Progressive Grocer - August 2018

Strategic merchandising drives tailgating and year-end holiday sales

BUMPER CROP Reap abundant sales of fall seasonal produce THINK SMALL Little dogs can mean huge pet aisle profits ALL THE WAY HOME Fleet management offers more control over last-mile delivery

Above all else, experience is crucial to the

STORE OF THE FUTURE August 2018 • Volume 97, Number 8

$10 • www.progressivegrocer.com

People have always loved our

They have embraced what’s

ICONS

NEW

Everyone will want what’s

NEXT

Times change. So do we.

Our brands have tremendous appeal and play a big role in the lives of generations of consumers. From our iconic soups, delicious snacks to fresh and organic products, we offer the foods and beverages people love and reach for time and again.

As we move into the future, we’ll focus on continuing to delight today’s and tomorrow’s shoppers, while providing innovative products in the entrepreneurial spirit of our founders.

©2018 CSC Brands LP

Contents 08.18

Volume 97 Issue 8

32 Features

42 SOLUTIONS

Open Season

32

Grocers can aid shoppers’ fall/winter entertaining with impactful products, marketing and merchandising.

COVER STORY

STORE OF THE FUTURE

Reshaping Retail

42

Above all else, experience is crucial to the future of selling groceries.

Departments

20 NIELSEN’S SHELF STOPPERS/SPOTLIGHT

8 EDITOR’S NOTE

Nonfood Grocery/ Laundry Supplies

De-Risking Experimentation 12 IN-STORE EVENTS CALENDAR

October 2018

22 MINTEL GLOBAL NEW PRODUCTS

Fabric Care 24 ALL’S WELLNESS

14 CONSUMER INSIGHTS

Lunchtime Habits

A Healthy Kickoff to Tailgate Season

26 NEW HORIZONS

The Power of the ‘She-E-O’ 28 SHOW RECAP

United on Fresh 79 EDITORS’ PICKS FOR INNOVATIVE PRODUCTS 82 INDEPENDENT THOUGHTS

Just in Meal Time

18 MENU TRENDS

Snacks PROGRESSIVE GROCER August 2018

5

Contents 08.18

Volume 97 Issue 8

8550 W. Bryn Mawr Ave. Ste. 200, Chicago, IL 60631 Phone: 800-422-2681 Fax: 978-671-0460

www.ensembleiq.com

54 FRESH FOOD

PRESIDENT, CANADIAN DIVISION & NORTH AMERICAN GROCERY Jennifer Litterick jlitterick@ensembleiq.com

Celebrate the Harvest

Grocers should make the most of fall’s seasonal items.

60 TECHNOLOGY

EDITORIAL EDITORIAL DIRECTOR James Dudlicek 224-632-8238 jdudlicek@ensembleiq.com

54

An Empowerment Issue

MANAGING EDITOR Bridget Goldschmidt 201-855-7603 bgoldschmidt@ensembleiq.com DIGITAL & TECHNOLOGY EDITOR Randy Hofbauer 224-632-8240 rhofbauer@ensembleiq.com SENIOR EDITOR Kat Martin 224-632-8172 kmartin@ensembleiq.com CONTRIBUTING EDITORS Princess Jones Curtis, D. Gail Fleenor, Bob Ingram, Jenny McTaggart and Barbara Sax ADVERTISING SALES & BUSINESS SOUTHEAST ACCOUNT EXECUTIVE Larry Cornick (NEW ENGLAND, SOUTHEAST) 224.632.8248 lcornick@ensembleiq.com

While many retailers today are adopting technology to benefit the shopper, some progressive grocers also are doing so to empower associates.

SENIOR MARKETING MANAGER Judy Hayes (CA, PACIFIC NORTHWEST) 925-785-9665 jhayes@ensembleiq.com SENIOR MARKETING MANAGER Theresa Kossack (MIDWEST) 214-226-6468 tkossack@ensembleiq.com WESTERN REGIONAL MARKETING MANAGER Rick Neigher (SOUTHWEST) rneigher@ensembleiq.com 818-597-9029 MARKETING MANAGER Mike Shaw (MID ATLANTIC) 201-855-7631 • Mobile: 201-281-9100 mshaw@ensembleiq.com

64 PG PET

Small Bites, Big Returns

ACCOUNT EXECUTIVE/CLASSIFIED ADVERTISING Terry Kanganis 201-855-7615 • Fax: 201-855-7373 tkanganis@ensembleiq.com CLASSIFIED PRODUCTION MANAGER Mary Beth Medley 856-809-0050 marybeth@marybethmedley.com

Catering to the needs of little dogs may give grocers a giant boost in profits.

EVENTS VICE PRESIDENT, EVENTS Michael Cronin mcronin@ensembleiq.com

64

MARKETING MARKETING MANAGER Carly Kilgore 201-855-7601 ckilgore@ensembleiq.com AUDIENCE ENGAGEMENT DIRECTOR OF AUDIENCE ENGAGEMENT Gail Reboletti greboletti@ensembleiq.com AUDIENCE ENGAGEMENT MANAGER Shelly Patton 215-301-0593 spatton@ensembleiq.com

67 HEALTH

On the Move

67

The sports nutrition category is becoming more innovative as it expands.

CREATIVE DIRECTOR Colette Magliaro cmagliaro@ensembleiq.com CUSTOM PROJECT MANAGERS Kathy Colwell kcolwell@ensembleiq.com Judi Lam jlam@ensembleiq.com ADVERTISING/PRODUCTION MANAGER Jackie Batson 224-632-8183 jbatson@ensembleiq.com ART DIRECTOR Bill Antkowiak bantkowiak@ensembleiq.com

More in Store

Supermarketers see design as indispensable to a successful operation.

The Final Countdown

Grocers can better control the crucial last mile of delivery using the latest fleet management tools.

SUBSCRIBER SERVICES/SINGLE-COPY PURCHASES 978-671-0449 or email at EnsembleIQ@e-circ.net PROJECT MANAGEMENT/PRODUCTION/ART VICE PRESIDENT OF PRODUCTION Kathryn Homenick khomenick@ensembleiq.com

71 EQUIPMENT & DESIGN

75 SUPPLY CHAIN

LIST RENTAL MeritDirect Elizabeth Jackson 847-492-1350, ext. 318 ejackson@meritdirect.com

REPRINTS, PERMISSIONS AND LICENSING Wright’s Media ensembleiq@wrightsmedia.com 877-652-5295

75

CORPORATE OFFICERS EXECUTIVE CHAIRMAN Alan Glass CHIEF EXECUTIVE OFFICER David Shanker CHIEF OPERATING OFFICER & CHIEF FINANCIAL OFFICER Richard Rivera CHIEF BRAND OFFICER Korry Stagnito PRESIDENT, ENTERPRISE SOLUTIONS Terese Herbig CHIEF DIGITAL OFFICER Joel Hughes CHIEF HUMAN RESOURCES OFFICER Jennifer Turner SENIOR VICE PRESIDENT, INNOVATION Tanner Van Dusen

6

progressivegrocer.com

Established, emerging and new coffee brands.

Unlimited shoppers.

Our coffee business delivers a diverse portfolio of trusted and emerging brands, with products and forms designed to meet the evolving needs of consumers.

Innovation brought to you by The J.M. Smucker Company family of brands. ©/TM/® The J.M. Smucker Company. © 2018. DD IP Holder LLC (as to Dunkin’ Donuts and all other trademarks, logos and trade dress of DD IP Holder LLC) used under license. Keurig, Keurig Hot, and the K logo are trademarks of Keurig Green Mountain, Inc., used with permission.

EDITOR’S NOTE

By Jim Dudlicek

De-Risking Experimentation t’s one thing to talk about what the store of the future will look like. It’s another thing to turn that vision into reality.

Larger retailers can tap deep wells of capital and shopper insights, but smaller retailers have much more to risk when crawling out on that limb into the future.

Fortunately for the independent grocer members of IGA, the grocery cooperative is launching an initiative to inspire smaller operators seeking to kick off a new era for their businesses. Recently, I spoke with IGA CEO John Ross about how the world’s largest independent grocery retailer group is answering the call for the store of the future. Here are some excerpts from our conversation: Ross: “I’m really excited about imagining the store of the future through the lens of an independent, with the list of what the shoppers are saying they’re looking for: A more intimate shopping experience. A retailer who knows me. Access to local products, especially those they believe are healthier. Ability to shop the store, or delivery or pick and pack, or cook for me, or take and bake. They’re basically saying, ‘I want this much wider palette of ways I can serve my food needs.’”

Taking all that into account, how is IGA starting to illustrate this vision? Is this something that’s going to be worked in on an ongoing basis, or is IGA actually coming up with a prototype?

Our mission for a prototype store is as much education as it is reinventing the shopper experience.”

—John Ross, CEO, IGA

existing services like produce and meat.

“There’s a third reason for our investing in a prototype store, and it’s recruiting. Many IGA members today are third- and fourth-generation owners.

The problem is, you don’t have a lot of Millennials knocking on the door, saying, ‘I’d like to be a butcher, or I want to learn the craft of grocery retail.’ We as an industry do a really terrible job of making grocery retailing fun and cool and exciting. And yet we’ve got a generation of young people who are more passionate about food than any time in our country’s history, so our expectation of our future store is also a place to recruit potential entrepreneurs and get people excited about the program. When you start imagining your grocery store being the resource for healthy food that serves your community and allows you to work with local suppliers, local farmers, and be engaged in the transformation of food and health and wellness, that’s a very exciting proposition.”

What’s the timeline for IGA’s prototype store?

Ross: “The answer is yes and yes. It is our plan to build a prototype future-looking IGA physical store. But our first stage is to use 1,100 entrepreneurs, many of whom have been doing delivery for years. Your local independent may have never stopped delivering groceries, and your grandmother may still be getting a delivery of groceries from the grocery store. So our first stage has been to benchmark what is working and not working across our chain, and then to identify the best practices, with actual data about what’s working, so that we don’t reinvent the wheel.

“Best-practices sharing is a reason to do a prototype store, because it’s one thing to show pictures on what one of our stores is doing, it’s another thing to be able to let you experience it. What that does is de-risks experimentation.

Now I’m able to learn systematically about what’s working without having to worry that I’m going to try this and fail two or three times.

“Our mission for a prototype store is as much education as it is reinventing the shopper experience. Our store will have to be more modular when it’s complete.

We’ll have to be able to roll things in and out, and we’ll have to have dedicated space for technical training for 8

progressivegrocer.com

Ross: “I had originally thought 2020, but I think it’s going to go faster because I’m leaning towards the idea of taking over an existing operating box and renovating it rather than starting from ground up, because for our members, if I built the most beautiful grocery store in the world, it may be hard for them to see how they get from A to Z.” We’ll be eagerly awaiting the results of IGA’s initiative. Meanwhile, turn to page 32 for more ideas about grocery’s store of the future.

Jim Dudlicek Editorial Director jdudlicek@ensembleIQ.com Twitter @jimdudlicek

T H E

A R T

O F

M E R C H A N D I S I N G

T M

HOOKS | SHELF & COOLER MERCHANDISING | LABELING WWW.TRIONONLINE.COM/ART | 800-444-4665 ©2015 Trion Industries, Inc.

BEER DISPLAYS DRIVE GROCERY SALES IN EVOLVING CONSUMER LANDSCAPE With ecommerce on the rise, traditional grocery total store sales growth slowed to

0.5 percent, and grocery store trips down 2.5 percent as new competitors emerge, supermarket retailers need to continue driving out costs through consistent operational discipline—and find strategic ways to disrupt in-store shoppers.

Beer is the perfect product to drive this disruption and ensure operational efficiency.

Within the beverage category, beer ranks high in penetration, trips and dollars spent in total U.S. food. It helps increase traffic and revenue, and delivers profits for retailers as the No. 1 revenue category in the total U.S. food channel with $10.6 billion in annual revenue, according

It all adds up to a prime opportunity to help level the playing field with current and emerging competitors by leveraging the benefits of the beer category.

PUTTING BEER ON DISPLAY

Displays and features with displays are beer’s main merchandising driver outside of the shelf across all segments in total U.S. food, leading to both impulse purchases and planned purchase conversion. These displays play an important role in beer in-store sales, with beer generating the third most incremental dollar sales among all categories when both featured and displayed.

All beer ad feature items should be accompanied

AVERAGE ANNUAL SPENDING ON FOOD & BEVERAGE 2017 DRUG

-13% GROCERY

-5%

MASS

-1% +3%

C-STORE

+5% SOURCE: ABI CATEGORY LEADERSHIP; INFOSCOUT CALENDAR YEAR 2017; IRI MULTI-OUTLET TOTAL STORE 2017

to data from IRI. In addition, IRI reports that 41 percent of households shop beer on an average of 14 trips per year, spending $14.26 per trip.

Beer also ranks as a highly productive grocery category for inventory management and space optimization, outperforming liquor and wine in weekly movement and weekly true profit per square foot. As the third-highest weekly true profit in U.S. grocery, beer is one of the Top 10 categories of weekly true profit and turns, which—unlike gross margins—accounts for activity-based costs.

DOLLAR

+10%

ECOMMERCE

by displays to take advantage of the resulting increase in lift, and the boost in incremental dollars compared with wine and spirits.

BACK-OF-THE-STORE STRATEGIES

To be successful, beer display strategies need to balance financial, operational, shopper and in-store considerations as they draw shoppers into aisles and remind them to purchase. Most important, of course, is that the display falls into the shopper’s vision, or else it will be impossible to create a sale.

AVERAGE BEER SALES LIFT

+58%

FEATURE ONLY

+81%

FEATURE AND DISPLAY

BEER ADS + DISPLAYS DELIVER THE MOST INCREMENTAL LIQUOR DOLLARS

$421 M $171 M $46 M

BEER WINE SPIRITS

BEER % INCREMENTAL DOLLARS

BY MERCHANDISING TYPE TPR ONLY

Back endcap displays tend to drive greater overall purchases, and here’s why: A shopper typically takes one of two paths when navigating in the store—U-shape or Racetrack—depending on the shopper’s needs and time. But both of these two paths suggest that the back of the store should have more foot traffic and visual reach than the front. And in fact, endcaps at the back of the store have an average of 88 percent foot traffic, compared with 64 percent for front endcaps. The average visual reach for back endcaps (54 percent) is also twice that of front endcaps (24 percent).

Back endcaps act as advertising billboards, reaching shoppers who were not planning on buying the category that day.

AVERAGE FOOT TRAFFIC

88 % BACK

ENDCAPS

64 % FRONT

ENDCAPS

18% 35%

FEATURES ONLY DISPLAY ONLY

AVERAGE VISUAL REACH

20%

FEATURES & DISPLAY

27%

54 % BACK

ENDCAPS

24 % FRONT

ENDCAPS

SOURCE: ABI CATEGORY LEADERSHIP; IRI 2017 FY TOTAL U.S. FOOD

BEER BY THE NUMBERS 13th in purchase cycle at 28 days 33 percent of beer shoppers’ trips have category as a primary driver

$31 added to basket with a beer purchase 2nd largest category in driving annual dollars per buyer

3rd in per trip dollars 113 percent index on incremental sales from displays

SOURCE: ABI CATEGORY LEADERSHIP; KANTAR; ANHEUSER-BUSCH BEHAVIOR POLL 2017

6th in annual inventory turns and adjusted gross profit/linear foot

SPONSORED CONTENT

IN-STORE EVENTS

Calendar S

10.18

M

1

International Coffee Day World Vegetarian Day

7

National Frappé Day

8

Columbus Day National Fluffernutter Day Honor National Pierogi Day by running a special in your prepared food department.

14

Draw attention to the bakery department for National Dessert Day.

15

National Cheese Curd Day National Mushroom Day

American Cheese Month Breast Cancer Awareness Month National Fair Trade Month Rhubarb Month

T

2

In honor of National Pasta Month, feature pasta-based specialties in your prepared food department.

W

3

National Soft Taco Day National Pumpkin Seed Day

9

10

National SubmarineHoagy-HeroGrinder Day

National Angel Food Cake Day

National Moldy Cheese Day

National Tic Tac Day

16

World Food Day National Liqueur Day

T

4

Apart from yesterday’s softtaco celebration, run promotions in honor of National Taco Day.

11

National Sausage Pizza Day

17

Run a do-over promotion for National Mulligan Day.

F

5

National Do Something Nice Day

6

National Noodle Day

12

13

Pumpkin Pie Day

National Pumpkin Festival

National Gumbo Day

National Coming Out Day

18

19

National Chocolate Cupcake Day

S

National Apple Betty Day

Honor where the food comes from by celebrating National Farmer’s Day.

National Cake Decorating Day National Stop Bullying Day

National Dessert Month National Pretzel Month National Pizza Month National Apple Month

National Seafood Bisque Day

National Peanut Festival

Yorkshire Pudding Day National M&M Day

20

National Brandied Fruit Day

National Pasta Day

Sweetest Day

21

National Pumpkin Cheesecake Day

22

Think outside the box on National Nut Day.

23

National Boston Cream Pie Day

24

25

26

27

National Pumpkin Day

National Potato Day

National Bologna Day

As an antidote to last week’s Sweetest Day, celebrate everything that’s the opposite for Sourest Day.

The best day of the year for the industry is National Food Day.

National Greasy Food Day

National Mincemeat Day

National American Beer Day

National Make A Difference Day Navy Day

28

National Chocolate Day

National Motherin-Law Day

12

29

National Oatmeal Day

You can capture additional pet sales for National Cat Day.

progressivegrocer.com

30

In preparation for tomorrow’s spookfest, celebrate National Candy Corn Day by showcasing recipes and products featuring the iconic treat.

31

Halloween National Caramel Apple Day

with

CATEGORY GROWTH SOLUTIONS

Join the Conversation: @HersheyCompany The-Hershey-Company hersheysolutions.com

Trusted iconic brands and expert category management deliver real solutions for sustainable growth.

CONSUMER INSIGHTS

Market Research

Lunchtime Habits HOW HAVE CONSUMERS’ PR ACTICES REGARDING THE MIDDAY ME AL CHANGED? Progressive Grocer, along with sister company EIQ Research Solutions, interviewed 500 consumers who have household responsibility for grocery shopping to find out where they purchase food for lunch. Of particular note is the 11 percent increase of survey respondents overall who are turning to prepared foods from grocery stores for their midday meals, as well as the 11 percent decline in people who skip the meal altogether. Gen X has embraced the grocery store the most, with a 36 percent increase in prepared food lunch purchases from supermarkets.

Survey respondents were sourced via ProdegeMR, reinventing the market research process by taking a respondent-first approach. Visit www.prodegemr.com for more information.

What’s for Lunch?

Total

Households with children saw an 18 percent increase in those purchasing grocery store prepared food items for lunch.

While frequent and infrequent shoppers purchase prepared food at grocery about equally, there’s much more growth among frequent shoppers, with a 16 percent increase in lunch purchases from the prepared food department of the grocery store.

Generation X

Boomers

Today

Last Year

Today

Last Year

Today

Last Year

Today

Last Year

Made from food on hand at your home

53.43%

52.36%

43.23%

40.3%

55.52%

54.08%

55.75%

57.14%

Purchased from a quick-service or fast-food restaurant (e.g., McDonald’s, Taco Bell, Arby’s, etc.)

13.71

14.16

15.5

17.23

15.28

16.08

13.12

12.26

Purchased prepared food at a grocery store

9.41

8.48

12.6

11.43

8.57

6.29

8.61

7.82

Purchased from a fast-casual restaurant (e.g., Chipotle, Panera, etc.)

6.70

7.46

7.32

8.6

7.12

7.97

6.95

7.06

Purchased from a traditional sit-down restaurant

6.23

6.35

7.54

7.02

5.21

5.65

5.61

6.43

Skipped lunch

5.85

6.56

6.72

7.92

3.41

4.29

6.04

6.31

Purchased prepared food at a convenience store

2.53

2.85

3.33

4.35

3.31

3.64

1.93

1.85

Purchased prepared food at a drug store

1.14

0.85

2.36

1.95

1.06

0.95

0.63

0.24

Other

6.11

8.19

7.68

7.16

2.69

7.69

10.49

11.86

Source: Progressive Grocer market research, 2018

14

Millennials

progressivegrocer.com

WANT TO KNOW A SECRET?

95

%

The dairy case is one of the

$ MOST PROFITABLE

of households buy dairy milk annually

FAC T

sections of the grocery store

MILK LEADS

48%

the dairy case in sales, but it is often left

HURD

LE

of shoppers undergo at least one dair y milk

OUT-OF-STOCK

UNDERSTOCKED & UNDERSPACED

EXPERIENCE

HOW DO YOU FIX THE PROBLEM & MAXIMIZE PROFIT POTENTIAL? SOLV E

OPTIMIZING

ARE YOU GIVING ENOUGH SPACE TO THE DAIRY CASE?

1

PRIORITIZING

2

DO YOU HAVE THE RIGHT VARIETY & SIZE MIX?

shoppers discover new 64% ofproducts in-store.

Dairy makes 20% of store profit with only 3% of store space.

RETAILERS COULD LOSE

$1800 - $3000 per shelf (per store) by converting that last dairy milk shelf to alternatives

Nearly half of the full dairy milk category is growing. Growth segments (lactose-free, health-enhanced, single-serve flavors) represent

$1B

IN NEW SALES OVER 5 YEARS.

(e.g., soy milk, almond milk, etc.)

Dairy milk’s last shelf earns 3x MORE profit than almond milk’s last shelf &

6x MORE than soy milk's.

$

WANT TO MAXIMIZE PROFIT POTENTIAL?

Contact MilkPEP's Melissa Malcolm to learn more about optimizing the dairy case at MMalcolm@MilkPEP.org

ABOUT THE RESEARCH The Milk Processor Education Program (MilkPEP) engaged several industry experts, including Prime Consulting and Willard Bishop, to leverage national retail data and proprietary research. Full list of sources includes: IRI 52 wks ending 6/17/2018 | Willard Bishop SuperStudy™ | Full year 2017 All Outlets IRI Panel | IRI panel data | Nelson 2015 | Projected by Willard Bishop and Prime Consulting based on time studies, labor costs of $24.40/hr., 2015 sales rates, incremental work for extra stocking and range of days involved each week | Prime Consulting | IRI MULO-C

ow

e e B Availabl e

Fall 201 8

No matter which day of the week, a steaming bowl of Beef Pho is no longer hard to find.

Inspired by the staple Vietnamese dish, this flavorful noodles is packed bowl of beef, mushrooms, with aromatic spices like basil, cinnamon & clove.

The balanced tastes of sweet, salty spicy

&

&

are highly craveable; This pho is an instant favorite.

To learn more, contact Blount Fine Foods at 774-888-1300 or visit us on www.blountfinefoods.com

beef mushrooms hro

noodles dles les ba basil cinnamon nna namon mon clo clove ve

MENU TRENDS

Research & Analysis

Snacks SNACKING IS AN ALL-DAY “DAYPART” THAT GROCERS SHOULDN’T IGNORE. Three square meals a day is old hat. Consumers are now eating meals four to five times daily. In fact, between 7 a.m. and 10 p.m., roughly 70 percent of the population is snacking during any three-hour period. Snacking should be a key part of any grocer’s marketing plans, but you need to know how it’s changed. It’s no longer just chips, crackers or a piece of fruit. According to Datassential’s “Keynote: Snacking,” consumers view snacking as any type of meal — sandwiches, snack beverages, mini-desserts … virtually anything. To better target these snacking occasions, especially between meals, consider offering smaller portions of entrée dishes and desserts.

Grocers should track restaurant dining trends. Innovative food trends begin at upscale and ethnic restaurants, but you should still unearth these concepts and flavors at their earliest stages to stay ahead of the game. Here are four snacking trends, starting with those in the earliest stage of Datassential’s Menu Adoption Cycle (MAC):

1

Za’atar MAC stage: Inception — Ethnic markets, ethnic independents and fine dining Trends start here and exemplify originality in flavor, preparation and presentation.

With Middle Eastern flavors becoming more popular across menus today, it’s worth adding exciting flavors from the region to a variety of snacks or entrées. Za’atar is ubiquitous in the Middle East, but brandnew to consumers across the United States. The spice blend, typically made with dried thyme and sumac, sesame seeds, and other herbs, can add mild flavor to hummus, dipping sauces, meats, fish and poultry.

On 1% of U.S. restaurant menus +200% over the past four years 15% of consumers know it/ 7% have tried it Menu Example Greek Pitza — Aladdin’s Eatery, Cleveland, Ohio (HQ) A vegetarian offering of feta, za’atar, diced cucumbers, green peppers, sliced tomatoes, Kalamata olives and sweet basil flakes.

18

progressivegrocer.com

2

“Everything” Bagel Spice MAC stage: Adoption — Ethnic aisle at supermarkets, casual independents, fast casual Adoption-stage trends grow their base via lower price points and simpler prep methods. Still differentiated, these trends often feature premium and/or generally authentic ingredients.

Apply the savory flavor of “everything” bagels to other snacks. The blend contains white and black sesame seeds, poppy seeds, dried garlic and onion, caraway seeds, and sea salt flakes. Add it to avocado toast, baked potatoes, hummus, guacamole.

On <1% of U.S. restaurant menus 42% of consumers know it/ 24% have tried it Menu Example “Everything” Smoked Salmon Benedict — First Watch, Bradenton, Fla. Two poached cage-free eggs on toasted ciabatta with wild Alaska smoked sockeye salmon, whipped cream cheese, red onions, hollandaise and “everything” bagel spice, with lemon-dressed mixed greens.

3

Wasabi MAC stage: Proliferation — Grocery deli, casual chains, QSRs

Proliferation-stage trends are adjusted for mainstream appeal.

Often combined with popular applications (on a burger, pasta, etc.), these trends have become familiar to many.

Best known as a condiment for sushi, wasabi brings unique, horseradish-like heat and global flavoring to all kinds of snacks in both CPGs and fresh-made dishes. On the CPG side, Lay’s has introduced Kettle Cooked Wasabi Ginger Chips, while classic dried wasabi pea snacks continue to be found in international sections of grocery stores and in Asian markets.

Wasabi can also work well for entrée snacks like burgers and mashed potatoes.

On 10% of U.S. restaurant menus +7% over the past four years 78% of consumers know it/ 46% have tried it Menu Example Cucumber Wasabi Burger — Big City Diner, Honolulu Japanese cucumber, real jack cheese and wasabi aioli.

4

Bacon MAC stage: Ubiquity — Available everywhere — convenience stores, cafeterias, family restaurants, etc.

Ubiquity-stage trends have reached maturity and can be found across all sectors of the food industry.

America loves bacon. The cured meat has endless possibilities for a variety of snacks, both sweet and savory. Whether it’s candied bacon ( up 88 percent on restaurant menus), bacon tacos, bacon milkshakes or bacon toppings, the food is highly craveable to the masses.

On 71% of U.S. menus +4% over the past four years 97% of consumers know it/ 93% have tried it Menu Example Chicken Fried Bacon — Cotton Patch Café, Grapevine, Texas (HQ) Six bacon strips chicken-fried until golden, with a choice of either home-style cream gravy or ranch dressing to dip them in.

Your Back-toSchool Partner DRIVING GROWTH DURING THE BACK-TO-SCHOOL SEASON

FOOD This season, families need convenient, affordable and healthy meal and snack solutions as they get back into their routine. Our brands offer the real food that fits your shopper’s needs.

INSIGHTS Knowing that 59% of shoppers give their children a packed lunch to take to school 5 days per week,* we can partner with you to make sure your store is their first choice.

SOLUTIONS We go further than just providing healthy, affordable products.

Our investment in innovation, incentives to buy, plus in-store and advertising support make your shopper’s trip easier.

GROWTH We have top brands that families love, across multiple categories. By collaborating to leverage the power of our portfolio, we can drive your sales as kids go back to school.

*Source: CSI BTS/BTR Event Window 2017 ©2018 CSC Brands LP

FRONT END

Shelf Stoppers

Shelf Stoppers

Frozen Vegetables TOTAL FROZEN VEGETABLE SALES REACHED $2.97 BILLION IN THE PAST YEAR (52 weeks ending April 2, 2016)

Nonfood Grocery

TOP 5 CATEGORIES IN $ GROWTH (MORE THAN $500M IN ANNUAL SALES) $80,000,000,000

Basket Drivers

Consumers chose frozen broccoli over alternatives for a variety of reasons:

70,000,000,000 60,000,000,000

Among various household paper products, 12%which command because it’s the quick and easy greatest average spend per trip for the household?

50,000,000,000 40,000,000,000 30,000,000,000 20,000,000,000

10%

10,000,000,000

because it tastes great

0 52 Wks - W/E 05/26/18 Health and Beauty Care

52 Wks - W/E 05/27/17

52 Wks - W/E 05/28/16

Tobacco Care Spotlight onandFrozenBaby Broccoli Tobacco Alternatives

Household Care

9%

General Merchandise

WHEN ARE CONSUMERS EATING FROZEN BROCCOLI?

Broccoli as an ingredient is most commonly

Frozen broccoli is most often used in a side

Nonfood categories store mixed bag by in as terms consumed across at dinner,the followed by have lunch. been a dish, followed a mainofentrée. performance year over year. While health, beauty and household care products 3% have seen moderate dollar growth of 1 percent, general merchandise and baby 9% care categories have struggled.

Increased accessibility of health care information, avoidance of undesirable ingredients, and the personalization of beauty care regimes have bolstered sales growth, prompting new methods for managing one’s personal MEAL ITEM in and household care. From sustainable OCCASION detergents to expanding the color palettes available 29% TYPE CLASS 62% 61% makeup brands, the path forward in nonfood products lies in catering to a35% multitude of consumer needs that have grown in complexity.”

because it’s healthy and nutritious

$3.04

Paper Napkins

8%

because it’s low in calories, fat and sugar

$6.35

Facial Tissues

—Lauren Fernandes, DINNER

LUNCH

OTHER

Manager-Strategy and Analytics, Nielsen SIDE DISH MAIN ENTRÉE OTHER

Spotlight on Laundry Supplies Deli packaged meats present a potential opportunity for cross-merchandising or co-promotions with laundry supplies, since consumers of laundry supplies are 10 percent more likely to purchase deli packaged meats than the average consumer. Other complementary categories include dry mixes, baking mixes, and bread and baked goods.

Percent Penetration

Index

Packaged Meats-Deli

95.5%

110

Prepared Food-Dry Mixes

90.5

110

Baking Mixes

76.6

109

Bread and Baked Goods

98.6

109

Deodorant

72.5

109

Comparison Products

Source: Nielsen

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$4.02

Paper Towels

$3.90 Toilet Paper

Source: Nielsen Homescan, Total U.S., 52 weeks ending May 26, 2018

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The United States is the largest fabric care market globally, but has seen slowed growth during the past five years.

The North American automatic-detergent market is strongly focused on liquids and capsules, with powder detergents seeing virtually no development in recent years.

The top claim of new launches of fabric care products in North America between December 2016 and November 2017 was “ethical and environmental,” with eco-friendly product and package claims leading the way.

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Key Issues

Nearly half of U.S. laundry detergent buyers consider scent/fragrance important when buying laundry detergent, and 45 percent agree that they want a product that keeps clothes smelling fresher for longer.

Although capsule launches are on the rise in North America, they don’t appeal to all demographics, as just 20 percent of consumers age 55 and older say that they’ve purchased single-dose pods, compared with 34 percent of those age 18-24.

What Does It Mean?

With scent being one of the top purchase drivers for fabric care in the United States, brands can offer ways to trial new scents, such as scratch-and-sniff panels, scent vents or scented cards.

While younger consumers value the convenience of pods, brands have an opportunity to reach older consumers by highlighting the predosed, mess-free and convenient nature of laundry pods.

Brands can increase usage of powder detergents by emphasizing the price benefits and environmental cost savings associated with the packaging materials, as compared with those of waterbased formats like liquid and pod detergents.

Liquid laundry detergent is a staple in American households, followed by single-dose pods, powder and detergent for hand-washing.

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ALL’S WELLNESS

By Diane Quagliani

A Healthy Kickoff to Tailgate Season GROCERS CAN TE AM UP WITH RE TAIL DIE TITIANS FOR WINNING IDE AS.

t’s tailgating season, that rite of fall signaling the kickoff of football parties and major holidays running straight through the year’s end.

Tailgating usually brings to mind wings, ribs, burgers and plenty of beer, but odds are good that some fans will prefer at least a few healthier offerings alongside the usual spread.

The evidence? More than one-third (36 percent) of consumers say that they follow a specific eating plan, with carb-trimmed and gluten-free diets among the most popular options, according to the 2018 Food & Health Survey, conducted by the Washington, D.C.-based International Food Information Council (IFIC) Foundation, which also found that three-quarters (77 percent) of consumers are trying to limit sugars, and seven in 10 (69 percent) prefer food choices with no artificial ingredients.

Fall Party Food HQ

It’s a snap for retailers to highlight healthier grilling and football party fare throughout the store, especially time-saving ready-made and easy-to-assemble options.

In the produce department, fruit and vegetable trays are always popular, as is pre-cut produce for shoppers who prefer to customize their own trays.

Also offer tips and quick recipes for less-typical options such as sweet potatoes, cauliflower steaks and seasonal fruit kabobs for the tailgate grill.

As for the requisite chips and dips, add interest and nutrition by promoting ready-made ethnic dips like hummus, tzatziki, baba ganoush, guacamole and salsa. They’re ready to pair with the multitude of vegetable and whole grain chips available today.

Lighter grill-worthy mains include lean meat and vegetable kabobs, marinated chicken breasts, lean burgers, and a whole slew of plant-based burgers, sausages and hot dogs.

Light beers and wine are good choices for the beverage cooler. And remember those 77 percent of consumers who are trying to limit sugars, according to IFIC? Sixty percent of them do so by drinking water, so make sure to feature a display of plain and no-sugar flavored waters for them.

Communications Game Plan

Research suggests that digital channels are just the ticket to communicate healthier football-focused recipes, food ideas and tips. Many grilling enthusiasts look for recipes from various online sources such as recipe (45 percent), cooking show (39 percent), grilling (27 percent) and food company (24 percent) websites, according to a 2017 survey on grilling conducted

by Jacksonville, Fla.-based marketing firm Acosta. Further, more than onethird (36 percent) of respondents tap into social media for ideas.

Team up with your retail dietitians to devise the best communications

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It’s a snap for retailers to highlight healthier grilling and football party fare throughout the store, especially time-saving ready-made and easy-to-assemble options.” strategy for your stores. You could work together to develop or curate a collection of lighter fall grilling and party recipes to post on your website, and then parlay that content into multiple communications opportunities using traditional and social media.

Dietitians can appear in TV news spots to give healthy tailgating tips and demonstrate recipes, post links to the content on their Facebook and Twitter feeds, and feature it in their blogs.

Also, when it comes to promoting healthier fall party options, don’t underestimate the power of good old-fashioned cross-merchandising: Display avocados near the whole grain tortilla chips, light ranch dressing near the precut veggies, and whole grain buns near the veggie burgers.

Diane Quagliani, MBA, RDN, LDN, specializes in nutrition communications for consumer and health professional audiences. She has assisted national retailers and CPGs with nutrition strategy, web content development, trade show exhibiting, and the creation and implementation of shelf tag programs.

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NEW HORIZONS

By Sarah Alter

The Power of the ‘She-E-O’ NO MAT TER THEIR TITLES, WOMEN PERFORM LIKE CEOS, AND THEY SHOULD BE RECOGNIZED FOR IT. n my house, my husband and I agree: I’m the CEO/COO, and he’s the CFO/CTO. Many women, especially working moms, perform like accomplished CEOs, both at home and at work.

At home, these “She-E-Os” set the tone, establish spending priorities, manage operations, and act as the main point of contact between the household (spouse, children and helpers); external stakeholders (teachers, professionals, plumbers, family and friends); and outside partners (community and religious groups).

At work, too, women are acting like successful CEOs, no matter where they are on the org chart. They’re using their leadership, organizational and people skills to determine strategy, allocate resources, build bridges, communicate changes effectively and ensure that everyone is rowing in the same direction.

But while many women have the same skill set used by accomplished corporate leaders and a record of proven results, few women are recognized and valued for them — and most women are uncomfortable sharing them.

At home — and on social media — women are quick to share news of a child’s or partner’s achievements, but are less likely to toot their own horns.

At work, it’s not much different.

Researchers Michelle C. Haynes and Madeline E. Heilman conducted a series of studies that revealed women weren’t likely to take credit for their role in mixed-gender group work unless their roles were explicitly understood by outsiders. Women gave more credit to their male teammates and took less credit themselves.

So how can senior leaders create workplaces where women can leverage their She-E-O skills, perform as confidently as their male peers do, and get recognized for their results?

Here’s how: Embed gender diversity at all levels, including the c-suite. Women are less likely to believe their achievements will lead to advancement — or self-promote those accomplishments — if they see talented women being overlooked in hiring and promotions.

Create clear career paths that lead to the top. If women don’t understand how they can build their resumés to advance, they won’t seek the opportunities or assignments that will move them ahead. And they’ll be they’ll less likely to risk alienating peers by speaking up if someone else takes credit for their ideas or successes.

Establish specific criteria for jobs. The clearer the criteria for evaluating candidates for promotion, the less likely that gender stereotypes will play a role in talent management. Job-knowledge test scores, for example, are gender-blind. Asking candidates to provide specific, gender-neutral information, such as role-related expertise, will reduce the opportunity for gender bias to creep into the selection process. Everyone should be

26

progressivegrocer.com

Everyone should be confident that they’ve been hired or promoted — and evaluated — based on their ability to do the job. Period.” confident that they’ve been hired or promoted — and evaluated — based on their ability to do the job. Period.

Make sure the job criteria don’t favor men over women. Do each role’s criteria set the employee up for success, regardless of their gender or life stage?

Or do they create barriers for applicants who are women, particularly during their career and life pivot points?

Clarify everyone’s role and responsibilities. It’s easier for all employees to collaborate, work on individual areas for improvement — and take credit where credit is due — if everyone in an organization has a clear understanding of what each person’s role is.

When workforce policies are gender-neutral and workplace cultures are bias-free, we’ll see more She-E-Os stepping into the c-suite — and our companies will be better for it.

Sarah Alter is president and CEO of the Network of Executive Women, a learning and leadership community representing more than 11,000 members, more than 800 companies, 110 corporate partners and 21 regional groups in the United States and Canada. Learn more at newonline.org.

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SHOW RECAP

SmartFood Expo/Healthy Shopper Summit

United on Fresh PG PARTNERSHIPS PUT THE SPOTLIGHT ON WELLNESS, HE ALTHIER E ATING. ood industry leaders and innovators converged over three days in June for education, networking and a product showcase, where the future of fresh, healthy and better-for-you options were on display.

With a goal of bringing to market the future of better-for-you products, SmartFood Expo — presented by the United Fresh Produce Association, Progressive Grocer and PG parent EnsembleIQ — focused on food that makes a difference — in your operation, in your brand, and in the mind, body and wellness of your customers SmartFood Expo was co-located with the United FreshMKT Expo, United FreshTEC Expo, International Floriculture Expo and Global Cold Chain Expo, all held June 2627 at McCormick Place, in Chicago.

In addition to exhibitors featuring innovative products, more than 100 hours of education and dialogue took place on the SmartFood Expo trade show floor, with sessions that gave attendees an opportunity to hear from the experts on the knowledge and insights

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SmartFood Expo focused on the future of better-for-you products with speaker sessions (top) as well as exhibitor booths (above).

to help retailers’ teams make the smartest decisions for their companies. Further connections occurred in the Marketing, Food Safety and Business Management X-Changes, where topics included guerilla marketing, information technology overload, brand equity and crisis management.

SmartFood included sessions such as “Join the Plant-Based Foods Revolution,” “The Digital Retail Landscape,” and “Food

SHOW RECAP

SmartFood Expo/Healthy Shopper Summit

Media, Food Culture and Making the Everyday Connection,” along with strategic insights from retailers including Walmart, Safeway and Kroger.

The SmartFood Expo concluded with the presentation of the 2018 United FreshMKT Achievement Award to Mason Arnold, “Veggie Nerd” of Cece’s Veggie Co., for his significant innovations in the marketing and merchandising of fresh produce.

Meanwhile, the sixth annual Retail Dietitian’s Healthy Shopper Summit, held over two days of the United Fresh show in Chicago, offered an immersive program designed to promote a 360-degree, total-store solution approach to health and wellness.

This year, the event was expanded to include and support retailers, CPGs and vendors that are working toward providing health-and-wellness options for customers. Additionally, retailers and sponsors met in one-on-one meetings to discuss healthy products and strategies.

Aiming to arm attendees with inside knowledge on the business of nutrition, health and wellness, the summit offered engaging speakers, dynamic content on top trends and unique networking opportunities, as well as the opportunity for registered dietitians (RDs) to earn continuing-education credits.

Sessions included “Retailers: Health and Wellness Disruptors,” on how to integrate health care services into the shopping

RD Outreach Innovation winners (l-r): Elaine Magee, Albertsons; Ashley Martinez, Kroger; and Johna Mailolli, Inserra/ShopRite.

Unable to attend was winner Heather Steele of Reasor’s.

experience; a case study of Kroger’s OptUp App; “The Health-Minded Consumer and the Evolution of Food for Wellness”; “Strategies for Helping Low-Income Families Overcome Perceived Barriers to Nutrition”; “Probiotics: What They Are and Dispelling the Myths”; “Best Practices in Food Retail Health/Wellness/Fresh: Focus on Family Meals”; “Building Retail Health Care Solutions”; “What’s Motivating Today’s Healthy Shopper?”; “Helping Consumers Understand Plant-Based Alternatives”; and “The Impact of Registered Dietitians in Nutrition Marketing through Multiple Communication Channels,” along with RD panel discussions.

The summit also hosted a reception for winners of the RD Outreach Innovation Awards, which went to Albertsons’ Elaine Magee, Kroger’s Ashley Martinez, Inserra/ ShopRite’s Johna Mailolli and Heather Steele of Reasor’s. These retail dietitians were honored for their innovative programs designed to help their respective retailers better engage with shoppers and the community on wellness outreach and education.

More information about the shows is available at www.smartfoodexpo.org, www.rdhealthyshopper.com and www.unitedfreshshow.org.

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COVER STORY

STORE OF THE FUTURE

ABOVE ALL ELSE, EXPERIENCE IS CRUCIAL TO THE FUTURE OF SELLING GROCERIES.

By Jim Dudlicek

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hink click-and-collect is cutting-edge? Think again.

How about a supermarket that shoppers can actually drive through — not up to a pickup window, but right up to the shelves?

A Russian inventor actually holds a patent for such a concept, which has made the rounds on social media. Shopping motorists actually pick products off rotating shelves from behind the driver’s seat, dropping items onto a conveyor belt that whisks them off to checkout, where the shoppers pay their bills and speed away, without ever getting out of their cars.

Is this the store of the future?

Despite the growth of ecommerce, shopper insights indicate that most consumers still like a brick-and-mortar store experience that delivers sights, sounds and smells, perhaps allowing them to linger over a cup of coffee, a full meal or a cooking demonstration.

But the broader picture indicates that most grocery consumers want a seamless experience — the ability to purchase goods in person, online, or by employing click-and-collect or delivery, as their needs and circumstances warrant. To be sure, industry experts agree that experience is paramount in creating a place that shoppers want to be, out and away from their computer screens.

So while you likely won’t see cars driving into every grocery store any time soon, it could be just one component of a larger, increasingly diverse picture of a continually evolving store of the future.

Key Takeaways Shopper experience is paramount.

Harness the latest technologies to deliver convenient solutions and reduce friction.

Spaces must cater to highly personal shopping missions.

A frictionless experience has been a key focus. Retailers have experimented with self-scanning devices to help shoppers avoid lengthy checkout lines, and Amazon is rolling out cashier-free stores that leverage tech to track purchases and total cashless basket rings.

And as consumers find it easier to purchase center store goods and nonfood items online on demand or with subscription services, grocers are looking at how to reallocate valuable space to augment fresh perimeter categories that many shoppers are still wary to trust to delivery services.

Ultimately, grocery stores must be solution centers, and retailers must keep a constant watch on consumers’ rapidly evolving needs so that stores can stay one step ahead of them.

Progressive Grocer consulted industry experts to get a better understanding as to exactly what “store of the future” means to consumers, the business of selling food, and their symbiotic relationship.

Here’s what they told us …

PROGRESSIVE GROCER August 2018

33

COVER STORY

STORE OF THE FUTURE An Entirely New Customer Experience

Looking back 10 or even five years and comparing that shopping experience to today’s retail reality, the difference is vast.

As frictionless checkout and delivery become commonplace in grocery conversations, one can’t help but ask, what does this mean for the future of grocery? With providers teasing the democratization of frictionless checkout, which could enable adoption by the masses and not just the likes of Amazon, there’s much to discuss.

“Many of our grocer clients are realizing successes by leveraging tech that blurs the line between digital and brick-and-mortar,” says Steve Duffy, VP of grocery for Orlando, Fla.-based Cuhaci & Peterson Architects, Engineers and Planners. “In order to be where their consumers are, they have to virtually be omnipresent. The question is no longer whether or not to delve into omnichannel, it is determining which channels to focus on.”

Duffy continues: “We are creating an entirely new customer experience for grocery and food, end to end. We are challenged with literally understanding the implications of the product, the freshness and the reality of getting it into the consumer’s home.”

Successfully getting food to consumers’ homes — the “last mile” — is “a battleground of epic proportions,” says Cuhaci & Peterson Principal Steven Blevins.

“This is an arena with fierce competition, and even fiercer challenges to making sure it is both a profitable and viable venture for grocers,” Blevins says. “Artificial intelligence and robotics are helping overcome some of the challenges, but the paradigm shift to stay close to customers, increase automation and do this at a scalable level is a conundrum that requires agility to overcome.”

Eric Thorsen, who leads global business development in retail and CPG for Santa Clara, Calif.-based tech company Nvidia, sees significant interest in using new technology like GPU (graphics processing units) in the retail industry.

“Retailers are interested in computer vision to monitor shoppers, prevent loss and enable a cashier-free departure,” Thorsen says. “This keeps in-store associates focused on contact with the consumer, rather than ringing registers. The end result is a more personal interaction, assisting customers with questions and providing advice on products. Customer satisfaction improves, and revenues increase as a result.”

And while there are more and more ways to obtain product (in-store, pickup, driveup, delivery), one added trial for grocers

Unlocking the unique differentiators that drive people to shop with a particular retailer and using technology to target unmet needs in the marketplace will be what sets apart the store of the future.”

—Lewis Shaye, Grocerant Design Group

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is maintaining relevance across multiple generations, all with varying levels of comfort with omnichannel options. Whether that’s through innovations that allow small to midsize grocers to embrace frictionless technologies, the improvement of micro fulfillment and last-mile capabilities, improved experiential shopping for increased brand engagement, or creating a “digital twin” to allow omnichannel consumers to have a “virtual” shopping experience, keeping up in an environment that’s undergoing seismic technological changes will set industry players apart moving forward.

“As retail store designers, creating an effective, stimulating experience involves stirring emotions to form powerful bonds with the target demographic,” says Lewis Shaye, founder of South Carolina-based Grocerant Design Group and former VP of culinary concepts for the Schenectady, N.Y.-based Price Chopper supermarket chain. “A brand refresh on its own is not powerful enough to cause people to feel remarkably different; it won’t deliver the results longterm. Unlocking the unique differentiators that drive people to shop with a particular retailer and using technology to target unmet needs in the marketplace will be what sets apart the store of the future.”

Duffy says a store-of-the-future design “takes the optimal shopper’s various needs and ability to acclimate to the disruption in new retail into consideration. Their future interactions with both the physical and virtual store worlds help shape our vision of what this future store could be.”

Five primary strategic underpinnings are central to change and are no longer considered trends, according to Duffy: technology, convenience, experience, fresh food and local.

Future grocery design will be significantly affected by technological advances like artificial intelligence, machine learning and robotics. The compounding effect of these multiple technologies bears great

White Paper

Brought to you by

White Paper

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Paper White Paper

ROI Standards: Standards: 2017 Shop! ROI

STORE REDESIGN REDESIGN

Examining Examining Motivators, Motivators,Metrics andMeaning MeaningBehind BehindStore StoreRedesign RedesignProjects Metricsand Projects

SPONSORED BY SPONSORED BY

Foreword A special thank you to our sponsors Specialty Lighting, Stylmark, Canada’s Best Store Fixtures Inc. and Trion for their support and also the Research Council and the ROI Standards Task Force for their work in developing this white paper.

In today’s retail climate, ROI data is no longer a “nice to have.” Retailers are counting on their suppliers to provide the information they need to demon­ strate ROI when they implement changes in store design–whether it’s improved signage, upgraded fixtures, a new mannequin line, or a complete redesign.

A SPECIAL THANKS TO OUR STORE REDESIGN ROI STANDARDS TASK FORCE MEMBERS Madeline Baumgartner Shop!

Jane Greenthal, Chair Gensler Teri Mascotti Stylmark Paul Pinkus Sharing Wisdom Michael Decker Medallion Retail Ted Flinn Tag Worldwide

In our continual effort to drive an industry dialog on ROI, Shop!, the trade associ­ ation focused on enhancing retail environments and experiences, is pioneering the development of industry standards for Store Redesign ROI. In 2014 Shop! worked with EWI Worldwide to gain an understanding of this topic. The EWI team surveyed retailers with physical remodels regarding their motivations, goals, and expectations of a store redesign. The information was shared in a 2015 EWI White Paper that was inserted in Retail Environments magazine.

Building off of those findings, Shop! has endeavored to further understand the current ROI measurement habits of retailers, store designers, and manu­ facturers. Shop! conducted a survey for the first phase of the research with key industry players in retail, store design, and fixture manufacturing.

The 2017 Shop! ROI Standards: Store Redesign white paper offers actionable insights, case studies, and best practices based on the findings of our recent studies. I hope the takeaways in the following pages will help you justify your investments to create and execute successful store redesign projects that ultimately enhance the retail experience for shoppers.

This is the first of a series of ROI research from Shop! in 2017. Later in the year, Shop! will release results on Understanding the Effect of the Retail Workers’ Service on the Customer Experience and How it Ties Back to Return on Design.

For questions or more information about the report, please visit the Shop! website at shopassociation.org, email us at info@shopassociation.org, or call Madeline Baumgartner, Shop! Director of Education & Research at 312­863­2917.

Thank you!

Steven Weiss, CEO, Shop!

2

2017 Shop! ROI Standards: Store Redesign

Photo: iStock.com/fiphoto Photo: iStock.com/fiphoto

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2017 Shop! ROI Standards: Store Redesign 2017 Shop! ROI Standards: Store Redesign

Building Buildingoff offthe thefindings findingsfrom fromthe theEWI EWIPaper Paperpublished publishedinin 2015, 2015,Shop!

Shop!endeavored endeavoredtotofurther furtherunderstand understandthe thecurrent current ROI measurement habits in the retail industry.

Last ROI measurement habits in the retail industry. Lastfall, fall, Shop! conducted a survey with key players in retail, store Shop! conducted a survey with key players in retail, store design, design,and andfixture fixturemanufacturing. manufacturing.

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The 2016 survey was conducted to understand: • goals & metrics used to measure ROI • target levels for ROI • frequency for calculating ROI • criteria for determining if store redesign was a success • criteria for determining/evaluating the role of any specific design element(s) in the success (or failure) of the store redesign Key findings from the survey include: Definition of “store redesign” was wide ranging. There is an old truism: ask three people a question and you will receive three different interpretations of the question.

Shop! found this to be true when we asked retailers, designers and store fixture manufacturers to define “store redesign.” Respondents used words like remodel, redesign, refresh, retrofit, reconfigure and renovation. The variety of terms reflected the range of design scope, from minor changes to completely new stores. Elements of redesign included everything from interiors and architecture, fix­ tures and flooring, graphics and branding, and everything in between. Rebranding and enhanced customer experi­ ence were also mentioned in describing a “redesign”.

Redesign lifespan depends on whom you ask. In terms of how long a store redesign should last, the three respon­ dent groups again had different responses: manufacturers thought 3­4 years; the majority of designers believed 5­6 years, while retailers’ responses were spread throughout the ranges, depending on their definition of redesign.

However, 90% of retailers did not expect a store rede­ sign to last more than 6 years before an update would be required. Not surprisingly, the smaller the remodel, the lower the expected ROI, and the lower the expected lifespan of the remodel. Conversely, the larger the remodel, the larger the expected ROI and lifespan.

Perceptions of retailer motivation differs. Shop! research also found designers and manufacturers had different per­ ceptions of what motivates retailers to embark on a store redesign. Understanding these during the planning phases of the project will help suppliers to better serve the retailer.

MOTIVATING FACTORS Better leverage physical footprint to increase sales across all channels

34% 23% 18%

Cohesively align with a redefined/ reinvented brand

11% 29% 12%

Create a stronger connection with current consumer base

23% 16% 12%

Retailers

Designers

Manufacturers

Specifically, retailers indicated that the single biggest motivator for a store redesign was to better leverage their physical footprint to increase sales across all channels.

Retailers also stated creating a stronger connection with current consumer base as a key motivator. Manufacturers aligned with retailers on the goal to leverage their physical footprint, but also felt they wanted to be seen as an innovator in their market.

Designers, for their part, believed the redesign was done primarily to cohesively align with a redefined/reinvented brand and to a lesser extent, better leverage physical footprint to increase sales across all channels. This may be indicative of the designers’ scope of work, specific to more store design­oriented goals, however, given retailer moti­ vations, it would behoove designers to assess the overall impact of their designs on sales lift across all channels.

KEY LEARNING: Designers and manufacturers need to better understand retailer motivations for a store redesign to help meet their core objectives.

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2017 Shop! ROI Standards: Store Redesign

Future of Bricks and Mortar

To help ensure continued growth, the industry must innovate around three themes: Experience, Convenience, and Personalization. Store design, fixtures and visuals must support experiential and interactive environments.

Investments in digital technology must support market demands for convenience. And custom­designed displays should be leveraged to create a unique, personalized value for shoppers.

In the 2016 Industry Size and Composition Study, Shop! identified five retail trends that are transforming the retail landscape.

Rise of omnichannel retailing.

Stores are now playing the role of showroom and distribution center, rather than buying center.

In many cases, there are sepa­ rate areas for click and pick­up Ph i oto ha : iStock om/bugp with stores are being redesigned .c to convey this multiplatform message.

Innovative retailers are creating hybrid stores where the physical and on­line merge seamlessly, and cater to shoppers with ultimate convenience and ease of access.

2017 Shop! ROI Standards: Store Redesign

Ph

oto : iSto

nz fr a ck.com/Rido

In-store retailing becoming more interactive and experiential.

Retailers are seeking fixtures and displays that are customized to meet new interactive and experiential retailing strategies.

Designs must aid in the creation of Ph er oto esh : iSto ck.com/skyn the store itself as a brand, as well as a place for customers to experience brands.

Refreshing/remodeling/ redesigning of stores is happening faster. Successful retailers will have the ability to change rapidly. Stores are refreshing, remodeling, and ho n to sI : iS ge redesigning themselves much toc Ima k.com / Weekend faster than they were able to do even a few years ago. There is a higher demand for fast turnkey solutions, along with an increased pressure on suppliers to remain aware of and anticipate trends.

P

Shrinking selling space. Stores are getting smaller, and the number of outlets is shrinking, even as U.S. retail value sales are growing.

Consumers are cutting back on the number of trips and doing Ph sr more big­box, one­stop shopping oto : iStock.com/andre trips and shopping online. As such, store fixtures need to maximize space utilization and do more with less. Portable, movable and/or adjustable fixtures will be increasingly important.

Online retailers opening physical stores. A growing number of suc­ cessful online retailers are open­ ing physical locations to create a more in­depth experience for their customers. Fixtures can help bridge the gap between the online and physical realms by carrying themes and colors from online to in­store.

c.

According to Shop! Research, retailers almost unanimously agreed that the in­store customer experience is very or extremely important to them. Retailers also see brick­and­ mortar stores as extremely important to their business and foresee its importance continuing, if not growing, for the next five to ten years.

KEY LEARNING: Larger industry trends indicate that stores must deliver more experiential environments that seamlessly merge the physical and digital. Consequently, store design needs to keep up with rapidly changing technologies and shopper expectations to be successful.

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Lighting for a Store Redesign

BY SPECIALTY LIGHTING

Retail Lighting Historically, retailers have been limited to the types of lighting and lighting capabilities they can use in a store redesign project. Until recently, light fixtures had to be designed around traditional light sources (e.g., incandes­ cent, halogen and fluorescent lamps). This limited not only the style of the lighting fixtures, but also the function of the lighting.

The past five years has brought about numerous changes in the lighting industry. In an industry once dominated by incandescent and fluorescent lighting, LED (light­emitting diode) has quickly emerged as the preferred lighting source of many lighting designers.

LEDs provide numerous benefits to the designers includ­ ing the flexibility to change lighting design without being held to traditional light sources. This allows designers to more easily create different moods within the store. LEDs also enable designers to create a more inviting shopping experience by not only having the capability to enhance products, but also product colors and textures.

Project Management The key to a successful lighting project is to have the project specifics identified at the start of the project. Most designers understand lighting needs to be changed in the redesign, but they do not necessarily know what specific lighting fixtures are needed. Lighting suppliers can assist

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with these decisions by understanding the environmental needs of the light, the mood the retailer is trying to create, what products and store fixtures need to be illuminated, and how flexible the lighting has to be. Does the retailer need the capability of adjusting the color temperature of the light or the light levels to enhance a product or change a mood within the store? This is especially important for retailers who routinely change the content and location of their product displays.

Success Metrics ROI on lighting products is calculated in many different ways. Cost for the product and installation is usually included, as is life of the fixture and light source, and product maintenance. Energy savings associated with the use of new light fixtures is another key metric. Retailers can measure ROI on replacement lighting projects in terms of energy savings, often measured as wattage savings per square foot and/or wattage savings per store. Customer Satisfaction with the shopping experience is another key metric. Traditional light sources (namely incandescent and halogen) not only create added ambient heat within the environment, but can be harsh on the eyes without proper optics and reflectors LED fixtures, when designed correctly, generate very little ambient heat. This not only makes for better shopping experience, but helps to lower the cost associated with operating the heating & air system.

Customer research can provide additional insight into the effectiveness of the overall environment.

2017 Shop! ROI Standards: Store Redesign 2017 Shop! ROI Standards: Store Redesign

Store Redesign Internal Stakeholders

Photo: iStock.com/NicoElNino

When working with a retail partner, knowing who is ultimately responsible for the store redesign is critical.

Shop! found that for most retailers, the Store Design team usually had ultimate responsibility for redesigns.

However, other responsi­ ble departments included; Marketing, Operations, Visual Merchandising and Construction.

Retailers are investing more into unique designs and tech­ nology in order to create an interesting, interactive, and memorable experience for customers. At the same time, Allocating budget to hybrid stores and online platform online retailers are starting to open brick­and­mortar stores development affects the budget allocated to traditional to augment the online experience. Their stores are not in­store marketing and store fixtures/visual merchan­ necessarily a place to buy the product, but to dising. Store designs must support new have physical interactions, including cus­ technology and new business models. tomer service and product trial before Brands are creating their own stores, Marketing deciding to purchase it. This trend is and traditional businesses are beneficial for in­store marketing looking to reinvent themselves, Merchanand store fixtures/visual mer­ which is leading to more store Operations dising chandising suppliers. renovations.

STORE

Retailers are moving away Industry experts believe DESIGN from “cookie cutter designs“ retailers are in the midst of by integrating technology and a “full­scale transformation” Store Visual Planning Mdse. inter action with technology as retailers become more in stores, such as using tablets comfortable with data and are Confor POS screens, and replacing merging the data with creative struction static messaging with touchscreen and personalization initiatives. engagement. As mobile usage continues Retailers are trying to refresh, remodel, to grow, retailers are seeking ways to capture and reinvigorate their stores. But, they are the attention of people on mobile devices. Retailers spending less money in terms of visual merchandising are experimenting with iBeacons and other devices to push and are looking for less expensive solutions. There is also a information to customers as they walk through different push for localization. Companies are adding a greater level areas of the store. of local relevance to what is right now a chain solution.

2017 Shop! ROI Standards: Store Redesign

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CASE STUDY: Storefront ROI in the United States

BY STYLMARK

QUICK FACTS Motivation: New Storefront Look Sector: Women’s Apparel Number of Stores: Ten Project Budget: N/A Desired ROI: N/A Retailer Victoria’s Secret approached Stylmark to develop an anodized aluminum extrusion that could replace the current steel extrusion they were using on their store­ fronts. Victoria’s Secret existing storefronts were made from a mirrored stainless steel. These steel extrusions used for the storefront were heavy, very difficult and time consuming to install.

Design Elements To begin the project, Stylmark developed a die similar to the existing steel extrusion that was twelve inches tall and developed a special finishing machine to achieve the same look as the current steel extrusion. Next, Stylmark developed a concept die drawing that was approved by Victoria’s Secret’s store design team based off the current

steel storefront extrusion being used. Then, working with Stylmark’s aluminum extruding partner, they finished the drawing, developed the tooling and did a die trial that took about four to five weeks. Once the die trial was approved, production on material began which took about two weeks.

Project Management There were ten stores in the redesign program. A Stylmark account manager worked directly with the store design team from Victoria’s Secret. The account manager brought the design vision to the Stylmark engineering team who developed the die. Once the die was developed, Stylmark’s purchasing manager worked with their extruding part­ ner on the die trial and then once the trial material was approved, store­ready extrusions were run. Those extru­ sions were then anodized to the 118 Victoria “Steel” finish and delivered to the customer. The finished product can be seen in the picture below.

Outcomes While both the steel extrusion and the anodized aluminum extrusion are very durable, the anodized extrusion installed in less time, required less labor on site and cost less to ship.

The original cost per square foot was $220 and using the new material reduced the cost to $20 per square foot.

Return on Investment This was a 60% savings on material – and about 25% savings on labor. This was an immediate return for the retailer. Ten stores received the new storefront aluminum extrusion during this rollout.

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2017 Shop! ROI Standards: Store Redesign 2017 Shop! ROI Standards: Store Redesign

Store Redesign Metrics Understanding what motivates retailers to execute a rede­ sign will help suppliers better serve their client. Knowing the key metrics and how to measure them, that will help suppliers show their value to the retailer.

Shop! found some variation in the importance of vari­ ous metrics as ratings varied among survey respondent groups. The key to every successful project is making sure these metrics are clearly defined and agreed upon at the start of a project.

Designers on the other hand stated that sales per square foot (23%) was the most important metric in determining the success of a store redesign, followed by overall stores sales (15%) and sales lift across all channels (15%). When asked about the relative importance of other metrics, 96% of respondents stated brand perception was very/ extremely important and 82% stated brand awareness as very/extremely important.

Finally, manufacturers stated overall sales and ROI were the most important metrics in determining the success of a store redesign (tied at 25% each). When asked about the relative importance of other metrics, 88% stated brand awareness and sales per square foot were very/extremely important.

Photo: iStock.com/fiphoto

For retailers, ROI (23%) was the most important metric in determining the success of a store design followed by overall store sales (17%), market share (10%) and conversion rates (10%). However, when asked about the relative importance of other metrics, 91% of respondents stated brand perception was very/extremely important. 81% of respondents stated brand awareness was very/extremely important.

KEY LEARNING: Ultimately, a store is the reflection of its brand and thus any design/redesign must reflect the values and value of that brand. Helping the retailer achieve such brand alignment and sales increases will help ensure a continued position as a valued partner.

KEY SUCCESS METRICS: RETAILERS % Very/Extremely Important

91%

87%

81%

81%

72%

71%

69%

69%

Brand Perception

Overall Store Sales

Brand Awareness

Brand Loyalty

ROI

Footfall (in­store traffic)

Category Sales

Sales per Square Ft.

Source: 2016 Shop! ROI Standards: Store Redesign Survey

2017 Shop! ROI Standards: Store Redesign

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CASE STUDY: Relocation to New Retail Space in Canada

BY CANADA’S BEST STORE FIXTURES INC. (CBSF INC.) QUICK FACTS Motivation: New concept in relocation Sector: Commercial Supplier: Electrical Supply & Power Alternatives Number of Stores: 103 across Canada Project Budget: ~$75,000 CDN Desired ROI: % increase in sales After working with CBSF Inc. to complete market analysis and develop their retail strategy, Westburne Electric had the opportunity to implement its new concept store in an existing market. Designed by CBSF Inc., this concept was the first to create the physical retail manifestation of the brand and experience.

Design Elements The retailer wanted to create a retail experience that celebrated the company brand and make their customers feel comfortable, which is not characteristic of its compet­ itors. It was important the concept be flexible to adapt to varying sized locations in their network of stores, ranging from 700 square feet to 3400 square feet, and showcase a wide range of products. Durability and quality were key to ensure their investment has a strong ROI (3 years).

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Two key features of this concept were the Power Lab and branded signage. The Power Lab was a designated area that served as a place for contractors to get their devices charged while they waited for orders. The area also provided contractors with information about alternative power sources, full energy solutions and other services the client provides. Information was presented in printed form through signage, supporting material on table top and trained staff on site to support and encourage discussion.

The Power Lab consisted of laminate and metal tables with stools, and colored walls to promote the brand and create a focal area.

The original intent was to leverage tablets and digital content, but as CBFS Inc. saw consistently across retailers in all markets, the task of content creation and management was typically a forgotten element and felt like a daunt­ ing task with little to no resources allocated to support in­house, and no budget to hire external management.

Celebrating the retailer brand in store was not common in the industry. Branded signage to promote the retailer was pushed as the primary focus, with secondary status given to vendor and supplier branding. In this market, the retailer branding reminded the customer where they are

2017 Shop! ROI Standards: Store Redesign 2017 Shop! ROI Standards: Store Redesign

shopping, and the vendor and sup­ plier branding was important to retain credibility in offering.

A combination of snap frames, printed vinyl applied direct to wall, along with card stock in acrylic sleeves were leveraged for both brand and category messaging.

Metrics of Success The redesign of a store at any level isn’t just a new look; it typically leads to store operations changes. This is why CBSF Inc. encourages retailers use metrics that measure staff adoption along with customer perceptions and finan­ cial. In this particular project the metrics were as follows: • Staff adoption of new processes, customer service training • Increase in customer loyalty program subscriptions • Increase in sales – especially over the counter.

• Project cost ($/sf costs) a key factor.

Costs & Capital Investments Westburne’s costs covered everything from services, to fixtures, to team training. In particular, the costs used to calculate the costs ($/SF cost) for this particular proj­ ect included software licensing and hardware costs for customer tracking analysis to understand current shop­ ping patterns; store design, planning and graphic services; manufacturing of custom retail elements and sourcing of commodity fixtures; printing of large and small format signage; installation of retail elements including some GC work; and Westburne team member time for training to learn how to conduct business in the new store concept.

2017 Shop! ROI Standards: Store Redesign

Outcome vs.

Expectations Outcomes exceeded expectations on all fronts. From a store operations perspec­ tive, staff are embrac­ ing the new concept and the opportunities it provides to enable a better experience for customers. For the customers, surveys and focus groups provided insights to the concept with potential minor improvements recommended. The biggest feedback is this Westburne store really differentiates from competitors, making customers linger in store longer with the feeling of being serviced quicker. The new format has seen steady growth at or above targets as compared to previous year same store sales. As for the costs, the project was on bud­ get for design, manufacture and installation. As CBSF Inc. continues to work with Westburne to implement more of these concept stores, we continue to value engineer to be more cost effective.

Lessons Learned From the perspective of the retailer, partner selection is key. Westburne credits the continuity CBSF Inc. was able to provide in doing the research, designing the retail environ­ ment and manufacturing all retail elements in house as an invaluable benefit to them as a retailer. Westburne appre­ ciated CBSF Inc.’s flexibility, team work, and ability to create practical solutions that look great and don’t compromise on capacity or operations.

From the perspective of CBSF Inc. the customer service they provide their customers – the retailers – is key to enabling retailers to move through a redesign process.

Any redesign process, regardless of scale or definition, can seem daunting and expensive to most who aren’t familiar with it. It can be a great expense and a risk for retailers to move through change so transparency is key.

11 2017 Shop! ROI Standards: Store Redesign

Calculating ROI ROI Calculation is Not Widespread While ROI may be important as a desired metric, few respondent companies actually calculated it. ROI, when calculated, also varied among all the respondents regard­ less of company type. Answers ranged from payback on capital investments, to energy savings and customer feedback.

Those who do calculate ROI, however, do it consistently; the majority of whom calculated it on all their projects.

While desired ROI outcomes vary among groups, one aspect was consistent among the three: the typical timeframe for calculating ROI was relatively short term (more than 1 year, but less than 3 years).

“

It’s impossible to know how long a redesign will last. We used to believe seven years, but now we are looking at five. Maybe this too will change soon, but if so, we need to really look at how to assess ROI and our whole way of what

”

redesign looks like.

— retailer

Photo: iStock.com/Yahor Piaskouski

Shop! found that 60% of retailer respondents calculated ROI on a store redesign. Only 27% of the designer respondents calculated ROI on a store redesign, and 19% of manufacturer respondents calculated ROI on products sold for store design.

ROI is greater when a holistic approach is taken. When the moti­ vators are focused on subjective as well as objective goals, the scope becomes robust and impacts more customer touch points, resulting in a cohesive in­store experience that inherently reaps tangible results.

While objective goals of overall sales and in­store traf­ fic continue to be of high importance, more subjective goals of brand perceptions and shopper engagement are undeniably proving to hold significant value as they often drive overall sales, albeit less directly and immediately. The power of “buzz,” online reviews, bloggers, and others are highly influential, whether positive or negative. The store experience is a key touchpoint that can create passionate brand advocates, or detractors.

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KEY LEARNING: Given the importance of ROI for retailers in evaluating store design success, designers and manufacturers must strive for the same metrics.

Tangible impacts on sales/profits, foot traffic, and conversion rates are important, as are less tangible impacts on brand perceptions, loyalty, shopper engagement and experience.

2017 Shop! ROI Standards: Store Redesign

CASE Experience in in India India BY BYGENSLER GENSLER CASESTUDY: STUDY:Rethinking Rethinking the Customer Experience QUICKFACTS FACTS QUICK Motivation: RelaunchReady­to­Wear Ready­to­WearBBrand rand Motivation: Relaunch Sector:Men’s Men’sApparel Apparel Sector: Number of Stores: prototypes(mall (mall++flagship) flagship) in India Number of Stores: 22prototypes ProjectBudget: Budget:N/A N/A Project Desired ROI: N/A Desired ROI: N/A

TheRaymond RaymondGroup Groupisisone oneof ofIndia’s India’slargest largest branded branded fabric fabric The andfashion fashionretailers retailerswith withover over700 700stores storesin in over over 200 200 cities. cities. and As a leader in luxury textiles and made­to­measure mens As a leader in luxury textiles and made­to­measure mens tailoring,Raymond Raymondwas waslooking lookingto toexpand expand into into the the ready­ ready­ tailoring, to­wear category.

After closing all its existing stores due to­wear category. After closing all its existing stores due lacklusterperformance, performance,Raymond Raymondturned turned to to Gensler Gensler to to totolackluster assist in crafting its ready­to­wear brand story and creating assist in crafting its ready­to­wear brand story and creating newconcept conceptprototype prototypestores. stores. new

DesignElements Elements Design

keycomponent componentof ofdeveloping developingthe thestore store design design strategy strategy AAkey wasaafocus focuson onmarket marketresearch researchand andconsumer consumer insights insights to to was refine the brand story, define the customer journey, and refine the brand story, define the customer journey, and identify key storytelling moments, leading to an innovative identify key storytelling moments, leading to an innovative concept addressing the modern Indian male. Given the concept addressing the modern Indian male. Given the enormous brand recognition for its textiles and custom tai­ enormous brand recognition for its textiles and custom tai­ loring, the challenge was to leverage the brand’s strengths loring, the challenge was to leverage the brand’s strengths while appealing to a different target audience and avoid­ while appealing to a different target audience and avoid­ ing brand confusion. Purposeful curation of merchandise, ing brand confusion. Purposeful curation of merchandise, “dioramas” that styled that latest fashions, attentive service “dioramas” that styled that latest fashions, attentive service

evoking evoking the the tailoring tailoringexperience, experience,and andseamless seamlesstechnol­ technol­ ogy enabled a customer experience that ogy enabled a customer experience thatcombined combinedthe the convenience and speed of modern shopping with the convenience and speed of modern shopping with thehigh high touch of a personalized, bespoke encounter. touch of a personalized, bespoke encounter.

Outcomes Outcomes

The results were literally award­winning, with several The results were literally award­winning, with several industry awards since opening, but most importantly, industry awards since opening, but most importantly, they exceeded business objectives. they exceeded business objectives.

Key Metrics Key Metrics

The client measured success in terms of store sales, The client measured success in terms of store sales, footfall, conversion rates and media “buzz”. footfall, conversion rates and media “buzz”.

The project resulted in: The project resulted in: • Product sales increase of 25% • Product sales increase of 25% • Conversion of footfalls of 80% • Conversion of footfalls of 80% (industry avg. ~60%) (industry avg. ~60%) • Average Bill Value up by 50% • Average Bill Value up by 50% • Setting of retail benchmarks • Setting of retail benchmarks in Bangalore in Bangalore

2017 Shop! ROI Standards: Store Redesign 2017 Shop! ROI Standards: Store Redesign

13 2017 Shop! ROI Standards: Store Redesign 13

KEY TAKE AWAYS AND RECOMMENDATIONS The key to success is to align store redesign goals and objectives with larger client strategic objectives, com­ pany culture, consumer expectations and empowered resources. In addition, the research showed that strategic, differentiated, in­store brand positioning with clear goals provide an ironclad framework for success. Creating a relevant space that truly engages with the customer while elevating and building memorable in­store experi­ ences, will set the retailer apart from the competition.

The factors influencing ROI on store design are multi­ faceted. There are tangible and intangible gains, measured through traditional and non­traditional metrics, supported by objective and subjective goals. The more holistic the approach, the more lucrative the results. Success is depen­ dent upon the scope you are willing to embrace, the clarity of the goals identified and the steadfast commitment to achieve articulated objectives.

STORE REDESIGN It is extremely important to outline and understand the metrics for success and outcomes based on the impact to staff, customers, and sales, as well as project costs. Often overlooked in the analysis is the employee whose produc­ tivity and customer interactions are also impacted by store design. Any challenges faced by store staff can ripple to the customer experience. Service interactions are a critical part of the store experience that must also be “designed.” Thus, staff should understand the impact to their operations with the new concept early on, be provided training and support to manage through any changes, and given the other tools to help them deliver the full sensory experience for shoppers.

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MOTIVATING FACTORS Designers and manufacturers need to better understand retailer motivations and budgets for a store redesign to help meet their core objectives. Clients typically come with a budget number in mind and some ideas on what they’d like to see. Be able to read the client as quickly as possible to determine if the budget or the ideas are what is motivating them – if it’s budget, then set expectations early on if their inspiration is not in­line with what they can afford; if it’s inspiration, then push to create something that will meet their expectations and not disappoint/restrict based on costs.

KEY SUCCESS METRICS In this ever­changing landscape, ROI has become a con­ tinuous process rather than an annual one. The evaluation process itself needs to be more fluid and more focused to ensure it continues to advance the organization toward its vision and goals. These mid­course corrections also include more frequent competitive reviews. Those who aren’t keeping an eye on the industry changes and the competition will be leapfrogged. We have seen the recent flurry of downsizing and store closures and wonder what metric were, or were not, measured.

2017 Shop! ROI Standards: Store Redesign

REFERENCE NOTES

ABOUT SHOP!

Canada’s Best Store Fixtures Inc., Case Study: Relocation to New Retail Space in Canada

Shop! (www.shopassociation.org) is the global non-

EWI Worldwide, The ROI on Retail Design, 2015

environments and experiences. Shop! represents more

Gensler, Case Study: Rethinking the Customer Experience in India

vides value to the global retail market-place through

profit trade association dedicated to enhancing retail than 2,000 member companies worldwide and proits leadership in: Research (consumer behavior, trends,

Retail Next, http://retailnext.net/en/blog/ brick­and­mortar­vs­online­retail/

and futures); Design (customer experience design,

Shop! 2016 Industry Size and Composition Report

(manufacturing, construction, materials, methods,

store design, display design, fixture design); Build logistics, and installation); Marketing (in-store

Specialty Lighting, Industry Insight: Lighting for a Store Redesign

communications, in-store marketing, technology, visual merchandising); and Evaluation (ROI, analytics,

Stylmark, Case Studies: Storefront ROI in the United States

recognition/awards).

For additional questions about the data or information contained in this White Paper please contact us at: mbaumgartner@shopassociation.org shopassociation.org, or call us at (312) 863-2900

@shopassociation

Florida Office

Illinois Office

@shopassociation

4651 Sheridan Street, Suite 470 Hollywood, FL 33021 (954) 893-7300

440 N. Wells Street, Suite 740 Chicago, IL 60654 (312) 863-2900

Shop! Enhancing Retail Environments & Experiences © Copyright 2017 by Shop! All Rights Reserved

No part of this report may be reproduced for distribution without the express written permission of the publisher.

2017 Shop! ROI Standards: Store Redesign

15

A R T

T H E

O F

M E R C H A N D I S I N G

THE ART OF MERCHANDISING

TM

Merchandising is more than fitout and fixtures. It’s the art of creating an attractive, well-organized retail presentation. As with any artistic composition, a wide variety of tools

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masterpiece. In retail Visual Merchandising, a gondola, pegboard, slatwall or shelf is your blank canvas. When combined with tools such as display hooks, label and sign holders, bar merchandisers, tray systems, and merchandising accessories, there are endless ways to effectively display all kinds of products and inspire your target audience to make a purchase. As one of the world’s top retail fixture manufacturers, Trion offers a generous supply of over 25,000 components and over 50 years of experience using them to execute precise planogram solutions, store designs and retail displays. Call us to turn your vision into an inspirational retail masterpiece.

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THE

The 3 Most Important Features for the Store of the Future Images courtesy of API(+)

Jeffrey Nader, project director, API(+)

1 2 3

Real estate: Based on local demographics, grocers will provide or lease out stores within stores to create a more differentiated shopping experience and a strong sense of place.

Social interaction: Spaces that go beyond lounge or seating areas. These spaces will need to be activated through community events centered on connectivity and growth.

The theater of food: This concept is focused on positioning food at the center of everything. Architecture, design and landscape elements will play a key role in setting the stage (e.g., vibrant produce displays, curated meal ingredients and locally sourced products) and creating a sense of engagement with the local community.

Engaging shoppers, whether through sampling at community tables (left) or leading group dances to celebrate a fresh batch of chicken, demonstrates a retailer’s commitment to an experience that transcends the mere selling of wares.

significance in the rate of change, as well as what can arguably be described as a metamorphosis into the next grocery design innovation curve.

This becomes key to bear in mind for traditional grocers, especially the smaller or regional operator; obtaining a complete understanding of current trends and coming innovations as they develop a strategic game plan will play an integral role in harnessing the operational efficiencies needed to maintain viability in tomorrow’s marketplace.

Other technological advances involve store infrastructure improvements, including predictive equipment, energy efficiencies in lighting and refrigeration systems, and possibly augmented or virtual-reality options that give consumers a wealth of information about products.

“As the demand for fresh and local options expands, the ability to provide more sophisticated and accessible information may bring about ‘digital twins’ as one way to fulfil this demand,” Blevins says.

“Imagine consumers being able to ‘virtually’ walk through a store and take their time to look over new products without ever leaving their home. With advancement in BIM [building information modeling] technology, this is something that is not far off.”

To deliver a compelling, experiential and customizable shopping experience, as the evolution of grocery intensifies, grocers must maintain an advanced technology store platform and remain agile enough to provide the best of online and in-store shopping in a dynamic retail environment. Together, all of these elements coalesce into a store of the future that engages on many levels, and one that can win in the new retail frontier.

How close are these concepts to being a reality?

The future is now. The innovative grocer spans a vast landscape, and innovation is happening in beta platforms across the world. Grocers of various scales are currently testing these concepts in small batches and are operating as small innovation centers for bigger things to come.

Mark Hardy, CEO, InContext Solutions

1

Top-notch ecommerce fulfillment and in-store inventory: The shopper experience will have to be fluid — no more wondering what’s in stock, hoping you get it in time or trying to price compare between the two channels.

2

Relaxing atmosphere: An experience that’s easy to navigate, clean and non-stressful. Instead of a huge store stocked full of real products, virtual products will help cut down on space at the customer level, while the majority of store real estate will be used for warehousing. Augmented reality will help shoppers navigate the aisles or various sections.

3

Digitized supply-and-demand chain: Using technology to cut down on all of the back and forth and the travel, and visualizing and testing concepts and products in digital before bringing them to market, will be the new normal.

How close are these concepts to being a reality?

Some of this is here, now. Stores are already using digital and virtual methods to maintain a competitive advantage.

But none is that far off. The technologies are available; we just have to figure out the best uses for them. We need to work on creating faster, more efficient processes on the back end so we can better focus on providing amazing, future-focused experiences for shoppers.

PROGRESSIVE GROCER August 2018

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COVER STORY

STORE OF THE FUTURE Image courtesy of API(+)

retail establishments, stores of the future will have a more specialized and highly skilled workforce such as health experts (including dietitians, nutritionists and macrobiotic experts); in-store chefs and food prep experts; and shopping guides. “This futuristic workforce will function as a group of go-to experts that will guide the customers on what to buy and how to store it,” Nader says. “Along with a highly skilled workforce, stores of the future will rely heavily on the Internet of Things, allowing them to better predict consumer demands and manage inventory across a network of stores.”

Additionally, Nader notes, grocer innovation will play a key role in reshaping customer satisfaction by concentrating efforts on creating a more modern shopping experience. He observes, “Experience will improve with focus on eliminating hassles such as long checkout and customer service lines, and those time-consuming aisle searches for products that are sold out or nonexistent, among other demotivators.”

Customer-Centric Solutions

Grocery stores should deliver an environment that reflects the neighborhood they serve, including design, decor and graphic elements that set the tone for the shopping experience.

Experience is the Central Focus

“One of the biggest trends that we are noticing across all retail project types is customer experience,” says Jeffrey Nader, project director at Tampa, Fla.-based design firm API(+). “Experience has become the central focus of the design process.

Maximizing store layouts with an emphasis on product placement is no longer the focus of the user experience. Instead, the design process has become human-centric, with careful attention to how the public enters and engages with spaces.”

Nonprice factors are going to be the biggest differentiators among traditional grocers, Nader asserts. “A strong focus on quality, freshness, customer service and a unique shopping experience are key elements that are shaping the path for a competitive playground among traditional grocers,” he says.

One of the most important technologies that stores of the future will need to employ, according to Nader, is a robust consumer relationship management (CRM) platform that manages critical customer information unique to the grocer’s brand. “It will create a single source of information that will increase sales efficiency, boost sales and improve forecast accuracy,” he says. “These tools have built-in algorithms that crowdsource information from various outlets, including social media, mobile applications and geo-located foot traffic.”

In addition to the current key personnel that maintain today’s 36

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While a multitude of factors are influencing store design, “it ultimately comes down to the need to better serve evolving customer lifestyles and preferences to create more convenient and engaging in-store experiences,” says Dr. Pallab Chatterjee, chairman and CEO of Dallas-based artificial-intelligence solutions provider Symphony RetailAI. Weekly pantry-loading trips have declined in favor of quick trips and online shopping, and timestarved customers increasingly place a greater value on prepared foods and grab-and-go options. Discounters are also challenging traditional grocery stores, not just bringing lower prices, but also introducing new paradigms for what a grocery store experience can mean.

“There is so much change happening that current supermarket formats need to be fundamentally reconsidered to respond to a new role they serve,” Chatterjee says. “Grocery stores of the future will offer innovative, customer-centric shopping experiences to meet needs and demands of modern shoppers.”

Along with a highly skilled workforce, stores of the future will rely heavily on the Internet of Things, allowing them to better predict consumer demands and manage inventory across a network of stores.”

—Jeffrey Nader, API(+)

COVER STORY

STORE OF THE FUTURE A primary challenge for traditional grocers is that current store layouts no longer meet the demands of today’s customers. “Ultimately, a wide variety of steps can and should be taken, but they all require that traditional grocers place customer experience as the foundational driver and rationale for change — and smarter data management is the linchpin that will make it happen,” Chatterjee asserts.

Image courtesy of Takeoff

AI-Enabled Robots Aim to Make E-Groceries Viable Boston-based Takeoff is launching a groundbreaking technology that’s bringing innovative automation to the e-grocery industry.

Customers’ orders are placed online through their local grocery store and filled by automated micro fulfillment centers provided by Takeoff, where AI-enabled robots assemble full supermarket orders of 60 items in a few minutes. These centers have a tenth of the footprint of a typical supermarket, thanks to innovative robotics and compact vertical spaces.

“The time is ripe for e-groceries,” asserts Jose Vicente Aguerrevere, co-founder and CEO of Takeoff. “Grocers have been dipping their toes in e-groceries for years. Now it’s time to jump in with both feet. Our automated, hyperlocal fulfillment centers enable grocers to do so with minimal operational costs.”

Takeoff is ready to build its fulfillment centers in urban and suburban locations. Retailers can leverage underused real estate by turning existing stores into micro distribution centers that can serve a broader market through a hub-and-spoke approach.

“Takeoff is a win-win for grocers and consumers across the board,” says Max Pedro, the company’s co-founder and president. “Our e-grocery automation is a turnkey solution that uses robotics to unlock ultimate convenience for shoppers, without the need of charging fees or a price premium.”

The first micro fulfillment center is expected to go live in October 2018, with others following alongside Takeoff’s several grocery partners across the United States. www.takeoff.com

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To compete in the near future and in the long term, the store of the future must emphasize a host of customer-centric features. “This will require that grocers reconsider the role of space within the store, the impact of multichannel and convenience shopping on the center store, and the potential for internal- and customer-facing technologies to improve the experience across the board,” he says. “Finding the right approach for each store and local market will require deep insight into owned business and customer data, along with partner/supplier data, which AI-enabled systems will be increasingly critical to manage.”

Stores of the future must employ technologies that help customers get what they want, when they want it, in an environment that they enjoy, Chatterjee says. “They will increasingly rely on technology to reduce friction in traditional processes, using AI-enabled systems to predict customer needs and manage assortments, promotions, associate responsibilities and more,” he notes. “AI will be essential, as only the grocers who are able to predict behavior can create the conditions customers demand.”

Beyond smarter data management, retailers also need to reduce the friction across customer touchpoints and ensure that multichannel shopping journeys are a cinch.

One essential service in this regard will be clickand-collect, according to Chatterjee. “Today, as more customers start their shopping journeys online, grocers are identifying follow-on benefits from offering this service by optimizing store layouts to adjust to new foot-traffic patterns. For example, they might relocate their pharmacy near a click-and-collect counter for fast collection, deploy a prepared-meal counter close by, or create a drive-through lane that keeps the customer’s time investment to a minimum,” he says.

For traditional shopping trips, the checkout is another area rapidly changing through technology.

“As revealed in Symphony RetailAI’s ‘Supermarket 2020’ research, we expect self-service kiosks to make up 80 percent of checkout lanes by 2020, with only 20 percent remaining manned,” Chatterjee observes. “This allows for more lanes, faster checkouts and happier customers.”

In response, the grocery workforce will become more optimally deployed, moving from transactional to value-driving roles. “As checkouts and other processes become automated or self-service, associates will be positioned as click-andcollect pickers, prepared-food chefs and mobile customer support staff,” Chatterjee predicts.

Customer experience will also move from transactional to experiential, as retailers create more enjoyable spaces, better convenience and new services. “The barriers between the digital and the physical will break down with services like click-and-collect, but also the presence of

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COVER STORY

STORE OF THE FUTURE touchscreens on in-store tables where customers can gather and consume prepared meals,” Chatterjee says. “These touchscreens will allow customers to engage with new products online, scan loyalty cards, and search for new offers and promos as they eat.

The store will serve multiple purposes, ranging from ultra-convenience to ultra-experience.”

From a supply chain perspective, AI will help create far more intelligent assortments and demand forecasting to help customers find the products they want, increase the value of fresh produce and meat, and allow for special product aisles with assortment changing twice a week to surprise and delight the maximum number of customers, Chatterjee notes. “The supply chain will become increasingly intelligent, agile and customer-serving, while limiting the waste and slow adaptations to customer demand that often occur in grocery today,” he adds.

Chatterjee expects these concepts to quickly become reality as retailers identify the value of these changes and customer expectations continue to become more demanding: “We expect the store of the ‘future’ to resemble this vision by 2020.”

Adapt to Market Trends Faster

Increasingly thinking like specialty stores, grocers are “taking a bigger interest in designing spaces that cater to different shopping missions,” says Mark Hardy, CEO of Chicago-based retail optimization solution provider InContext Solutions. “So they’re testing new aisle layouts, product groupings and store configurations to see what resonates best with their shopper base. Taking a cue from Target and others, they’re trying to learn if they should develop special sections for quick shopping and online pickup areas. They’re [also] trying to decide what signage and technologies resonate best.”

According to Hardy, one of the most important factors for grocers going forward will be agility. “The ability to move quickly and make changes on the fly will be key in keeping on top of the ever-changing landscape,” he says. “Ecommerce has traditionally held the upper hand when it comes to being agile — websites can be easily updated, products can be switched out in seconds, promotions and discounts can be applied and communicated instantly. Brick-and-mortar grocers have the benefit over online grocery right now, but they are going to need to look to technology to help them adapt to market trends faster.”

Helping grocers keep up are mixed-reality solutions, which are InContext’s stock in trade. “We know mixed-reality solutions — including virtual and augmented realities — are changing retail dynamics for our clients by enabling faster, lower-risk and higher shopper-impact decisions at the speed of thought,” Hardy notes. “Virtual simulations have quickly become a game-changing tool for visualizing and testing new in-store concepts before having to create any physical prototypes or mock stores.

It also enables teams to collaborate within an immersive virtual space from anywhere in the world, saving the time, expense and headache of travel.”

Artificial intelligence (AI) is also going to be increasingly important to brick-and-mortar stores. “Not only for things like frictionless checkout and more seamless shopping experiences, but taking a cue from Amazon and really leveraging AI for data collection and interpretation will be an integral part of retailing,” Hardy says. “AI in the field of agriculture — creating predictability for farmers and their produce — will have a big impact on the quality and availability of food at the supermarket. Predictive analytics is going to open up hundreds of doors we haven’t even come to yet.”

While technology will help retailers eliminate tasks so they can focus on other things, Hardy observes that “what it will also do is create new avenues for people to hone new skills and expertise.

For example, the supply chain will become digitized. Procurement could be done through 3D and mixed-reality content, which will cut down on time and travel, and allow the buying and planning process to become faster and more efficient.”

Customer experience will continue to become more fluid between online and in-store. “We’ll no longer have to weigh the pros and cons of ordering online versus buying in-store — same-day free delivery, in-store pickup and matching price points will make shopping easier and more cohesive for the customer,” Hardy says, “and we’ll need the workforce to meet those demands.”

The ability to move quickly and make changes on the fly will be key in keeping on top of the ever-changing landscape. Brick-and-mortar grocers have the benefit over online grocery right now, but they are going to need to look to technology to help them adapt to market trends faster.”

—Mark Hardy, InContext Solutions

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SOLUTIONS

Tailgating & Holiday Parties

Open Season GROCERS CAN AID SHOPPERS’ FALL / WINTER ENTERTAINING WITH IMPACTFUL PRODUCTS, MARKE TING AND MERCHANDISING.

By Bridget Goldschmidt t’s sweltering outside now, but before we know it, the cooler weather of autumn and winter will set in, and with it, such celebratory events as tailgate parties to cheer on favored football teams, along with holiday gatherings of all sorts and sizes. That being the case, now is the time for grocers to get their game on to make sure that they’re shoppers’ primary destinations for seasonal entertaining needs.

“Fall and winter are the busiest seasons of the year for us, and we have a full calendar of promotions planned so the customer can always discover something new and see the full range of what we offer for the season,” affirms Dena Kowaloff, director of marketing at Wellesley,

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Key Takeaways Distinctive displays such as rustic wooden shelving can help brands stand out visually.

Aware that consumers want innovation alongside classic offerings, manufacturers are honing their product portfolios.

Cross-merchandising items provides pairing ideas as well as a one-stop shopping experience.

Mass.-based Roche Bros., which operates 20 stores under three banners in its home state. “We celebrate football season every year with our Tasty Tailgating offering — promoted in our stores with featured merchandising positions, balloons, hanging signs and case toppers, and out of store with features in our weekly circular, and

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SOLUTIONS

Tailgating & Holiday Parties

Jewel-Osco deli sections carry smoked pulled pork from Lillie’s Q, a convenient option for shoppers planning tailgate and holiday parties.

even food drops with local radio DJs.” Roche Bros. highlights more traditional festivities as well. “For our Thanksgiving and Christmas offerings, one of our most successful promotional events are our holiday open houses, where customers can browse holiday offerings across departments, taste samples, and get advice and recipes from our associates,” notes Kowaloff. “These interactive events are fun and engaging for the customers, and give them a chance to taste the food and really understand what they’re getting!”

In merchandising such items, the grocer makes sure that they stand out, wherever they are in the store. “Seasonal offerings always do well on tables at our entrance, in barker cases for perishables and in dedicated seasonal sets for grocery,” says Kowaloff.

The retailer’s ultimate aim, she observes, is to help consumers hold the best party possible, no matter what their skill level is. “Our customers are often looking for opportunities to gather people they enjoy spending time with, together with the food they enjoy preparing and eating,” notes Kowaloff. “Special events like football games and holidays provide themes around which to focus that energy for entertaining. Throughout the fall and winter, we look to provide our customers with options to ‘make it or take it’ — meeting them wherever they are in terms of energy and talent for food preparation.”

Informed Sauces

Not surprisingly, sauces, dips and spreads are popular choices for festive fare.

“Tailgating and autumn/winter holiday parties are big seasonal social events, and food is a central part of it,” notes Doug Renfro, president of Fort Worth, Texas-based Renfro Foods, which offers a line of sauces whose products include Mrs. Renfro’s Pumpkin Salsa, Craft Beer Salsa and Ghost Pepper Salsa.

“To promote … tailgating and party ideas, we market through

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our social media channels with recipes and product giveaways,” adds Renfro, while in stores, “end cap and shipper presentations work best in making the product stand out.”

“Some of our retailers, such as Hy-Vee and Wegmans, have added rustic wooden shelving units to merchandise our sauces,” says Brian Golinvaux, president of Chicago-based Lillie’s Q, which provides barbecue sauces, rubs, kettle chips and even smoked pulled pork for the deli section, all inspired by fare at the brand’s namesake restaurants. “This allows our entire brand to completely visually stand out from the rest of the sauce set, and clearly communicates our artisan differentiators. We are also testing various cross-store merchandising tactics, such as driving Jewel-Osco shoppers that see our smoked pork in the deli to the sauce aisle, and vice versa.”

Golinvaux also points out: “Seasonal promotions are driven by retailers, and we find that fall and winter is a particularly good time for discounting the kettle chips.

This is likely aligned with increased snack demand during back-to-school time.”

Innovative yet convenient product pairings packaged together can be a draw, too. “We have a party-focused ‘get-together platter’ that features two different dairybased dips, spinach and chunky tomato cilantro, plus a fresh bruschetta in a 3-pack,” asserts Angelo Fraggos, chairman and CEO of West Palm Beach, Fla.-based Italian Rose Garlic Products, the largest manufacturer of fresh refrigerated salsa in North America. “You simply take it to the party, and it is ready to serve. We are also

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SOLUTIONS

Tailgating & Holiday Parties

Leading food brands make excellent decisions.

© 2018 OSI Group, LLC

offering this configuration in different combinations of salsas that allow [retail] customers to custom-tailor a product to their market.”

The company also pays attention to how its products are merchandised. “We have a shelf-stable garlic spread in a free-standing shipper display this year that works in deli, produce or bakery departments,” notes Fraggos. “There are 72 4-ounce cups of a garlic, parsley and margarine [spread]. Cooks can spice up their favorite baked bread, or even fish and vegetable dishes.”

Asked how grocers can best place and promote perimeter products during this time period, he advises: “Refrigerated space is always at a premium, so the best way for retailers to maximize sales is to think about promoting throughout a season for party items, rather than just an event. End cap coolers and in-store signage need to announce not only the value of the product, but the fact that there is something exciting going on in this cooler! This helps condition consumers to shop [the] refrigerated case and look for that wow factor they want to add to events and everyday meals.”

Dip Into Product Development

Observing that “consumers are looking for food products that emphasize convenience, flavor and a new twist on traditional classics,” Amanda Hughart, senior associate brand manager at Beaverton, Ore.-based Reser’s Fine Foods, enumerates some of the brand’s new seasonally appropriate items: Stadium Cole Slaw, “a distinct combination of fresh cabbage, mayo, mustard, sweet and dill relishes, ketchup, and a dash of hot sauce,” and, due in October from Reser’s Stonemill Kitchens brand, four additional dips in savory and sweet flavors: Roasted Chile & Pepper Jack Cauliflower, Buffalo Style Cauliflower, Dulce De Leche, and Strawberry Cheesecake.

The company also recently released, under its Main St Bistro brand, Roasted Tri-Color Potatoes, a fully cooked item that comes in a grill-ready metal tray for easy tailgating or backyard parties, according to Brenda Killingsworth, Reser’s trade marketing manager.

Adds Killingsworth, “At retail, we work closely with each chain to create customized ads, promotions, online features and cross-promotions with other products.”

In common with Reser’s, Greenville, S.C.-based Duke Brands has honed its product offering by augmenting old favorites with inventive new varieties. The company “specifically ramped up for this tailgate season with a new line of dips called Shindigs that are meant for parties and sharing,” explains Marketing Director

Leading food brands

make it Matthew Haskell. “Looking at consumer trends, we structured the recipes around a premium cream cheese base, and flavors that were testing well in our research kitchens and with consumers. The line features staples like Spinach Artichoke and Buffalo Chicken dips, and newcomers like Mediterranean Feta Olive, and Bacon Cheddar Ranch. These flank our existing line of southern traditions under the Duke’s brand, with family-recipe Pimento Cheese, Chicken Salad, and Ham, Pepper & Onion Spread. Additionally, test markets will be seeing our premium sweet/dessert CM dips, Dippin’ Delights, rolling out, with flavors like Caramel Turtle, Vanilla Bean, Red Velvet and Pumpkin Spice, among others. ThisMY product will see a wider release just in time for holiday parties.

CY “In addition to couponing for products new to market, many CMY of these products lend themselves well to end cap displays for a certain huge football game that will go unnamed,” continues Haskell. “Several of our clients have our tailgating dips as part of their private label offerings, and they promote the spreads through packaged promotions with other tailgate goodies, store sections devoted to tailgating, or game-day treats. One of the best alignments with the products we offer for the tailgating and holiday season is the opportunity for customer engagement.

Since these occasions are heavily driven by gatherings of friends and family, it offers unique opportunities to engage from a brand and partner standpoint with our customer audiences through social media posts seeking community feedback, to surveys, digital advertising and community involvement.”

Naturally enough, according to Haskell, “Many of these items will be merchandised as tailgating and Super Bowl promotions, with specific displays centering around football and the shared experience of watching the game with friends.”

Further, “several of our retailers do a ‘Holiday Show’ to promote new products in-store,” he says. “This show allows the individual store-level contacts to view how products are merchandised by the vendors and to try the new products coming on the market for the holiday and tailgating season. Other considerations are packaging many of the dip items in packages that can be utilized hot or cold, with many of the dips gaining enhanced flavor profiles once heated. Also, retailers carrying our products often pair them with tortilla chip promotions to drive incremental sales beyond the dips and spreads we provide.”

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Tailgating & Holiday Parties

Best Buds

Given that “guacamole serves as a go-to party feature,” Dianne Le, senior manager, national shopper marketing at Avocados From Mexico (AFM), notes that the Irving, Texas-based marketing group offers “simple, casual recipes to implement into [shoppers’] party prep routines and create the perfect tailgate with our Tastiest Tailgate program.”

This year’s campaign, which runs Sept. 16-Dec. 31 and includes a partnership with Bud Light’s Ritas line, “is focused on inspiring fans to throw the tastiest, most original, most crowd-pleasing tailgate and homegate feasts,” according to Le. “From a tasty outdoor barbecue with our signature guac burgers, to an indoor party spread with chips, guacamole, tacos and sandwiches, … these are the products and dishes we are excited to share with consumers.”

What’s more, the team-up of avocados and beer leads to sales success. “According to the 2018 InfoScout Insights, basket rings increased over 57 percent when flavored malt beverages and avocados were purchased together versus alone,” notes Le. “Given this fact, we expect the Tastiest Tailgate program to help retailers increase basket ring as it has in the past and create a trend by giving consumers more incentive to purchase complementary products like Avocados From Mexico” and Lime-A-Rita or Berry-A-Rita.

For his part, Ari Kertesz, VP grocery at St. Louis-based Anheuser-Busch, explains that since “females account for 41 percent of NFL football fans, Ritas partnered with the NFL to appeal more to the female shopper/consumer. … Also, 74 percent of shoppers report they would buy more avocados if they saw more ‘displays around the store’ to remind them of avocados.”

When it comes to in-store placement, “cross-merchandising with relevant and complementary products is engaging to the shopper, which is why we are introducing a joint-bin display with side stackers for Lime-A-Rita product to accompany our AFM bins,” says Le. “Our Tastiest Tailgate joint bins work as a destination for game-time snacks and beverages that can be easily found by shoppers in retailers’ produce sections and/or produce perimeter. Signage in-store serves as another eye-catching display option to grab shoppers’ attention in the produce section or in-aisle, and offers a friendly reminder to pick up avocados for their ideal guacamole.”

Other “tried-and-true” promotional efforts suggested by Le include custom and co-branded merchandising; consumer savings offers, mail-in rebates and coupons; digital and social media activation with paid social support; an updated website with recipe ideas and promotional support; in-store radio; and retail-specific programming.

Tailgate Keepers

Aside from its partnership with AFM, Anheuser-Busch is preparing for the season by drawing on the “passion point” of NFL and college football fandom to also address the tailgate occasion, according to Kertesz, noting that the brand campaign’s theme is how “Friends Show Up On Game Day.” Additionally, “Bud Light is teaming up with Tostitos and Pepsi for a memorable lineup this NFL season,” asserts Kertesz. “The NFL is the biggest sport in the U.S., and almost half of all Americans — 46.4 percent — are NFL fans. Tortilla chips are the No. 1 salty snack served/purchased for NFL watch parties, and basket rings increase more than 70 percent when Tostitos, Pepsi and Bud Light are purchased together, versus each brand alone.”

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Roche Bros.’

Autumn/Winter Seasonal Offerings GROCER PROVIDES R ANGE OF PRODUCTS FOR E VERY SKILL LE VEL During the fall and winter holiday season, Roche Bros. carries a range of seasonally appropriate items for customers, regardless of their level of expertise in the kitchen.

“We always provide top-quality fresh ingredients — produce, meat and seafood — for those who want to cook from scratch,” notes Dena Kowaloff, director of marketing at the Wellesley, Mass.-based grocer. “We have an array of readyto-cook offerings which save steps — such as cut or spiralized vegetables, and marinated meat and seafood. And then we have a vast array of heatand-serve offerings, from our Bloomin’ Bread for tailgating — an alpine boule crosshatched and stuffed with shredded cheese and pepperoni — to beautiful cheese trays, veggie platters, fruit bowls, and even complete heat-and-eat turkey or prime rib dinners with all the fixings. Throughout the season and year-round, we also offer full-service catering, including waitstaff and bartenders if needed, and grocery home delivery. So our customers have choices for every level of preparation and multiple ways to get their food.”

Perhaps understandably, given shoppers’ time constraints, quick and easy solutions are bigger than ever at the 20-store food retailer. “Convenience offerings that allow customers to put a delicious contemporary or classic meal on the table while enjoying more time with their guests continue to be increasingly popular,” observes Kowaloff. “Many formal holiday dinners are also giving way to more casual gatherings focused on appetizers and desserts, though the traditional Thanksgiving dinner still holds strong.”

Even so, people still want a personal connection to their food, as well as assurances regarding its wholesomeness. “We continue to see customers looking for more local, organic and heritage offerings,” she says, “especially for the winter holidays.”

SOLUTIONS

Tailgating & Holiday Parties

Further, A-B will address the nostalgia of holiday get-togethers and reunions through the Budweiser Holiday program and the Stella Artois Hosting Campaign. Speaking of Stella, Kertesz observes that the beloved Belgian beer brand and Korbel Champagne are “the perfect party pair for your celebration. We’re giving shoppers a deal on everything they need to toast to the holidays with a discount on” both items, as basket rings increase more than 18 percent when beer and champagne are bought together, versus each brand alone.

Additionally for the holidays, A-B “will be merchandising the new Copper Lager with iconic Jim Beam and Budweiser with holiday-centric thematic [point-of-connection materials],” he says. “We will also have firstin-basket offers with holiday nostalgia items such as gift wrap, gift cards and poinsettias.”

Citing recent research by A-B/IPSOS and InfoScout, Kertesz notes that “75 percent of all beer purchases are influenced by displays, and consumers notice both the product and merchandising elements during their shopper journey. Therefore, the best way to merchandise these products is in a prominent/ high-traffic area of the store in order to prompt incremental purchase. It’s also important to utilize premiumized point-of-connection material and communication signage to clearly identify new products and promote partner products to increase overall basket ring.”

At White Plains, N.Y.-based Heineken USA, “Dos Equis returns this college football season as the Official Beer Sponsor of the College Football Playoff and to provide fans with unique ways to liven up tailgating occasions,” says Karla Flores, Dos Equis brand director.

“With an exciting promotion in market September through December, every week Dos Equis is giving football fans and beer drinkers the chance to win tickets to the College Football Playoff National Championship. ... [T]he brand will deliver fun and authentic content while giving the fans a chance to live once-in-a-lifetime experiences.”

Among these experiences will be the new “Ear Beer” — a bottle that from the front looks like a frosty Dos Equis, but on the back has a speaker, along with a button that, when pressed, starts the narration of

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Tailgating/Holiday Trends to watch MANUFACTURERS SHARE INSIGHTS ON PRODUCT FORMUL ATIONS, PACK AGING, MORE Progressive Grocer spoke with various food and beverage manufacturers about which trends they expected to grow in popularity in connection with tailgating and holiday entertaining products. Following are their thoughts on what’s bound to be big: Matthew Haskell, marketing director, Duke Brands: “One trend we are seeing grow is club-sized dips and spreads are in high demand, as the larger sizes are immediate grab-and-go items for a party or tailgate. Also, through research from Mintel, we are seeing that value is a key factor in decision-making, further reinforcing sales in club stores for dips and spreads. Having meat and non-meat items in the lineup is becoming more and more important to the shareable aesthetic of our offerings.

“Additionally, as the market is trending towards newcomers like flavored hummus, there is still a disconnect for consumers between ‘hummus’ and ‘sweets,’ so our research around developing a sweet, healthier-than-ice-cream product has been key to launching new products specifically designed to be appealing for autumn and winter holiday parties.”

Karla Flores, Dos Equis brand director, Heineken USA: “We see a clear trend toward convenient packs for tailgating that are premium and cool quickly. We also see innovative packaging as a compelling and increasingly popular product feature; our football-like 24-ounce can is an example of this.”

Angelo Fraggos, chairman and CEO, Italian Rose Garlic Products: “We see a move toward fresh for the inherent good-for-you properties in the basic ingredients, [and] snacking and meal additives that offer more convenience and value being prepared for you, and [are] just as good as homemade.”

Brian Golinvaux, president, Lillie’s Q: “Bourbon has been a huge culinary trend for the past few years. … [Its] flavors fit nicely into fall and winter, and are a great way to transition dishes traditionally thought of for summer into colder seasons. We also foresee interest in lesser-known regional flavors to continue to grow, [and there’s] the trend of consumers looking to recreate authentic flavors in their home, without trade-offs. The desire for cleaner labels and products will also only continue to grow.”

Doug Renfro, president, Renfro Foods: “The sweet-heat trend continues, such as raspberry chipotle and mango habanero, and the extreme-heat trend keeps building, but we put flavor in the fire — we don’t want to just sell gasoline in a jar!”

Amanda Hughart, senior associate brand manager, Reser’s Fine Foods: “Products that feature bold, innovative flavors will continue to be on trend and in demand for dedicated tailgaters’ needs. We also see vegan meat products reaching new heights and becoming an alternative option at tailgating parties, due to consumers’ increased awareness of plant-based benefits and need for hormone-free and antibiotic-free products.

“We see fresh and cooked vegetables becoming a central focus of the holiday table this year, as they meet a variety of allergen and dietary consumer needs. One great way to add flavor to cooked and fresh vegetables is through the addition of a specialty dip as a recipe ingredient or veggie-dipping companion.”

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SOLUTIONS

Tailgating & Holiday Parties

the “interesante” version of college football history as told by legendary college football coach Steve Spurrier. “For those who are unable to travel to the College Football Hall of Fame to experience the Ear Beer itself, Dos Equis will be bringing iconic college football artifacts and the Ear Beers on the road throughout Texas and the Southeast during the football season,” promises Flores.

The beer brand’s convenient packaging options include 24-ounce single-serve cans, due in September, “that look and feel like a football to grab consumer attention and engagement in a relevant way,” notes Flores. “In addition, Dos Equis is partnering with other tailgate-relevant products and fellow College Football Playoff sponsors that are sure to make the party occasion as exciting as the game itself. With Eckrich sausages for grilling and Dr Pepper for an alternative beverage option, these partners add value to the consumer experience and add cross-merchandising solutions for retailers.”

As evidenced by Heineken USA’s elaborately detailed campaigns, “[t]he most compelling retail promotions merchandise the products in ways that create ‘retail theater’ that is creative, visible and highly impactful,” advises Flores. “We also know that retailers like to offer their customers shopping solutions, so we partner with compa-

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nies and brands that facilitate cross-merchandising and, ideally, one-stop shopping for the consumer. It all comes together in-store as we extend the College Football Playoff partnership with the College Football Hall of Fame sponsorship all the way through to the point of purchase. The first wave of the promotion will focus on tailgating as we leverage floor displays and localized POS highlighting locally relevant artifacts. Wave two is oriented more toward the New Year’s Six and the College Football Playoff National Championship, with football-themed visibility elements, POS and the chance to win tickets to the CFP National Championship throughout the whole college football season.”

In the realm of tailgating and seasonal entertaining, what it all boils down is maximum impact with minimum fuss. As Roche Bros.’ Kowaloff puts it, “Anything that allows consumers to provide the best for their family and friends without spending too much time in the kitchen will continue to be a winner!”

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FRESH FOOD

Produce

Celebrate the Harvest GROCERS SHOULD MAKE THE MOST OF FALL’S SE ASONAL ITEMS.

By D. Gail Fleenor

ustomers love the colors and traditions of autumn, but they may not know that many fruits and vegetables reach their peak in flavor, color and nutrition only at harvest time. Online shopping can’t compete with the touch, smell and sight of pears, apples, grapes, pumpkins, persimmons, squash, rutabagas, and more of autumn’s abundance.

Also, since fall is a time for festivals, why not create a produce celebration for customers with an in-store or sidewalk farmers’ market offering cooking demos or a tasting fair, so customers will discover fall produce at its peak, and buy?

Favorite Fall Freshness

When there’s that telltale nip in the air, or the calendar says that fall is coming, many shoppers like to cook a variety of root vegetables in soups and stews.

Posting recipes near displays of cabbage, leafy greens, carrots and other cooking vegetables can increase sales, especially if there’s a list of what’s needed for each dish. Recipes for grilling options are also appreciated by shoppers. Some customers prepare traditional fall family recipes, while others want to try healthy new dishes using fall produce with autumnal spices and seasonings like peppercorns, mustard seeds and ginger. Fall produce can also perk up smoothies with the addition of pears, figs, sweet potatoes, and even cauliflower or beets.

The popularity of specific fall vegetables may vary a little by area, but pumpkins, sweet potatoes and apples are always at the top of the list. Winter squash is also in demand at most supermarkets.

Key Takeaways Create colorful, seasonally appropriate displays for fall.

Provide information for customers: nutritional benefits, recipes (especially for soups and stews), dish ingredients, how to cut/ prepare items, and storage requirements.

Let customers know when vegetables and fruits are at their peak with signs and samples.

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FRESH FOOD

Produce

“Acorn, butternut, spaghetti and other hard-shell squash are popular in our stores,” affirms Jeff Cady, director of produce and floral at Williamsville, N.Y.-based Tops Markets LLC. “The cooking veggies, like cabbage, rutabaga, turnips and parsnips, also increase in sales in fall.”

For his part, Richard McKellogg, director of produce and floral merchandising for Lowes Foods, based in Winston-Salem, N.C., cites sales increases in fall hard squash and in cooking vegetables such as loose and stalk Brussels sprouts.

Popular fall fruits at Lowes include pomegranates, clementines and cranberries.

Posting signs on vegetable and fruit displays to alert customers to peak ripeness can drive spur-of-the-moment sales. For example, foods that reach their peak during October include pumpkins, persimmons, pears and apples. Lakeland, Fla.-based Publix Super Markets and some other supermarket chains use their respective company websites to alert customers when certain varieties of produce are at their peak. Consider a weekly promotion for shoppers as various fruits and vegetables are at their best. Check out https://www.fruitsandveggiesmorematters.org/whats-in-season-fall for a list of what’s ripest and when.

Autumn is the time to change from the seed fruit eaten in summer to fall’s nutrition-filled grapes and persimmons, to name a couple of examples, according to the Dallas-based American Heart Association. Produce selections provide vitamins, minerals and fiber. Some fall fruits and vegetables fall into the “superfood” category, boasting essential vitamins and minerals. These include sweet potatoes, rutabagas and Brussels sprouts. Many customers seeking a healthier diet make the produce department their first stop. Consumers will appreciate information about vitamins and other healthy aspects of various vegetables and fruits, showing this appreciation through increased purchases.

Another service that customers appreciate is the pre-cutting of some vegetables such as winter squash. Shoppers

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FRESH FOOD

Produce

who haven’t tried fall squash varieties before may be daunted by the thick skin and size, or it may be difficult for some consumers to prepare. For cooking vegetables like rutabagas and butternut squash, Bucky Slagle, produce and floral director at Abingdon, Va.-based Food City/K-VA-T Food Stores Inc., says that his produce departments offer optional pre-cutting and cubing, which can encourage customers to try butternut squash or other fall vegetables, and attract those who are pressed for time.

Other supermarkets offer this service as well, including Lowes and even some smaller operators. “We cube butternut squash and sweet potatoes for customer convenience,” notes Michael Garton, produce manager at Libbie Market, an upscale neighborhood grocery store in Richmond, Va., that was once a Ukrop’s location.

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‘Scary’ Produce Adds Fun at Halloween Specialty produce suppliers can offer ideas to retailers for all seasons: For example, autumn is the time for Freaky Fruits. “Exotic and strange-looking fruits are displayed together,” says Robert Schueller, director of public relations at Los Angeles-based Melissa’s/World Variety Produce Inc., explaining the promotion, in which odd-appearing fruits like Buddha’s Hand, dragon fruit, lychee, kiwano horned melon and rambutan are merchandised with signature cards that give ideas for Halloween appetizers using the items. Not much effort is required to turn these unusual fruits into ghosts and zombies.

Eight major retailers participate in the promotion, which launches in September and runs through the end of October. The displays attract customers to the department and the highlighted items.

According to Schueller, the merchandising promo has been growing over the past four years. Since Millennials are said to be big spenders at Halloween, as reported by CNBC, that could be one explanation for the program’s success.

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FRESH FOOD

Produce

Brief Guide to Autumn Produce Here’s a sampling of fall fruits and vegetables: Kale, a member of the cabbage family, is a good source of vitamins A and C, as well as calcium and potassium.

Choose dark-colored kale bunches with small to medium leaves. Kale should be stored in a plastic bag, in the coldest part of the refrigerator, for three to five days.

Kumquats, a good source of vitamin C and fiber, should be firm when selected. The fruit can be stored at room temperature for a few days, or up to two weeks in the refrigerator. Eat the entire fruit like a grape, skin and all.

The flesh is tart, but the skin is sweet.

Parsnips, a good source of vitamin C and fiber, are said to be at their sweetest after a frost. Refrigerate this sweeter carrot cousin in an unsealed bag, unwashed, for up to three weeks. Smaller parsnips have more flavor and are more tender. Traditionally used in stews and casseroles, they can be cooked in almost any way.

Persimmons are an excellent source of fiber and vitamins A and C. This Asian fruit can be eaten as a snack, added to salads, or made into cookies, cakes or puddings. Ripen them at room temperature until they’re soft, and then refrigerate them. Yellow patches indicate unripe fruit.

Pomegranates should be selected when they’re round, plump and heavy for their size. An excellent source of fiber and vitamins C and K, as well as potassium, folate and copper, the fruit may be stored for one month in a cool, dry place, or up to two months in the refrigerator. Pomegranates contain hundreds of seeds and translucent skin, both of which may be eaten. They may be consumed raw, in salads or in healthy drinks.

Quinces smell like a mixture of pear and pineapple, and can be eaten raw or cooked. Fuzz on the quince falls away as the fruit ripens.

An excellent source of vitamin C, quinces can be stored at room temperature for one week, or refrigerated for up to three weeks. The fruit may be eaten as a snack; used in jelly, jam, chutney and cobblers; or poached.

Quince is often supplied by specialty fruit companies.

Rutabagas look like turnips, but are sweeter and turn orange when cooked. They can be refrigerated in a plastic bag for up to three weeks.

An excellent source of vitamin C, this cruciferous vegetable is often prepared as part of a stew or casserole, or cooked with carrots.

Source: Fruits & Veggies — More Matters, Produce for Better Health Foundation

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Lowes, meanwhile, changes out its Pick & Prep pre-cut lineup to cold-weather items in fall, according to McKellogg.

Providing this service can attract Millennials, who are looking for easy prep and new items.

Festival Time

“We try to make fall an event,” asserts K-VA-T’s Slagle. “We use our own tote bags for apples, and sell candy apples and our own ciders, which do well in fall. We cross-merchandise items from other departments like bakery/deli.”

Since supermarkets compete with farmers’ markets, some grocers have decided to create their own market displays. Libbie Market, for instance, celebrates fall on the sidewalk in front of the store with traditional orange pumpkins, primarily heirloom varieties, and Cinderella pumpkins with a bright-red orange color and a somewhat flattened shape, Garton says.

Seasonal celebrations don’t require just traditional items, however. “Jarrahdale green pumpkins do very well for us — people like something different,” he notes.

“If you’re not selling them, you’re missing out. Green pumpkins and other varieties besides orange are unique, and customers are fascinated by the variety.”

He adds that many everyday vegetables, such as broccoli, cabbage, kale, celery and cauliflower, are sweeter in autumn when temperatures are cooler and the ‘frostkissed’ effect kicks in. Offering samples can bring sales. In addition to hard squash, kale, collards and broccoli are sought-after fall vegetables at Libbie Market.

David Taylor, Libbie Market’s co-owner, notes that if a customer would like to taste a fruit or vegetable in his store, a produce associate will go to the salad bar and provide a sample. The same is true with the store’s hot bar, which offers grilled corn, cubed squash and sweet potatoes through fall. When customers taste fall’s difference, affirms Taylor, they’ll want to take home the season’s fruits and vegetables to share with family.

TECHNOLOGY

Workforce Management

An Empowerment Issue WHILE MANY RE TAILERS TODAY ARE ADOPTING TECHNOLOGY TO BENEFIT THE SHOPPER, SOME PROGRESSIVE GROCERS ALSO ARE DOING SO TO EMPOWER ASSOCIATES.

By Randy Hofbauer ne of the biggest problems in retail is turnover. Data from the Hay Group shows that retail has one of the highest turnover rates of any industry, reporting a median rate of 67 percent for part-time employees. Additionally, on average, it costs 16 percent of one year’s salary to find, hire and train a replacement for one minimum-wage employee.

In the past year, several grocers have helped remedy the situation by raising minimum hourly wages and benefits. For instance, Bentonville, Ark.based Walmart said it would raise the starting wage rate for all hourly U.S. associates to $11, expand maternity and parental leave benefits, and give eligible full- and part-time workers a one-time cash bonus of up to $1,000. Also, Minneapolis-based Target raised its minimum hourly wage to $12.

Although it helps, paying more money isn’t the only way to help keep employees, however: When associates aren’t given set goals to meet — or the tools necessary to meet goals — they will become frustrated with their inability to progress and grow in their careers.

Thankfully, grocers have access to lots of new tools that can help. Here are just four ways grocers in the past year have begun using technology to empower their associates.

Workforce Management and Scheduling

Natural Grocers is known for taking care of its employees and helping them succeed inside and outside the workplace. Last April, the Lakewood, Colo.-based natural food retailer upped its employees’ minimum hourly pay to $11 at all stores for both part- and full-time employees. Additonally, the company’s CEO, Kemper Isely, mentioned the important role that training efforts played in its strong first quarter of fiscal 2018.

“We are pleased with the success of these marketing and operational initiatives, and the momentum they have created,” he told participants in a February call to discuss the earnings.

PROGRESSIVE GROCER August 2018

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TECHNOLOGY

Workforce Management

So it’s understandable that with 147 stores across 19 states, Natural Grocers would need a strong solution to effectively manage its workforce — it’s a complex task to improve productivity, forecasting and labor management. The solution was found in HotSchedules’ cloud-based platform, originally designed for the foodservice industry.

Simply put, the platform is intended to make better staffing and management decisions that are influenced by critical sales trends and forecasting data, while also giving more than 3,000 employees the ability to schedule via mobile.

“The Natural Grocers team understands how important it is to give managers tools to effectively forecast demand, optimize labor and help maintain compliance, while also making it easier for hourly employees to schedule shifts around personal obligations,” notes David Cantu, co-founder and chief customer officer at Austin, Texas-based HotSchedules.

Added Heather Isely, EVP at Natural Grocers: “Ever since our first store opened in 1955, one of our five founding principles at Natural Grocers has been our commitment to our employees.

Part of that commitment is giving our in-store managers and regional leadership world-class tools to help them succeed.”

Freedom at POS

This past May brought the news that Walmart was shuttering the mobile checkout platform it had only recently finished piloting and begun expanding: Scan & Go, which CBC News reported had closed due to lack of popularity. The Android- and iOS-enabled app — which also could be used via hand-held devices provided in-store — allowed customers to scan and bag items while they shopped, and to pay for their purchases with their mobile devices.

It securely stored credit or debit card information for fast and easy checkout, and, after payment, allowed shoppers to exit the store through the Mobile Express lane, bypassing checkout.

Just weeks before, however, the mega-retailer had launched a different sort of mobile checkout that focused more on

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Northgate uses Axonify’s employeeknowledge software on such devices as tablets to help employees build, sustain and share knowledge in a fun, engaging and gamified way.

empowering the employee over the customer, while still providing customer convenience. Check Out With Me saves customers time by allowing on-the-spot payment in Walmart’s Lawn & Garden Centers for such products as flowers, soil and mulch.

Here’s how it works: A customer walks in, chooses what he wishes to purchase, and then brings it to a Check Out With Me associate on the floor. Using a dedicated mobile scanning device, the associate scans the items, swipes the shopper’s credit or debit card, and then provides a printed receipt.

Previously, customers had to exit the Lawn & Garden Center and enter the store itself to pay for lawn- and garden-related products.

“As we continue to test this new process, we’ll be listening to our customers and working on ways to bring their expectations to life,” Walmart said at the time of the launch. “Check Out With Me is the latest example of our commitment to deliver a more convenient shopping experience that saves our customers time.”

Financial Independence and Management

Walmart isn’t just empowering its associates on the job, though. Understanding that less stress at home can lead to happier team members in stores, the company last December introduced a suite of services to help employees plan ahead for bills and savings goals while also allowing them access to wages ahead of paychecks for unexpected expenses.

More than 1.4 million associates nationwide across three divisions — Walmart, Sam’s Club and Walmart eCommerce — now have access to the new money-management services, which were created in collaboration with two financial technology startups: Oakland, Calif.-based Even and San Jose, Calif.-based PayActiv — with tools accessible through Even’s mobile app, available for iOS- and Android-based devices. Being able to plan ahead eliminates employees’ work of determining how much money is OK to spend, while access to earned pay in advance of paychecks via a feature called Instapay provides greater flexibility and helps avoid overdrafts, highfee funding or credit options.

Even’s app securely connects to associates’ checking accounts, prepaid accounts or Walmart Associate Paycards, and links to the company’s payroll systems. It automatically subtracts anticipated expenses from a user’s expected cash inflows, allowing associates to see how much money they’re able to spend.

“Traditional approaches to workforce well-being often focus solely on physical health, but we know from listening to our associates that financial well-being is just as important,” said Jacqui Canney, Walmart’s chief people officer, at the time of the rollout. “We’re investing to give our people financial tools that help provide more stability in their lives, which we believe will empower them to be all they can be when they are at work serving our customers.”

So employees need not worry about adding the services to their own bills, Walmart covers the entire cost of Even’s automated financial management tool for both hourly and salaried associates, and will ensure that associates can use Instapay up to eight times annually at no charge. For employees who need to use Instapay more frequently, Walmart will subsidize the additional Even subscription required to do so.

Training

In an industry where customers’ trust is extremely difficult to gain but incredibly easy to lose, it’s always best to be more proactive than reactive in training employees to ensure that protocol is followed to the letter. One Southern California grocer, Anaheim-based Northgate Gonzalez Markets, realized this when it shopped for technology that could help train more than 6,000 employees across dozens of its stores in the region in understanding and following all government regulations, inspection expectations and compliance requirements for food safety, in addition to abiding by safe work practices and policies.

Launched last year, the software helped employees build, sustain and share knowledge in a fun, engaging and gamified way. Associates were able to develop the confidence to perform their roles to the best of their abilities, due to the software’s adaptation of learning content to target and close individual knowledge gaps. Oneand-done training events pushed through other learning methods differed from what

Walmart’s Check Out with Me service empowers associates by giving them the technology to check out customers wherever they are in the Lawn & Garden Center.

Gary Orona, Northgate’s director of training and development, saw in the system from Waterloo, Ontario-based Axonify — the “same success mechanics and continuous progression” that he used in coaching high school football.

“I used the same principle of repetition, doing the play over and over, repeating it until it was perfect so that the team could remember and execute it on game day,” Orona says. “It’s the same thing in retail: When the results aren’t what you want, you make people do it again so they get it right. If you miss a training question in Axonify, you will get the question again until you remember it.”

Participation didn’t rise rapidly, but within 12 months after implementation, it went from 20 percent to more than triple that. And as customer surveys reveal other areas in need of improvement, the software is used to optimize training in each sector.

“We started launching training regarding smiling, making eye contact, talking to our customers about what they’re making, about their families, and we just really started to dig in a little bit more to try to get the associates to understand the importance that the customer makes the decision to come into our store,” Orona notes.

While one might think the end goal to each employee is trivial — to play a game or win a prize — what Northgate discovered was a truly valuable lesson.

“When we launched a survey, one of the questions we asked was ‘What feature do you like most about the training platform?’” Orona observes. “We thought it would be the prizes or the gaming part of it. But the No. 1 answer that came back was ‘job-performance knowledge.’”

PROGRESSIVE GROCER August 2018

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Small Bites, Big Returns CATERING TO THE NEEDS OF LIT TLE DOGS MAY GIVE GROCERS A GIANT BOOST IN PROFITS.

By Princess Jones Curtis aryssa Garcia has been breeding Chihuahuas for more than a decade. When asked about the smallest full-grown adult she’s ever bred, she answers without hesitation. “It’s the kind of thing you never forget,” she says. “People are always asking me about the tiniest dog possible. Small is very big right now.”

According to a survey by the Stamford, Conn.based American Pet Products Association, families across the United States house a total of 89.7 million pet dogs. While the most popular dogs in the country are Golden Retrievers and German Shepherds, small breeds like Chihuahuas and Yorkshire terriers have been seeing increases in numbers over the past decade or so.

Key Takeaways Small dog breeds have increased in numbers over the past decade or so.

These breeds have physical and nutritional needs distinct from those of larger breeds.

Supermarkets can meet the varying needs of consumers with small dogs; for instance, they can make it easy to shop the aisles by grouping parent brands together and organizing product by wet versus dry foods.

Small dogs have their own unique needs.

“People love to spoil a dog, but they really love to spoil a small dog. I think it has something to do with size,” muses Garcia. “They kind of look like puppies forever, so it’s easy to want to baby them. That cuteness makes you want to go the extra mile for them.”

Aside from the cuteness factor, small dog breeds have different physical and nutritional needs from other breeds. This opens the door for a host of product categories that solve those size-specific problems. These products can be good for the bottom line of the retailer that carries them, as long as the merchandising efforts are consistent with what consumers with small dogs are looking for.

Rise of the Small Dog

If you think about it, the rise of the small dog has been a long time coming.

“Around seven, eight years ago, small dogs overtook large and medium-sized breeds, and now make up over 50 percent of pet ownership, with no signs of stopping,” notes Jake Trainor, director of marketing for Secaucus, N.J.-based Freshpet, the first company in the United States to offer fresh all-natural refrigerated pet food. He adds that small-dog breeds have unique benefits for today’s dog owners.

“Small dogs certainly don’t eat the same amount of food daily compared with medium and large breeds, so consumers are opting for smaller, more affordable mouths to feed,” observes Trainor. “We also see pet parents moving into urban areas or downsizing from

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Consumers shopping for pet food are looking for more specific solutions and products formulated or positioned as great for small breeds.”

—Jake Trainor, Freshpet larger homes, so space is certainly a factor, as is older pet owners choosing pets that are easier to care for and handle.”

As if the practicality of caring for a smaller dog wasn’t enough, there’s also the increased humanization of pets in general which, according to Trainor, “includes a gravitation to higher-quality food made with natural ingredients, and products moving closer to real food.”

He continues: “Boomers and Millennials are important cohorts.

In the case of Millennials, [they] see their pet as their first ‘child,’ [while] Boomers, with their kids leaving home, are now disproportionately spending more money on their pets.”

These factors have converged to give rise to the small-dog trend.

Specialized Needs, Specialized Products

This trend is one that grocers can’t ignore or deny. “Consumers shopping for pet food are looking for more specific solutions and products formulated or positioned as great for small breeds,” points out Trainor. “I think where grocers/retailers can have challenges is if they get too breed-specific and bring in niche products that don’t appeal to a broad enough consumer base.

“Freshpet has a strong tradition of launching very successful innovation across a variety of product forms that have appealed to the masses and dogs of all sizes/breeds, but some of our recent innovation on small dogs/breeds has been very targeted,” he adds.

“With the rise of small dog ownership, we felt like we needed to create something very specific for those pet parents looking for specific ingredients and benefits that are great for small dogs.”

The right balance between specificity and broad appeal is what drives companies like Freshpet to create innovative products. Ten years ago, when the natural and fresh pet food company launched, the dog food industry hadn’t changed much in 70-plus years. This year has seen the launch of Freshpet Select Small Dog Tender Chicken Recipe with carrots and cranberries. The new product specifically targets smaller dogs/breeds.

Made with fresh, locally sourced chicken, it comes in bitesized morsels that are just the right size for small dogs.

When it comes to food products for small breeds, brands like Purina use scientific research to develop targeted products.

“We are driven by science, with over 500 scientists, nutritionists and veterinarians on staff every day,” explains Joe Toscano, VP and director of trade and industry relations at the St. Louis-based Nestlé Purina PetCare Co. “It is that science that helps us identify and develop breakthrough new items year after year.”

Purina’s small-breed offerings include Purina One Small Bites and Purina Bella. Purina One Small Bites Beef &

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Rice Formula for Dogs features real beef as the first ingredient, blended with other high-quality protein sources to support strong muscles, including a healthy heart. The new formulas are made with smaller kibble and meaty morsels — perfect for smaller mouths. Purina Bella, meanwhile, is a full line of pampered meals inspired by small dogs.

“Our new products are innovative and typically lead or are on trend with current consumer desires in a way that is best for your pet,” says Toscano. “For us at Purina, it’s all about meeting the consumer’s needs whenever and wherever they choose to shop.”

Merchandising for Profitable Results

“Merchandising is the art of making it easier for consumers to navigate the store and find what they need,” says Mike Franco, a professional merchandiser who has worked with grocery brands big and small, “but the store uses merchandising to maximize its shelf space into the best profit ratio.”

Don’t make the mistake of assuming that small-dog owners will only be looking for one type of food. Consumers could be looking for wet food in individual servings, or dry food in bags. If there’s more than one dog in the home, bulk packaging might be attractive. Grocery locations that carry a variety of products can meet the varying needs of their consumers with little dogs.

It might be tempting to create a small-dog section, but Franco warns that most grocery stores don’t have that kind of real estate. “Specialty stores have a better change with that setup,” he notes. “When you’ve got 9,000 square feet just for pet products, you can afford to separate the small dogs into their own sections, but if you’re working with just an aisle, or maybe two, you have to prioritize your space.”

Instead, focus on making it easy to shop the aisles for the best merchandising effect. Go for brand recognition by grouping parent brands together, but also organize by wet versus dry. In most cases, it’s a good strategy to highlight the wet food over the dry food, because consumers spend more on the wet-food SKUs, which is often easier for dogs with smaller mouths to eat.

“Education can bridge the gap between what a consumer thought they wanted when they walked in the door to what they ultimately put in their cart,” reminds Franco.

Many consumers use the signage and print collateral that stores provide to make those final purchase decisions. These pieces are a good investment in a store’s efforts to move consumers through the path to purchase.

According to Garcia, a breeder with more than 10 years’ experience with small dogs and the people who love them, it all comes down to that personal experience. “They’re such special little creatures, you know?” she says. “If I walk into a store and it seems like they get that, they’ve made a sale.”

SOLUTIONS

Health, Beauty & Wellness

On the Move THE SPORTS NUTRITION CATEGORY IS BECOMING MORE INNOVATIVE AS IT E XPANDS. By Barbara Sax ports nutrition and supplement products are still fueling growth for retailers. A recent study from London-based market research firm Euromonitor finds that sports enthusiasts and non-athlete consumers alike are attracted to the convenience, innovation and new flavors that manufacturers are bringing to the category. Euromonitor’s research further shows that manufacturers’ focus on innovation, plant-based products and clean labels will continue to impact the category.

“Consumers who are focused on a healthy lifestyle are looking for healthy protein-snack options that can satisfy hunger or bridge them between meals,” affirms Kristine Urea, VP of category management and shopper strategy at Ronkonkoma, N.Y.-based Nature’s Bounty, manufacturer of the Pure Protein, Met-Rx and Body Fortress brands.

“The category has grown beyond hardcore athletes.”

Key Takeaways Plant-based protein products are driving much of the sports nutrition category’s growth, since consumers view plantbased products as healthier than animal proteins.

Among sports nutrition beverages, sales of ready-to-drink items are outpacing those of powders.

Protein bars are racking up solid growth, thanks to consumer demand for portable and convenient foods, with innovation coming from new flavors and formulations, but manufacturers are also introducing new delivery methods to expand the category.

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SOLUTIONS

Health, Beauty & Wellness

“Even the senior population is now consuming sports nutrition proteins to support their health and get energy for activities such as long walks,” points out Carolina Ordonez, senior consumer health analyst at Euromonitor.

In fact, data from Chicago-based SPINS for the 52 weeks ending April 22 show that multioutlet retailers outpaced both specialty and natural channels for dollar sales growth in the protein powder and liquid categories. Protein and meal replacement liquid dollar sales were up nearly 8 percent across those channels, while protein powder dollar sales spiked 10 percent.

Plant it Here

Plant-based protein products are driving much of the growth in this segment, since consumers view plantbased products as healthier than animal proteins. “We see more launches with hemp, pea, rice and lentil proteins, or mixes of all of them,” says Ordonez. “With more and more consumers trying to eat less meat, plus a growing Generation Z that tends to support the cruelty-free movement, I believe this will be the fastest-growing category within sports proteins.”

According to Neal Cournayer, category manager for Medford, Ore.-based C&K Market, which operates Ray’s Food Place in Oregon and Northern California, plant-based products are a mega-trend. “It’s the direction the category is heading,” he observes.

“The plant-based protein category is seeing strong growth year over year,” affirms Jason Hull, brand manager for CytoSport’s Evolve Brand. Last year, Walnut Creek, Calif.-based CytoSport, which manufactures the Muscle Milk brand, launched Evolve, the company’s first line of plant-based ready-to-drink protein shakes and powders. Protein bars joined the line early this year. Evolve powders, ready-to-drink beverages and bars include only 10 to 11 non-GMO ingredients; contain no dairy, soy, gluten or artificial flavors; and are made with North American-sourced pea protein.

For its part, Nature’s Bounty launched Pure Protein Super Food, a plant-based protein powder. “Consumers’ desire for plant-based protein is on the rise, so we are continuing to look for ways to innovate in this space,” says Urea. “We expect to see strong growth in the ready-to-drink liquids and single-serve segments, as well as in options for different parts of the day.”

According to Manitoba Harvest, its hemp-based protein products have grown 400 percent over the past five years.

Anne Thompson, VP of marketing for the Winnipeg, Manitoba-based company, notes that hemp is on “the brink of becoming the next big superfood.” Developed with clean labeling in mind, Manitoba Harvest’s new Hemp Yeah! contains between four to eight ingredients. “Consumers are actively seeking cleaner ingredient lists, a particularly important topic when it comes to protein powders, which can be laden with long lists of complex ingredients,” adds Thompson. Manitoba Harvest hemp protein products are carried by Hy-Vee, Mariano’s and Shaw’s, among other retailers.

Drink Up

The ready-to-drink shake segment is also heating up. Gary Willard, store manager of Wade’s Foods’ Christiansburg, Va., location, says that sales of protein powders and liquids are strong at the retailer’s two stores.

“Liquids are outpacing powders,” he notes.

The stores devote 4 feet to both powders and liquids and concentrate heavily on whey-based protein products. Wade’s competes with Target and Walmart, which give more space to the category and promote it more heavily.

“There have certainly been more introductions in liquids than powders,” agrees C&K Market’s Cournayer. “It’s all about convenience, and if it’s ready to go, non-GMO and meets other specifications the consumer wants, they are grabbing it.” Non-GMO claims are the first thing consumers are looking for in the category, he says.

Ready-to-drink protein beverages offer retailers a strong profit center. “Consumers are willing to pay more for convenience,” notes Nature’s Bounty’s Urea.

The protein supplement category as a whole is far less promotional than other

We see more launches with hemp, pea, rice and lentil proteins, or mixes of all of them.”

—Carolina Ordonez, Euromonitor

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SOLUTIONS

Health, Beauty & Wellness

Innovation is happening in the performance bars segment in the natural and specialty gourmet channels, and outpacing category growth rates.”

—Kimberly Kawa, SPINS

nutritional categories, but when retailers do promote, they generally focus on larger pack sizes or multiple purchase discounts that incentivize stock-ups.

More retailers are merchandising single-serve protein shakes at the front of the store in coolers, she points out. “Many of our drug store partners, as well as Meijer, have been adding more single-serve shakes to checkout coolers,” says Urea. “Ahold and Kroger are also outposting bars near the checkouts.”

Also in this area, the La Farge, Wis.-based Organic Valley cooperative recently reformulated its Organic Balance milk protein shake to contain significantly less sugar and has repositioned the product clearly as a breakfast meal-replacement option.

shelf is devoted to protein powder brands from Nature’s Bounty (Pure Protein and Body Fortress), Abbott Nutrition (EAS), and Premier Protein. Bars are given six shelves in the section, and the chain includes more mainstream brands, such as Kind, along with more specialized offerings from Clif, Lara, Gatorade and Fit Crunch.

Cournayer, for one, believes that the bar category has been under assault from an overabundance of new introductions. “Our next direction will be to replace other bars without organic and non-GMO claims with products that have these attributes,” he says. “With so many products on the market, everything below the non-GMO line will go.”

Behind Bars

More Ways to Deliver

Sports protein bars have continued to record solid growth, with sales driven by consumer demand for portable and convenient foods.

Innovation in this category is coming from new flavors and formulations: For instance, Cytosport has recently launched a line of 15- and 20-gram Muscle Milk protein bars in 12 new flavors.

Nature’s Bounty’s newly launched Pure Protein breakfast bars are available in innovative flavors, including strawberry waffle, and the bar line has added limited-edition seasonal flavors such as peppermint bark and maple.

The segment is one for retailers in the grocery channel to watch, especially since it trails other channels in category growth for performance bars. SPINS data show that dollar sales of performance bars are up nearly 8 percent in the specialty channel and 47 percent in the natural channel, but multioutlet retailers saw a decrease in dollar sales. “Innovation is happening in the performance bars segment in the natural and specialty gourmet channels, and outpacing category growth rates,” observes Kimberly Kawa, a SPINS retail analyst.

Sunbury, Pa.-based Weis Markets merchandises sports nutrition in an 8-foot section in the center of the store, across from sports beverages. The top

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Meanwhile, manufacturers are introducing new delivery methods to expand the category. SPINS data show an “exaggerated growth rate for the energy food and candy product type, due to rapid distribution as a new segment breakout, which is an emerging trend,” says Kawa.

Nature’s Bounty, for instance, is launching an innovative snack cup with a protein-fortified hazelnut spread, as well as protein-enhanced bite-size cookies in a pouch, under its Met-Rx brand.

Another prime example of this trend is the Cheyenne, Wyo.based Regimen brand, which has introduced a food-grade edible whey protein film that can be consumed anytime.

“Consumers want on-the-go options, and they want variety,” affirms Urea. “We are expanding options in the category.”

EQUIPMENT & DESIGN

Store Design

Bashas’ Window Rock store in Arizona reflects its location on the Navajo Nation.

Key Takeaways

More in Store SUPERMARKE TERS SEE DESIGN AS INDISPENSABLE TO A SUCCESSFUL OPER ATION. By Bob Ingram he Bible’s Book of John says, “In the beginning was the word.” The food retailing equivalent might be, “In the beginning was store design.”

Retailers and wholesalers know from front-line experience the intrinsic value of store design in their marketing efforts.

“Good store design is essential, as it has a large effect on the overall customer experience,” affirms Johnny Basha, VP of special projects for Bashas’ Family of Stores, in Chandler, Ariz. “It’s imperative that we exceed customer demands and expectations, and good store design is as indispensable to that as customer service, price and quality.”

Bashas’ relies on both a design firm and an in-house design team, the design firm providing information on the latest trends, efficiencies and sustainability upgrades, while the internal team interprets consumer sensitivity to provide a fluid, positive customer experience.

“During our extensive store remodel plan, we have paid close attention to the focus on fresh, locally sourced and convenient food options,” Basha says.

A focus on fresh departments, technological innovations, innovative areas offering unique products and services, and intuitive layouts are among the elements currently being incorporated into new stores; accurately reflecting the concerns and aspirations of a store’s surrounding demographics is also key.

Some supermarkets rely primarily on in-house teams, others on outside design firms, and a few on a combination of both to generate and execute design ideas.

Despite the encroachments of digital, in-person shopping isn’t going away.

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EQUIPMENT & DESIGN

Store Design

Creating an Experience

We recommend a combination of trendy and timeless, since we know that remodels don’t happen every year.”

—Anthony Smith, Associated Wholesale Grocers

“In that respect, we work hard to grow the variety of offerings in all perimeter departments.”

The retailer’s latest design innovation is at its Bashas’ Diné market, in Window Rock, Ariz., on the Navajo Nation. While the store’s décor and signage have always reflected the Navajo language and culture, Basha explains, the recent remodel has revitalized that celebration of the local community.

“We worked especially hard to ensure that everything, from the basic store design and offerings to the local artisans’ artwork displayed throughout the store, honors that vibrant culture of the Navajo people,” he says.

Basha envisions technological advancements in both building operations and customer support in the future of store design.

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“Store layout and design are very high on the list for a successful operation,” agrees Anthony Smith, senior manager, design source group at Associated Wholesale Grocers (AWG), in Kansas City, Kan. “A sensible layout helps customers easily navigate the store, and without a cohesive design, attention may be distracted from the product displays.”

A good supermarket design is one that speaks appropriately to the store’s surrounding demographic, as well as directing customers’ focus to the products, Smith explains. “The use of basic design principles to accomplish this is the key,” he notes.

AWG does full-service interior design in-house for smaller projects that can be handled as “design/build,” and collaborates with architects and/or engineers on larger projects requiring full stamped drawings.

“Many retailers want to have an updated look and be on-trend,” Smith observes, “but we recommend a combination of trendy and timeless, since we know that remodels don’t happen every year.”

With the high-tech nature of online shopping and the increasingly digital landscape, Smith feels that it’s necessary to create an experience within a store, and in response to this need, retailers are including more interactive elements in their stores. “Ever-changing digital displays, cooking schools and even bars are being incorporated into new store layouts and designs,” he notes.

“What we know,” Smith concludes, “is that brick and mortar is not going away. Too many in the new generation of shoppers like the experience of shopping in person. With that, it will continue to be even more important to create an experience within a store through added services, departments or within the interior design itself.”

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Gelson’s Markets collaborates with design firm Shook Kelley on stores such as this one in Silver Lake, Calif.

In-House Expertise

At De Pere, Wis.-based Festival Foods, Store Planning Director Aaron Aspenson asserts: “Store design is paramount to successful store operations.

With an evolving and increasingly competitive grocery landscape, we are constantly looking for ways to innovate in order to exceed our guests’ expectations.”

Aspenson believes that a good store design drives sales, looks full and fresh without sacrificing on shrink, allows for efficient workflow, and provides an easy, enjoyable shopping experience.

“We design our fixture plans in-house,” he says, “as we lean on the experts from each department to provide feedback and recommendations regarding their respective areas. We also gain efficiencies in speed and cost.”

For the future of store design, Aspenson predicts designing to elevate fresh and prepared foods, ecommerce space allocation, more self-service, and efficient space planning in smaller footprints, as well as community gathering spaces and value-added services not available online. He also sees a continuing focus on lowering energy consumption and costs by way of new technology and equipment.

Filling a Tall Order

“Great store design is essential for success, asserts John Bagan, chief merchandising officer at Gelson’s Markets, in Encino, Calif.

“First and foremost, it provides the environment for our customers’ in-person experience with our brand, products and employees. A store’s design will either enhance or diminish customers’ experiences with each of those essential elements of the visit.”

In a food environment, according to Bagan, the perfect blend of form and function in great design is difficult to achieve, given the intense operational and production needs of the business.

“Our store designs need to provide an upscale, relaxing, interactive experience for our customers that celebrates food and allows for as much interaction between our customers and associates as possible,” he says, “but they also need to be efficient, clean, safe and profitable. That’s a tall order.”

Since Gelson’s doesn’t have its own design experts, it combines its legacy knowledge and vision with a partner that can apply its own expertise to create successful designs. “Shook Kelley is our strategic partner for both branding and design efforts, and they have been fantastic,” Bagan says of the design firm with offices in

Los Angeles and Charlotte, N.C. Among new features, the grocer is “rolling out a new ‘Sip & Shop’ service that invites our customers to enjoy and drink and snack at the bar — and hand their shopping list over to us to be procured for them,” Bagan says. “It has been very well received.”

In the future, he believes that a smaller footprint and being closer to where customers live and work in an urban environment will be common features. “Our designs need to enable that vision,” he emphasizes.

Home Away From Home

“A design reflects the mood and attitude of our owners,” says Susan Budlong, marketing and communications manager at East Greenwich, R.I.-based Dave’s Fresh Marketplace. “To us, the design is coming home.

We want our customers to feel like they are shopping in a store that reflects their neighborhoods. Our customer service departments are the hub of the neighborhood, providing friendly faces and answers to questions.”

Dave’s wants young people to visit its stores with wonder, and the older generation to feel a touch of nostalgia, she says, and to these ends, the retailer works closely with the design team at Cheshire, Conn.-based wholesaler Bozzuto’s, headed by Dave Falt, and Fairfield, Ohio-based CIP Retail to bring it all to life.

“The end of 2017 saw Dave’s Fresh Marketplace completing the remodeling and upgrade to all new deli cases that have self-service and full-service options,” she notes, adding: “Perishable is king. We will continue to update and invest in our stores to balance a comfortable, bright shopping experience with fresh, high-quality perishables.”

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SUPPLY CHAIN

Fleet Management

The Final Countdown

The shortage of trucks and drivers is squeezing the retail industry while also encouraging the use of new technology.

GROCERS CAN BE T TER CONTROL THE CRUCIAL L AST MILE OF DELIVERY USING THE L ATEST FLEE T MANAGEMENT TOOLS.

By Jenny McTaggart

Key Takeaways

s a grocery delivery driver rushes to make his last drop-off for the day — after making it through treacherous traffic, a missed delivery and the possibility that his freight is now spoiled due to surging temperatures outside — you can almost picture him singing the chorus of the ’80s hair-metal band Europe’s popular song: “It’s the final countdown!”

Indeed, today’s grocery delivery business isn’t for the faint of heart, as an uptick in deliveries on busy roads has been met with a shortage of drivers, as well as a shortage of vehicles. Those factors are combined with increased transportation-related regulations that companies are required to follow, along with the need for more short deliveries and the expansion of the all-important final mile to include consumers’ homes.

Luckily for retailers, technology is making a huge impact on the world of fleet management with solutions that help with efficiency and cost savings, whether you’re talking about upgraded features in the vehicles themselves, tools to better manage the long haul on big rigs from the manufacturing facility to distribution centers, or, most importantly for the grocery industry, the final mile.

Tools that allow retailers to gain deeper visibility are key to connecting all of the points of the supply chain and ultimately ensuring on-time delivery and smart use of their fleets and drivers.

Companies such as Cleveland-based TMW Systems and Maynard, Mass.-based Kuebix are among those offering trans-

Visibility-providing tools are key to connecting all points of the retail supply chain, and ensuring timely delivery and efficient use of fleets and drivers.

The rise of online ordering and home delivery will require the use of smaller vehicles, including even unmanned cars and drones, for shorter routes.

To get product to where it needs to be, retailers in the near future may rely on roaming warehouses on wheels.

portation management systems to help grocers tackle their unique challenges.

Dan Clark, president of Kuebix, says that he was inspired to create his company after spending time in the trucking industry and seeing that grocery was the most challenging business.

One of the goals at Kuebix is to build technology to make delivery more efficient for the carrier and the grocer, with the aim of saving grocers money, he notes.

Kuebix’s solutions are designed to offer a collaborative, real-time platform that helps manage multiple steps of the supply chain, including building shipments and PROGRESSIVE GROCER August 2018

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SUPPLY CHAIN

Fleet Management

cost-effective routes around the initial orders, finding the optimal carrier, tracking the order, managing the driver and product as it moves from the supplier to the DC, and overseeing the final mile of delivery. The company has an enterprise solution for larger clients, as well as tailored offerings for small to midsize businesses.

“Especially with vertical delivery, as in grocery, you want to be able to manage your drivers and see that they have productive runs that are being sent out and delivered,” explains Clark. “Then, how do you turn those assets into revenue-generating assets?

That’s where you start looking at how you can connect the inbound orders that you have to bring back with other opportunities where you can pick up freight from other people.

“It’s not that easy to manage, because of all the constraints you have,” he continues. “You have to comply with food safety regulations, you have to work within the hours that your driver has left, and you have hundreds of thousands of opportunities that you can take and dynamically match to your location. That requires a system that can integrate with many different platforms.”

With more stringent requirements on food safety that have come from the U.S. Food and Safety Modernization Act, one area that grocers need to pay particular attention to is the temperature of their refrigerated items, observes Ray West, SVP and GM of the portfolio of transportation management solutions at TMW Systems. “There’s

satellite tracking and temperature sensors at different locations in the trailer,” he notes. “The refrigerated units have monitoring and remote controls to adjust temperatures depending on what the commodity is.”

The Last Mile Redefined

The final mile of grocery delivery is often the most complex, and thus requires enhanced optimization and visibility, according to Brian Larwig, VP and GM of final mile for TMW Systems.

“In the retail grocery space, the dynamic day-to-day nature is one of the big issues that we deliver specialized tools for,” he says. “Backhauls are a really good example — the day-to-day needs of what product needs to get brought back, and where it needs to be brought back to. That’s consistently changing throughout the day. This isn’t an industry where you can make your

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delivery plans at midnight for the next day. Visibility becomes really important, because you need to know where everything is at any given time, both in terms of your equipment and your drivers and assets, so you can match them up throughout the day.”

That visibility additionally lets a retailer know when it’s in jeopardy of not fulfilling a commitment, because of traffic or other unforeseen variables, he adds: “Our system also gives you suggested ways to alter your existing plan to account for the changes. That’s pretty key for this industry, to have decision assist that can help you.”

As if the final mile of grocery delivery weren’t already complicated enough, the uptick in online ordering and direct-to-consumer delivery is adding a new level of complexity to grocery delivery, he observes.

Keep on Truckin’ While most major grocery companies still own and operate their own fleets, more of them are looking for outside help when it comes to maintenance and other issues, according to Mike Willey, director of sales at Bellevue, Wash.-based Paccar Leasing, a major truck-leasing company that also manufactures Peterbilt and Kenworth trucks.

“There’s been a recent shift to outsourcing maintenance, just because of the complexity of the vehicles, all the technology that goes into it, and a shortage of technicians, which is no different than the shortage of drivers,” he observes.

Willey estimates that PacLease’s portfolio now includes as much as 30 percent of businesses in the food industry. “With our new-generation vehicles coming out, we’re aggressively going after these P&D [pickup and delivery] type of operations,” he explains. These new-generation vehicles have larger cabs and other driver comforts, including aerodynamic features.

“When you look at the grocery industry today, automation is almost becoming standard — things like having a synchronized transmission for fuel economy and a lot of onboard technology, whether it be accident mitigation, lane assist, backup cameras or driver monitors,” continues Willey. “You see all that technology aggressively in this industry, because so much of what they do is P&D, same-type deliveries. It becomes a good way for them to mitigate risks and reduce costs.”

At the same time, grocery companies aren’t keeping their trucks for as long as they used to, instead opting to replace their own fleets with newer models, he notes. “When I first got into this industry 20 years ago, grocery companies would sometimes keep their truck for 15 years,” says Willey. “But now there seems to be a strategy around fleet aging, and they’re very concerned about driver retention.”

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Mike Willey, Paccar Leasing PROGRESSIVE GROCER August 2018

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SUPPLY CHAIN

Fleet Management

“Online ordering and home delivery is making a huge impact,” notes Larwig. “That final mile has been extended. The supply chain used to end at the grocery store; now there can be another piece after that, and a lot of times that product is coming from the distribution center. So there’s a whole new piece of transportation involved.”

He notes that smaller vehicles, including delivery vans, are required for these shorter routes. Looking ahead to the future, smaller trucks will become even more popular, he predicts.

In some cases, a growing number of these vehicles will even be unmanned. The Cincinnati-based Kroger Co. recently made headlines by introducing a pilot delivery program that uses unmanned road vehicles provided by Mountain View, Calif.-based Nuro to fulfill online grocery orders. Earlier in the year, Santa Clara, Calif.-based Robomart, said to be the world’s first self-driving store, made its debut at the Consumer Technology Association’s CES show. And, when considering the world of driverless technology, don’t forget drones, which are already being tested by Seattle-based Amazon.

Kuebix’s Clark imagines the future of grocery delivery as increasingly nimble, noting: “You’re going to see more and more old shopping malls being used as distribution centers for local deliveries, and you’re going to see more home delivery to the end consumer. But to do that, you really need systems that

can get product to where it needs to be. It’s almost like taking the just-in-time model to a level where you have roaming warehouses on wheels.” Thus, he notes, the need to be fully connected will be even more crucial.

The supply chain used to end at the grocery store; now there can be another piece after that, and a lot of times that product is coming from the distribution center.”

—Brian Larwig, TMW Systems

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EDITORS’ PICKS

Food, Beverage & Nonfood Products

Creamy and Cheesy

Answering the call for more portion-controlled grab-and-go snacks — and recognizing Americans’ love of cheese — Bel Brands USA has launched Laughing Cow Cheese Cups: single-serve portable, dunkable cups of creamy cheese that join the brand’s classic Cheese Wedges and Cheese Dippers snack packs. The 1.5-ounce refrigerated cups contain no artificial colors or flavors, as well as no preservatives, and comprise three varieties: Creamy Swiss Original, Creamy Swiss Garlic & Herb, and Creamy White Cheddar. They retail in 4-packs with an SRP of about $4.79 each. www.thelaughingcow.com/

Whip it Good

Plant-based foods and dairy alternatives are hotter than ever, given the growing interest in consuming fewer foods made from animal products. Now Conagra Brands has responded to this trend in the whipped-topping segment by launching nondairy options under the Reddi-Wip brand: Non-Dairy Coconut and Non-Dairy Almond.

The gluten-free varieties are 10 calories per serving and free from artificial flavors and preservatives.

Their SRP is $3.99 per 6-ounce can. www.reddiwip.com

Better Butters

Ethical Sipping

With Americans today growing increasingly concerned about the environment, brands are learning that people want to help by making little changes here and there, all of which can add up. To that end, Repurpose has introduced what it calls the first flexible, single-use compostable straws. Said to be strong and durable so they don’t crack mid-sip, and also BPA-free, chlorine-free and nontoxic, the bendy straws are certified compostable, meaning that they break down in an industrial composter in just 90 days.

Fewer fossil resources are required to produce Repurpose’s straws than conventional straws, further lowering their overall carbon footprint. The SRP is $2.79 per 50 straws, which come in packaging made from 85 percent recycled materials. www.repurposecompostables.com

As a growing number of people try snacking on alternatives to peanut butter, many are discovering — and even preferring — the taste of creamy almond butter or cashew butter. So why not put either in a chocolate cup? That’s exactly what Justin’s has done with its Dark Chocolate Almond Butter Cups and Dark Chocolate Cashew Butter Cups, USDA-certified organic cups that offer “an exceptional organic treat with high-quality, mindfully sourced ingredients and less sugar than conventional cups.” Both are NonGMO Project Verified, Certified Gluten-Free, and made with no artificial flavoring or preservatives. Crafted with Rainforest Alliance Certified chocolate and Orangutan-Friendly Palm Oil, the cups retail for a suggested $2.29 per two-cup pack. http://justins.com

PROGRESSIVE GROCER August 2018

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8550 W. Bryn Mawr Ave. Ste. 200, Chicago, IL 60631 Phone: 800-422-2681 Fax: 978-671-0460 www.ensembleiq.com PROGRESSIVE GROCER (ISSN 0033-0787, USPS 920-600) is published monthly by EnsembleIQ, 8550 W. Bryn Mawr Ave. Ste. 200, Chicago, IL 60631. Single copy price $10, except selected special issues. Subscription: $135 a year; Canada $164 (Canada Post Publications Mail Agreement No. 40031729. Foreign $270 (call for air mail rates). Periodicals postage paid at Chicago, IL 60631 and additional mailing offices. Printed in USA. POSTMASTER: Send all address changes to Progressive Grocer, P.O. Box 1842 Lowell, MA 01853. Copyright ©2018 EnsembleIQ All rights reserved, including the rights to reproduce in whole or in part. All letters to the editors of this magazine will be treated as having been submitted for publication. The magazine reserves the right to edit and abridge them. The publication is available in microform from University Microfilms International, 300 North Zeeb Road, Ann Arbor, MI 48106. The contents of this publication may not be reproduced in whole or in part without the consent of the publisher. The publisher is not responsible for product claims and representations.

Anheuser-Busch Inc.

10-11

Beaver Street Fisheries

43

Blount Fine Foods

16-17

Brill

4

Calico Brands

52

Campbell Soup Company

Inside Front Cover-3, 19

CIP International, Inc.

37

Coca Cola Ltd.

45

Consorzio Tutela Formaggio Asiago

41

Crave Brothers Farmstead Cheese, LLC

30

Del Monte Fresh Produce Inc.

29

FoodStory Brands

51

Freshpet

65

Italian Trade Commission

Back Cover

Jelly Belly Candy Company

21

Kimberly Clark

23

MasonWays Indestructible Plastics

78

McKernan Packaging

77

MilkPEP

15

Naturipe Farms

59

NBT Cooperative

58

New Hope Network

69

Organics Unlimited

55

Organic Valley Family Of Farms

25, 27

OSI Industries

46-47

Paran Management Company, Ltd.

72

Reser’s Fine Foods

53

Saputo Cheese USA, Intl

49

Shuman Produce, Inc.

56

The Garlic Company

57

The Hershey Company

13

The J.M. Smucker Company Tosca Ltd. Trion Industries Inc.

7 31 Insert 35, 9

Viking Cold Solutions

39

Wells Enterprises Inc.

Inside Back Cover PROGRESSIVE GROCER August 2018

81

INDEPENDENT THOUGHTS

By Kat Martin

Just in Meal Time CONSUMERS’ NEEDS AND SHOPPING PAT TERNS ARE CHANGING, SO IT’S TIME TO TE AR DOWN THE SILOS TO MEE T THEM.

n the wake of the Supervalu-United Natural Foods Inc. merger news, which admittedly took me by surprise — not because I didn’t know Supervalu wouldn’t make a move like this at some point, but because there hadn’t been a whisper about such a merger, and I had just been at the Supervalu National Expo the day before the news broke — the point is driven home that nothing in the grocery industry remains static for long.

That means retailers can’t remain static, either.

I’ve been doing a lot of speaking at various industry events lately about meal options in grocery stores, including meal kits and prepared foods, which are further indicators that nothing in our industry remains status quo. Sure, the term “home meal replacement” has been bandied about for decades, but now it’s time to get serious. As the pages of Progressive Grocer have been reiterating for quite some time, it’s time to tear down the silos.

Consumers are looking for solutions — they don’t care if it’s technically a produce item or a deli item, they just want meals that address whatever need state they find themselves in at that moment.

And independents are perfectly poised to tear down those silos, as it’s pretty easy to persuade yourself that all sales are important to the bottom line — the only line that really matters.

As I mentioned above, I was at Supervalu’s National Expo, where Jody Barrick, Supervalu’s VP of corporate bakery/deli merchandising and sales, spoke about the wholesaler’s Quick & Easy line of meals. This isn’t meant as a commercial, but merely to offer an example of providing solutions that meet multiple need states.

Quick & Easy is a three-pronged approach to meal solutions. It offers fully prepared, ready-toeat, grab-and-go options; completely assembled heat-and-eat meals; and meal kits that require the consumer to do some prep. This hits all three need states that consumers have regarding meals.

That’s what shopping is all about: meals. I won’t go into how meals are changing and the rise of snacking, but it’s a fact of nature that we all have to eat. It’s what our business is based on, and you 82

progressivegrocer.com

Consumers are looking for solutions — they don’t care if it’s technically a produce item or a deli item, they just want meals that address whatever need state they find themselves in at that moment. have to adjust to the changes in how consumers want their food. It’s also a fact that fewer consumers than ever know how or have time to cook, yet they still need to feed their families.

The center store has been shrinking for years as consumers’ interest in the fresh departments grows.

A meal solution center is the next step in this evolution in the perimeter.

At a recent Illinois Food Retailers Association meeting, Associated Wholesale Grocers CEO David Smith noted: “Meal kits are an important part of the supermarket experience. We believe it is a growth tool to enhance shoppers’ experiences. It’s a great starting spot for new chefs, new consumers and people that are time-starved.”

You just have to make sure that shoppers think of your store for those easy meal solutions, offered any way they want them: a little bit of prep, cold but ready to heat up when it’s time to eat, or hot and ready to be consumed when they get home.

This is the future of food shopping.

SHOULD BE PART OF YOUR NEXT ICE CREAM RESET

U

Velocity VARIETY PACK

U

E

N

MBER ON

E

VALUE NOVELTY ICE CREAM

*

N

MBER ON

*

SELLING PAIL

U

E *

N

MBER ON

Offer your shoppers carefully crafted quality at a surprisingly affordable price. Generously sized and in classic flavors, they’re a go-to for parties and everyday family moments.

Stock Blue Ribbon Classics® and give shoppers another delicious reason to visit.

*

1–800–331–0830 info@blueribbonclassics.com

Source: Nielsen Answers On Demand Latest 52 Weeks WE 6/30/18 ©2018 Wells Enterprises, Inc.

2018

A COMPREHENSIVE STR ATEGY GUIDE TO BUILDING BEER BUSINESSES ACROSS CHANNEL S

3 4 5 10 PAG E

PAG E

PAG E

PAG E

An Update from Kevin Doyle MillerCoors Advantage Industry Overview Off-Premise

10

25

CO N V E N I E N C E S TO R E S

D O L L A R S TO R E S

15

28

G R O C E RY S TO R E S

D R U G S TO R E S

20 L I QU O R S TO R E S

30 34 43 PAG E

eCommerce

PAG E

On-Premise

PAG E

2

Key Takeaways

Beer is big business.

It’s a constantly changing one as well, with new brewers, brands and packages appearing seemingly every day. Today’s consumers have more options than ever before when choosing a beer.

Consumers also have more options when it comes to where they shop for a beer. And their reasons for purchasing a particular beer are changing as well. Today consumers don’t buy the same beer for every occasion.

They buy a beer based on where and when they’ll be drinking it and with whom.

That’s where this Building with Beer® publication comes into play.

This strategy guide will give you a look at how beer contributes to the overall success of your store and how to capitalize on the changing habits of today’s beer shopper. Building with Beer® shares best practices from each of the industry’s key classes of trade and provides insights and solutions to help you navigate and win in today’s challenging retail environment.

At MillerCoors we are committed to providing the tools and services to help you – our customers – grow the size and value of your total beer category. A growing category benefits everyone – including your consumers. This strategic guide reflects that commitment.

We hope you enjoy this Building with Beer® publication. To learn more about trends in your business and the full assortment of tools and resources MillerCoors can provide, we encourage you to reach out to your MillerCoors sales team.

Thank you,

Kevin Doyle President, Sales and Distributor Operations MillerCoors

3

M I L L E R C O O R S A D VA N TA G E

The MillerCoors Advantage is the bundle of goods and services we provide to our customers to help grow the size and value of our customersâ&#x20AC;&#x2122; beer category.

Brands We have a robust brand portfolio that includes industry-leading premium American lagers and premium American light lagers, crafts, prestige imports, hard ciders, flavored malt beverages and more.

Innovation

MillerCoors Advantage

We create scalable and differentiated innovation that excites consumers, shapes the category and drives incremental value.

Brands

Business Building Solutions We bring a suite of space and assortment, retail marketing, revenue management and other tools to help convert shoppers.

Distributor Services Profitable Category Growth

People We have the most collaborative, passionate and value-add talent in beer with the skills to meet the needs of our dynamic industry and increasingly sophisticated retailers.

Distributor Services Our network of entrepreneurial distributors is constantly looking for new ways to help retailers build their beer business.

4

Innovation

People

Business Building Solutions

at work trying to bring people into the category, by bringing new innovation, new packaging and more.

But getting beer right at retail is critical. That means understanding what makes consumers tick and appropriately setting up the shelf or the bar.

This Building with Beer ® publication details the strategies for getting the most out of beer in every class of trade. The insights are the result of exhaustive research MillerCoors has done during the past three For years, retail sales for beer have followed a

years, including interviews with more than 30,000

familiar pattern: Revenue goes up while case volume

consumers and analysis of more than 2.5 billion

remains flat to slightly down.

retail transactions.

But 2017 was different.

What we’ve learned: Now, more than ever, purpose drives purchase.

Dollar sales inched up just 0.5 percent, about a fifth of

Consumers enter the store with a

the growth rate in recent years, while volume dropped

purpose. They want to engage with brands that have

nearly a full percentage point, according to Nielsen.

a purpose. They want a shopping experience that

1

enables this, and frequently they’re not getting it.

The grocery channel appears to be the hardest hit, with revenue down 0.8 percent, marking the first time

The reason: The explosion in new beer brands and

since before 2010 that revenue slipped into the red.

packs has made the beer shop more complicated

Case volume fell 2.2 percent. Convenience dollar sales

than ever.

were up 0.7 percent, but volume slid 0.9 percent.

2,3

In 2017, more than 17,000 SKUs were sold in the Causes range from changing demographics to

beer category, making the beer aisle more chal-

growing competition from wine and spirits to

lenging for retailers – and consumers. For instance,

evolving consumer trends. Brewers have been hard

just 49 percent of consumers said they were

5

INDUSTRY OVERVIE W INNOVATION • ENGAGEMENT • OCC A SIONS “relaxed” when shopping for beer, compared with 89 percent when shopping for wine.4 And it’s starting to hurt sales and turnover. While the number of beer SKUs rose 14 percent between 2013 and 2017, productivity per SKU declined 5.1 percent.5 This fragmentation also has led to out-ofstocks in core brands, and if you don’t have what consumers want, they are more than willing to go across the street to get it.

WHAT’S THE WAY FORWARD?

or pairings. This occasion involves a trip to the

We believe that a healthy category relies on a

grocery or liquor store or an on-premise account.

balanced approach that is grounded in retailer

• Celebrate – This is a high-energy event where you

strategy, and we believe that all segments play a

connect and celebrate with friends and acquain-

role in your path to profitable growth. Here are

tances. You’re looking for something refreshing,

four principles that flow from this belief:

perhaps something flavored and sweet, and sessionable. This indexes highest with liquor and

1) Consumer choice is driven by occasion. People

on-premise.

buy beer based on the situation in which they’ll be drinking it. There are four primary occasions: • Relax – Alone or with family, this occasion is all about relax and reward and treating oneself.

You’re looking for a trusted brand with value – and perhaps some prepared foods to go with it. This occasion indexes highest with grocery and c-stores.

• Connect – This is about being with family and close friends – people you are comfortable with

2) Every segment plays a role. Right now the above premium segment is driving growth in the beer industry. Does that mean retailers should focus

– to catch up or just hang out. Here

their energy on above premium at the expense of

you’re looking for something light

American light lagers and economy? The evidence

and refreshing and sessionable. This

suggests no.

occasion indexes highest with c-stores.

• Social – This is an occasion with friends and

6

Consumers are interested in exploring the right

acquaintances where you want to impress and

assortment of craft or flavored malt beverages in

stand out, and you’re choosing a beer accord-

above premium. Fully 62 percent of consumers say

ingly. You may be looking for something popular,

they went into a store with a premium brand in

something with flavor, something with a story and

mind – think Coors Light or Budweiser.6 Economy

heritage and, depending on the situation, recipes

is critical: About 23 percent of consumers choose

INDUSTRY OVERVIE W INNOVATION • ENGAGEMENT • OCC A SIONS a store based on perceived value, second only to

come from innovation.5 It’s especially

convenience.6

important to millennials; some 18 percent of them plan to look for

Retailers must find ways to capitalize on growing

something new when they shop. They’re far

segments. But it’s important to remember all

more engaged in new products than their older

segments need to be properly represented to have

counterparts. But too much choice confuses

a growing category.

consumers, clogs up shelves and drives down productivity.6

3) The core matters. More than three-quarters of consumers say

PURPOSE DRIVES PURCHASE

they know from which category

Consumers are faced with increasing options.

they were going to buy before

Finding the correct balance of assortment,

they walked into the store. A combined 66

pack size and type, innovation and pricing is key

percent of beer volume is driven by baby boomers

to earning and retaining a consumer’s business.

and Generation X drinkers, consumers who are

Who they are with and what they are doing has

predisposed to shop by brand and pack size. If

a profound impact on the products consumers

retailers don’t have that brand or pack size in stock,

choose – not just for segments but also for specific

they risk losing that visit. While millennials are

brands and pack sizes. What drives consumer

less focused on brand and pack size, a significant

choice at shelf is dependent on the occasion; 67

percentage of them still care.

percent of total alcohol beverage shops are for the

6

6

4) The right innovation works. Fifty percent of industry growth over the past five years has

relax and connect occasions and when shopping for relax occasion, brand and pack are the most important factors to consider.7

THE POWER OF PREMIUM LIGHTS Coors Light, Miller Lite and Bud Light represent

or cans – nearly 79 percent exclusivity.3 And they’ll

a third of beer volume sold at retail. They have

buy the pack size, bottle or can that fits in with

three times higher velocity per SKU than the above

the occasion they’re buying for and the money

premium category as a whole. A big reason is that

they have in their pocket. Premium American light

they fit in with a wide range of occasions, from big

lagers drive business for retailers – 96 percent of

social occasions down to more intimate at-home

retailers who grow premium lights are growing their

occasions. And they have a faithful consumer-base:

beer business. But 72 percent of retailers who are

14 million legal-aged consumers drink premium

not growing premium lights are seeing their beer

American light lagers, while only 8 percent of all

category decline.4

1

beer drinkers are craft-only consumers.2 People also have a strong preference for bottles

1. Kantar, Custom Behavioral Tracking Study, GPK — Custom Incident Study, 2017 2. Nielsen Homescan, 2017 3. InfoScout Beer Panel, L12M October 2017 4. Nielsen Grocery, full-year 2017

7

INDUSTRY OVERVIE W INNOVATION • ENGAGEMENT • OCC A SIONS SETTING THE SHELF TO IMPROVE SHOPPER PREFERENCE Choice begins with occasion

SHOPPER NEEDS LINK TO THOSE OCCASIONS

FRUIT Y & FL AVORFUL

E XPER IENTIAL

M Y ROUTINE Light

Quality @ home

Innovative

Expressive

Complex

Fruity & Flavor ful

DECISION DRIVERS HELP TO INDUCE PURCHASE PRICE

•

BR AND

•

PACK

COUNTRY

•

ST YLE

•

PACK

PURCHASE

FL AVOR

•

T YPE

•

ABV

PURCHASE

This means that pack loyalty remains high: 47 percent

of out-of-stocks and SKU fragmentation, opera-

of consumers who purchase 6-packs remain loyal

tional challenges exist across each class of trade.

to that pack, shifting to 35 percent for 12-packs,

Implementing a strategic space plan ensures the

30 percent for 18-packs and 40 percent for big

most complex of layouts and retail environments

packs. Getting the right packs on shelf is more

properly meet the changing needs of today’s

important than ever. Miss a key pack and retailers

consumers.

8

risk losing the shop.

But using space planning as a means to balance With nine out of the top 10 growing packs priced

days of supply, or simply increasing days of supply

under $12, it is clear that consumers also are looking

to help address out-of-stock challenges, can be

for specific price points. Unique packs help you do

dangerous. Simply put, balanced days of supply

just that – provide unexpected value at shelf.

attempt to drive parity between packs in the

9

cooler. Getting every package to the same days The driver of choice in crafts and imports is different;

of supply only creates excessive inventory on the

price plays a role but where the beer is from, the

shelf and limits the variety that can be offered to

style and the package are more important than

consumers, which can impact your sales.

brand and price. And for FMBs, it’s all about getting the right flavors in each of the sub-segments (seltzer,

While we agree that the long tail is too long and

soda, FMB, higher alcohol).

that there is a need to reduce inventory, simply increasing days of supply on packages is not

SPACE MATTERS

recommended. You first need to consider what you

Retailers are talking about space more than ever.

want in the box so you are selecting the right core

In 2017, the average number of items sold on shelf

items in each segment, delivering on what your

was down. Coupled with an increased number

shoppers want.

10

8

INDUSTRY OVERVIE W INNOVATION • ENGAGEMENT • OCC A SIONS Consider the impact of adding one day of supply:

shelf right is dependent on your strategy.

• You will delete an average of 30 shelf SKUs. • Even if items are slow-moving, the deletion

There is no simple, one-size-fits-all solution. We

accounts for the loss of ~5k units a week.

know that the occasions remain stable across

• This translates to $60k dollars in lost revenue

retailers and classes of trade, but the items within

a year – FOR EACH STORE.

each can be tailored to the specific needs of

• If you have 1,000 stores, adding one day of

shoppers. Having a strategy based on true shopper

supply to every store accounts for $60 million

insights that addresses the right assortment, shelf

in lost category revenue.11

flow and in-account experience can be the difference maker in the dynamic beer business.

Imagine what the impact would be if you decided to move to seven days of supply. This is why it’s

This Building with Beer ® publication shares

important to strike the right balance between days

the best practices of successful retailers who

of supply and number of packs.

have done a good job in meeting the needs of shoppers, building the beer business at their own

RETAIL STRATEGY DRIVES FLOW

locations and overall, and who have embraced the

Consumer satisfaction with the shopping experi-

opportunities presented by a solid, thought-out,

ence is declining.12 They know what occasion they

strategic beer plan.

are shopping for and don’t want to be challenged in finding the products they want.

Getting the right item assortment on the shelf, spaced appropriately, is the most important thing a retailer can do. Flow can improve shopper experience and drive sales. But getting the flow of the

Sources: 1. Nielsen Total US xAOC + Convenience, year ending Dec. 30, 2017 2. Nielsen Total US Grocery, year ending Dec. 30, 2017 3. Nielsen Total US Convenience, year ending Dec. 30, 2017 4. Kantar Retail ShopperGenetics(r) 52 weeks ending May 2017 5. Nielsen Total US xAOC + Convenience, 2012 -2017 6. Nielsen BevAl Shopper Fundamentals Study, 2017 7. Kantar, Custom Behavioral Study, full-year 2017 8. Nielsen Household Panel 2017 9. Nielsen, 2017 10. Nielsen, xAOC + Convenience, 5 years ending Dec. 31, 2017 11. Custom Space Study (Nielsen Grocery, full-year 2017) 12. Kantar, Retail ShopperGenetics, 2017

DESIGNING A FLOW TO DELIVER ON SHOPPER NEEDS

PURPOSE DRIVEN FLOW

FRUITY & FLAVORFUL

EXPERIENTIAL

MY ROUTINE

SINGLES

CRAFT - LOCAL

SUPER PREMIUM

CIDER

FMB

CRAFT - NATIONAL

PREMIUM (LT/REG)

FMB

CIDER

EUROPEAN IMPORTS

ECONOMY

FLAVORED BEER

MEXICAN IMPORTS

MY ROUTINE

EXPERIENTIAL

FRUITY & FLAVORFUL

SINGLES

MEXICAN IMPORTS

FLAVORED BEER

ECONOMY

EUROPEAN IMPORTS

PREMIUM (LT/REG)

CRAFT - LOCAL

SUPER PREMIUM

CRAFT - NATIONAL

BASKET BUILDING FLOW OR

• LEADS WITH LARGEST OCCASIONS & SEGMENTS

• LEAD THE SMALLER OCCASIONS & SEGMENTS

• SCORES HIGHEST IN SHOPPER PREFERENCE

• PULLS CONSUMERS THROUGH THE AISLE — INDUCE

• PROVIDES DIRECT LINKAGE TO OCCASIONS • ALIGN SEGMENTS BY PRICE & DRIVERS OF CHOICE

INCREMENTAL SPENDING • ANCHOR ROUTINE AT ONE END OF AISLE

9

C-store is the largest class of trade for beer sales,

the package type and brand are not available, a

representing almost one-third of industry volume

third of shoppers will leave the store.4 However, if

and continuing to increase in importance.1 C-stores

a shopper finds an item in the first 10 seconds,

continue to grow due to consumers’ on-the-go

he/she will buy more items.5

lifestyles. More than 56 percent of consumers look for proximity of stores, 43 percent want to spend

OCCASIONS

less time shopping as they see “it as a chore,” and

C-store beer shoppers buy packages that perfectly

47 percent prefer to get in and get out quickly.

match three occasions.

2

C-STORE TRIPS ARE

Relax is the first occasion driving purchase intent.

FAST AND WITH INTENT

Relax is an after-work transition to “Shed the Day,”

An average c-store shopper spends less than 20

which usually involves one to two people, with

seconds at the cooler and less than two minutes

singles the most purchased pack.

in the store. Due to this quick decision-making 3

process, it’s difficult to influence the beer shopper

Connect is the second occasion driving purchase

in-store as 86 percent of beer purchase decisions

intent. Customers usually pick small packs to

are made before they step inside. In fact, two-thirds

reconnect with a small, trusted group of close

of shoppers make the brand/package decision

family and friends.

before arriving, leaving only one-third open to influence.4 It’s important to be in stock because if

Social, the third occasion, is when customers use beer to celebrate at a party or tailgate. They will buy

K E Y FAC T S C-STORE SHOPPERS SPEND: • < 2 minutes in the store • < 20 seconds at the cooler VideoMining, 2016

10

both large packs and small packs for this occasion.

Since shoppers are on their way to an occasion, nearly 83 percent of beer purchases are for consumption within two hours, and 65 percent within one hour.6 Therefore, cold beer from the cooler is essential.

C-STORES OCCASIONS • SINGLES • PRICING THE VALUE OF BEER SHOPPERS Beer shoppers are important to c-stores due to

$15

BEER DRINKERS SPEND MORE

their loyalty and frequency. Beer shoppers make 26 c-store trips per month versus only 14 trips by non-beer drinkers. C-stores are a key destination for beer as 55 percent of c-store beer trips are solely to purchase beer. These shoppers also spend more:

AV E R AG E C-STORE BASKET

$6

approximately $15.12 per basket, which is two times the average c-store basket. The after-work window

in focus groups. Through our partnership with

is critical as 60 percent of beer sales occur between

NACS, we studied 8,000 shoppers in the Annual

3 and 8 p.m., making beer the No. 1 category in

Convenience Tracking Program, as well as firms

c-stores during that window. 53 percent of beer is

representing 18,517 stores in the State of the

sold Friday, Saturday or Sunday.7

Industry report to fuel our thinking.

BUILDING WITH BEER®

OPTIMIZE COOLER ASSORTMENT

The foundation of Building with Beer ® starts with

Often beer is under-spaced in the cooler. With a

the most up-to-date, solid facts and insights. Since

lower average days of supply versus other categories,

2010, we’ve analyzed 800 million c-store transactions,

beer is worth more in sales than the space it’s given.

conducted more than 6,100 shopper exit intercepts,

On average, optimal c-stores have at least 40 percent

studied more than 2.9 million in-store visitors and 52

of cooler doors dedicated to beer. As the beer

million c-store baskets nationwide with VideoMining,

category expands space, revenue increases, more

and talked with c-store shoppers across the country

than any other beverage category in the cooler.8

W E E K LY R E V E N U E BY # O F CO O L E R D O O R S

$4,382

$3,666 $3,196 $2,626 $1,866 $429

1

<= 0.5

$950

3

2

4

5

6

7

# OF UPRIGHT COOLER DOORS

Beer

Tea + Juice

Energy + Coffee

Sports Drinks

Carbonated Soft Drinks

Water

Nielsen Space Audit, 2017

11

C-STORES OCCASIONS • SINGLES • PRICING C-STORE SHOPPERS

EXPECT TO FIND ECONOMY & PREMIUM AMERICAN LIGHT LAGER BEERS

INDEX ECONOMY

122

PREMIUM LIGHT

119

PREMIUM REGULAR

114

CRAFTS

72

IMPORTS

86

FLAVORED MALT BEVERAGES

97

*Index based on % likelihood purchasing any beer in the channel compared with % likelihood of them purchasing the specific segment in that channel

INDEX* BY SEGMENT

Nielsen Category Shopper Fundamentals Survey, Q4 2016

WIN WITH SINGLES

Creating a singles destination will help the

Singles continue to expand in c-stores and

singles shopper find what he/she needs quickly.

now represent a 25 share of category dollars

Merchandising singles together rather than

and 55 percent of beer transactions. Singles

dispersing them across all doors results in an

growth has been impressive and is responsible

average 18 percent higher sales rate.11 Five distinct

for two-thirds of beer category gains over the

segments drive singles and are all necessary

past five years. Of this optimal 40 percent,

for growth. Merchandising singles within these

c-stores should have at least 25 percent of the

segments will help shoppers quickly find what

beer space dedicated for singles.

they’re looking for, increase their basket size and

9

8

encourage trade-up: Singles and multipacks rarely overlap as only 3

• Flavors: Flavored malt beverages, hard sodas,

percent of beer transactions have both singles

cocktails

and multipacks in the basket. So merchandising 10

singles together from a shopper perspective

super premium

makes sense. Singles shoppers are some of the

• Refreshment: Premium and near-premium

most valuable c-store customers and their c-store trips are increasing; singles shoppers will visit a

American light lagers • Value: Economy

c-store 29 times a month and purchase 20 times.

4

12

• Indulgence: Imports, crafts and hard ciders,

• Large bottles: 32-, 40- and 42-ounce bottles

C-STORES OCCASIONS • SINGLES • PRICING SIMPLIFY PRICING AT SHELF On average, the singles shopper purchases 1.5 singles per transaction, meaning sometimes he buys one and sometimes he buys two. Too many price points and too many cooler door stickers are confusing for the shopper and lead to fewer sales. To encourage purchase, move to one or two price points on a shelf with “2-For” promotions. Clearly communicate it with prominent shelf strips. Clear signage results in a 5 percent sales lift even when the “2-For” pricing is just the single purchase price times two.11

Too many price points and door stickers

Simple shelf pricing makes it easier to shop

OPTIMIZE ASSORTMENT

largest segment and have the most consumer reach

Base sales make up 98 percent of total c-store

in the beer category.15 So it’s not surprising that

beer volume sales, with just 2 percent attributed to

c-stores that carry both 12-pack cans and bottles

incremental sales.12 Getting the right SKUs on shelf

for all three premium American light lager brands

with enough days of supply is imperative. Make

sell 9.6 percent more beer on average than stores

small multipack mix count. Ensure availability of

that don’t carry all six packages.16

core 12-packs and smaller. Small beer multipacks make up three-quarters of sales and provide one

C-stores must also ensure availability of economy

of the largest c-store basket rings, more than twice

brands to satisfy shopper expectations as economy

the average c-store basket.13

shoppers are very loyal with the highest exclusivity rates in the category.15 They spend more annually

Seven of 10 small-packs sold in c-stores are

in c-stores than any other beer shoppers ($249/

premium American light lagers and economy.

year), they complete 12 percent more trips and 69

However, since 2013 the number of c-store SKUs

percent exclusively want their brand.15

has increased by 29 percent, while American light lagers and economy SKUs fell from 72 to 67

It’s important to focus and hold space for the core

percent.14

segments while also balancing an assortment of growing segments. After American light lagers

C-stores must lean into premium American light

and economy, imports hold 17 percent share of all

lagers to drive conversion. Shoppers are looking for

c-store beer purchases. This is driven by Mexican

12-packs – the No. 1 multipack package in dollar

imports, growing 20 percent in c-stores in three

sales.9 Premium American light lager brands are the

years – up $1 billion since 2014.17

13

C-STORES OCCASIONS • SINGLES • PRICING I T TA K E S 2 4 W E E K S FO R C - S TO R E S TO G A I N T H E I R FA I R S H A R E O F I N N OVAT I O N SA LE S Fair Share

55.0 45.0

300

250%

200

C-Store $ Share of Measured Outlet Sales for Key Brand Innovation

40.0 35.0 25.0

NEW ITEM FROM THE INITIAL STORE PURCHASE 250

50.0

30.0

S H O PPE R S 2 . 5 X M O R E L I K E LY TO PU R C H A S E

1 wk

10 wk

150 100 24 wk

Total Outlet Nielsen Scan Key Innovation SKUs, 2016

50

100%

Store Where Purchased New Item

Any Store

0 Total Outlet Nielsen Homescan, 2016

Though the craft segment makes beer industry

pack size and brand decisions. Ensure there is always

headlines, it makes up only 6 percent of total c-store

space for cold beer and that beer is always in stock,

beer purchases. Prioritize national craft to maximize

especially during the 3-8 p.m. high-traffic period.

revenue since national craft moves 1.5 times faster 2) Win with singles by dedicating at least 25 percent

than local craft.17

of cooler space to singles, merchandise singles Millennials and Generation Z are expected to

segments to motivate trade-up, communicate price

represent 57 percent of the population in 2020, so

clearly with shelf tags and implement “2-For” pricing.

it’s important to engage 21+ consumers in new ways to stay relevant. If millennial shoppers choose beer

3) Optimize space by having the right assortment.

at age 21, they’re two times more likely to stick with

Maintain stock on the core segments – American light

beer over their lifetime.

lagers and economy. Balance the portfolio with key

18

growth segments and be quick-to-market with key Shoppers are 2.5 times more likely to purchase new

innovations that attract new shoppers and increase

items from the site of the initial purchase, however,

return trips.

it takes c-store 24 weeks to gain share of innovation brand sales.19 To attract the millennial shopper, leverage innovation with improved speed to market and support it with breakthrough in-store merchandising that disrupts at the point of purchase. For example, using digital price signs with movement results in a 2.1 percent lift.20 Merchandise the store – make shoppers look for something different.

STEPS TO BIGGER C-STORE BEER SALES: 1) Realize the value of the shopper and understand their shop. They’re more loyal, make more trips and spend more money. The shopper occasion drives

14

Sources: 1. MillerCoors Industry Estimates, December 2017 2. Global Survey Growth Strategies, 2016 3. VideoMining, 2016 4. MillerCoors PBM Consolidated Intercepts, 2017 5. TNS, 2014 6. MillerCoors Profitable Beer Marketing Transaction Study through November 2017 7. 5,000 c-store shopper surveys, January 2017; 2016 NACS convenience tracking program survey; NACS 2016 State of Industry 8. Nielsen Convenience Space Audits, bi-annual audit, Oct. 24, 2015 9. Nielsen C-Store Audit, Q4 2017, MillerCoors Profitable Beer Marketing, 2017 10. MillerCoors Profitable Beer Marketing Transaction Study, 2017 11. Nielsen C-Store Audit, Q3 2016 12. Nielsen AOD C-Store POS Volume Sales, 2017 13. Nielsen C-Store, latest 52 weeks ending May 6, 2017; MC Transaction Analysis 14. Nielsen AOD C-Store POS Volume Sales, 2013-2017 15. Nielsen Panel Data, Q3 2017 16. Nielsen C-Store Analytics/Space Audit, Q4 2015 17. Nielsen Total U.S. Convenience year-to-date Aug. 12, 2017 18. Consumer Adoption Survey, 2014 19. Nielsen Homescan, 2016 20. MillerCoors Digital Price Sign A/B testing OH, February-May 2018

Beer is a big, important category in grocery. It accounts for $11 billion in sales and is the No. 1 category during summer months.1 Beer has the power to drive traffic and influence store choice and trip mission â&#x20AC;&#x201C; as it is the No. 1 category driving trips to stores.2 Year-round, beer is bigger than 98 of the

CONVERT SHOPPERS MORE OFTEN TO TAKE ADVANTAGE OF $390M OPPORTUNITY By having a balanced assor tment of brands and pack sizes.

top 100 categories in grocery.1 In fact, the premium American light lager trio, Coors Light, Miller Lite and

the entire hot dog category and 37 percent more

Bud Light, each year generate more revenue than

revenue than the vodka category.1

15

GROCERY STORES CONVENIENCE • VALUE • FOOD EXPERIENCE

Success in grocery stores is critical for beer category growth, an area that has slowed in 2017.

TOTAL GROCERY ALCOHOL BEVERAGE SHOPS

two purchase-driving elements: 1) who will I be with and 2) what will I be doing?

However, while the format of a RETURN TO GROWTH

grocery store has changed very little in 50 years, the shopper

28%

has evolved and moved into a

The growth opportunity comes from defining and commercializing the four

new shopping mindset – quicker,

occasions: relax, connect, social and

smaller trip missions. The

celebrate. In a consumer mindset,

average grocery trip is now less

they are non-substitutable pockets

than 15 minutes, with eight out

of demand defined by the number of

of 10 trips smaller in nature.3

39%

The opportunity for retailers to

people involved and the consumer motivations in those moments. As

capitalize upon these trends is

such, many segments and pack sizes

immense as consumers need to

fit into different consumer occasions,

be served on both small trips

with much overlap between occa-

and larger stock-up trips, which

sions and accommodating pack sizes.

13%

are increasingly fulfilled via eCommerce outlets.

A balanced assortment of premium American light lagers, craft, imports and flavored malt beverages is critical

The grocery channel is being

to ensure all occasions are met.

challenged from many sides with more smaller-format stores

Once a consumer has evaluated the 20%

and no-frills retailer expansions

‘who’ and ‘what’ prompting a trip,

supporting the existing avail-

they then decide what items will

ability in c-stores, gas stations

fulfill it (planned and unplanned).

and eCommerce home delivery.

Sticking to the fundamentals of

MillerCoors Global Segmentation Study, 2016

what the consumer is looking for – convenience, value and assortment – will create

These needs help define the choice drivers, such as convenience, perceived value and assortment and

ultimately the best shopping outlet.

reasons to bring them into grocery.

Retailers should focus on three factors that can

16

Category growth will return by deepening the under-

bring the category back to growth.

standing of consumer desires, their motivations, their

1) Deliver on consumer occasions

needs and where they are not being satisfied. The

2) Exceed consumer in-store expectations

consumer is not regimented by decision trees and

3) Ensure options are available for all trips – small

stereotyped demographics. They are motivated by

to stock-up missions

GROCERY STORES CONVENIENCE • VALUE • FOOD EXPERIENCE

QUICK TRIP 42% OF TRIPS $163M OPPORTUNITY

FILL-IN TRIP 33% OF TRIPS $128M OPPORTUNITY

cold beer, as well as ensuring large packs are cold for high-energy, larger crowd social events.

STOCK-UP TRIP 25% OF TRIPS

The opportunity for driving beer displays is huge

$97M OPPORTUNITY

in grocery. Seven out of 10 consumers have beer on their list, but of the 30 percent who did not plan

2016 Shopper Landscape Study Pack Size and Beer Segment; Sizing Source: InfoScout, L12M June 2016

to purchase, half stated a display influenced an incremental beer purchase.5 A display can convert

FUNDAMENTALS

50 percent of your consumers who were not

The consumer is motivated by convenience, value and

originally planning on purchasing beer!

assortment. Almost 80 percent of shoppers consume beer within two hours of purchase,4 so it is critical to

Beer is one of the most expandable categories in

leverage food and meal partnering occasions with

grocery, so displays can generate a huge amount of

TOP TE N BR A NDS DR I V E C ATEGO RY SA LE S Top 10 brands account for 53 percent of category sales and the

remaining top 50 account for 29 percent. Category tail of 2,753

ESS G U IN N

PA B S T

FF

RD

S M IR N O

ORCHA

S

ANGRY

ITA S

K U G E L’

L AG U N

L E IN E N

NE

M IK E ’S

K E YS TO

D OS EQ U IS

A NEW B E L G IU M

N E VA D

L A DA M S

S IE R R A

L IN G

SAMUE

Y UENG

A R T O IS

BLU E M OON

AL

EN

S TELL A

H E IN E K

N AT U R

BUSCH

O MODEL

O B U LT RA

A

IS E R

M IC H E L

BU DWE

CO R O N

L IT E

L IG H T CO O R S

M IL L E R

B U D L IG HT

brands make up remaining 18 percent of category sales.

Nielsen, U.S. Food, latest 52 weeks through June 30, 2018

17

GROCERY STORES CONVENIENCE • VALUE • FOOD EXPERIENCE incremental spend for retailers. Almost 40 percent of consumers say a display was important or extremely important to their decision to purchase beer, with one in five consumers noting their purchase was incremental.5 Compounding this, beer holds the same trip patterns when purchased off-display or via cooler, generating a repurchase rate and additional trips similar to salty snacks, bread and cereal (all displayed at higher rates).

Consumer motivation to find value through features remains strong: eight out of 10 consumers use features in shop planning, and over $3 billion was saved in promotional activity in 2017.6 Along with a balanced assortment, retailers should bring a feature strategy that reflects consumer spending across both segments and price points. Leading with premium American light

As seven of 10 consumers have beer on the list

lager large packs at a price discount,

pre-store, ensuring there is a comprehensive

supporting with mid-size packs on

assortment of core items is key.6 This will ensure

multibuys and having small packs

sales are converted at a maximum rate, and that

hitting key price points can drive

shoppers are not leaving a store unsatisfied. Core

the highest traffic and conversions.

premium American light lagers, such as Coors Light, Miller Lite and Bud Light, drive one-third of category

42 percent of all feature volume

revenue and turn 53 percent faster than the category

comes from premium American

average.8 Craft has also been growing and is now

light lager large packs, but 25

22 percent of category dollars.7 Maintaining high

percent of feature volume comes

in-stocks of these brands – and cold – is paramount

from Mexican imports, like Sol,

to category success. A balanced assortment of lagers,

reflecting the need for a varied

craft, economy, imports, hard ciders and flavored malt

feature strategy to maximize

beverages will ensure a quality consumer experience

sales.

and a successful beer shopping trip in grocery.

7

18

GROCERY STORES CONVENIENCE • VALUE • FOOD EXPERIENCE

FOOD PARTNERING

that meet all needs – from ‘grab and go’ singles

As the expansion of meal kits and prepared food

and small packs to larger packs that can help

and the growth of in-store ‘food-to-go’ areas

serve a crowd. The relax and connect occasions

continues, it is critical that retailers engage with this

fulfill almost 70 percent of grocery trips,12 and

trend and ensure that cold beer is readily available

retailers must have available options for these

to encourage basket building. The consumer

moments to convert the consumer.

buying beer creates a basket that is 43 percent higher than baskets without beer, highlighting

Programs like Pints and Plates offer new ways

the value of a consumer-relevant food and beer

to go to market with food and beer – designed

solution. With 68 percent of Americans considering

to increase trips and basket size. This program

themselves ‘foodies’ and 72 percent of Americans

creates a destination within the store, and via

cooking at home at least four times a week, satis-

digital and social media, where shoppers can

fying the needs of these consumers is essential.

be inspired to purchase more items in an easily

9

10

11

shopable way.

With the increased assortment of beer SKUs in the category, the consumer is now becoming more interested in what beer and food pairings could exist when seeking a partner for meals.

Considering the different occasions where food is key, it is important for retailers to have offerings

Sources: 1. Nielsen, Answers on Demand, Total US Food + Mass, 52 weeks ending April 21, 2018 and June-August 2017 2. Nielsen Category Fundamentals, 2017 3. VideoMining, 2016 4. Profitable Beer Marketing, 2010-2017 5. InfoScout, September 2016 6. Nielsen BevAl Category Fundamentals, 2017 7. Nielsen, US Food, 2017 8. Nielsen xAOC, 2017 and Willard Bishop, 2016 9. Kantar Retail Shopper Genetics®, 52 weeks ending May 2017 10. Mintel, November 2016 11. PR Newswire, December 2016 12. MillerCoors Global Segmentation Study, 2016

19

The liquor store format is unique and important to

are clear indicators that the shopper’s needs are

growth across total alcohol occasions. This class of

not being met.

trade is big ($46 billion in total sales) and provides

• Grocery attracts four times the beer households

an exceptional opportunity to recruit and satisfy the

and two times the beer trips with less than half

needs of the shopper with more than 164 million

the variety.2

trips per year.1 However, both sales and trips are

• 32 percent of liquor store trips include beer, less

declining, highlighting an opportunity to improve

than wine and spirits.2

the in-store experience, merchandising discipline

• 44 percent of the U.S. population shops the liquor

and assortment of items carried across segments.

channel, but only 37 percent of those consumers buy beer from liquor stores.2

LIQUOR SHOPPER The liquor store shopper is diverse and evolving,

Why recruit the beer shopper? Beer improves the

and it is essential to exceed his/her expectations.

frequency of trips and has a greater impact across

Stores have aggressively expanded variety in beer,

broader alcohol occasions. Wine and spirits drive 15

spirits and wine to differentiate against other

and 36 percent fewer trips, respectively, than beer.3

channels. The shopper desires variety but never at the expense of shopability. Despite carrying more

Elevating the beer category and improving ambient

than twice the number of beer SKUs as grocery

merchandising with inspiring points of interest

stores, liquor stores struggle with conversion rate,

throughout the store will generate incremental

basket size and recruiting routine shoppers. These

purchase and build a bigger basket.

BEER IS NOT TOP OF MIND FOR SHOPPERS IN LIQUOR STORES

85%

37%

28%

BUY BEER SOMEWHERE

BOUGHT BEER AT LIQUOR

OF THEIR BEER DOLLARS ARE SPENT AT LIQUOR

Down 2.1% InfoScout Beer Shoppers @ the Liquor Channel, 2016-2017

20

Down 2.3%

Down 0.3%

LIQUOR STORES PORTFOLIO • CUSTOMER BASE • MERCHANDISING

• 38 percent of shoppers state a display was

D I S PL AY SA LE S R ATE

important in their decision to buy beer.4 • 28 percent greater velocity with multi-brand and family of brand displays.4

+28%

A disciplined category management approach across segments in the cooler is crucial to maximize beer consumption occasions. Variety is important, but a balanced portfolio that leverages the advantages of each segment is critical to return the category

Solo Display

Family of Brands

SOURCE: Nielsen NSO Audit, July 7, 2012

to growth.

• 93 percent of all beer is purchased cold, while more than half of craft purchases are bought warm.5 • 63 percent of cold beer is bought for immediate consumption (<4 hours).5

Now of legal drinking age, millennials have significant buying power — $200 billion — the most of any generation. This consumer has broad impact, enjoying spirits, wine and beer with their

• 38 percent of cold beer buyers will consume the entire pack size in the same day.5

choices guided by different alcohol occasions.

That said, millennials spend 23 percent less than

To win in the liquor class of trade we must partner

general shoppers in liquor stores.6 This group is

together to recruit shoppers and exceed their

very diverse, and the majority fit in the three beer

expectations.

consumer categories described below.

SHOPPER OPPORTUNITY

Women beer drinkers have been overlooked from a

Increasing trips beyond the current customer base is one

merchandising and marketing perspective. Women

of the keys to driving growth in the liquor channel. Two

beer drinkers consume almost 25 percent of all beer

buying groups that drastically under-index in purchasing

volume, which adds up to about 17 billion servings

beer from liquor stores are millennials and women.

a year.7

THE LIQUOR STORE SHOPPER IS DIVERSE AND EVOLVING SOPHISTICATED TAB ENTHUSIASTS

SAVVY ENTERTAINER

CONNECTED BEER EXPLORER

• Millennials • Look to drink and experiment with beer • Look for ratings, descriptions and pairings in-store • Consider themselves beer connoisseurs • Prioritize ambiance, service and selection over price • Seek craft and imports often

• Skews Hispanic and male LDA millennials • Buys across all beer types to ensure there is something for everyone • Less likely to be loyal to a particular store or channel • Although they enjoy browsing, they are somewhat price conscious because they are buying TAB for themselves and others

• Under 40, mostly millennial • Ethnically diverse • Price conscious • Will buy on impulse if product is new or ‘catches their eye’ • Buys across all beer types for party stop

MillerCoors Custom Shopper Landscape Study, 2016

21

LIQUOR STORES PORTFOLIO • CUSTOMER BASE • MERCHANDISING

We have realized this gap and continue to invest in

connecting to what is being served at parties

products, design, packaging and education to recruit

• Occasion-based merchandising

and improve engagement across the category with

• Shopability of products on the shelf (not

female consumers.

merchandised too high) • Inviting atmosphere and ambiance.

Liquor stores currently under-index in their fair share of women shoppers and consumers. Stores should

• “Fruity and sweet” products compete with wine occasions

make the investment and adjustments to capture the potential of this group. Research focus groups

Build a larger routine beer shopper base in liquor

highlight that women do not feel comfortable shop-

stores through disciplined category management

ping in liquor stores — often due to poor ambiance

principles in the cooler and across the store foot-

and difficult-to-navigate merchandising.

print. Only 7 percent of shoppers claim to spend half their beer dollars in liquor, and 45 percent

With innovations and new flavors in beer, more

of beer shoppers never purchase beer in liquor

women are entering the category than ever before.

stores.8

Retailers should appeal to women by exceeding their expectations with in-store executions.

Routine shoppers are valuable to retailers. Only 11 percent of shoppers make eight or more trips

22

Female beer drinkers look for:

per year to a liquor store, but they account for 54

• Education and information on pairings and

percent of the beer revenue.9

LIQUOR STORES PORTFOLIO • CUSTOMER BASE • MERCHANDISING

WILL SHOPPERS SHOP MULTIPLE SEGMENTS?

On the other hand, 50 percent of shoppers shop only once per year in liquor stores.8 We see these one-time shoppers using the liquor format for celebrate occasions around the holidays, but these same shoppers buy beer more frequently throughout the

37%

49%

of Trips Include Spirits

year, utilizing other channels. Of one-time shoppers,

7%

36% SPIRITS

1%

22 percent buy beer in liquor stores around the Fourth of July, while 12 percent buy beer in liquor

4%

5%

stores around Christmas.8

22% BEER

Consumers are taking more purposeful trips and shoppers are visiting fewer retailers overall. Their store choice is defined by the occasions they are shopping

32%

for and four macro trends that meet their needs:

of Trips Include Beer

convenience, value, experience and information.

• 78 percent of beer shoppers say they are always

25% WINE

of Trips Include Wine

InfoScout Panel, Total Households N=24,601; May 1, 2016 – April 30, 2017

trying to simplify their life.5 • While 57 percent of beer shoppers are open to discovery, they want it to be simple.

5

• 42 percent of craft shoppers leave stores without

Liquor stores need to meet the ever-increasing demands of consumers with a disciplined merchandising approach and category manage-

buying beer because of three main barriers: over-

ment process. By doing so, they can strategically

whelming variety, unable to find desired product

leverage the role of each segment to the broad set

and desired product out of stock.

of consumer occasions.

5

Improve conversion and basket building with the current shoppers. Beer under-indexes in liquor stores and is not top-of-mind – about 77 percent of liquor revenue is generated by spirits and wine.

Developing a total alcohol beverage solution and elevating beer through ambient displays and strong cooler management will add multiple segments to the basket.

Nearly 18 percent of households are total alcohol beverage shoppers in liquor stores, but only 1 percent of transactions have items from all three categories in the basket.5

23

LIQUOR STORES PORTFOLIO • CUSTOMER BASE • MERCHANDISING

WHY IS A BALANCED CRAFT ASSORTMENT CRITICAL? ADDS TO STORE’S BEER CREDIBILIT Y IF BAL ANCED CORRECTLY

MOTIVATIONS • Wide variety • Exploration and experimentation • A product for every occasion • Makes buying beer special

?

BARRIERS • Too many options makes selection process overwhelming • Lack of organization makes it tough to find specific product

SHOPPERS DESIRE VARIETY BUT NOT AT THE EXPENSE OF SHOPABILITY AND IN-STORE EXPERTISE

Summer adds incremental occasions and an oppor-

Today’s millennials are savvy entertainers. They love to

tunity to inspire shoppers with ambient displays

plan large get-togethers, especially over the summer

integrating spirits, wine, beer and multi-brand

holidays. They look to make everyone happy and

points of interruption throughout the store. Summer

ensure they have the right beer selection for everyone.

brings in 13 percent more beer households and 12

Multi-brand displays create the opportunity for a

percent more beer trips.

one-stop-shop to help fulfill these occasions and needs.

1

Beer is a planned trip more than 70 percent of the time. The ability to influence purchase decisions differs based on beer’s perceived importance. On a beer-focused trip, 21 percent of shoppers made some type of incremental purchase – either a larger-size package of brand choice or a brand on display that the consumer wasn’t planning on purchasing. More than half of those shoppers were not going to buy beer, but did so because of the display.9 Sources: 1. Nielsen Homescan Panel Data, 52 weeks ending Aug. 27, 2016 2. InfoScout, 52 weeks ending Sept. 25, 2016; Nielsen Panel Data, Sept. 27, 2016 3. Nielsen Panel Data, 2016; Willard Bishop Super Study 2016; InfoScout Receipt Capture Data, Oct. 16, 2016 4. InfoScout Display Analysis, September 2016 5. InfoScout Panel, Total Households N=24,601, May 1, 2016 – April 30, 2017 6. InfoScout Insights Survey, June 2017 7. MillerCoors Behavioral Tracking Study (bi-annual), December 2015 8. InfoScout Custom Survey, October 2016 9. InfoScout Panel, Total Households N=24, 601, May 1, 2016 – April 30, 2017

24

DOLLAR STORES

Dollar stores are the fastest-growing channel, driven

Premium American light lagers and economy lead

by consumer need for value and convenience. Since

the way based on both revenue and productivity

2001, dollar channel household penetration has

($/item). Beer also helps increase basket rings from

increased from 59 percent to 66 percent. The number

$14.77 without beer to $29.48 when beer is in the

of dollar stores has more than tripled in the same

basket.3

timeframe, totaling more than 29,000 outlets, and projected to be more than 34,000 outlets by 2020.1

CATEGORY SALES IN DOLL AR CATEGORY

TOTAL $

$/TDP

CANDY, GUM, MINTS

$1,551,787,311

$23,613

approaching 9,300 stores. 2 Beer sales per store

SOFT DRINKS

$1,519,076,290

$82,516

are also increasing, up 24 percent in 2017 versus

SALTY SNACKS

$1,259,450,814

$42,637

COOKIES AND CRACKERS

$533,134,776

$26,919

MILK PRODUCTS

$491,579,495

$221,709

CEREAL AND GRANOLA

$329,614,480

$32,194

BEER

$324,182,139

$171,456

WATER

$277,348,826

$107,383

PACKAGED COFFEE

$276,308,726

$64,722

BREAD

$233,716,276

$160,866

NUTS

$132,101,546

$29,888

TOTAL WINE

$54,012,977

$71,298

MILK/DAIRY ALTERNATIVE

$4,853,193

$42,478

$826,246

$123,634

Total 2017 beer sales in dollar outlets were up 36 percent, while the number of dollar stores selling beer has dramatically increased since 2012,

a year ago.

2

Beer is the second most productive consumable category tracked by Nielsen in terms of velocity ($/point of distribution), surpassed only by milk.

BEER DOLLARS PER STORE CONTINUE TO INCREASE Beer Dollars per Store

$35,301

Stores Selling Beer $21,051 $10,315 $3,852 2012

$23,659

$28,371

$15,279 $5,023

$6,437

$7,350

$8,461

2013

2014

2015

2016

$9,276

2017

Nielsen Scan Data, 2012-2017, Dollar General + Family Dollar Geographies

TOTAL SPIRITS

Nielsen Edible Scan Data, Dollar General + Family Dollar, calendar year 2017

25

DOLLAR STORES AWARENESS • ASSORTMENT • EXECUTION

DOLLAR SHOPPER

or less) with less than 20 percent coming from larger

Dollar is the preferred convenience channel for

than 18-packs.1 Singles are also a large opportunity.

female shoppers, who represent 72 percent of total

They fit with the relax occasion and drive only 6

store trips. Dollar store shoppers also tend to skew

percent of dollar sales, but make up 22 percent of the

lower income with 49 percent of shoppers earning

unit sales.2

less than $40,000 per year.2 BUILDING WITH BEER® WHAT ARE THE OCCASIONS? • Relax: An after-work transition to me-time that usually involves singles • Connect: A time to spend with friends/family

The biggest beer opportunities for dollar retailers are low beer shopper conversion and trip leakage to competing channels. Of all the beer-buying households that shop dollar stores, only 4 percent of them buy beer in the dollar channel.2 Dollar channel beer shopper leakage

26

Beer shoppers buy packs

to the grocery channel represents

that perfectly match these

more than 50 percent, and opportu-

occasions. Three-quarters

nity remains to increase conversion

of their beer purchases are

and capture more trips from the

small packs (multipacks of 12

grocery channel.3

DOLLAR STORES AWARENESS â&#x20AC;˘ ASSORTMENT â&#x20AC;˘ EXECUTION

T YPE SHARE IN DOLL ARS AND SKUs

door assortment strategy that focuses on the core items that consumers purchase

BEER SEGMENT

$ SHARE

# SKUs

SPACE TO SALES INDEX

PREMIUM AMERICAN LIGHT LAGER

38.5%

25.9%

67

ECONOMY

27.8%

22.0%

79

PREMIUM AMERICAN LAGER

10.1%

8.4%

83

Economy and premium American light

SUPER PREMIUM

11.8%

22.4%

190

lagers are the biggest beer segments,

IMPORT

5.0%

8.0%

160

FLAVORED MALT BEV/COOLERS

5.2%

7.1%

136

CRAFT

1.4%

3.5%

253

HARD CIDER

0.2%

0.0%

-

ALTERNATIVE

0.0%

0.0%

-

most.4 In a recent dollar channel study, allocating more cooler space to beer contributed to a 38 percent sales lift.4

and currently are under-spaced from a space-to-sales standpoint. Economy beer buyers are the most loyal and frequent shoppers, representing a valuable shopper to target. Ensure enough days of supply on key economy packs.

Start with the right mix of singles and

Nielsen Dollar Channel Space Audit, 2017

multipacks. Based on Nielsen space audits, the optimal beer cooler

Dollar retailers must

allocation is 25 percent singles and

overcome three barriers

75 percent multipacks.4

in order to drive continued growth and

3. IN-STORE EXECUTION

increase conversion:

Display execution and reducing out-of-stocks are the biggest execu-

1. AWARENESS

tion opportunities. Displays help to

Capture leakage by

trigger awareness for beer and serve

building awareness for cold beer through in- and out-of-store messaging. Target

as back-stock for fast-moving items, especially if they are on promotion.

messaging to shoppers who are not visiting the beer aisle (endcaps, special displays, circular ads, etc.)

Finally, reducing out-of-stocks is critical to maintaining

while focusing messaging on small packs, as these

strong growth trends and requires coordinated effort

are more likely to drive trial with female guests.

among the retailer, brewer and distributor network supported by solid store-level execution.

2. EFFECTIVE ASSORTMENT Dollar stores tend to have limited cooler space, and 82 percent of small-format shoppers prefer to purchase beer cold; it is critical to have a cooler

Sources: 1. Statista 2. Nielsen Dollar Scan Data through calendar year 2017; Dollar Geographies are Dollar General and Family Dollar only 3. InfoScout Receipts, 2017 4. Nielsen Space Audit, 2017

27

DRUG STORES

The drug store channel is a relatively small

retailers all rank within the top 15 accounts for

class of trade in beer volume, just 3.5 percent,

total category beer volume.

but almost double that of 2016. Drug stores 1

DRUG STORE SHOPPER

provide consumer needs for value and convenience. Drug channel household penetration across edible products was 82 percent in 2017.

Drug is a preferred channel for convenience 2

among female shoppers. Female shoppers represent 62 percent of total store trips and

Beer is a large business for drug retailers,

61 percent of total beer trips. The most

ranking No. 3 among front-end categories

common trip types are quick trips, followed

and No. 2 based on velocity per store, just

by a fill-in trip. 3

behind tobacco. The drug channel’s top three The drug channel serves two primary roles for BEER STILL THIRD-LARGEST CATEGORY IN DRUG, VELOCITY SECOND DOLLAR VOLUME

VELOCITY ($/TDP)

RANK

CANDY

$3,110,024,023

$75,557

1

TOBACCO

$2,798,749,730

$434,534

2

BEER

$1,294,263,529

$350,918

3

LIQUOR

$951,451,382

$335,571

4

SOFT DRINKS

$927,069,763

$143,224

5

SALT Y SNACKS

$905,090,011

$76,695

6

WINE

$746,822,536

$178,811

7

WATER

$440,052,982

$200,500

8

NUTS

$425,725,412

$106,728

9

Nielsen Scan Data, latest 52 weeks ending Dec. 30, 2017, Total Drug

28

most shoppers: • Convenience for female shoppers to make quick, in-and-out trips • Place to make balanced, lifestyle solutions OCCASIONS • Relax: An after-work transition to me-time that usually involves singles • Connect: A time to spend with friends/family Beer plays a key role in the personal and social occasions that support many drug shoppers’ expectations for a balanced lifestyle. Beer shoppers purchase beer just 3.8 times per year and generally spend $30 when beer is in the basket – $15 more than when beer is not in the basket.3

DRUG STORES CONVERSION • AWARENESS • VALUE BUILDING WITH BEER®

ASSORTMENT

The biggest beer opportunities for drug retailers

The most common beer purchases across the

are low beer shopper conversion trip leakage to

relax and connect consumption occasions are 6-

competing channels and low frequency. Of all the

and 12-packs of American light lager brands and

beer-buying households that shop drug stores,

leading imports.1 These segments are currently

only 10 percent of them buy beer in a drug store,

under-indexed in terms of space to sales.

leaving the remaining beer purchases to competing channels.2

Cold beer assortment is also critical – 82 percent of drug store shoppers buy refrigerated beer,

Many drug chain beer buyers consider the drug

while 22 percent buy room-temperature beer.4

channel to be better for quick convenience trips.

The top barriers preventing these shoppers from purchasing beer at drug stores center on awareness and perceptions of value and assortment.4

Sources: 1. Nielsen Scan Data Volume through 2017 2. InfoScout Total Drug, 2017 3. Nielsen Homescan Total Drug, 2017 4. C+R Drug Research, 2016 5. Nielsen Scan, 2017 6. National Drug Retailer Shopper Card Data, 2015

AWARENESS Capture leakage by building awareness through in- and out-of-store messaging that connects with

SEG M E N T D O LL A R A N D T Y PE S H A R E $ SHARE

SHARE OF SKUs

SPACE TO SALES INDEX

conversion and trip frequency. Target in-store

PREMIUM AMERICAN LIGHT L AGER

29.7

18.1

61

messaging to shoppers who are not necessarily

IMPORT

28.6

19.8

69

CR AFT

10.0

14.7

147

PREMIUM REGUL AR

8.3

7.2

87

more likely to drive trial with female guests.5

PREMIUM AMERICAN L AGER

7.8

7.1

92

PERCEIVED VALUE

ECONOMY

6.2

5.1

83

SUPER PREMIUM

5.0

5.6

113

FLAVORED MALT BEVER AGES/ COOLERS

2.8

6.5

227

HARD CIDER

0.8

2.6

307

ALTERNATIVE

0.0

6.4

-

occasions. In-store beer displays trigger shoppers to the presence of cold and warm beer sections and can help direct a path to purchase, increasing

visiting the beer aisle (endcaps, special displays, circular ads, etc.) while focusing the messaging on small packs (6- and 12-packs) as these packs make up more than 50 percent of drug revenue and are

Advertise value to shoppers by ensuring clear execution of promotional pricing at retail – accurate shelf price tags and eye-catching, value-offer displays.Leverage displays that cross-merchandise with beer as 87 percent of drug shoppers buy other items with beer; 55 percent of shoppers purchase food and snacks and 27 percent select another alcohol beverage.6

BEER SEGMENT

Nielsen Drug Channel Space Audit, 2017

29

Five years ago, online shopping generally was about one thing:

explosion of microbrews,

CPG HOUSEHOLD PENETRATION

craft and seasonal products

convenience. Online beer sales were insignificant, because online availability was tiny and the sites

in this category broadens the competitive set, but also

72%

23%

means physical shelf space is

FUTURE

TODAY

were clunky. Convenience, with

more of a battleground than

beer, wasn’t as big an issue with a convenience store on every corner.

ever. Currently, all of CPG ONLINE

growth is coming from online

OFFLINE

– up 25 percent in 2017

The Digitally-Engaged Food Shopper, Nielsen and FMI, 2017

The online experience has moved

while in-store is basically flat.

rapidly from convenience-centric to convenience

Nielsen forecasts that by 2023, 20 percent of all

+ exploration + joy + inspiration + endless variety.

CPG volume will be ordered online (approximately

Brick-and-mortar retailers are now struggling at

5 percent today) and that online household

times to provide as good an online experience as

penetration will grow from 28 million to 88 million

digital-only retailers where the online experience is

households by 2025.1

often faster, simpler, more intuitive and more fun.

The changing retail landscape is accelerating online There’s an entire class of on-demand delivery

beer growth as well. Online beer is expected to

middlemen offering an exceptional user experi-

grow to 4 percent of total off-premise beer volume

ence. And within beer specifically, the continued

by 2020 (85 million cases) driven by growth from

ONLINE BEER SHARE 2% 12%

62%

2020 Case Share

24% MillerCoors Estimates, January 2018

30

BRICK & MORTAR

• Walmart • Kroger

• Total Wine & More • Safeway

3RD PARTY DELIVERY

• Instacart • Drizly

• Shipt

PURE PLAY

• Amazon • Peapod

• Fresh Direct

DIRECT TO CONSUMER

• Half Acre

• Great Lakes Brewing Co.

eCOMMERCE A W A R E N E S S • U S E R E X P E R I E N C E • I N S P I R AT I O N ONLINE SHOPPING OCCASIONS

HIGH PURCHASE INTENT 56 %

Current online grocery buyers intend to purchase beer online in the next year

81%

Current online beer buyers intend to purchase the same amount or more in the next year

PERCEIVED CONVENIENCE 98 %

More likely to say it was easier/more convenient

42 %

More likely to say it saved me time/ I was in a rush

LOW AWARENESS 33 %

Don’t think it’s legal in their state

47 %

Have never considered it

MillerCoors Online Shopper Research Study, January 2018

large-format mass, grocery and liquor stores along with expansion of pure-play retailers.2 In fact, many large-format retailers expect to drive 10 to 15 percent of their beer volume online by 2020.

45% - RELAX

19% - CONNECT

I wanted to be comfortable or treat myself. Low energy me-time, or time with my partner, recharging or decompressing.

I wanted to spend time with a small group of close friends and/or family, where the reason was to connect with other people.

18% - SOCIAL

18% - CELEBRATE

I wanted to meet up with a small to medium group of friends, where people cared about impressing others.

I wanted to go to or plan a special event with a large group, where people were expecting a good time.

MillerCoors Online Shopper Research Study, January, 2018

And while retailers still have to navigate the liquor laws in their local markets to determine the best

enjoyable. And while online beer shoppers are

online business model, online beer is currently

intrigued with the promise of convenience, many

available in more than 78 percent of the country and

online grocery shoppers are not aware that beer is

expanding rapidly. The bottom line is people love

available online.3

2

shopping for beer, and consumers are bringing that beer-buying passion to digital channels in rapidly

Let’s face it, the digital beer-buying experience lags

increasing numbers.

far behind the broader eCommerce space.

3

ONLINE EXPERIENCE

The key to winning more online beer shoppers

The experience they encounter, however, often isn’t

is to infuse more joy into the digital beer-buying

TOP 10 USER FRUSTRATIONS 1. There were few or no promotions/sales available

6. Product descriptions were not as detailed

2. The promotions/sales were hard to find

7. There were no customer reviews

3. Filtering by type (e.g., type of beer) was difficult

8. It was hard to get a feel for the products from the

or unavailable 4. Navigation to product pages (e.g., beer, wine) was difficult or unavailable 5. There were no staff picks or favorites

visuals provided 9. There were no recommended products 10. Categorization of products did not make sense MillerCoors Online Shopper Research Study, January 2018

31

eCOMMERCE A W A R E N E S S • U S E R E X P E R I E N C E • I N S P I R AT I O N

eCOMMERCE BEHAVIORS TO INFLUENCE

DRIVE TRAFFIC ... BY BUILDING CATEGORY AWARENESS

CONVERT SHOPPERS ... BY ELIMINATING FRUSTRATIONS

1st BASKET

BUILD BASKETS ... BY PROVIDING INSPIRATION AND EXPLORATION OPPORTUNITIES

REPEAT

GROW LOYALTY

... BY ENCOURAGING REPEATING BEHAVIOR

experience. To accomplish this it is important

1. Ensure the beer category navigation filter is

to understand how the four key occasions drive

clearly visible on the homepage, making it quick

online beer purchase.

and easy to jump to the beer category department.

2. Place beer occasion banners on the homepage

WINNING ONLINE BEER SHOPPERS

to communicate beer awareness and inspire

With this knowledge, retailers can build solutions

shoppers to purchase beer and other products

to drive online beer sales by leveraging the

for key beer occasions.

specific shopper needs for each occasion. Our

3. Place point-of-sale in the beer aisle of your

solution framework outlines the key beer shopper

physical stores, letting your shoppers know they

behaviors retailers must influence.

can also buy their beer online.

Within this category framework MillerCoors has developed a suite of solutions to help retailers win the online beer shopper. The following solutions are aligned to each of the opportunity areas.

DRIVE TRAFFIC

Beer is a top-selling category for most retailers but under-indexes online due to low awareness and low conversion.3 The key is to drive online traffic from the homepage to the beer category page. To help accomplish this goal, retailers can take three key steps: 32

eCOMMERCE A W A R E N E S S • U S E R E X P E R I E N C E • I N S P I R AT I O N beer solutions. Of

CONVERT SHOPPERS

online beer shop-

To convert beer shoppers to beer buyers, retailers

pers, 55 percent

should focus on driving conversion with best-in-

like exploring new

class product content and providing easy search

beer options versus

and exploration options.

sticking with what

1. Ensure online beer assortment includes core

they know. 3

items so shoppers can purchase their preferred

2. Provide shopable

beer items.

occasion solutions

2. Provide intuitive filters and taxonomy to make

to inspire shoppers

it easy for beer shoppers to explore the beer page.

and help make

3. Provide best-in-class product content with

their beer drinking

search-optimized product titles and descriptions

occasions

so shoppers can easily find the items they are

more enjoyable.

searching for. Include great product and lifestyle

3. Offer educational

images/video content to drive conversion once

content to inspire

shoppers find what they want.

confidence and aid browsing for

Only 20% of Shoppers Go Beyond the First Page

71%

90%

of category sales happen on the first three pages 13%

PAGE 1

PAGE 2

6% PAGE 3

C AT EGO RY S A L E S B Y PA G E

53%

of online beer shoppers RESEARCH online prior to purchasing in-store

57%

of all beer shoppers are OPEN to DISCOVERY

Profitero Analytics, November 2017 MillerCoors Online Shopper Research Study, January 2018

beer shoppers when they are in the exploration shopping mode. This will make their shopping experience more enjoyable and encourage them to add more items to their basket.

GROW LOYALTY

Increase purchase frequency to increase the value of each shopper through repeated purchases.

1. Deliver targeted offers to lapsed users.

2. Offer loyalty programs, rewards and online exclusive offers.

Online beer is going to grow at an accelerated

BUILD BASKETS

Build bigger baskets via new and seasonal

rate because of increased availability coupled with shoppers’ desires for convenience and an enjoyable beer shopping experience.

product offerings, occasion solutions and beer education.

1. Encourage shoppers with new and seasonal

Sources: 1. The Digitally-Engaged Food Shopper, Nielsen and FMI, 2017 2. MillerCoors Estimates, January 2018 3. MillerCoors Online Shopper Research Study, January 2018

33

WINNING BACK THE ON-PREMISE The beer category remains the biggest contributor

TRAFFIC

(47 percent) to total alcohol beverage in the

71%

69%

66%

Q4, ‘16

on-premise establishments (casual or fine dining,

66%

Q3, ‘16

58%

Q2, ‘16

63%

Q1, ‘16

The total number of consumers visiting traditional

Q4, ‘15

account for 76 percent of total on-premise beer.1

(SHARE OF CONSUMERS VISITING AT LEAST ONE ON-PREMISE ESTABLISHMENT IN PAST TWO WEEKS)

Q3, ‘15

on-premise channel. Casual dining and bars

59%

64%

55%

On-premise traffic (the percentage of consumers

Q3, ‘17

quarter and a year-over-year decline from 2016.2

Q2, ‘17

third quarter of 2017, reflecting a drop from the past

Q1, ‘17

hotels, bars and clubs) dropped to 55 percent in the

visiting) remains very soft for many operators.

Technomic Co-Pilot, Q3 2017

ON-PREMISE CONTRIBUTION TO BEER ON-PREMISE

In this modern, experience-driven on-premise

Other - 14%

environment, the on-premise consumer continues to evolve faster than ever before. The channel is

Casinos - 2%

experiencing a split between millennials and guests

Hotels - 7% Concessions - 0.4%

aged 35 and older. Older, 35+ consumers are Bars 39%

going out for smaller, more food-driven occasions.

Millennials are going out to the on-premise less frequently, and when they do go out they are opting

Casual Dining - 38%

for fewer, bigger, share-worthy evenings.3 But even with the lower frequency, the on-premise remains the only channel that over-indexes for millennials.

On-Premise Overview, Technomic, October 2017

34

That’s good news for the channel!

ON - PREMISE A S S O RT M E N T • V I S I B I L I T Y • P R I C I N G S T R AT E G Y

KEY ON-PREMISE OCCASIONS

ENERGY: Lower

ENERGY: Higher

NEEDS: Connect and feel comfortable

NEEDS: Impress/stand out and feel energized

AGE: 25 to 49

AGE: 21 to 34

GENDER: Mostly male or mixed gender

GENDER: Mixed

Four macro-occasions have been identified. Two

• Share of all on-premise visits that included an

occasions over-index for the on-premise and over-

alcohol drink rose to 47 percent from 41 percent

index for beer, thus offering the biggest opportunities

year-over-year!2

for the beer category: connect and social occasions.

• Beer is the beverage of choice on-premise, capturing more than 55 percent of occasions,

The opportunities for the channel don’t stop there.

followed by spirits at approximately 43 percent.2

Three top trends that emerged in late 2017 provide opportunities for the beer category going forward:

Six imperatives are recommended for an on-premise account to leverage these trends and to ultimately

• Average number of visits to all on-premise

grow the size and value of their beer category:

establishments has increased consistently since 1. Drive volume and variety with optimal assortment.

the second quarter of 2016 – from 3.6 to 4.5 visits in the third quarter of 2017.

2. Increase the visibility for beer.

2

3. Win big with the right pricing strategy.

SHARE OF ON-PREMISE OCCASIONS 57%

52%

55%

55%

56%

55%

57%

43% 41%

45%

42% 44%

44%

45%

44%

20%

22%

23%

21%

22% 20%

23%

51%

20%

56%

4. Elevate the beer category.

5. Provide share-worthy experiences and meaningful connections with consumers.

6. Drive a passion for selling beer.

41%

22%

Q3 ‘15 Q4 ‘15 Q1 ‘16 Q2 ‘16 Q3 ‘16 Q4 ‘16 Q1 ‘17 Q2 ‘17 Q3 ‘17 Beer/Cider

Spirits

Wine

Technomic Co-Pilot, Q3 2017

35

ON - PREMISE A S S O RT M E N T • V I S I B I L I T Y • P R I C I N G S T R AT E G Y

IN THIS NEW WORLD, EVERY BEER HAS ITS PLACE... from the more functional to the more emotional

FUNCTIONAL

AMERICAN LIGHT LAGERS

• Massively familiar • Comfortable • Democratic

MASS DOMESTIC

• Approachable • Intrigue

MASS IMPORT

• Historied • Premium • Exotic

CRAFT

• Storied • Diverse • Craftsmanship • Constant variety

EMOTIONAL

Glassware Exploration, The Sound, August 2017

DRIVE VOLUME AND VARIETY

segment is a mainstay representing one out of every

WITH OPTIMAL ASSORTMENT

three beers sold, and the segment with the most loyal drinkers.4

WHAT WE KNOW: The optimal assortment drives volume and revenue.

Crafts represent one of the core growth segments within beer over the last year.¹ However, craft

And despite this fact, draught brands that don’t

drinkers like to play the field. More than 50 percent

drive sales are taking the taps from brands with the

of their volume is sourced from segments outside of

most volume. The opportunity for the on-premise is

craft. And when drinking within the craft segment

to focus on the winning segments – segments that

they tend to choose from the top 30 national craft

deliver both volume and revenue.

brands.5

With an approximate 14 percent share of total tap

The import segment is another that grew over

handles, premium American light lagers deliver

the past year.6 The top-performing brands overall

the average dollars per distribution point. Those

are from the import segment. Over half of this

velocities are 1.5 times higher than imports and two

segment’s draught volume and dollars are sourced

times higher than craft. It is important to continue

from six brands. It is important to note that the

to leverage the power of premium American light

dollar yield per distribution point is 65 percent of

lager.

premium American light lagers. Once again, it’s a

4

balance.

It does not, however, suggest ignoring craft brands.

It’s a balance. The premium American light lager

36

Similar to draught brands, low-velocity packaged

ON - PREMISE A S S O RT M E N T • V I S I B I L I T Y • P R I C I N G S T R AT E G Y brands are taking sales from brands with the biggest

thousands of innovative brands the account size

volume. The opportunity is the same – focus on the

can determine the optimal tap handle total.7

winning segments.

INCREASE THE VISIBILITY FOR BEER An assortment that is anything less than optimal will not satisfy consumers and will negatively impact the

WHAT WE KNOW: What consumers see sells.

bottom line. Give consumers what they want!

6

Beer is the alcohol beverage of choice for most While providing consumers with optimal

Americans. Despite this, beer is often not visible

assortment, it is important that choices are not

in accounts. At times, the only evidence is a tap

overwhelming. “Food first” accounts can satisfy

handle, and in accounts with a wide variety of

consumers with eight tap handles, a variety of beer

draught brands, it is a sea-of-sameness where

styles that pair well with menu offerings. The game

one brand struggles to stand out from another.

changes in “beer first” accounts, where consumers

Great theater has a huge impact upon consumers,

go to enjoy their favorites and experiment with new

especially when the scene is fun, emotional

styles. Here, 24 handles can be enough, but with

and engaging. This is a powerful tool to attract

D R AU G H T B E E R SA LE S BY SEG M E N T

$

SHARE

#

SHARE

AVERAGE $/ DISTRIBUTION POINT

PREMIUM AMERICAN LIGHT L AGER

$4,763,229,934

22.2%

220,155

14.4%

$19,947

PREMIUM AMERICAN REGUL AR

$1,326,018,795

6.2%

81,382

5.3%

$17,836

$271,862,751

1.3%

30,964

2.0%

$8,544

$3,180,237,360

14.8%

241,261

15.8%

$13,036

$83,753,064

0.4%

12,722

0.8%

$6,857

$10,234,452,458

47.8%

775,457

50.7%

$9,408

$11,423,781

0.1%

4,816

0.3%

$2,372

$505,925,078

2.4%

74,803

4.9%

$6,944

$1,039,847,521

4.9%

87,300

5.7%

$5,947

$21,416,750,742

100.0%

1,528,860

100.0%

$90,892

SEGMENT

ECONOMY IMPORT SUPER PREMIUM CR AFT FL AVORED MALT BEVER AGE HARD CIDER *ALL OTHER /UNASSIGNED TOTAL *Includes coolers, malt liquor, near beer, unassigned items

SALES

DISTRIBUTION POINTS

Nielsen, year-to-date, week ending Dec. 2, 2017

37

ON - PREMISE A S S O RT M E N T • V I S I B I L I T Y • P R I C I N G S T R AT E G Y

attention. At a time when accounts prefer “clean”

• Illuminated posters have more impact than

walls, there are impactful ways to increase the

non-illuminated; when illuminated, the graphics

visibility of beer:

tend to be simpler and more colorful.

• Animated, digital menu boards attract attention and drive consumer purchase.

• Differentiated illuminated signs make a big

• Chalkboards always score more customer attention – there is something about the personalization of the message and the

difference to customer attention in an account

immediacy of what it is saying that tends to

and can be used to effectively capture attention

attract attention.

– the key is differentiation.

• Tent cards typically work well when placed upon a table as there is often “time to kill.”

• Glorifiers work well for two reasons: 1. They provide more excitement to the product and frame it.

2. Their location increases the opportunity for a customer to note and perhaps prompt purchase.

Sell more beer when you attract consumers’ attention in a unique and engaging way.8

38

ON - PREMISE A S S O RT M E N T • V I S I B I L I T Y • P R I C I N G S T R AT E G Y PRICE SENSITIVITY VARIES BY GEOGRAPHY: NORTHEAST CENTRAL

I am willing to pay MILLER LITE

COORS LIGHT

BUD LIGHT

LOCAL CRAFT

IMPORT

NATIONAL CRAFT

different prices for different types of beer.

LIGHT LAGER

OPTIMAL PRICE GAP IS TYPICALLY $1.50-$2.50

NON-PROMOTIONAL PRICING (NPP)

CRAFTS AND IMPORTS

NPP X 1.40

NPP X 1.55

N O R T H E A S T CE N T R A L E X A M PLE BEER SEGMENT

PTC CURRENT

PREMIUM AmLLs

$2.00

NATIONAL CR AFTS

$2.50

INDEX TO PAmLLs CURRENT

REVENUE BASED ON 100 UNITS/WEEK $200.0

125%

$250.0 $450.0

TOTAL REVENUE

PTC WILLINGNESS TO PAY PREMIUM AmLLs

$3.50

NATIONAL CR AFTS

$4.90

RECOMMENDED INDEX TO PAmLLs $350.0 140%

$490.0 $840.0

TOTAL REVENUE

$390.0

POSSIBLE INCREASE IN REVENUE BASED ON CONSUMER WILLINGNESS-TO-PAY DATA

87%

Nielsen CGA On-Premise, Q1 2017

WIN BIG WITH THE RIGHT

Some things stayed the same.

PRICING STRATEGY • American light lagers are more price-sensitive WHAT WE KNOW: Suboptimal price gaps can

– price change has more influence on demand.

leave money on the table.

Consumers drink more per occasion and have high brand loyalty.

In 2017, when consumers were asked: “How much

• Crafts and imports are less price-sensitive

would you be willing to spend on a standard serve

– price change has less influence on demand.

of your preferred drink when out?” their responses

Consumers pay more for the higher quality

were varied by geography and by beer segment

perception but they drink less per occasion.

within each geography.

3

39

ON - PREMISE A S S O RT M E N T • V I S I B I L I T Y • P R I C I N G S T R AT E G Y

Some things changed.

ELEVATE THE BEER CATEGORY

The new news is consumer responses vary in nine

WHAT WE KNOW: Signature glassware is a

regions of the United States. Painting the country

sign of quality.

with the same pricing brush is not the way to achieve optimal price gaps and maximize revenue.

This is a glass-half-full story. It’s an opportunity to drive profit and elevate the consumer experi-

Follow these two simple steps to leverage the

ence with signature glassware.

biggest pricing opportunity: 1. Set the base by understanding what consumers

While glassware alone will not elevate the quality

in your region are willing to pay for a premium

perception of beer, the consumer does believe

American light lager when not on promotion.

that there are benefits to glassware. No matter

2. Apply the relevant price index for the craft and

the segment, glassware enhances the

import segments in your region to the non-promo-

experience.

tional pricing of premium American light lagers.

• Domestic beer – unique glassware helps Based on the example on the previous page, an

brands stand out from the pack and makes the

account has the opportunity for an 87 percent

drinking experience feel special.

increase in weekly revenue when implementing

• High-end beer – a glass specifically shaped

optimal, region-based, non-promotional pricing.

for the style of beer enhances the experience

A couple of bucks can make all the difference.

and adds an intrigue or premium.

9

40

ON - PREMISE A S S O RT M E N T • V I S I B I L I T Y • P R I C I N G S T R AT E G Y The proper glass isn’t just about marketing. It allows

of education and entertainment. Unbranded

the drinker to:

on-premise engagements provided server and

• See the beer

consumer beer education, impacting three key

o Three Cs of beer presentation: color, clarity and carbonation • Smell the beer o 80 percent of beer flavor comes from aroma • Enjoy the beer o Glass shapes can amplify the taste and maintain beer head – making it feel less filling

areas: • BEER – delivered education for American light lagers and, importantly, elevated the light beer category • CONSUMER – created the memorable experience that consumers seek • RETAILER – made participants feel more favorable toward the bar and more likely to return to the account

A recent study showed results overwhelmingly in favor of signature glassware.

Accounts that embrace such engagements on the right day of the week and at the right time of the

“I SAW SOMEONE ORDER A BEER IN A

SIGNATURE GLASS, AND I WANTED THE SAME THING.” LET’S DO IT! Glassware Exploration Study, August 2017

day will attract younger, legal-aged consumers, give them what they want and encourage them to come back for more.

Social media remains a crucial communication platform. Whatever the engagement, if the 21+

PROVIDE SHARE-WORTHY

consumer is the target, an account must leverage

EXPERIENCES AND MEANINGFUL

every social media platform to talk to them pre-tail,

CONNECTIONS WITH CONSUMERS

at-retail and post-tail.

WHAT WE KNOW: Consumers, particularly the 21-

Know what consumers desire and give it to them.

to 27-year-old set, increasingly expect on-premise operators to make leaving the house worthwhile.

To reverse softening on-premise traffic, operators have to change the way they think and compete.

They must know: • what your consumers desire, • which occasions are important, • what experiences they seek and • when they want them.

One of the most successful beer category programs in 2017 was Edu-Tainment, the combination

41

ON - PREMISE A S S O RT M E N T • V I S I B I L I T Y • P R I C I N G S T R AT E G Y

LET’S SAY STAFF SERVES...

750 PEOPLE =

PER WEEK

IF THEY CONVERT...

1 OUT OF 4 PEOPLE

+

TO SPEND $4...

+

FOR ONE EXTRA BEER

$112/WEEK

$750/WEEK

EXTRA FOR SERVER

REVENUE FOR THE BAR

MSS, Bartender Influencer Beer Report, January 2015

DRIVE A PASSION FOR SELLING BEER

consumer is leaning on bar and waitstaff for recommendations. Unfortunately, in many

WHAT WE KNOW: Beer is the alcohol beverage

instances, consumers are not getting them. Not

of choice for most Americans.

all beers are created equal. Beer education for any server will improve their knowledge of the

Thirty-seven percent of U.S. consumers drink out

product. They’ll learn what a quality product is

at least once a week (versus 33 percent in October

and will understand what makes each style of

2016). Controlling the path-to-purchase is abso-

beer different. All in, service staff will then be

lutely vital as more than 25 percent of consumers

able to make informed recommendations to the

do not know what they are drinking beforehand.

consumer.

Consumers often feel lost, but they are open to

Persuasive power from waitstaff is a win-win: It

suggestion and are willing to pay more:

boosts revenue for the account and increases tips

• 40 percent of consumers don’t know what they

for servers. Inspire your staff to make recommen-

10

11

want prior to ordering;

dations for increased sales.

• 27 percent of consumers are interested in bar and waitstaff recommendations and • up to 26 percent lift in price if the drink is seen as a premium.

The average shopper drinks beer but doesn’t know beer, and is eager to learn. With so many different beer styles and segments, the 42

Sources: 1. Technomic On-Premise Overview, October 2017 2. Technomic Co-Pilot, Q3 2017 3. CGA On-Premise User Survey, September-October 2017 4. Nielsen Homescan, 2016 5. BTS, October 2016/Guest Metrics, 2016 6. Nielsen CGS On-Premise data – volume, 288-oz EQ, rolling 52 weeks ending Nov. 4, 2017 versus year ago 7. Geo Tracking Technology Services, 2017 8. Which elements of POS work best? Ian Scott, instinct laboratory LTD, Sept. 7, 2017 9. Nielsen CGA On-Premise, 2017 10. Nielsen CGA On-Premise User Survey, March-April 2017, sample size: 15,042 11. Nielsen CGA View from the Bar, 2017

K E Y TA K E A W AY S CONVENIENCE STORES • Realize the value of the beer shopper and understand their shop. The shopper occasion drives pack size and brand decisions. Ensure beer is always in stock, especially during peak high-traffic periods.

• Focus assortment on right packs with importance on both premium light and economy segments.

• Ensure robust in-store execution plans to ensure enough days of supply and help increase conversion.

• Win with singles by dedicating at least 25 percent of beer cooler space to singles, merchandise

DRUG STORES

singles segments to motivate trade-up and

• Generate awareness for beer through both

communicate price clearly with shelf tags.

• Optimize space by having the right assortment.

Ensure stock on American light lagers and economy. Maintain a balanced portfolio with key growth segments and be quick to market with key innovation.

pre-shop and in-store messaging to increase conversion.

• Drive value messaging to change perception of value within drug channel.

• Focus assortment on right packs with importance on both premium light and import segments.

GROCERY STORES

eCOMMERCE

• Consumers are motivated

• Drive traffic by building awareness for your online

by convenience, value and assortment.

• Consumer grocery beer purchasing behaviors are prompted by occasions.

• Leverage cold beer with prepared food and meal partnering occasions.

• Get beer on the floor – a display can convert shoppers who were not planning to purchase beer.

beer offering.

• Convert beer shoppers by providing intuitive navigation filters and best-in-class product content, making shopping easy and fun.

• Build baskets by featuring new and seasonal product offerings, occasion solutions and beer education.

• Grow loyalty via personalization, loyalty programs and online exclusive offers.

LIQUOR STORES • Beer improves frequency of liquor store trips.

• Elevate the beer category and attract millennials and female shoppers with improved ambiance and merchandising.

• A disciplined category management process will leverage the role liquor stores play in meeting a broad set of consumer occasions.

ON-PREMISE • Give consumers what they want with optimal assortment.

• Create impactful ways to increase beer’s visibility in accounts.

• Know what consumers in your region are willing to pay and apply relevant price indexes.

• Utilize proper glassware to elevate the perception of beer.

DOLLAR STORES • Generate awareness for beer through both pre-shop and in-store messaging to increase conversion.

• Connect with consumers in meaningful ways – often through social media.

• Empower waitstaff to make recommendations to increase sales.

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At MillerCoors, we are committed to growing the size and value of the beer category in your business. Our approach is simple: Understand retailers’ businesses and objectives, and then work on opportunities to achieve those goals.

Our network is ready to share with you the Building with Beer® suite of channel solutions designed to deliver total category results.

PLEASE CONTACT YOUR MILLERCOORS SALES TEAM FOR MORE INFORMATION.

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