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Home , Amazon Fresh, Amazon Go, Lidl, Whole Foods Market

, discounters reshape the traditional grocery landscape.

BY MARK HAMSTRA

ithin just a few days this past June, , the kets being forced to evolve in order to retain sales that are being -based discount food-retailing giant, siphoned off by faster-growing alternative formats. opened its first U.S. stores, and Amazon Bill Bishop, chief architect at Barrington, IL-based consulting announced its planned acquisition of , firm Brick Meets Click, says he sees three broad types of food TX-based . It was a retailing emerging. One type will be led by the hard-discounters Wone-two punch that promises to reshape the traditional grocery and other value-driven merchants attracting consumers who are shopping landscape. willing to accept the trade-off of limited choice and lower service The events illustrate how the middle tier of the levels in exchange for low prices. At the other end will be retailers industry, historically a comfortable sweet spot for traditional catering to consumers seeking high levels of service, as exempli- operators who competed mostly amongst each other, is being fied by Whole Foods and online specialists such as Fresh Direct, stretched thinner and thinner. Industry experts see supermar- and Amazon.

40 / OCTOBER 2017 / PRODUCE BUSINESSSS MODERNIZES STORES Dick Spezzano of Monrovia, CA-based Spezzano Consulting Service says the most recent Aldi stores that have opened in are impressive. “Aldi’s starting to modernize its stores,” he says. “Produce previously stacked on pallets is now on display fixtures. They have refrigerated space of about 20 feet, while [older] stores I visited in the Northeast probably had 4 feet of refrigeration, and the rest was dry, to keep costs down. They’ve made some moves to improve presentation.” Spezzano says that while the Aldi stores might not carry the top brands of produce in any one category, they do offer well- known secondary brands. The company also features organic produce options among its limited assortment. Spezzano says he counted about 20 organic items among 75 to 80 total SKUs in the produce department at a local California Aldi. “They realize that’s where the consumer Aldi has cast a long shadow since coming to the and is on an aggressive is going,” he says. expansion track. Because Aldi stores are relatively low volume — Spezzano estimates they tally “Both of those segments on the be higher than in the U.K., or at least in about $150,000 per week, compared extremes are growing,” says Bishop. they’ll get there faster,” says Bishop. “For with $500,000 or more at a supermarket “Then, in the middle, you’ve got the tradi- example, Lidl is a smaller store in , such as — the threat Aldi poses to tional shoppers who basically are saying, but in the United States it’s almost a traditional is not so much ‘You know, there’s nothing wrong with the 40,000-square-foot store, with a bakery. from a single store opening nearby, but way we do it right now. We like to go to Aldi is becoming much more similar to from multiple locations, he says. “If the store. We like walking down the aisles. traditional grocery stores. I think the you are a typical Kroger, and Aldi opens We like private label and brand choice grocery share of hard discounters will down the street, they might take $4,000 together, and we’re comfortable with that.’ grow rapidly in the United States because to $5,000 per week away from you,” says Over time, that middle segment is bound they’ve actually done more to make them- Spezzano. “That’s not much of a hit. It’s to give up to the other two extremes, and selves interesting to U.S. shoppers.” when they put one on the other side, take exactly how it plays out, time will tell.” Lidl has said it plans to have 100 loca- another $4,000 to 5,000 away, and then A blueprint for how the growth of the tions open within its first year, mostly they put one on the other side of town, discount segment might unfold in the along the Mid-Atlantic. It also has been and all of a sudden you’ve got three of United States can be seen in the history of pursuing locations in and the them, and now they’re taking $15,000 to the expansion of Lidl and fellow hard-dis- Midwest. Aldi, which has more than 1,600 $20,000 a week away from you.” counter Aldi in Europe. In Germany, stores in the United States, says it plans to Lidl’s U.S. model is similar to Aldi’s where the parent companies of both add another 900 locations by 2025. Aldi in that it relies heavily on private labels Aldi and Lidl are based, the hard-dis- is also in the midst of a major remod- and a limited assortment of product with count grocery segment has amassed what eling program in which it is enhancing no-frill displays, but its stores are more some analysts have estimated is about its perishables assortments, among other than twice as large and include in-store 50 percent of the grocery market share. changes. bakeries and large non-food sections In the , where Aldi and In addition, the United States has its offering in-and-out “treasure hunt” Lidl only began expanding aggressively in own hard-discount chain, Earth City, bargains. recent years, the two discounters recently MO-based Save-A-Lot, which has about surpassed 12 percent market share 1,280 locations. SUPERMARKET ADVANTAGES combined, according to Kantar World- A recent report by Boston-based Bain Rick Stein, vice president of fresh foods panel data. & Co. projects that the hard-discount at Arlington, VA-based Food Marketing “My feeling is because the hard-dis- segment will grow by up to 10 percent per Institute, says he believes traditional counters have changed what they’re year in the next four years, or five retain an edge over the hard doing to better accommodate the needs the rate expected of traditional grocery discounters because the wider assortment of U.S. shoppers, their market share will retailers. will appeal to a large segment of shoppers.

42 / OCTOBER 2017 / PRODUCE BUSINESS “They’re not going to be able to what a traditional supermarket does in “I believe there’s opportunity here for inde- the produce aisle,” he says of discounters such as Aldi and Lidl. “The traditional pendent supermarket operators because fresh supermarket has a tremendous amount is where independents excel and differentiate of variety, and they put a rather large foot- print against it.” themselves in the marketplace.” He also says traditional supermar- — Peter Larkin, National Growers Association kets have a longstanding reputation for produce quality that will continue to serve them well. According to FMI’s Power bought produce at a supermarket, and where independents excel and differen- of Produce 2017 report, 89 percent of shop- maybe at a roadside stand, and occa- tiate themselves in the marketplace,” he pers say the produce bought at supermar- sionally, maybe a specialty retailer,” says says. “Perishables, particularly in the meat kets is safe, and 86 percent believe it is Stein. “Now you can buy produce at a gas and produce departments, will remain an high quality. station and at a drugstore — you can buy area where independents hone their focus “From the low-price, value-type produce in a variety of outlets. Any time on, and independents can win on presen- retailers, all the way up to the high end, you’re splitting the pie again and again tation, variety, selection and service.” they are all very good, because they’ve and again, it obviously has an impact Maeve Webster, president of Arlington, been doing it for ages,” says Stein. “I see because consumers have more choices VT-based consulting firm Menu Matters, supermarkets being able to look their where they can shop.” says club stores such as , Sam’s customers in the eye and say, ‘Based on Peter Larkin, president and chief exec- Club and BJ’s Wholesale might also feel what we offer versus all the discounters, utive at the Arlington, VA-based National the impact of Aldi and Lidl’s planned we think we’re a better solution for you.’” Grocers Association (NGA), says indepen- expansion in the United States. Those That being said, however, he concedes dent supermarkets, in particular, will be chains “require huge purchases to achieve the hard-discounters do provide yet well-positioned against the encroachment discounts, not to mention membership another option for some consumers to of the hard-discount format. “I believe fees,” she says. “With smaller footprints, turn to for buying produce. there’s opportunity here for independent fewer categories and no membership “Twenty-five years ago, you basically supermarket operators because fresh is required, I’m guessing these retailers could

44 / OCTOBER 2017 / PRODUCE BUSINESS have a significant impact on the participa- consumers, particularly the younger of Shelton, CT-based TABS Analytics, says tion at the club stores.” consumers, it remains to be seen if that he doesn’t put much stock in the poten- Webster also believes Aldi and Lidl will attitude will continue to lead consumers tial impact of Aldi and Lidl on most main- eventually be pressured to increase the to turn to discounters in the years ahead. stream supermarket operators. “They just variety of their assortments, “which will “I think the expansion will put to the don’t do enough volume per store to have then create issues for their go-to-market test what American consumers really place this major disruptive effect,” he says. “The strategy.” a premium on — super cheap prices with Lidl effect has been so extraordinarily The economy could also play a role at all, or stores offering more than overblown, it’s just ridiculous.” in the future of these formats. While just cheap prices, even if the prices are a While Jetta says he believes a market observers note the recession of 2007-08 bit higher than at an Aldi or Lidl,” says niche exists for these types of discounters, and the subsequent slow recovery has Webster. the impact will be largely felt by the lesser instilled a lingering frugality among Kurt Jetta, founder and chief executive supermarket operators. “There are a few weak competitors out there that are going to probably eventually fall,” says Jetta. “But for the big guys, I don’t see that there’s going to be much impact at all. If anything, they tend to grow stronger as some of the weaker guys get shaken out.”

IMPACT OF E-COMMERCE In addition to the growth of the hard-discount format in the United States, supermarkets are also adjusting to the merger of technology with food retailing, largely in the form of grocery e-commerce. Supermarkets have applied a variety of solutions to serve customers who are seeking to buy groceries online. Some chains, such as Kroger, Wal-Mart and Target, are approaching this channel from multiple angles, offering combina- tions of home delivery and “click-and- collect” services that allow shoppers to select their orders online and pick them up at the store. Others are partnering with third-party delivery firms such as , which contracts with freelance shoppers who select and deliver items for customers, often for same-day delivery. Supermarkets are battling for a share of this segment of the business not only against each other, but also online-only grocers such as -based FreshDi- rect and -based . Nearly a quarter — 24 percent — of all consumers regularly purchase some goods online, according to Brick Meets Click’s Bishop, up from 22 percent two years ago. “If you took a look at the percentage of people who’ve ever bought some- thing online, that’s already more than 50 percent,” he says. “So you’ve got a gradual evolution here toward people starting to go online buying one-off activities, and then maybe spending more online.” Bishop says he believes traditional brick-and-mortar retailers have been increasing their market share in grocery e-commerce. “There are signs that because

46 / OCTOBER 2017 / PRODUCE BUSINESS of the more aggressive activity on the part effort in which it analyzed the e-com- online is corroborated by results from of the brick-and-mortar retailers, they’re merce sales of about 200 brick-and-mortar Peapod, the U.S. online grocery division actually gaining share over Amazon in stores operating under 25 different of Netherlands-based grocery operator certain categories,” he says. “It’s become banners, and found that 85 percent of the Delhaize. more of a dogfight, and the brick-and- transactions included produce. Tony Stallone, vice president of mortar people are not getting rolled over.” “I think while there is a significant merchandising for Peapod, says the number of people who still want to company’s customers actually buy “a lot ONLINE SALES STRONG squeeze the melons and look at banana more produce online” on a per-order The growing swell of grocery e-com- colors and things like that, when people transaction basis than do customers in merce has not left produce behind, start shopping online they start shopping the company’s brick-and-mortar stores. says Bishop. Brick Meets Click recently online for produce, too,” he says. “Our metrics show every order has more concluded a benchmarking research Consumer interest in buying produce than $20 worth of produce on it,” he says. “We over-index compared with brick- and-mortar when it comes to produce. It speaks to the quality of the produce we offer here at Peapod, and it also speaks about our customer. “I remember years ago people said we’d be able to sell cans of peas and soup, but no one will ever trust (enough) to buy produce online, but it’s really just the opposite,” says Stallone. “Customers trust you until you violate that trust, but then you are going to lose a customer. That’s why we put a lot of effort, and spend a lot of time, making sure that we deliver a quality experience in produce for our customers.” Peapod offers a 100 percent money- back guarantee for the produce it sells, and invests a lot of energy providing an offer it knows its customers want. For example, Peapod’s online customers index about three times higher for buying organic produce than do customers in the brick-and-mortar locations, according to Stallone. “It is important that you know what your customers are looking for; that your assortment meets those customers’ needs, and that you are curating your website in a fashion that presents it to the customer in an easy way for them to click and buy,” he says. Pre-cut produce is also a “huge, fast- growing category” among online shop- pers, says Stallone. “People are not buying products any more. They are seeking solu- tions,” he says. “Anytime you can package convenience into a solution, customers will gravitate to it.” Stallone says online customers tend to buy multi-packs of produce online — two- and four-packs of certain fruits, for example. That observation led the company to offer more multi-pack options. “We are now packaging multi- ples, and we see customer satisfaction and dollars per order go up,” says Stallone.

48 / OCTOBER 2017 / PRODUCE BUSINESS TRUSTING E-TAILERS Diana Sheehan, a director on the grocery channel research team at - based Kantar Retail, says many consumers appear to trust that their online retailers can select high-quality produce better than they can themselves. “One of the biggest misconceptions is that people do not want to buy produce online,” she says. “From the people I have spoken with who are involved in grocery e-commerce, what they see over and over again is produce is actually one of the strongest categories online.” Shoppers today, particularly younger consumers, tend not to have the kind of knowledge older generations have about selecting produce — in part because young consumers tended not to go grocery shopping with their mothers, like their own parents did, explains Sheehan. According to Peapod’s Tony Stallone, vice president of merchandising, “every order has “If you’ve never been through that process, more than $20 worth of produce on it.” you don’t know how to pick out a good She also notes many people have actu- one’s home. melon,” she says. “I think what people ally been ordering produce via catalog Sheehan says she expects about 10 are finding is that you end up with better for decades — think of boxes of Florida percent of all grocery sales to go through produce when you shop online because oranges for the holidays, for example — e-commerce channels in the next 10 to 15 you have people who have been trained so it’s not that big of a leap to believe years. “This mimics what we’ve seen in to pick out the good produce.” high-quality produce can be delivered to Europe, which is about a decade ahead.”

50 / OCTOBER 2017 / PRODUCE BUSINESS The United States has also begun to follow the pattern of Europe in other “What we’ve seen in Europe is e-commerce ways. Home delivery has become the preferred method of fulfillment in urban actually manifests itself equally in both areas, while click-and-collect options have suburban and rural areas versus urban, but evolved as a more practical solution in more rural and suburban communities, it manifests in different product models.” where fulfillment of the “last mile” to the — Diana Sheehan, Kantar Retail consumer’s home is more challenging. “What we’ve seen in Europe is e-com- merce actually manifests itself equally produce aisle, not only do you experience the quality of the produce, you also have in both suburban and rural areas versus the ambiance of the merchandising and knowledgeable associates.” urban, but it manifests in different product models,” says Sheehan. Jetta of TABS Analytics says there’s been an increase in the e-commerce efforts of brick-and-mortar retailers in the last year. “Everybody talks about Amazon, but the big surge is with .com, and Target. com, which have both also picked up, and then a lot of these regional grocers are really stepping up their game and getting broader penetration,” he says. “But, we’re still talking about a very small percentage of .” Jetta notes packaged produce in particular has found an audience online. “There’s definitely a migration to more packaged perishable products,” he says. “To the extent that there are packaged produce products, the whole issue of that being a barrier to e-commerce just doesn’t seem to hold much water.” Spezzano of Spezzano Consulting Service says e-commerce providers have become adept at merchandising their produce offerings on digital platforms. “It’s all about confidence,” he says. “If you order bananas or tomatoes, and you get them the way you like them, you get more confidence to try something else. “Some of these online companies are very sophisticated in how they communi- cate to their consumers,” says Spezzano. “It can be kind of mouthwatering — they are showing you great pictures of beautiful fruits and vegetables to entice you to order those seasonal items, and those special items. That will steal more business away from brick-and-mortar, there’s no doubt.”

IN-STORE EXPERIENCE FMI’s Stein says the in-store experience will help brick-and-mortar retailers retain customers in an increasingly online world. “I think one of the things the supermarket has going for it is the three-dimensional experience,” he says. “Online, you get a two-dimensional experience. In the

PRODUCE BUSINESS / OCTOBER 2017 / 51 While a small percentage of shoppers that online will send them, I believe, to “I think you’ll see an expansion of online might still prefer to buy produce online, brick-and-mortar stores where they can shopping, from large to small operators the opportunity exists for retailers to lure talk to knowledgeable associates, see a and everything in between,” he says. “This Millennial shoppers who may have little good variety, and learn more about their is an opportunity for independents to win product knowledge. produce and experience it that way. The because they excel in fresh and in service. “The Millennial crowd doesn’t have a retailers who really excel at that experience We have seen many independents already deep understanding of all the different will be the winners,” says Stein. in the e-commerce space and are the types of fruits and vegetables. They NGA’s Larkin says the focus inde- preferred e-commerce choice because they don’t have a deep understanding of the pendent supermarket operators have are winning on produce and exceeding nutritional benefits, nor do they have a on providing high levels of service will customer expectations on service.” deep understanding of how to prepare also benefit them as more of them offer them,” he says. “The inability to do e-commerce options for their customers. AMAZON MOVES QUICKLY Amazon wasted no time making its mark on Whole Foods. Within days of receiving approval of shareholders and government regulators, the online behe- moth closed the $13.7 billion deal and immediately cut prices on a range of prod- ucts, including many produce items. The company also says its membership will become the for Whole Foods — which had only recently begun to test its own loyalty programs — and that Whole Foods’ private-label products will be made available through Amazon.com. It also plans to roll out lockers to some Whole Foods locations for in-store pickup of Amazon orders. “We’re determined to make healthy and affordable for everyone. Everybody should be able to eat Whole Foods Market quality — we will lower prices without compromising the brand’s long-held commitment to the highest standards,” says Jeff Wilke, chief executive of Amazon Worldwide Consumer, in a statement announcing the deal’s closing. Although many observers say they believe Amazon’s pressure on pricing will squeeze out many smaller product vendors, John Mackey, cofounder and chief executive of Whole Foods, says it would continue to “support and promote local products and suppliers.” “It’s been our mission for 39 years at Whole Foods Market to bring the highest quality food to our customers,” says Mackey in a statement. “By working together with Amazon and integrating in several key areas, we can lower prices and double down on that mission and reach more people with Whole Foods Market’s high-quality, natural and organic food.” Brick Meets Click’s Bishop says the acquisition demonstrates Amazon’s commitment to the grocery industry. “Amazon’s decision to buy Whole Foods is one more indication that for it to

52 / OCTOBER 2017 / PRODUCE BUSINESS the landscape. Now every other retailer will face the possibility of competing with Amazon in a store down the street.”

ORGANICS AND MEAL KITS Jetta of TABS Analytics says he has been skeptical of Amazon’s ability to disrupt. One way Amazon could refashion Whole Foods to be more competitive, however, might be to loosen up the retailer’s focus on organic foods, he suggests. “You can still have natural and fresh and high quality, similar to the way is perceived,” he says. “But, there’s just such a limited market for organics. Hopefully, Amazon will understand that to reach the mass market, you have to get past that.” Although growth in organic product sales is outpacing growth in the grocery market overall, TABS’s research shows Amazon’s acquisition of Whole Foods “will accelerate the evolution of the landscape,” says that only about 10 percent of consumers Bill Bishop, chief architect of Brick Meets Click, Barrington, IL. consider themselves to be regular organic grow as fast as it wants to in grocery, the says he expects the strongest appeal will shoppers — a proportion that “really company has to have a physical presence be among consumers seeking a high level hasn’t moved that much over the past in the market,” he says. of service from their grocery retail experi- three or four years,” says Jetta. Although Amazon says it will seek to ence. “It’s not going to affect all customers Menu Matters’ Webster says she make Whole Foods a more affordable or appeal to all customers,” he says. “It believes the Amazon-Whole Foods option for mainstream consumers, Bishop will, however, accelerate the evolution of merger could lead to the expansion of

PRODUCE BUSINESS / OCTOBER 2017 / 53 SUPPLIER OPPORTUNITIES Bill Bishop, chief architect at Barrington, the bigger companies are still covered with of 3 pounds, or perhaps bags of six small IL-based consulting firm Brick Meets barnacles and aren’t as easy to work with.” avocados in place of larger bulk avocados. Click, says suppliers need to think about He also lauds the chain’s packaging and Maeve Webster of Arlington, VA-based approaching the two ends of the value displays. “There is some really good produce consulting firm Menu Matters, says produce spectrum that are growing — the low-price merchandising going on at Aldi.” suppliers need to think about how their specialists and the high-service and online Dick Spezzano of Monrovia, CA-based produce can best be merchandised via retailers. “Vendors need to establish and Spezzano Consulting Service agrees e-commerce platforms. “Produce vendors, then grow their business with the hard suppliers should establish relationships with first and foremost, need to think about discounters,” he says. “Aldi sells tremen- the hard discounters. “As Lidl comes into how they can convince consumers of the dous volumes and is very easy to deal with. the Southeast and Northeast, they will need freshness and quality of an item they won’t People like working with them. I think you’d local suppliers and national suppliers. You touch,” she says. “Second, they should be surprised how many people rate Aldi want to be one of those people.” consider how best to package sets or solu- as one of their top customers, not only He says vendors should be mindful these tions of produce similar to the kits to drive volume-wise, but just because of ease of retailers might be interested in value pack- larger volume purchases that make sense working with them. Unfortunately, a lot of aging, such as 2-lb. bags of apples instead and provide additional value.” pb

the meal-kit segment. “I think we’re going etc., which will change the way products “If Whole Foods gives them a little more to see a lot more meal solutions or other are marketed.” credibility in the space, and if it enhances similar kit options that will change the David Portalatin, food and beverage their ability to take those categories to the way consumers buy groceries,” she says. consumption analyst at Port , last mile of delivery in a timely fashion, “It may not necessarily be the kit options NY-based research firm NPD Group, says where consumers feel like they get the we have now, but rather recommenda- the Amazon deal could accelerate the quality and the freshness, that could accel- tions for sets of products that allow you to acceptance of buying perishables online. erate penetration in the fresh category.” achieve certain goals. Online retailers can “The one thing Amazon has not been Sheehan of Kantar Retail agrees Whole offer a bulk purchase that gets you every- able to crack the code on as far as grocery Foods’ reputation for quality will enhance thing you need for a goal, event, occasion, delivery is those fresh categories,” he says. Amazon’s image as a fresh foods retailer.

54 / OCTOBER 2017 / PRODUCE BUSINESS CA Giant.indd 1 9/26/17 5:47 PM “Amazon has a credibility issue,” she Foods recover from its slump — its same- says. “Amazon Fresh is great, but it’s not store sales have been fading as traditional exploding. Amazon is used to things retailers such as Kroger, , exploding. Whole Foods immediately , , , gives them credibility in the produce and Hy-Vee have expanded their natural area, and that’s something they do need. and organics offerings. Beyond that, Whole Foods has a very loyal “Whole Foods is broken,” she says. and highly valuable shopper base that “They have some things they need to fix Amazon hasn’t really reached yet. So they within their organization, and Amazon should be seeing gains there.” can help with that. Amazon can help with Sheehan says Amazon also brings some prices, logistics, personalization and tech- much-needed resources to help Whole nology. Whole Foods has little in terms

Fresh Thyme is noted as a retailer best suited for easy product browsing.

of digital couponing and things like that, and Amazon can help them there as well.”

WINNING RETAIL FORMULAS The supermarkets that emerge as the winners in the evolving supermarket land- scape are those that will provide options for online shopping and a rewarding in-store experience, industry experts say. “It’s become really evident that if a traditional retailer has been slow or sloppy in moving into e-commerce, that’s a negative,” says Bishop. “The only way they’re going to sustain their growth is by having an offering that combines both the store and the online shopping experience. If they don’t offer shopping online, that business goes someplace else.” Retailers also need to think about how to make their stores better suited to new-product discovery. Stores that lend themselves to easy product browsing, such as Trader Joe’s, Fresh Thyme and Whole Foods, will have an edge over traditional operators, says Bishop. “Your typical everyday combination supermarket isn’t very browse-able,” he says. “It’s overwhelming.” He suggests supermarkets could create in-store destinations for specific types of products, such as new items or products grouped together as solutions. Supermarket operators will also need to be responsive to the evolving nature of their competition, but in a calculated way that “allows them to control the perfor- mance of their business,” says Bishop.

56 / OCTOBER 2017 / PRODUCE BUSINESS Millennials are saying, ‘I want it conve- “Give me a reason to walk into the store, nient, I want it fast, and I want to have fun, too. You’ve got to bring the fun.” rather than just make a few clicks and have Jetta of TABS Analytics says main- stream retailers need to stop trying to something delivered.” emulate Whole Foods and accept that — David Portalatin, NPD Group there’s nothing wrong with having mass- market appeal. “Embrace who you are, and that’s a mass-market retailer that In the U.K., by contrast, the major groceries.’ And for that Boomer genera- offers the things that people like. People operators responded to the incursion of tion, it was,” says Sheehan. “What’s inter- like brands,” he says. “Grocery chains like Aldi and Lidl with aggressive price posi- esting now is the younger GenX’s and Publix, H-E-B, Wegmans and ShopRite all tioning, which caused profitability to erode, he says. “They lost control of their business, and they had horrible perfor- mance. It’s only been recently they’ve kind of gained control back.” NPD Group’s Portalatin says retailers and their supplier partners need to think creatively to define a purpose for their brick-and-mortar stores to exist. “I think you will see stores try to recreate them- selves to be a little more experiential,” he says. “Give me a reason to walk into the store, rather than just make a few clicks and have something delivered. That’s what retailers need to be thinking about.” Retailers have the opportunity to work closely with their suppliers to encourage more online produce sales, says Portalatin, by leveraging digital photography and other content that assist consumers in selecting quality fruits and vegetables.

NEW IN-STORE SERVICES Kantar Retail’s Sheehan believes retailers will begin to integrate tech- nology in new ways that will enhance the customer experience. “Whether that’s self- checkout or digital technology to person- alize things — whatever it is, I think it is going to be an integral part of the of the future,” she says. She also says she expects expanded service departments offering prepared foods and cooking classes. “The grocery store is going to stop being just a grocery store,” she says. “Instead, it’s going to be a local food and drink hangout where you can get a lot of things covered all at once.” In the produce department, efforts to enhance the in-store experience can already be seen with the addition of smoothie stations and “produce butchers” — specialists who chop, slice and dice produce to order and can also provide tips on product selection and usage. “In the 1980s, Wal-Mart came in and said, ‘Efficiency is what matters most in

PRODUCE BUSINESS / OCTOBER 2017 / 57 TECHNOLOGY OPPORTUNITIES Diana Sheenan, a director on the grocery its store in Seattle. Although some retailers have been hesitant channel retail team at Kantar Retail, says “I can see them using Whole Foods to embrace self-scan systems because of retailers will need to work at finding the stores as a way to test new ideas in grocery,” the perceived potential for theft, consumers right balance of technology and in-person says Sheehan. “I think there are going to be who have learned to use the devices enjoy service to maximize the consumer experi- changes for both Whole Foods and Amazon them, he says. ence. “If people want that quick, fast, conve- that ultimately lead to further innovation in The self-scan systems pose challenges nient trip, they’ll go online to buy groceries. grocery. We don’t know yet until they start for produce, however, because of the Then if they want a little bit more, they’ll go testing some of these things in stores what random weight of many of the products. “As to the store because it’s truly different.” might stick and what might not.” a shopper, there is a fair amount of more In fact, Whole Foods could become a Bill Bishop, chief architect at Barrington, work that needs to be done when buying testing ground for a range of technologies IL-based Brick Meets Click says there may random weight versus fixed weight products. Amazon is developing, such as the self- be opportunities for technology inno- Somebody’s got to simplify that in terms of checkout Amazon has been experimenting vators to improve self-scanning systems, the interface between the random weight with — reportedly with little success — at particularly when it comes to produce. scale, scanner and POS system.” pb

earn very strong scores in feedback from the brick-and-mortar front. The fact that Amazon started a movement 10 years ago consumers. If it ain’t broke, don’t change two of the most successful innovators in and has never looked back,” says Kantar it. You can evolve, but so many of these modern business — Mackey, Whole Foods Retail’s Sheehan. “You’ve got two of the companies are trying to get caught up in founder and chief executive, and Amazon founding fathers of innovation coming the trendy concepts.” founder and chief executive — together in the e-commerce space, and However retailers and suppliers choose are now working together portends signif- there’s going to be some exciting things to cope with the new era of food retailing, icant change, says London-based Kantar to come. This is what we know because they need to be ready to face new and Retail. of what we see. There’s also going to be unexpected challenges, particularly now “Whole Foods started a movement a lot more that we just couldn’t even that Amazon has entered the battle on 30 years ago and has never looked back. imagine.” pb

58 / OCTOBER 2017 / PRODUCE BUSINESS