Key Themes from the 2017 Food Marketing Conference
Hard discounters, click and collect and 3D baskets are shaking things up
We traveled to Western Michigan University’s 52nd Food Marketing Conference in Grand Rapids this month to bring you the most talked about trends and issues in food retail. And if one thing’s clear, this category is still the Wild West. While growth is coming from tougher, more uncomfortable places, there are still opportunities to strike serious gold. You just have to be really, really committed to the dig.
1. Hard discounters are quickly changing the rule book.
Industry advisors from Brick Meets Click and Customers & Guests say the rapid growth of European hard discounters ALDI and Lidl in the U.S. heralds the discount-driven age of retail. Hard discounters win easily on price, and are working feverishly to overcome the barriers of limited selection and store experience. According to Bryan Gildenberg, Chief Knowledge Officer at Kantar Retail, only discount, club and convenience formats are growing faster than the total retail market, which could accelerate with an ALDI/Lidl war. Other retailers could soon struggle to compete — in particular, those that tend to emphasize price and aren’t well differentiated in the market.
2. Click and collect programs are on the rise.
In the age of Amazon, retailers are rushing to give customers “the ultimate convenience,” according to Kroger representatives who shared early successes from their ClickList program. Retailers are still working out the kinks in adjusting for fluctuating shopper demand and challenges in inventory management, basket impact, labor costs and more however, this has not deterred major players from jumping in with gusto. Meijer recently announced a partnership with grocery delivery startup Shipt, and Costco continues to nurture partnerships with both Shipt and InstaCart.
3. Trade collaboration is evolving.
There is more collaboration between retailers and manufacturers than ever before, but retailers’ expectations are rising. Retailers want manufacturers to not only be quicker in getting to market (Judy Spires, Chairman/CEO of Kings Food Markets, recommended “3 months or less”), they expect them to come prepared with creative and strategic marketing programs to reach the right shoppers and drive trial ASAP. Manufacturers should consider investing in creative resources to strengthen their approach.
“The only way you win is to continually innovate. It’s about solution selling now.” — Denny Belcastro, VP Industry Affairs, Kimberly-Clark
4. Three-dimensional baskets are the future.
A combination of tactical baskets (what gets bought with what), strategic baskets (based on shopper need states — occasions, seasons, etc.) and relationship baskets (what gets bought how — online vs. in-store, auto-replenish vs. discrete purchase), three-dimensional baskets such as those used by Jet.com represent a huge shift in trade spend architecture. Basket-level pricing tied to algorithms instantly adjusts prices in checkout, allowing retailers to monetize supply chain savings directly to customers. The next step: teaching algorithms to sell more profitable baskets.
5. Mobile promotions are still mystifying the industry.
Sales driven by promotions have been flat for the past five years. Why? In-store promotions aren’t reaching shoppers on their phones. Price-sensitive shoppers have infinitely better vehicles for saving money than sporadic in-store promotions that require time and energy to find. Target’s Cartwheel app, launched in 2013, is still one of the best efforts to date.
“There is no limit as to how much energy and resources you should be spending on understanding mobile shopper marketing.” — Bryan Gildenberg, Chief Knowledge Officer, Kantar Retail
6. Amazon is the turbocharged pace car.
How to compete with or leverage the retail Goliath’s numerous innovations — Amazon Go, Amazon Prime, Amazon Prime Now, Amazon Echo — was on the minds of both speakers and attendees as nearly all areas of the industry continue to be impacted. A poll of attendees revealed roughly 75 percent were Amazon Prime members. Amazon’s “Alexa” now knows over 10,000 skills, and is integrating more deeply into our lives through partnerships with automotive, consumer electronics, hospitality and CPG brands. At this year’s CES, Ford Motor Company and Amazon announced an industry-first collaboration that would integrate Alexa into Ford vehicles.
7. Ailment shoppers aren’t getting any healthier.
Is anyone else really depressed that the term “ailment shopper” exists? Well, it’s not great news for American consumers, who are increasingly focused on the health and wellness category and managing a host of acute and chronic health issues — from diabetes (now in 25 million U.S. households) to heart disease to celiac disease. As shoppers demand not only healthier food options but transparency from brands and retailers, the responsibility falls to the industry to listen and respond. A prime example is Target, who recently announced a commitment to transparency in all product ingredients by 2020 — from beauty and baby care to personal care and household cleaning.
What other trends are dominating this year? Tell us in the comments.
— Mallory Diamond, Director, Business Development