Retail Thought Leaders SWL Group has just launched an exciting new Food-to-Go initiative – F2G 360. This special convenience food solution presents retailers with significant potential for both competitive advantage and operational improvement benefits in the year ahead. But there’s a minefield to negotiate.
According to a new report published by McKinsey & Company last week, convenience food is cited as a top-five priority by a third of the UK’s Retail CEOs. Added to this, other factors such as value for money, healthy eating/nutrition and speed of service – compounded by the pandemic – create an enormous growth sector for Retailers. The Institute of Grocery Distribution (IGD)’s research predicts that supermarkets will take a 7.8% market share of Food-to-Go by 2024. But with great potential comes a plethora of factors to be navigated.
In our new article, ‘Food-to-Go: the urgent need for a 360 approach’, we summarise some of the findings of this report, and synthesise numerous related articles and research from fellow retail experts. We discuss how our F2G 360 programme can offer insight and solutions to a number of important and problematic Food-to-Go issues.
Before we examine the mitigating factors affecting success in convenience food offers, it’s useful perhaps to gain an overview on the growth in Food-to-Go provision among Grocery Retailers.
Retail Times cite IGD’s encouraging projections about the sector:
The UK food-to-go market is forecast to be worth £23.4bn by 2024, up from £18.5bn in 2019, growing by 26.4%. According to new research from IGD, the channel is set to experience double the growth of the wider UK food and grocery retail market – 12.5% – over the next five years.
As long ago as 2018, The Grocer would pre-empt this, agreeing wholeheartedly on the transformation of this market:
‘What started out with a few standard sandwiches has become a hub of innovation. It’s a market worth investing in.’
The HIM and MCA UK Food To Go Market Report in 2019 found that ’12% of all trips to [convenience stores were] driven by a food-to-go mission.’ Accordingly, the 2021 McKinsey report reveals ten key Grocery trends identified by European Retail CEOs. In addition, these trends incorporate important ‘shifts’ which must drive the Retailer’s strategy:
‘The essence of these trends is shaped by three key shifts: online becomes core, value is king again (downtrading), and consumer lifestyle agendas drive demand through a focus on health, sustainability, and convenience food.’
Their recent survey found that Retail CEOs ranked the growth in convenience foods fifth in priorities shaping the immediate future of the industry. This is clearly significant. We’ll focus here on two of the industry trends highlighted in the report. Namely, these are value and lifestyle factors:
‘Value is king (again)’
The UK government’s reduction of VAT to 5% has helped Retailers of course. Plans for cheap licensing for retailers to offer food-to-go outside the premises will also help the financial pinch. But these are minor gains in a column far outweighed by the losses. There remains an inexorable focus on ‘value’:
‘CEOs see downtrading, or increased price sensitivity, as the most influential trend for the grocery market, with 56 percent of CEOs listing it among their top three priorities. The downtrading trend is amplified by an increased quality expectation of consumers at the entry-level price tier (ranked at number seven in the CEO survey), as it puts pressure on grocery retailers regarding both price and quality.
Our consumer survey confirms this downtrading trend. Across Europe, net 34 percent of consumers indicated that they want to save money when shopping in 2021 compared with 2020, 27 percent plan to research promotions more actively, and 17 percent want to switch to less-expensive products.’
Convenience.co.uk‘s report similarly bears witness to the pandemic’s undeniable effect on customers’ heightened eye (or need) for a bargain:
‘With over 9.5m people in the UK being put on furlough during the Covid-19 pandemic, consumers have become far more cognisant of their spending,” says Lazar. “In the convenience channel where shoppers harbour a perceived price premium it is vital that retailers showcase value for money to their shoppers, leveraging pricing and promotional tactics, such as PMPs and meal deals, to drive sales.’
IGD’s 2021 report echoes this loud and clear. The continued drive for value presents Retailers with tighter and tighter margins:
‘In 2021 more food-to-go missions are likely to be discretionary vs core as some consumers cut back on food-to-go lunches, drinks and snacks as they move around less, work more from home or to save money. This will lead to more and new ways to make food-to-go affordable through the mechanics of promotions, meal deals, pack size changes and product reformulation.
At the same time, food-to-go businesses (particularly those operators hardest hit by lockdowns) need to protect margin so will focus on all levers to improve efficiency. This could have far reaching implications for format, staff, service and back-of-house operations, including the increased use of technology to deliver efficiency.’
SWL’s F2G 360 solution is tailor-made to address these efficiency concerns. Through forensic analysis in real-time, expert diagnosis and solutions derived from three decades’ experience in Retail Productivity Improvement.
Lifestyle agendas drive food demand
Four years ago, research by GlobalData was already evaluating and forecasting this key shift in consumer demand. For many UK consumers,
‘Time is becoming a scarce resource. IGD has identified a clear desire among Brits to allocate less time to chores and more time to keep-fit, hobbies, socialising and fun. These lifestyle changes are particularly true for younger career-focused consumers who are becoming more reliant on time-saving products, across all sectors.‘
Even post-COVID, retailers have been boosted by this change in customers’ changing optics. While ‘normal’ socialising is currently still off the table, convenience is key. Indeed, Morrissons met this need with the launch of their hot-food take-away cafe service in June 2020. While more and more supermarket businesses shut deli counters, they equally opened up their Food-to-go offer. Footfall has of course become a precious commodity. And as IGD found in their 2017 study, availability of hot drinks is often a deciding factor in where the Customer shops. Similarly, Food-to-Go also offers a handy convenience for the multi-tasking consumer:
‘For a growing number of retailers, an in-store, food-to-go offering gives shoppers the opportunity to complete a top-up or even a main shop at the same time as buying breakfast or lunch. This helps those who are seeking food that can be obtained conveniently while they are juggling other commitments, lunch for some is a time for running errands and shopping.’
IGD’s 2021 report goes further, stressing the importance on ‘format diversity’ to further satisfy the Customer’s individual preferences post-COVID-19:
Food-to-go retailers and operators will seek to adapt stores to serve consumers with new and different priorities… This will lead to more diversity in format strategy under one brand umbrella and more formats with specific roles (e.g. digital only, dark kitchen, vending, experience-led) operating as a network and balancing cost, service and brand experience.
Working from home during the pandemic has brought a significant change in demand away from a commuter-based urban market to what IGD term ‘suburban shift’. And this may have long-term, semi-permanent ramifications:
‘Suburban customers will have different routines, motivations and needs to commuter and office worker customers. New models based on variations on mission mix, channel mix, footfall flow, range, pricing, service and in-store environment will be needed.’
In their findings, IGD also highlight the swinging ‘balance of power’ in grocers’ favour at the expense of the hospitality/food sector as a result of Coronavirus restrictions. But in a post-pandemic world, there is opportunity for partnerships and franchises:
‘As the ability to invest in new developments favours retailers we expect to see more partnerships between retail and food-to-go specialists as both seek to adapt to meet changing consumer needs.’
The March 2021 McKinsey report indeed cements these ideas. And the lifestyle factors are important. The pandemic has not slowed down the focus on health, sustainability and product provenance:
‘The COVID-19 crisis accelerated the trend toward more healthy, sustainable, and local products with no apparent slowdown so far. Across Europe, net 30 percent of respondents plan to focus more on healthy eating and nutrition in 2021 compared with 2020, 24 percent plan to spend more on regional and local products, and 19 percent plan to spend more on environmentally friendly products.’
This mirrors what Mintel described as “a correlation between ‘food and mood’”. Many people simply feel better in the afternoon after eating a healthy meal. This may seem trivial – or indeed blindingly obvious – but of course retailers ignore customer well-being and preference at their peril.
But the complications of capitalising on this growth market are a thorny rose. It’s not just a matter of installing a coffee dispenser to ‘drive footfall’. Kantar Worldpanel’s Consumer Insight Director Tolga Necar cites a key trend:
‘There’s clear evidence of shoppers switching their lunchtime spend out of the multiples and into quick service restaurants. Those out-of-home food services have grown to encompass 15% of lunchtime trips this year, up from 13% last year… So when they do purchase a lunch to go, they want to treat themselves. Because of this, shoppers are finding it more permissible to swap from an inexpensive, standard local supermarket lunch to a pricier, more indulgent quick service restaurant.’
But the market is there, for retailers and eateries alike, even while working from home remains (and will remain) a prevalent feature of the New Normal. Hannah Morter of Country Choice believes that creative menus with interesting choices and attractive packaging provide a catalyst for attracting the teleworker out of the house on their lunch break. In her opinion, many simply don’t want to prepare their own lunch:
‘The next trend we’re seeing coming along is people working from home that want to get out of the house and pick something up for lunch – ‘home lunch breaks’,” says Morter. “We’re looking at food boxes that someone could have for an interesting lunch. They’re getting bored of cheese and ham sandwiches.’
It’s clear that Retailers will need to be nimble, innovative and customer-focused to provide a relevant Proposition and range. SWL’s F2G 360 solution is ideally positioned to make sense of these important and contradictory factors: convenience and value imbued with hygiene, ecological purpose, lifestyle, quality, health and complexity.
How can retailers capitalise?
In their article ‘6 Things You Need to Know About Food-to-go’, conveniencestore.co.uk examine a number of encouraging trends for the convenience and supermarket retailer. Headlined “Food to go is making a comeback as the UK finds its ‘new normal’”, they interview Hannah Morter, manager of customer insight & category management at County Choice. She explains that, due to a number of key factors – including an increase in the number of picnics and people working from home who want a lunchtime ‘treat’ – as Lockdown eases,
‘sales have improved dramatically. While many retailers have yet to venture back into hot food to go, those who have are seeing a strong performance. Morter claims that within customers who are operating their food to go departments, savoury sales are now back to where they were pre-Covid. “It’s about taking that step without fear of wastage and hitting margins too heavily,” she says.’
Rhian Thomas, head of shopper and food-to-go Insight at IGD paints an encouraging landscape for supermarket retailers to exploit. But it’s somewhat tempered by the sheer importance of targeting, focus and relevance:
‘Food-to-go remains a key growth opportunity for businesses, and one that appears particularly attractive given the structural and growth challenges being faced by UK supermarkets and hypermarkets right now.
While there continue to be good opportunities for growth in this area, the gap will continue to grow between those businesses who are actively targeting food-to-go growth and those who simply want a presence in the channel. Opportunities remain, however, for those with clearly defined and relevant strategies.
It is precisely this balancing act between procurement and wastage, opportunity and strategy, rising customer expectations, relevance and range, expenditure, hours and profit that forms a key element to SWL’s F2G 360 solution. We can help you capitalise more profitably on this upturn in Food-to-Go’s fortunes.
F2G 360 offers a comprehensive multi-faceted solution:
1 Sustain Quality & standards
2 Relevant Proposition & range
3 Shrinkage management
4 Risk management
5 Product availability management
6. Understanding customers changing needs
7 Right hours to deliver product & service
Contact us today on 01527 895020 to learn more about F2G 360 and its benefits.