grocery Tracker: Changing Appetites

Just as America’s tastes have evolved from meat and potatoes to craft beer and artisan cheese, so too have its supermarkets. This week’s Grocery Tracker has the latest on how supermarkets are trying to whet the consumer’s appetite for grocery shopping, including Kroger’s growth strategy, how grocery stores are improving online shopping and offerings, as well as changes at the top for two major grocers.

Kroger Is Hungry

It is the nation’s second largest grocery retailer, but Kroger is not done growing. In an annual investment meeting on Wednesday, Kroger executives said they are taking a fresh look at their acquisitions and mergers (A&M) strategy, pointing out there is $100 billion market potential in companies that are defined as requiring a turnaround. The grocer’s shares jumped 5 percent following the meeting. Last year Kroger spent $800 million to purchase Roundy’s, which is a Midwestern grocery chain that includes Pick ‘n Save and Mariano’s. Those stores were losing market share but have shown positive sales results since being revamped by Kroger.

In addition to its new A&M strategy, Kroger is working on new ways to improve the experience for shoppers, including ClickList, a click-and-collect service that allows customers to order groceries, drive to the store and have an employee deliver them to their cars. According to Business Insider, Kroger began testing ClickList two years ago and has since rolled it out to more than 500 stores. This service, which has been popular in the U.K., is also offered by a few other U.S. retailers, including Walmart and Harris Teeter. Amazon, which currently offers Amazon Fresh and Prime Now, is also said to be considering launching a click-and-collect offering.

New Markets

Amazon may also be expanding into Singapore. Amazon Prime and Amazon Fresh would be the first to offer those services in Southeast Asia. TechCrunch reported that Amazon is “covertly acquiring assets” in anticipation of a Southeast Asia launch.

Publix Super Markets is also trying its hand at online offerings. The Alabama-based supermarket chain rolled out Instacart in the Tampa Bay, Fla. region at the end of October. The app-based delivery service also delivers items from Petco, Costco and other retailers in the Tampa and St. Petersburg areas. Publix was a pioneer of online grocery delivery service in the 1990s but ended the service when it wasn’t profitable enough.

Online shopping isn’t the only way grocers are trying to make their mark in the industry. International food retailer Ahold Delhaize has announced plans to offer new private labels to stand out from rivals in the Netherlands and the U.S. In the U.S., the company is teaming up with Queen Latifah to create a line of flower arrangements, which will be available at Stop & Shop, Giant-Landover, Giant-Carlisle and Martin’s stores, as well as online at Petaldelivery.com.

Clean Up, Aisle 1

Meanwhile, Target is struggling to find its footing in the grocery industry. Last week the company announced that its leading grocery executive is leaving after just 18 months on the job. During Anne Dament’s tenure, Target tried to get away from directly competing with Walmart and offer more high-margin items such as wine, craft beer, coffee, and premium sauces. Target announced a 2 percent drop in traffic and a 1 percent decline in comparable sales in August, which they blamed on grocery performance and their pharmacy transition.

Whole Foods has also announced the retirement of two of its top executives. Co-CEO Walter Robb and CFO Glenda Flanagan had been with the company for more than 25 years before the news on Wednesday. Whole Foods announced its fifth straight quarter of declining sales.

The Kids’ Table

The $800 billion grocery industry is seeing more changes at the hands of millennials. The Wall Street Journal reported last week that younger shoppers are eating more at restaurants, ordering takeout from their phones and buying more groceries from convenience stores such as CVS and superstores such as Walmart instead of making a run to the supermarket. However, according to data from the Consumer Expenditure Survey, Americans of all ages are spending more money at bars and restaurants and less at traditional supermarkets. In what industry analysts call “grocery channel fragmentation,” today’s shoppers divide their shopping between superstores, supermarkets, specialty stores and online retailers.

For grocers, it is a steady diet of changes in demographics and delivery methods.