Insights and News /

26 March 2018 3 min read

Customers want meals not deals!

Patrick Winters

Patrick Winters
Partner, expert in FMCG

Why meals, not ingredients will drive growth in food retail

  • The growth in convenience retail at the cost of the traditional big shop experience
  • Greggs providing 22% Total Shareholder Return (TSR) in 2017 (outstripping anything the best supermarkets can deliver)
  • The rapid growth of Deliveroo and their shift into becoming a restaurant operator through the use of dark kitchens.

What do each of the above have in common? They all indicate a growing trend for customers to choose meal solutions over traditional product-centric shopping activity. This makes sense. When I go to a supermarket, I tend to be buying products based on the meal I am looking to cook not based on my love of any given product category.

Yet supermarkets (with the notable exception of some gondola ends offering assembly cooking options and ready meals) are still arranged around product categories. Planograms are designed around these, and buying teams mirror each category. Online teams focus on getting individual products to us with an ever reduced lead time. The more enlightened food retailers are moving towards in-store food service offers and wider food inspiration. They are going in the right direction but they are not solving my higher order need, they are simply incrementally improving my current experience.

There are sensible reasons for this. Designing stores around meals would cost a lot (try keeping chilled, deep chilled and ambient products side-by-side in a store). On a digital platform this problem disappears. Creating meals and getting them to customers in a fresh state would require a significant investment in supermarkets’ web and logistics infrastructure. Taking this approach would also have a significant impact on supplier income (the revenue supermarkets get from their promotional activity with consumer products companies). Then there is customer behaviour.

For years we have been trained to think and act a certain way. Services like Deliveroo and Uber Eats are beginning to disrupt these patterns but what is stopping wider adoption of supermarkets moving into meal solutions? Clearly, there will always those who enjoy cooking and these people will continue to cook. For them it is a relaxing activity, a way of sharing their passion and expressing their creative flair. For the rest of us, myself included, the main barriers to wider adoption are:

Cost- Without significant scale this is difficult to make work at a price point acceptable to the average customer.

Provenance- We want to know what goes into our food, exactly. Supermarkets with strong provenance credentials are ahead of the game on this. Consumers trust them. A move into meal solutions and delivery is an easier sell for their customers.

Habit- We are used to shopping in a certain way. Any shift away from this will take time and require a change in mind-set. Digital solutions are a key enabler to this and require significant thought and investment. They help us remove our need to think. That is good.

My hunch? The pure play digital disrupters will get into this space first and lead the way through meal subscription models and the rest will be playing catch up. Their challenge will be around their provenance credentials. Traditional supermarkets will need to make a choice, continue to incrementally improve their current offer or take a bold strategic decision and move into the world of meal solutions with the associate consequences. One thing is for sure, the disruption to the food retail market shows little sign of abating.

Would you like to work with us or find out more?Get in touch