The Edge - Volume One

CONSUMER TRENDS

GROCERY DEL IVERY 1

THE CONVENIENT HEALTH FOOD MOVEMENT

fresh, locally-sourced health foods is increasing in popularity. Health- conscious consumers are also driving SKU proliferation – the segmentation of products for improved customer choices – by demanding “healthier” versions of foods, such as gluten-or dairy-free products, organic produce and more. Perhaps the best example of how SKU proliferation and changes in consumer tastes are combining to drive increased demand for cold storage is the yogurt industry. Not long ago, there were only two dominant yogurt producers with several products each, but the widespread popularity of Greek yogurt has completely remade the market, both in terms of players and products – all of which require more cold storage and logistical support. Furthermore, as global consumer preferences continue to evolve away from frozen foods to fresh produce and other foods that require cold rather than frozen storage, there will be a rebalance of frozen and chilled space within the cold storage industry. Finally, the meal kit industry has grown to combine convenience and health into one nicely bundled package of ingredients delivered straight to your door. Meal kit companies have a clear target audience: the busy, health- conscious consumer. The market for meal kits grew 40.7 percent last year in the U.S., according to a report by Earnest Research. While identifying the target consumer may be easy, customer retention is tough and the supply chain and logistics behind preparing a meal kit and delivering fresh ingredients are quite complicated and expensive.

Changing consumer eating habits can be broken down into three major product and service trends: grocery delivery, health foods and meal kits. Let’s start with grocery delivery . You no longer have to get in your car and drive to the grocery store, walk through the aisles, fill your cart, check out and lug your groceries into the house. Now, you can simply sit down at your computer or open an app on your smartphone, place an order and have food delivered to your door. Many grocers have started providing this service to stay in front of projected growth in the industry. Online grocery share is projected to capture 20 percent, or an estimated $100 billion, of total grocery spend by 2025, according to a study by Food Marketing Institute conducted by Nielsen. Online grocery shopping, a trend that began in the U.S., is taking hold in the UK and France, who together claim a meaningful share of online grocery sales at 6 to 7 percent. Several grocers in the UK have started offering online services that include home delivery. The Ocado Group, the world’s largest dedicated online grocer, has been offering online grocery fulfillment since 2002. It operates from four fulfillment centers near London, which accounts for more than 50 percent of its sales. In France, a click-and-collect model dominates the online grocery offering. Euromonitor estimates that France has 3,500 click- and-collect drive-thru locations used by more than 4 million households. The demand for convenient delivery isn’t the only trend transforming the food industry. The demand for organic,

HEALTH FOODS 2

MEAL KI TS 3

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