Foodservice in Retail - US - October 2017

OVERVIEW
What you need to know
Definition
EXECUTIVE SUMMARY 
The issues
Supermarkets face falling market share
Figure 1: MULO sales of food and drink, by retail channel, 2012 and 2017
Foodservice can only do so much for grocers
Figure 2: Reasons for choosing primary grocery retailer, August 2015
Grocers can’t replace restaurants
Figure 3: Foodservice in retail attitudes, by HH income, August 2017
The opportunities
Millennials are the target market for foodservice in retail concepts
Figure 4: Foodservice in retail attitudes, by generation, August 2017
Foodservice offerings can bring in non-loyalists
Figure 5: Concept interest, by segment shoppers, August 2017
Drive trial with samples and specials
Figure 6: Foodservice in retail purchase motivators, August 2017
What it means
THE MARKET – WHAT YOU NEED TO KNOW
Supermarkets need to stay competitive
Competition comes from all sides
Behavioral changes make the case for foodservice in retail
MARKET BREAKDOWN
Supermarkets are slowly losing market share to competitors
Figure 7: MULO sales of food and drink, by retail channel, 2012 and 2017
MARKET PERSPECTIVE
Meal kits threaten both foodservice and retail
Dollar stores and discount grocers encroach on competitor’s market share
C-stores, the original foodservice in retail
Figure 8: Total US convenience store foodservice sales, at current prices, by segment, 2011-21
Buying online in a digital world
Figure 9: Online shopping attitudes and behaviors, August 2017
MARKET FACTORS 
Supermarket and restaurant sales are neck-in-neck
Figure 10: Food sales at home and away from home, January 2003-April 2017
Millennials shop around
Figure 11: Number of stores shopped for groceries, by demographics, August 2016
Rockin’ the suburbs
Figure 12: Net migration, by type of area, 2005-06 through 2015-16
Labeling laws further delayed
KEY PLAYERS – WHAT YOU NEED TO KNOW 
Grocers tackle foodservice
Prepared foods are nice to have, not need to have
Stores become restaurant destinations
WHAT’S WORKING?
Foodservice becomes the norm at supermarkets
Hy-Vee
Mariano’s
Wegman’s
Lowe’s Foods
Kroger
Mass merchandisers upgrade their foodservice programs
Walmart moves beyond traditional QSRs
Can foodservice be Target’s niche?
Whole Foods lays down the template for foodservice programs
Grocery bars are a new opportunity for alcohol brands
WHAT’S STRUGGLING?
Foodservice alone couldn’t save Whole Foods
Figure 13: Price of Whole Foods stock, 9/3/2012-8/21/2017
Consumers choose stores based on convenience and price
Figure 14: Reasons for choosing primary grocery retailer, August 2015
Dollar stores and discount grocers thrive despite lack of foodservice programs
Food safety issues arise
WHAT’S NEXT?
Smaller stores, larger foodservice offerings
Figure 15: TeaBot at 365
Figure 16: Tablet ordering at 365
Technology makes its way into the prepared foods section
Grocers keep up with the trends
Food halls completely blur the lines between retail and foodservice
Restaurants become an opportunity for non-grocery retailers/CPG brands
THE CONSUMER – WHAT YOU NEED TO KNOW 
Younger consumers drive interest in grocer foodservice programs
Attract non-loyalists with foodservice
Not as fun as a restaurant
Provide diners with comfort and privacy
Spur sales with samples and specials
FOODSERVICE IN RETAIL PURCHASES
Prepared chicken dishes are a household favorite
Figure 17: Foodservice in retail purchases, August 2017
Men purchase ready-to-eat options
Figure 18: Foodservice in retail purchases, by gender, August 2017
Millennials are the target market
Figure 19: Foodservice in retail purchases, by age, August 2017
Affluent consumers are more likely to buy prepared dishes
Figure 20: Foodservice in retail purchases, by age and HH income, August 2017
Foodservice purchases highest in Northeast, lowest in Midwest
Figure 21: Foodservice in retail purchases, by region, August 2017
Figure 22: Foodservice in retail purchases, by area, August 2017
Parents look for convenient prepared options
Figure 23: Foodservice in retail purchases, by parental status and age, August 2017
Natural grocer consumers are most likely to buy prepared options
Figure 24: Foodservice in retail purchases, by segment shoppers, August 2017
Figure 25: Foodservice in retail purchases, by segment shoppers (loyalists), August 2017
FOODSERVICE IN RETAIL CONCEPT INTEREST
A third of consumers are not interested in any foodservice concept
Figure 26: Concept interest, August 2017
TURF analysis: Foodservice concept interest
Figure 27: TURF analysis – Store concept interest, August 2017
Foodservice options appeal to iGens/Millennials
Figure 28: Concept interest, by generation, August 2017
Men prefer QSRs while women want coffee shops
Figure 29: Concept interest, by gender and age, August 2017
Those in the Northeast are open to grocery FSRs
Figure 30: Concept interest, by region, August 2017
Foodservice options helps grocers appeal to non-loyalists
Figure 31: Concept interest, by segment shoppers, August 2017
In their own words: Ideal foodservice in retail concept
CONSUMPTION LOCATION
Most prepared options are consumed at home
Figure 32: Consumption location, August 2017
Figure 33: Mariano’s email, August 13, 2017 “New Loadable Lunch & Dinner Menu: Prime Rib Meal, Buffalo Rotisserie Chicken Salad, Cubano Panini and more”
Millennials are most likely to eat options AFH
Figure 34: Consumption location, by age, August 2017
FOODSERVICE IN RETAIL ATTITUDES 
Consumers value the convenience of foodservice in retail
Figure 35: Foodservice in retail attitudes, August 2017
Younger men are the grocery bar drinkers
Figure 36: Foodservice in retail attitudes, by gender and age, August 2017
Fun for all ages
Figure 37: Foodservice in retail attitudes, by generation, August 2017
Urban parents are most likely to enjoy foodservice programs
Figure 38: Foodservice in retail attitudes, by parental status and age, August 2017
Figure 39: Foodservice in retail attitudes, CHAID output, August 2017
Natural grocer consumers are most enthusiastic about foodservice in retail
Figure 40: Foodservice in retail attitudes, by segment shoppers, August 2017
RETAIL VERSUS FOODSERVICE ASSOCIATIONS
Methodology
Consumers think of retail foodservice foods as fresh and healthy
Figure 41: Retail and foodservice associations, August 2017
PURCHASE MOTIVATORS 
Samples and specials may drive sales
Figure 42: Retail in foodservice purchase motivators, August 2017
Figure 43: Hy-Vee, August 1, 2017 “Pick up dinner tonight”
Motivate female customers with samples and selection
Figure 44: Retail in foodservice purchase motivators, by gender, August 2017
Boomers may prove to be an elusive target
Figure 45: Retail in foodservice purchase motivators, by generation, August 2017
Loyalists aren’t that interested in trying foodservice options
Figure 46: Retail in foodservice purchase motivators, by segment shoppers, August 2017
A great in-store experience motivates urbanites
Figure 47: Retail in foodservice purchase motivators, by area, August 2017
APPENDIX – DATA SOURCES AND ABBREVIATIONS
Data sources
Sales data
Consumer survey data
Consumer qualitative research
Abbreviations and terms
Abbreviations
Terms