The Dutch Grocery Sector in 2030 1

RETAILes: The Dutch grocery sector in 2030 1

RETAILes The Dutch grocery sector in 2030

TALE 1: THE GROCERY STORE OF THE FUTURE 2 RETAILes: The Dutch grocery sector in 2030 RETAILes: The Dutch grocery sector in 2030 3

BACKGROUND

Roland Berger and EFMI Business School have recently industry survey in which 150 Dutch executives from conducted a joint study to gain insight into the future retailers, fresh food companies, brand- and private-la- of the Dutch grocery sector and understand how the bel manufacturers gave their views on the future of the industry could transform itself over the next 10 to 15 grocery sector. years within the context of a rapidly-changing world. In order to capture accurate insights from within the In a series of tales we aim to give an impression on what sector, we organized roundtable discussions with CEOs the industry could look like in 2030. Selected focus are- and senior management of a wide variety of players ac- as include the future of the brick-and-mortar store, the tive in the food and retail industry – both incumbent impact of digitalization and the social impact of these companies and innovative newcomers. In addition to developments. In this first tale we discuss the future of the insights gained from these roundtable discussions, brick-and mortar grocery stores (Figure 1). EFMI and Roland Berger conducted an in-depth food

In the this study first we proposetale Roland to focus Bergeron 3 selected and areas:EFMI Business School will developments in brick-and-mortar, digitalization and social impact discuss the future of the brick-and-mortar grocery store

Figure 1: RETAILes: The Dutch grocery sector in 2030 … … INTRO BRICK-AND-MORTAR DIGITALIZATION SOCIAL IMPACT

The grocery store Online grocery Sustainable 0 1 of the future 3 shopping supply chains Introduction to RETAILes: The Dutch grocery sector in 2030 Innovative in-store E-commerce The pursuit 2 technology models of health

Figure 3: Evolving focus of the 2030 physical grocery store concept How will the grocery store concept look like in 2030? [% of respondents]

– – – + + + Large reduction Reductionin No change in Increasein Large increase in focus focus focus focus in focus

Figure 2: Development of brick-and-mortar Focus on convenience – grocery stores in NL (2016-2030) Offering fast and high service 6% 50% 44% solutions to customers -850 100% 82% Focus on experience – Offering a true shopping 2% 8% 49% 41% experience ~4,750 ~3,900 stores stores Focus on fresh – Offering an appealing 2016 2030 2% 8% 64% 26% fresh assortment Source: IRI, EFMI and Roland Berger in-depth food industry survey of 150 Dutch executives (2018) Source: EFMI and Roland Berger in-depth food industry survey of 150 Dutch executives (2018) 4 RETAILes: The Dutch grocery sector in 2030

KEY TAKEAWAYS OF TALE 1: THE GROCERY STORE OF THE FUTURE

• Physical stores will continue to play an important role in the future grocery landscape • The market share of hard discounters continued to increase in 2018 - The discount segment is expected to further increase in importance in the next decade • Although the winning physical store concept(s) is still to be uncovered, the winning formula will focus particularly on convenience, experience and/ or fresh assortment • Technology is one of the answers that will help stores remain cost competitive in the future RETAILes: The Dutch grocery sector in 2030 5

In the study we propose to focus on 3 selected areas: developments in brick-and-mortar, digitalization and social impact

Physical stores will continue to The market share of hard discounters Figure 1: RETAILes: The Dutch grocery sector in 2030continued to increase in… 2018 - The play an important role in the … future grocery landscape discount segment is expected to INTRO BRICK-AND-MORTAR DIGITALIZATIONfurther increase inSOCIAL importance IMPACT in the The global grocery landscape is rapidly changing. Industry developments such asThe the grocery growing store importance Onlinenext grocery decade Sustainable of the future shopping supply chains of online,0 changing customer1 preferences and techno3- In the past decade we have seen discounters gain signif- logicalIntroduction innovations to are expected to continue to impact icant popularity in the food retail landscape. Discount- RETAILes: The the traditionalDutch grocery grocery store concept. ers such as Lidl and Aldi have gained a prominent posi- Havingsector a physical in 2030 presence will remain important in tion in the Dutch retail market. As such, the joint market the future grocery landscape.Innovative Respondents in-store to the E-commerceposition of these two discountersThe pursuit in The Netherlands EFMI and Roland Berger in-depthtechnology industry survey modelshas increased by over 30%of healthover the past decade1. Al- of 150 food executives2 believe that in 2030 rough- though the growth rate of hard discounters is not as ly 80% of the current amount of physical stores will high as it used to be, the combined market share of Aldi still be operational in the Netherlands (Figure 2). The and Lidl continued to increase in 2018, indicating that importance of having a physical presence can be the growth of the discount segment is not over and that illustrated by recent moves of pure online players into the channel is likely to further increase in importance in the brick-and-mortar segment. Alibaba recently ex- the next decade. Figure 3: Evolving focus of the 2030 physical grocery store concept panded into the offline grocery world with their new How will the grocery store concept look like in 2030? [% of respondents] HEMA grocery store. In the US, Amazon entered the Although the winning physical store brick-and-mortar area with its acquisition of Whole – – – + + + Large reduction Reductionin No change in Increasein Large increase Foods in 2017. concept(s) is still to be uncovered, in focus focus focus focus in focus the winning formula will focus Figure 2: Development of brick-and-mortar particularly onFocus convenience, on convenience – grocery stores in NL (2016-2030) experience and/orOffering fresh fast and high assortment service 6% 50% 44% solutions to customers -850 The brick-and-mortar full-service grocery store con- 100% cepts are most likely the breakthrough winners that 82% no longer restrict themselvesFocus on experience to a transactional – role but find new ways toOffering appeal a trueto consumers. shopping Our survey 2% 8% 49% 41% shows that three keyexperience store attributes are expected to ~4,750 ~3,900 become more important going forward (Figure 3). stores stores Focus on fresh – Offering an appealing 2016 2030 2% 8% 64% 26% fresh assortment Source: IRI, EFMI and Roland Berger in-depth food industry survey of 150 Dutch executives (2018) 1 Nielsen (2017) Source: EFMI and Roland Berger in-depth food industry survey of 150 Dutch executives (2018) In the study we propose to focus on 3 selected areas: developments in brick-and-mortar, digitalization and social impact

Figure 1: RETAILes: The Dutch grocery sector in 2030 … … INTRO BRICK-AND-MORTAR DIGITALIZATION SOCIAL IMPACT

Figure 3: Evolving focus of the 2030 physical grocery store concept How will the grocery store concept look like in 2030? [% of respondents]

– – – + + + Large reduction Reductionin No change in Increasein Large increase in focus focus focus focus in focus

Focus on convenience Carrefour and Tencent introduced Le Marché, a con- First, the store of the future is expected to be focused cept which offers fast check-out via face recognition. In on convenience of the customer, through fast and the Netherlands, AH To Go, part of Ahold Delhaize, has high-quality in-store solutions. A recent development in recently introduced its “tap to go” concept. Customers this area is the automated store check-out process. In- can use their phone to scan the selected products, after novative checkout systems can result in saving custom- which their account is automatically debited. Although ers time on one side and reduce the operational cost the check-out process is not the only change being in- base on the other side. Already an increasing number troduced, other initiatives that are being launched also of Dutch grocery stores have self-checkout systems in focus on further enhancing the shopper’s convenience place. Amazon has pushed developments even further and experience. As such, in Italy, Coop’s supermarket with its launch of Amazon Go, a cashless convenience of the future provides product information on screens store that replaces cashiers with tracking technology. with augmented reality. In addition to these technologi- RETAILes: The Dutch grocery sector in 2030 7

cal innovations, store concepts with more focus on con- offering of freshly prepared in-store meals and venience and speed are on the rise. In the Netherlands, fresh meal kits. In addition, grocery stores are this can be illustrated by the roll-out of stores under experimenting with innovative fresh-initiatives. convenience concepts such as AH To Go, Jumbo City, An example is the Kräuter Garten (“herb garden”), COOP Vandaag and Spar Express. a project between wholesale supermarket Metro and indoor farming startup Infarm. Using farming Focus on experience installations, herbs are grown and produced in-store, Second, the future store concept is likely to transition thereby securing product quality and maximizing from being merely focused on transactions to providing product freshness. the customer with a novel experience as well. The grocery store is expected to increasingly become a place where consumers go for inspiration or as a social activi- Technology is one of the answers ty. This development will further blur the lines between that will help stores remain cost food and food service. In the Netherlands, Jumbo has competitive in the future introduced its Foodmarkt, a concept that combines the traditional supermarket with foodservice elements such Technological developments can help stores to re- as a restaurant, coffee corner and pizza-on-the go. In main cost competitive in the future. Developments China, Alibaba has introduced Hema, a new physical re- in the area of in-store robotics, automated check-out tail concept where customers can for example hand-se- systems, new payment solutions and other smart lect their seafood and have it prepared on the spot. In in-store technologies have significant potential in the US, Raley’s has introduced Market 5-ONE-5, a new reducing the operational cost base in-store and supermarket concept with focus on fresh products as enhancing the customer experience. In tale 2 we will well as customer experience. Their stores offer wine by cover the main technological developments that we ex- the glass, on-site dining and space to socialize with oth- pect to contribute to the development of the traditional er customers while being inspired by features of local brick-and-mortar grocery store. artists.

Focus on fresh food and meal solutions Third, the future grocery store is expected to focus Having a physical presence will more on fresh food. Fresh products such as fruits, vegetables, dairy and ready-meals will have a more remain important in the future grocery prominent position in the future store, whereas dry landscape – survey results indicate goods and non-food products will be increasingly sold that in 2030 roughly 80% of the current through online channels. We expect to see a deep- er fresh product offering with more in-store product number of brick-and-mortar grocery processing. Groceries are already expanding their stores will still be in operation 8 RETAILes: The Dutch grocery sector in 2030

PUBLISHER Roland Berger Amsterdam World Trade Center Amsterdam Strawinskylaan 581 1077 XX, Amsterdam The Netherlands +31 20 796 0600 www.rolandberger.com

EFMI Business School Groeneveld 2 3744 ML Baarn The Netherlands +31 35 303 7777 www.efmi.nl

AUTHORS Alexander Belderok – [email protected] Mireille Einwachter – [email protected] Marcel van Aalst – [email protected] Joris Winkelman – [email protected] Rosie Veul – [email protected]

DISCLAIMER This study has been prepared for general guidance only. The reader should not act on any information provided in this study without receiving specific professional advice. Roland Berger and EFMI Business School shall not be liable for any damages resulting from the use of information contained in the study.