Channel Migration Blurs the Lines of Grocery and Restaurant

Proliferation of the Grocerant Niche

Woman shopping in delicatessen shop.

Betsie Van Der Meer/Getty Images

The line between restaurants and food retailers grows ever thinner. The fight for America's food dollars continues to intensify as consumers find fresh prepared ready-to-eat food options at a wide and growing array of outlets across almost every channel: convenience stores, chain drug stores, restaurants, grocery stores, club stores, vending, gas stations, and even dollar stores.

While manufacturers, retailers, and restaurants worry about choice overload, consumers have embraced their new choices, The fight is taking place in what is called the grocerant niche.

The Restaurant Industry Is Slow to Innovate

Typically in the United States, the larger the chain, the slower they move to adopt something compared to a smaller chain or independent restaurant. The goal of chain restaurants is simpleā€”to feed one meal at a time in the restaurant while protecting and edifying the brand.

Historically, chain restaurant leaders have denied the credibility of start-up competitors as irrelevant. The pizza sector is a great example; evolving from family dining independents to a national chain of "Red Roof" Italian, then to delivery-only outlets.

Increase in Non-Traditional Meal Occasions

At the intersection of the consumer, freshly prepared food, and technology we find that consumer eating behavior is now beyond the control of traditional food marketers. Evolving culture, lifestyle, demographics, and uncertain economy all put pressure on the American food consumer: Demands of work, economic shrinkage, raising a family, commuting, social interaction, kid's after-school activities, all contribute to a food marketplace where convenience vies with price.

Food Packaging and New Outlets Empower Consumers

Everyone is going after restaurant food dollars. Walgreens is selling fresh prepared ready-to-eat and made-to-order sandwiches. Whole Foods, Trader Joe's, Safeway, and Wegmans sell ready-to-eat and/or heat-and-eat fresh pizza. Coinstar is selling Seattle Best Coffee at 1,000 locations.

Foodservice sales represent 23% of all convenience store sales, according to 2018 State of the Industry data from the NACS. Many convenience stores offer the double convenience of getting gas at the same time.

Shoppers Propel New Retail Food Formats

Trader Joe's and Whole Foods are each known for high quality (restaurant quality) ready-to-eat and heat-and-eat foods with distinctive offerings. More important, each is leading with innovative products and package size to create value. Each chain is positioned as a food shopping destination for meal components customized and personalized for immediate consumption or mix-and-matched for a meal time at home.

Walgreens' fresh prepared food is restaurant quality and priced less than Panera Bread or Corner Bakery CAFE. Both Panera Bread and Corner Bakery CAFE thrive in urban locations. Walgreens is now growing price, quality, and speed of service advantages over legacy retailers. Legacy restaurant chains must reconsider the speed at which they evolve and adapt or non-traditional outlets will capture profit margins as well.

Traditional views of meals and mealtime are things of the past. Legacy retailers waiting for the "next big thing" to copy simply might be out of luck this time. Legacy food retailers may not like to be first movers, but waiting too long just may not work.

Product, Packaging, Placement, Portability, and Price

The retail food world is evolving at an ever-increasing pace filled with innovation in food, portion size, points of distribution, and quality fresh prepared meal solutions. The price, value, service equilibrium is resetting in retail foodservice. In order to edify the brand and reinforce consumer relevance, restaurateurs must leverage the 5P's of food marketing.

Many legacy food retailers continue to practice brand protectionism, stifle the brand while diminishing consumer relevance. The consumer is dynamic, not static. Brands must be dynamic, evolving with the consumer.

Steven Johnson is Grocerant Guru at Tacoma, WA-based Foodservice Solutions, with extensive experience as a multi-unit restaurant operator, consultant, brand/product positioning expert, and public speaker.