Deflation has received a lot of the blame for the soft sales many U.S. grocers are experiencing, but I believe there is more happening that we should be talking about. In a nutshell, deflation has caused the corrosive effects of two other factors to be more evident, and one of these factors holds the potential for growth if you look at it through the right lens.
First, competition for sales of consumable products has exploded in ways that challenge even how to define “the competition.” Some non-supermarket retailers even refer to this as their “consumable strategy”; for example, some convenience stores sell a gallon of milk for less than the supermarket. This price competition extends beyond the usual suspects — mass merchants and dollar stores — all the way to home improvement and office supply outlets. (And that’s before considering the dot com competition like Amazon, FreshDirect, Door-to-Door Organics, Thrive, Blue Apron, Chewy.com, etc.)
Second, Americans have shifted the way they eat, especially the evening meal. Far fewer evening meals are eaten together, partly due to the growing number of single-person households, but also because of schedule pressures. How many times last week did everyone in your household sit down together for dinner? In addition, many households don’t have the cooking skills or time required to prepare dinner. The combination of factors makes many feel like their only options are to go out to eat or order in.
What’s happening in the “meal business,” and what can grocery/food retailers do about it?
The bundled meal solutions merchandised by supermarkets a decade ago never caught on, but the growing popularity (or at least initial trial) of today’s meal kits shows that consumers are actively looking for better options to solve the following problems:
- Spending the time necessary to plan and prep a meal
- Having all the spices and other ingredients on hand
- Eating a meal that’s “good for them”
- Dealing with leftovers
None of these may sound like big problems, but they’re real barriers for many households, and they highlight the gap in available solutions — the big space between “ingredient-based meals prepared at home” and “eat out/carry in.”
Bottom line, meals are one area where supermarkets can and should find new growth if they watch how people are shifting gears in getting dinner on the table and offer compelling solutions in the way of new services and products.