November 2, 2012
FRBuyer: Fresh Taking Toll on Center Store
Through a special arrangement, presented here for section of a recent article, from Frozen & Refrigerated Buyer magazine.
Retailers are looking to differentiate by adding more fresh meal items, and different sized items, in meals, snacks and desserts. The goal is to take business away from restaurants, but all this has had an impact on center store volume, including frozen and dairy.
"Let’s say the consumer picks up a deli pizza and not a frozen pizza. Who wins?" asks Todd Hale, SVP of consumer and retail insight at the Nielsen Company. "And what about margins in the perimeter, with its high labor costs and shrink? All this needs to be considered. Why not take some frozen desserts and put them in the fresh-prepared meals section? This gives consumers more choices. Coca-Cola has done something similar to this, with carbonated displays around prepared meal areas."
At the same time, prepared foods’ success is causing retailers to rethink how they merchandise other departments to provide a more broad-based solution for shoppers.
"One retailer moved everything related to a picnic right up close to the meat department — paper plates, napkins, charcoal, lighter fluid and so on. Shoppers could buy everything for the entire picnic occasion all in one area," said Mr. Hale. "Another group of retailers bundled refrigerated meal items all together in one location. Without even a price promotion, the stores saw strong sales increases from those displays because they delivered on making a complete meal, rather than forcing the shopper to walk the whole store."
BrainTrust
Recent Discussions
Discussion Questions
How is the popularity of prepared foods affecting other grocery categories and store profits? How can supermarkets lay out their stores to take better advantage?
Poll
I love the idea of solution-based merchandising. I think it makes a lot of sense. But I also see the problem it creates for center store – when you have a SKU spread across multiple locations in the store, it makes it a lot more difficult to keep all of those locations stocked. And eating away at center store floor space to support more of the prepared items takes a space that already has assortment depth issues and makes it even smaller. To me, the solution is to shift a lot of that center store stuff online as replenishment orders that are just picked up in the store as shoppers come to pick up their fresh items.
Prepared food profits should be a positive on overall store results BUT the complexity lies in individual stores marketing to their particular demographics. A one size fits all approach can be a profit disaster. Leading grocery retailers need to be out ahead of the curve in areas of meals, snacks, marketing to singles etc. While the results may counteract local restaurant efforts, retailers must be aware of the potential impact particularly on their frozen and refrigerated departments. These are typically high margin areas and the balance needs to be maintained to contribute to overall store results. Not an easy task but a necessary one to still be a successful retailer over the next decade.
The reason for the growth in perishables is simple. We simply can not compete in the center-store anymore, due to the massive amount of groceries being sold in non-traditional supermarkets these days. Everybody sells beans, pop, chips, and household stuff, and no one is going to crack the mass merchandisers stranglehold on this, so perishables are the new way to move forward.
My concern is the way Fresh prepared foods are promoted. The thaw and serve foods are the easy way, but how does it really differentiate yourself from the convenience store model, if that is what you choose?
It does take effort, and labor to really stand out, if you’re going into homemade foods, and in the long run it is worth it. Consumers will drive past the big box stores to get your uniquely prepared salads, entrees, and fresh baked breads and desserts, IF they are delicious. They will pay more, knowing it is still a better option, than eating out, plus other sales inside the store will grow as well.
Sample, Sample, Sample, and run solid profitable promotions weekly, and over time, the customer will keep coming in each week, to see what’s for dinner.
Wait! … Wait! … Help!
Oh … it’s RetailWire. Thank God! I thought for a moment I had fallen into some devilish time warp and I was stuck back in the 1990s!
Wait! … Wait! … As they say in the legal world, hasn’t this question been asked and answered about ten million times over the past two or three decades?
Cross merchandise center store items with prepared/fresh foods? What a concept!
Cross merchandise frozen and fresh. Wait! … Wait! … Let me dust off the archives … I have those files somewhere … Ah, yes, here they are. Let’s spend hours discussing the problem of cutting up floors and the merits of free standing coffin cases.
Sorry, I have a hard time taking this question seriously.
The answer to the first question seems to be a loud and resounding, “Duh!!!!!!!!” As to the answer to the second question, I’m going to paraphrase one of Peter Fonda’s lines from Easy Rider, (hey, we are in the Way Back Machine, no?,) and say, “We blew it man!”
The right answer was — and remains — blow up the traditional Aisles of Death floor plans which make stocking and inventory so convenient and shopping so painful and begin building stores based on how people would shop if they could build a store.
Of course that would mean building smaller stores, reducing inventories, etc., etc. and — given where we are in time as evidenced by the question — we won’t be able to start thinking about effective inventory rationalization for a decade or so.
Drive incremental traffic with prepared food and increase the market basket with related items nearby.
Executed correctly this is a net positive to revenue and profitability. That math is long since proven and probably getting even more attractive as consumers continue to increase the amount of prepared they consume. The challenge is getting the right balance and scale for both the chain and the local market.
I fully agree with Todd’s comments. The traditional approach to Center of Store (COS) will continue to be challenged. Walmart and the value retailers continue to take share from traditional supermarkets. Online purchases of COS products will continue to grow. Does anyone need to visually inspect paper towels, cereal, diapers, etc. before purchasing?
I envision a day when COS is significantly diminished. One in which many of the COS products are purchased online and delivered to the store. Consumers will shop enhanced and exciting perishable departments and then have their online purchases placed into the trunk of their vehicles.
In the meantime, suggestions by Todd and others need to focus on consumer solutions to food retail shopping. At the very least we need to consider new merchandising solutions like easy to prepare end cap meals with all of the products available to make a family dinner. Or how about merchandising dairy creamers with coffee, canned soup with deli sandwiches, or salad dressings with fresh vegetables? There is a need to fundamentally rethink the consumer shopping process and adapt the store and other factors accordingly.
Grocery shoppers today tend to shop around occasions such as dinner, kids lunch, or a quick meal and they are seeking solutions, not just products.
The center store has traditionally been designed as a warehouse of separate products on tall shelves in monolithic aisles. In recent years, the perimeter of the store has been transformed, but center store remains largely the same.
The move for grocers to feature prepared foods reflects the shopper desire for basic solutions to life’s many occasions. The question is how to redesign center store to better meet the need.
Shopper research shows the department shoppers like to shop most is produce. Part of this is because of the bright colors, smells and variety of choices. But they also like the product layout with many smaller tables and an open feel. Perhaps there is something to be learned from the shopper experience with produce.
Let’s address the two questions in reverse order.
The supermarket is an ever-enlarging phenomenon for serving an ever-decreasing desire to cook at home or even eat there. It’s time to reinvent the supermarket to accommodate our changing consumption culture.
To innovate an appropriate and applicable supermarket requires a combination of brains and materials. The more retailers use the creative sides of their brains, the less materials and store size they will need to serve today’s faster-paced consumers … unless they wish to convert into warehouse clubs.
What the grocery store used to need was a good location. What they need to serve today’s marketplace is also a strong sense of clued-in direction. With nearly every merchant now selling groceries and many others now selling prepared foods there is an obvious impact on supermarket sales and profits.
Todd’s examples of solution selling are dead on. Retailers and manufacturers alike need to recognize that we need to change our products and merchandising to anticipate consumer needs or shoppers will vote with their feet and spend more time in more convenient establishments.
The physical operation challenges including refrigeration, store design and stocking are addressable with creative planning. The trickiest part is the in-store barriers created by siloed buying selling teams. Recently one food manufacturer that operates in different departments told us their own colleagues in the frozen section were their enemies. And how many times have we heard retailer merchants ask for ideas on how to beat their peers in other categories?
New levels of collaboration are critical to institutionalize solution selling and to start we must all look in the mirror!
Gene Hoffman has, once again, hit the nail on the head. Supermarkets should worry more about “stocking” creativity and innovation and less about how many cases of baked beans Walmart sells.
Every day, consumers are pounded with messages warning them away from center store items that may be loaded with sodium, sugar, and preservatives. It’s not surprising at all that innovative grocers are responding in this way, and consumers will likely react well to displays that break up the tedium of grocery shopping!
From my point of view (as a spouse that is forced to shop or never be fed) – it seems that the center store in grocery stores can be at times little more than a consumer products delivery node for shoppers – as they stand today, few like shopping them and you always see people hovering at the end caps wondering whether or not they should plunge in to locate some item; or they’ll dart in and grab something and do a quick u-turn back out. People don’t go to the grocery store because they enjoy going up and down those aisles (Ryan’s Aisles of Death). Sometimes I venture into these areas just to see what’s new and what’s on the way out.
The way shoppers are responding to time and shopping tells many retailers to lay out the stores so people can shop by occasion (not a new concept), make it easier, save me time, and make it fun. Prepared foods are a reflection of our busy lifestyle and they won’t go away any time soon (they’ll just morph and get even tastier and healthier). People want healthier foods and when they do the math they get a prepared meal at a grocery store for nearly the same amount that it would cost them to prepare at home and they save time.
As to store profitability, grocers have struggled with that forever and their razor thin margins won’t change unless they differentiate their stores and think more about their customers with new shopping experience (which can include center store type of merchandise) and less about maintaining the integrity of traditional center store (aka “Aisles of Death”). …with shopping list in hand for the weekend.
Wow, imagine this: A new grocery store layout! For the first time in 100 years! In my view, there should be no such thing as “Center Store” to begin with. It’s almost a self-fulfilling prophecy that the CENTER-store literally becomes the “target” of other categories.
There is no law that states that dry grocery products must be stocked in parallel aisles in the middle of the store. More could be done with retailer / CPG collaboration to drive more sales volume of high-margin items, regardless of perishability.
I’d like to see a store built with a clean sheet of paper. No rules. No history. Just today’s shopper in mind. Social media touchpoints throughout the store, true meal planning stations with all products grouped together for a particular recipe. 100% of dry grocery items allocated with enough holding power to carry shelf (or whatever fixture is innovative) capacity from delivery to delivery. This CAN be done. And, looking at the average monthly movement of these items it will astound most executives that 80%+ of SKUs move less than a case per month per store.
Keep the high-margin dry items mixed in with fresh, and the total store margin will grow.
Two things are at play here. First, as the first waves of younger shoppers enter the grocery segment, they’re more prone to buying ‘to go’ vs ‘to make’ as they just don’t have the experience or knowledge yet ‘to make’. Defined as “Millennials,” this new group of shoppers is estimated to be as big as 80 million people whose impact on ‘to go’ will be substantial. So, look for it to continue.
Second, both younger shoppers and older empty nesters are not only interested in the ‘to go’ offerings, but they’re also really over the center store, period. Our studies have shown that younger shoppers “hate” going into the middle of a grocery store and will do just about anything to avoid it. It’s seen as a “chore.”
Solution: re-think center store! And don’t just move some things around and create new signs; RETHINK it! (As in do away with it as it is.) Customers are just waiting for a forward-thinking grocery to come along and completely change the game. Whole Foods, isn’t that you? Take charge.
Supermarkets need to stop looking for the solution somewhere out there or from some consultant or from some other store. Know your customers, know what they want to buy, make it convenient to buy those items, and make the process enjoyable.
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I love the idea of solution-based merchandising. I think it makes a lot of sense. But I also see the problem it creates for center store – when you have a SKU spread across multiple locations in the store, it makes it a lot more difficult to keep all of those locations stocked. And eating away at center store floor space to support more of the prepared items takes a space that already has assortment depth issues and makes it even smaller. To me, the solution is to shift a lot of that center store stuff online as replenishment orders that are just picked up in the store as shoppers come to pick up their fresh items.
Prepared food profits should be a positive on overall store results BUT the complexity lies in individual stores marketing to their particular demographics. A one size fits all approach can be a profit disaster. Leading grocery retailers need to be out ahead of the curve in areas of meals, snacks, marketing to singles etc. While the results may counteract local restaurant efforts, retailers must be aware of the potential impact particularly on their frozen and refrigerated departments. These are typically high margin areas and the balance needs to be maintained to contribute to overall store results. Not an easy task but a necessary one to still be a successful retailer over the next decade.
The reason for the growth in perishables is simple. We simply can not compete in the center-store anymore, due to the massive amount of groceries being sold in non-traditional supermarkets these days. Everybody sells beans, pop, chips, and household stuff, and no one is going to crack the mass merchandisers stranglehold on this, so perishables are the new way to move forward.
My concern is the way Fresh prepared foods are promoted. The thaw and serve foods are the easy way, but how does it really differentiate yourself from the convenience store model, if that is what you choose?
It does take effort, and labor to really stand out, if you’re going into homemade foods, and in the long run it is worth it. Consumers will drive past the big box stores to get your uniquely prepared salads, entrees, and fresh baked breads and desserts, IF they are delicious. They will pay more, knowing it is still a better option, than eating out, plus other sales inside the store will grow as well.
Sample, Sample, Sample, and run solid profitable promotions weekly, and over time, the customer will keep coming in each week, to see what’s for dinner.
Wait! … Wait! … Help!
Oh … it’s RetailWire. Thank God! I thought for a moment I had fallen into some devilish time warp and I was stuck back in the 1990s!
Wait! … Wait! … As they say in the legal world, hasn’t this question been asked and answered about ten million times over the past two or three decades?
Cross merchandise center store items with prepared/fresh foods? What a concept!
Cross merchandise frozen and fresh. Wait! … Wait! … Let me dust off the archives … I have those files somewhere … Ah, yes, here they are. Let’s spend hours discussing the problem of cutting up floors and the merits of free standing coffin cases.
Sorry, I have a hard time taking this question seriously.
The answer to the first question seems to be a loud and resounding, “Duh!!!!!!!!” As to the answer to the second question, I’m going to paraphrase one of Peter Fonda’s lines from Easy Rider, (hey, we are in the Way Back Machine, no?,) and say, “We blew it man!”
The right answer was — and remains — blow up the traditional Aisles of Death floor plans which make stocking and inventory so convenient and shopping so painful and begin building stores based on how people would shop if they could build a store.
Of course that would mean building smaller stores, reducing inventories, etc., etc. and — given where we are in time as evidenced by the question — we won’t be able to start thinking about effective inventory rationalization for a decade or so.
Drive incremental traffic with prepared food and increase the market basket with related items nearby.
Executed correctly this is a net positive to revenue and profitability. That math is long since proven and probably getting even more attractive as consumers continue to increase the amount of prepared they consume. The challenge is getting the right balance and scale for both the chain and the local market.
I fully agree with Todd’s comments. The traditional approach to Center of Store (COS) will continue to be challenged. Walmart and the value retailers continue to take share from traditional supermarkets. Online purchases of COS products will continue to grow. Does anyone need to visually inspect paper towels, cereal, diapers, etc. before purchasing?
I envision a day when COS is significantly diminished. One in which many of the COS products are purchased online and delivered to the store. Consumers will shop enhanced and exciting perishable departments and then have their online purchases placed into the trunk of their vehicles.
In the meantime, suggestions by Todd and others need to focus on consumer solutions to food retail shopping. At the very least we need to consider new merchandising solutions like easy to prepare end cap meals with all of the products available to make a family dinner. Or how about merchandising dairy creamers with coffee, canned soup with deli sandwiches, or salad dressings with fresh vegetables? There is a need to fundamentally rethink the consumer shopping process and adapt the store and other factors accordingly.
Grocery shoppers today tend to shop around occasions such as dinner, kids lunch, or a quick meal and they are seeking solutions, not just products.
The center store has traditionally been designed as a warehouse of separate products on tall shelves in monolithic aisles. In recent years, the perimeter of the store has been transformed, but center store remains largely the same.
The move for grocers to feature prepared foods reflects the shopper desire for basic solutions to life’s many occasions. The question is how to redesign center store to better meet the need.
Shopper research shows the department shoppers like to shop most is produce. Part of this is because of the bright colors, smells and variety of choices. But they also like the product layout with many smaller tables and an open feel. Perhaps there is something to be learned from the shopper experience with produce.
Let’s address the two questions in reverse order.
The supermarket is an ever-enlarging phenomenon for serving an ever-decreasing desire to cook at home or even eat there. It’s time to reinvent the supermarket to accommodate our changing consumption culture.
To innovate an appropriate and applicable supermarket requires a combination of brains and materials. The more retailers use the creative sides of their brains, the less materials and store size they will need to serve today’s faster-paced consumers … unless they wish to convert into warehouse clubs.
What the grocery store used to need was a good location. What they need to serve today’s marketplace is also a strong sense of clued-in direction. With nearly every merchant now selling groceries and many others now selling prepared foods there is an obvious impact on supermarket sales and profits.
Todd’s examples of solution selling are dead on. Retailers and manufacturers alike need to recognize that we need to change our products and merchandising to anticipate consumer needs or shoppers will vote with their feet and spend more time in more convenient establishments.
The physical operation challenges including refrigeration, store design and stocking are addressable with creative planning. The trickiest part is the in-store barriers created by siloed buying selling teams. Recently one food manufacturer that operates in different departments told us their own colleagues in the frozen section were their enemies. And how many times have we heard retailer merchants ask for ideas on how to beat their peers in other categories?
New levels of collaboration are critical to institutionalize solution selling and to start we must all look in the mirror!
Gene Hoffman has, once again, hit the nail on the head. Supermarkets should worry more about “stocking” creativity and innovation and less about how many cases of baked beans Walmart sells.
Every day, consumers are pounded with messages warning them away from center store items that may be loaded with sodium, sugar, and preservatives. It’s not surprising at all that innovative grocers are responding in this way, and consumers will likely react well to displays that break up the tedium of grocery shopping!
From my point of view (as a spouse that is forced to shop or never be fed) – it seems that the center store in grocery stores can be at times little more than a consumer products delivery node for shoppers – as they stand today, few like shopping them and you always see people hovering at the end caps wondering whether or not they should plunge in to locate some item; or they’ll dart in and grab something and do a quick u-turn back out. People don’t go to the grocery store because they enjoy going up and down those aisles (Ryan’s Aisles of Death). Sometimes I venture into these areas just to see what’s new and what’s on the way out.
The way shoppers are responding to time and shopping tells many retailers to lay out the stores so people can shop by occasion (not a new concept), make it easier, save me time, and make it fun. Prepared foods are a reflection of our busy lifestyle and they won’t go away any time soon (they’ll just morph and get even tastier and healthier). People want healthier foods and when they do the math they get a prepared meal at a grocery store for nearly the same amount that it would cost them to prepare at home and they save time.
As to store profitability, grocers have struggled with that forever and their razor thin margins won’t change unless they differentiate their stores and think more about their customers with new shopping experience (which can include center store type of merchandise) and less about maintaining the integrity of traditional center store (aka “Aisles of Death”). …with shopping list in hand for the weekend.
Wow, imagine this: A new grocery store layout! For the first time in 100 years! In my view, there should be no such thing as “Center Store” to begin with. It’s almost a self-fulfilling prophecy that the CENTER-store literally becomes the “target” of other categories.
There is no law that states that dry grocery products must be stocked in parallel aisles in the middle of the store. More could be done with retailer / CPG collaboration to drive more sales volume of high-margin items, regardless of perishability.
I’d like to see a store built with a clean sheet of paper. No rules. No history. Just today’s shopper in mind. Social media touchpoints throughout the store, true meal planning stations with all products grouped together for a particular recipe. 100% of dry grocery items allocated with enough holding power to carry shelf (or whatever fixture is innovative) capacity from delivery to delivery. This CAN be done. And, looking at the average monthly movement of these items it will astound most executives that 80%+ of SKUs move less than a case per month per store.
Keep the high-margin dry items mixed in with fresh, and the total store margin will grow.
Two things are at play here. First, as the first waves of younger shoppers enter the grocery segment, they’re more prone to buying ‘to go’ vs ‘to make’ as they just don’t have the experience or knowledge yet ‘to make’. Defined as “Millennials,” this new group of shoppers is estimated to be as big as 80 million people whose impact on ‘to go’ will be substantial. So, look for it to continue.
Second, both younger shoppers and older empty nesters are not only interested in the ‘to go’ offerings, but they’re also really over the center store, period. Our studies have shown that younger shoppers “hate” going into the middle of a grocery store and will do just about anything to avoid it. It’s seen as a “chore.”
Solution: re-think center store! And don’t just move some things around and create new signs; RETHINK it! (As in do away with it as it is.) Customers are just waiting for a forward-thinking grocery to come along and completely change the game. Whole Foods, isn’t that you? Take charge.
Supermarkets need to stop looking for the solution somewhere out there or from some consultant or from some other store. Know your customers, know what they want to buy, make it convenient to buy those items, and make the process enjoyable.