- June 3rd, 2015
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Taking Orders From Consumer Behavior: How Restaurants, Grocers Can Come to the Table
A couple of trends registering in the food industry should have merchants shaking in their booths.
Consumers are trading grocery carts for combo meals, directing larger portions of their food dollars to restaurants and bars over supermarkets. The trend began to surface about a year ago, culminating with dine-out sales overtaking grocery sales for the first time in recorded history in either December or March. (The National Restaurant Association puts it in December; the Commerce Department in March.)
First, let’s look at the shift toward restaurant spending. Sales in restaurants exceeded grocery sales by $1.5 billion in April, according to the National Restaurant Association. Many reports credit younger consumers for the change, though even among restaurants this population’s tastes are specific. “They tend to favor fast food, deli food and pizza restaurants over coffee shops, high-end dining and casual dining,” the National Restaurant Association advises on its website. “Their diversity and interest in new things draw them to more ethnic restaurants, too.”
What is not addressed is the durability of this trend. Once a large share of this young consumer group marries and settles down, how will its members shift their spending? Will they venture to take the baby out for Korean bibimbap? Or will they have to fire up the stove?
Such considerations clear the way for the next course in emerging food trends – the movement toward more fresh ingredients.
Basket cases: Target, Whole Foods make changes
Traditional supermarkets such as Kroger have been upping their investments in organics and fresh foods for years. Now untraditional supermarket chain Target is pulling back on what some call “big food”: processed meals by the likes of General Mills, Kraft Foods and Kellogg’s. Instead of canned, bagged and boxed meals, Target will focus on healthier items such as yogurt and cooking oils.
Meanwhile, as Target aims at healthful ingredients, competitor Whole Foods has announced plans to open a lower-priced chain, also targeted to younger shoppers.
Consumer purchase data clearly plays a role in these decisions – Target is commissioning its own research to determine what will grace its shelves, and I am sure Whole Foods is relying on its insights to shape its low-priced format. But I am more interested in knowing the extent to which each will use today’s insights to determine tomorrow’s behaviors, because if these changes are driven by margin alone, that could be a mistake.
Here’s why: With their respective changes, Target and competitor Whole Foods are both migrating toward the same space. There will be practical reasons younger consumers, once they have a family, will begin to eat more at home. However, as retailers begin to tap this fruitful well, and begin making new offerings that address this growing market, they risk becoming exactly what they are strategizing against – looking the same.
Making change with data
Grocery retailers, armed with unprecedented levels of insights and technology, have an uncommon opportunity to prepare their own future at this high-potential juncture in consumer marketing. They can allow their assortments to be further shaped by a combination of health concerns and consumer demand for ease – as evidenced in increased restaurant sales – or they can lead the charge by changing the opportunity for what consumers can experience, and buy.
This could mean in-store restaurants, as recently introduced by the innovative supermarket chain H-E-B, which included a fast-casual eatery at its new Houston store. It could mean more freshly prepared and ready-to-eat foods to meet the demand for easy meal preparation – a trend we have seen for many years but one that may be poised for an explosion. And it may mean partnering with restaurants, as many supermarkets do with fuel stations, to add new rewards or incentives for loyal shoppers whose behaviors indicate they often eat at home. Imagine receiving a coupon for a free appetizer at a local restaurant for every fill-up worth more than $50.
Or perhaps food retailers should use their insights to literally change behavior at home. Call it the final course in food trends of this decade: The creation of cooking schools in the grocery aisle.
This article originally appeared on Forbes.com, where Bryan serves as a retail contributor. You can view the original story here.