Progressive Grocer - October 2018

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EXCLUSIVE RESEARCH: Produce still packs a punch for grocery sales SWEETNESS IN SEASON Candy’s more dandy than ever at the holidays FIND THOSE SEEKERS Why search engine optimization is a must for grocers SUPPLY LINES Industry preps for possible effects of tariffs, changes to NAFTA



Retail Kroger proves you can still be a hometown hero while leading the way to radically transform the grocery business.

October 2018 • Volume 97, Number 10

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Expanding our Portfolio

Creating Innovative Products

Meeting Consumer Needs

Contents 10.18

Volume 97 Issue 10

28 Features





Cold Plays

Redefining Retail

Merchandising refrigerated and frozen foods across the store can be a challenge, but it often pays off.

Kroger proves you can still be a

hometown hero while leading the way to radically transform the grocery business.

Departments 10 EDITOR’S NOTE


December 2018 14 CONSUMER INSIGHTS

Holiday Sweets



Get a Hand in the Cookie Jar

Pay Parity is Possible – Here’s How




Fruits and Vegetables


Produce at the Local Level


The Power of Produce PROGRESSIVE GROCER October 2018


Contents 10.18

Volume 97 Issue 10

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



Glad Tidings

Festive confections help grocers ring in the holidays.

EDITORIAL EDITORIAL DIRECTOR James Dudlicek 224-632-8238 MANAGING EDITOR Bridget Goldschmidt 201-855-7603 DIGITAL & TECHNOLOGY EDITOR Randy Hofbauer 224-632-8240


SENIOR EDITOR Kat Martin 224-632-8172

The Pull of Produce

CONTRIBUTING EDITORS Princess Jones Curtis, D. Gail Fleenor, Jenny McTaggart, Lynn Petrak and Barbara Sax

Exclusive research shows that the category maintains its draw for primary shoppers.



WESTERN REGIONAL MARKETING MANAGER Rick Neigher (SOUTHWEST) 818-597-9029 MARKETING MANAGER Mike Shaw (MID ATLANTIC) 201-855-7631 • Mobile: 201-281-9100 ACCOUNT EXECUTIVE/CLASSIFIED ADVERTISING Terry Kanganis 201-855-7615 • Fax: 201-855-7373 CLASSIFIED PRODUCTION MANAGER Mary Beth Medley 856-809-0050 EVENTS VICE PRESIDENT, EVENTS Michael Cronin


Got SEO?

MARKETING MARKETING MANAGER Carly Kilgore 201-855-7601

Grocers that aren’t trying these tips to improve their Google ranking are missing major incremental sales opportunities.

AUDIENCE ENGAGEMENT DIRECTOR OF AUDIENCE ENGAGEMENT Gail Reboletti AUDIENCE ENGAGEMENT MANAGER Shelly Patton 215-301-0593 LIST RENTAL MeritDirect Elizabeth Jackson 847-492-1350, ext. 318 SUBSCRIBER SERVICES/SINGLE-COPY PURCHASES 978-671-0449 or email at


Trade Winds

As President Trump gets tougher on U.S. trade, the industry is weighing the long-term impacts on the grocery supply chain.



The Online Opportunity


Grocers should harness ecommerce as part of their pet care business.




Peak Performance




Grocers stand to benefit by offering robust sexual wellness sections in their stores.





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The Power of Working Together GROWTH Our retail relationships are built on our desire to work collaboratively and effectively to meet the diverse needs of our customers and their shoppers.

SOLUTIONS Our collaborative approach means customizing our efforts to the needs of our customers and providing differentiation.

Š2018 CSC Brands LP.

Campbell’s value to Our Customers is centered around REAL and comes to life through a commitment to our customers and our consumers. We are committed to building better partnerships because real success comes as we all work together. TOGETHER, WE WILL DELIVER REAL, SUSTAINABLE, PROFITABLE GROWTH.

FOOD We are transforming our food, beverages, and snacks, making them affordable and accessible to all.

INSIGHTS We know what both today’s and tomorrow’s shoppers want and how they want it. These real, actionable insights enable us to drive loyalty, increase trips, and maximize basket size.

EDITOR’S NOTE By Jim Dudlicek

The Ties That Bind t was an item easily missed amid the online noise. Someone at a Kroger supermarket in Michigan posted a photo on social media of a store associate bending down to tie a woman’s shoelace as the woman was getting out of her scooter and into her car parked in a handicapped space. A simple gesture, to be sure, but one not typically associated with a multibillion-dollar business. Kroger’s been in the news plenty lately — not for stuff like this, but for a steady stream of innovations that the Cincinnati-based grocery giant has been rolling out in its effort to basically redefine the grocery business. The industry continues to be under constant disruption as it transforms from a historically brick-and-mortar enterprise to one that connects with consumers on every level, physical and digital, day and night. And Kroger’s been a leader in that industry transformation, making significant investments and forging strategic partnerships here and abroad. Of course, you’d think Kroger was Sears the way that fickle investors responded to Kroger’s latest earnings call, which reported Q2 sales softer than expected, sending the company’s stock prices downward. They really seem to be missing the bigger picture: The transformative investments that Kroger is making are bound to deliver healthy dividends over the long haul. That’s why Progressive Grocer selected Kroger as its 2018 Retailer of the Year. We last gave this honor to Kroger five years ago. The changes since then have been astounding, but the mission is still the same. “We’re going to always give the customer great value for their money. For us, that’s just part of who we are,” Chairman and CEO Rodney McMullen told me when I interviewed him during the Grocery Manufacturers Association Leadership Forum this past August. “Then we’ll personalize offers based on what’s important to you. We’ll use our insights about each household, and for every household that engages with us, we’ll have offers that are important to them. That’s part of who we’ve been for a long time. It’s who we’ll continue to be. We always assume the market will be more competitive in the future than 10

Few companies demonstrate leadership on so many levels as does Kroger. It has proved that it can engage consumers intimately as well as broadly, and connect with them in body and spirit.” it is in the past, and I certainly don’t envision that ever changing, certainly [not] in my career.” At another industry gathering I attended this year, a Kroger executive showed a video the company made of associates reading “Dear Kroger” letters from consumers about how Kroger employees affected their daily lives in some special way. The associates didn’t know the letters were about them at first, something they realized as they got to meet the letter writers. The vignettes were heartwarming, and I’ll admit to tearing up at some of them. Few companies demonstrate leadership on so many levels as does Kroger. It has proved that it can engage consumers intimately as well as broadly, and connect with them in body and spirit. Perhaps Amazon, as an ecommerce pioneer, is more flashy and cutting-edge, striking fear as it does in the hearts of traditional merchants. But Kroger has certainly demonstrated that it can be competitive in this new world of retail and will help push the entire industry to where it needs to go to stay relevant and exciting. And I bet no one from Amazon stops to tie your shoelace in the parking lot.

Jim Dudlicek Editorial Director Twitter @jimdudlicek

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Calendar S



National Stress-Free Family Holiday Month Universal Human Rights Month

National Egg Nog Month National Fruit Cake Month National Pear Month







National Fried Pie Day World AIDS Day Eat a Red Apple Day


National Fritters Day


National Peppermint Latte Day


National Cookie Day


National Comfort Food Day


National Gazpacho Day National Microwave Oven Day

Hanukkah begins.





Set up a machine and offer free samples for National Cotton Candy Day.

National Brownie Day

Repeal of Prohibition Day


National Pastry Day


National Lager Day



UNICEF Birthday

National Ambrosia Day

National “Have a Bagel” Day

National Cocoa Day


National Popcorn String Day

National Biscuits and Gravy Day National Bouillabaisse Day

National Gingerbread House Day


National ChocolateCovered Anything Day – an occasion we can all get behind.


National Maple Syrup Day



National Roast Suckling Pig Day

National Oatmeal Muffin Day

National “I Love Honey” Day

National Hard Candy Day


National Sangria Day


Winter Solstice

National Gingerbread Latte Day National Cupcake Day


National Date Nut Bread Day

National French Fried Shrimp Day National Hamburger Day National Cookie Exchange Day


National Bake Day


Christmas Eve

Festivus, for the rest of us.


National Bacon Day





National Candy Cane Day Boxing Day Kwanzaa begins.


New Year’s Eve


National Fruitcake Day


National Box of Chocolates Day


National Pepper Pot Day National “Get on the Scales” Day

Flavor & Convenience #FTW!

Leading Growth F RO M F R I D G E TO F R E E Z E R Š General Mills


Market Research

Holiday Sweets When it comes to holiday candy purchases, men tend to be more practical (looking in the candy aisle or browsing end caps, and purchasing items as snacks). Women, however, tend to be more engaged: They use more store options, know to look in the seasonal section, are more likely to favor holiday-themed items and use holiday options in more unique ways. Progressive Grocer, along with sister company EIQ Research Solutions, interviewed 500 consumers who have household responsibility for grocery shopping to find out how they shop for holiday candy. Survey respondents were sourced via ProdegeMR, reinventing the market research process by taking a respondent-first approach. Visit for more information.

Holiday Candy Retail Purchase


60% 50


40 30






10 Supercenter



Where in Store

End caps

65% 29% 4%

Checkout lanes





Limited Grocery


Natural Grocery


Holiday Candy Usage

Seasonal selection Candy aisle










Recipe Icon indicates being more common among that gender compared with the other at a 90% confidence interval




57% of candy purchases during the holiday season are holidaythemed items

27% 21% 3%


Holiday-themed Source: Progressive Grocer market research, 2018


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Research & Analysis


From center store to the fresh offerings in the bakery display case, cookies continue to be one of America’s favorite desserts and snacks. While classics like oatmeal and chocolate chip are mainstays, there’s room to experiment with trendy flavors and styles. Check out one from each of the four stages of Datassential’s Menu Adoption Cycle (MAC) on cookies.


Alfajor MAC stage: Inception — Ethnic markets, ethnic independents, and fine dining

Trends start here and exemplify originality in flavor, preparation, and presentation. For a new take on the cookie sandwich, look no further than the alfajor. This cookie sandwich, found in South and Central America and Spain, can be made with a variety of cookies and has a dulce de leche filling. Cover it in chocolate and top it with ingredients like nuts or coconut. On <1% of U.S. restaurant menus +50% over the past four years 13% of consumers know it/ 7% have tried it Menu Example Alfajor — Aroma Espresso Bar, New York Our irresistible South American treat: velvety dulce de leche caramel between two delicate and buttery shortbread cookies sprinkled with powdered sugar



Macaron 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. This French mini cookie has seen a surge in popularity over the past few years, thanks to its colorful appearance — especially good for Instagram. It’s also a gluten-free food. The petite cookie is made with meringue, almond powder and various flavorings. On 1% of U.S. restaurant menus +47% over the past four years 73% of consumers know it/ 50% have tried it Menu Example Mini Macarons — Paul Bakery Café, Marcq-enBarœul, France Delicate ground-almond cookies filled with assorted flavors, including chocolate, coconut, caramel, lemon, raspberry and pistachio


Lemon 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 While lemon is a ubiquitous fruit, don’t leave it out of your cookie selections. There are several ways to apply its fresh, tart citrus flavor to cookies. One of the best-known examples is the madeleine, which has grown 80 percent on restaurant menus over the past four years. For a sweeter lemon flavor, consider using the Meyer lemon, up 26 percent on menus. On 3% of U.S. restaurant menus +6% over the past four years 59% of consumers know it/ 33% have tried it Menu Example Lemon Ricotta Cookies — Mandola’s Italian Market, Austin, Texas A creamy, luscious cookie made with ricotta and topped with a lemon icing


Macadamia 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. The macadamia nut is commonly paired with white chocolate in desserts. Take the white chocolate macadamia nut cookie to new levels by customizing it with other ingredients like cranberries, coconut, oatmeal and peanut butter. Also, try it in baked goods beyond cookies. On 5% of U.S. menus +8% over the past four years 90% of consumers know it/ 71% have tried it Menu Example Royale Cookie — Boudin Sourdough Bakery & Café, San Francisco Macadamia nuts, fresh coconut, chocolate chips


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Shelf Stoppers

Shelf Stoppers



(52 weeks ending April 2, 2016)

Top Dairy Supercategories by Dollar Sales $18,000,000,000

Basket Facts

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

16,000,000,000 14,000,000,000 12,000,000,000

How much are American 12% households because it’son spending quick and easy average per trip on various dairy products? 10%

10,000,000,000 8,000,000,000 6,000,000,000 4,000,000,000 2,000,000,000 0


52 Wks - W/E 07/28/18

52 Wks - W/E 07/29/17

Milk Products


52 Wks - W/E 07/30/16 Yogurt

Spotlight on Frozen Broccoli


Total U.S. xAOC (All Outlets Combined) – includes grocery stores, drug stores, mass merchandisers, select WHEN ARE CONSUMERS EATING FROZEN BROCCOLI? dollar stores, select warehouse clubs and military commissaries Source: Nielsen Retail Measurement Services, Total Food View Broccoli as an ingredient is most commonly consumed at dinner, followed by lunch.

Frozen broccoli is most often used in a side dish, followed by as a main entrée. 3%

We’re seeing dynamic shifts in what consumers are demanding 9% across dairy aisles in America. In many cases, we’re seeing a tradition tradeout where new alternatives are outpacing slow or negatively performing categories.OCCASION Take milk alternatives, for example. Growth MEAL ITEM has all but disappeared across many milk products as a whole,CLASS declining at 29% traditional TYPE 62% 35% 61% 5 percent in dollars year over year. Meanwhile, milk alternatives like almond and coconut milk continue to drive growth. Other examples can be seen in alternative cheese, nondairy yogurt and Latin crema in the sour cream category.”

because it tastes great


because it’s healthy and nutritious

$6.04 Cheese


because it’s low in calories, fat and sugar

$4.95 Yogurt

Analytics, DINNER—Lauren LUNCHFernandes, OTHER Manager-Strategy SIDE DISH andMAIN ENTRÉENielsen OTHER

Demographic Spotlight Household Income Aggregated

Total Dairy Department

Total Cheese

$ / HH Index - Product

HH Index Product

$ / HH Index - Product

HH Index Product

Under $20,000





$20,000 - $29,999





$30,000 - $39,999





$40,000 - $49,999





$50,000 - $69,999





$70,000 - $99,999










Dairy consumers within the under-$20,000 income bracket spend 26 percent less than their expected share on dairy products, relative to their incidence in the U.S. population. Dairy consumers within the $100,000-plus income bracket spend 19 percent more than their expected share on dairy products, relative to their incidence in the U.S. population.

Market: Total US HS • Segment: All Buyers • Retail Outlet: All Outlets • Period: Latest 52 - W/E 07/28/18 Source: Nielsen Homescan, Total U.S., 52 weeks ending July 28, 2018



Milk Products

$2.96 Eggs

Source: Nielsen Homescan, Total U.S., 52 weeks ending July 28, 2018

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Global New Products Database

Fruits and Vegetables Market Overview

The United States leads the way for fruit and vegetable innovation globally, accounting for 10 percent of all new product launches in the category in 2017. The top five claims on new fruit and vegetable launches in North America in 2017 were kosher, microwaveable, ease of use, organic and no additives/preservatives.

Key Issues

Rising health awareness continues to propel the global market, as 30 percent of U.S. fruit buyers believe that organic fruit is healthier than conventional fruit.

Rising health awareness continues to propel the global market, as 30 percent of U.S. fruit buyers believe that organic fruit is healthier than conventional fruit.

As convenience is one of the top claims on fruit and vegetable product launches globally, the snacking trend continues to influence innovation in the category. GMO-free is also increasingly important, with one-quarter of U.S. vegetable buyers agreeing that non-GMO is an important factor when purchasing vegetables. There’s some confusion about the meaning and benefits of non-GMO products, however. Manufacturers are innovating in regard to transparent packaging that allows consumers to see what they’re purchasing: Jars, tubs and flexible stand-up pouches all increased in 2017 from the year before.


What Does It Mean? Naturalness will continue to be a key driver in the global fruit and vegetable category, with ample opportunities in sales of organic products. Brands can convey naturalness through the elimination of additives and GMOs, as well as through clearer packaging or increased transparency, but may need to provide more explanation of their natural claims. Fruit and vegetable packaging that enables consumers to see the actual product they’re purchasing is a positive move to increase product trial in the category. Fruits and vegetables in convenient, small packages are likely to be the next iteration of the snacking trend.



The Power of Produce VALUE-ADDED PRODUCTS AND SERVICES CAN HELP SHOPPERS E AT MORE FRUITS AND VEGGIES. ating fruits and vegetables regularly is a common element of some of the most healthful diets in the world when it comes to promoting longevity, increasing cognitive and emotional well-being, and preventing chronic diseases — including reduced risk for coronary artery disease, stroke and certain cancers. As an added bonus for retailers, when produce lands in the shopping cart, overall basket size is 44 percent higher on average. Though 39 percent of consumers say they’re seeking more plant-based foods, only about 10 percent eat the recommended amount of fruits and vegetables, and fewer than half of shoppers recently surveyed report eating fresh produce each day. What stands in consumers’ way of eating enough produce? Intake barriers include convenience, preparation time, spoilage and variation in family member preferences. Food retailers can help combat barriers by offering value-added products and services.

Boost Convenience

Fresh, pre-cut and prepared produce delivers time savings that can make all the difference in getting fruits and vegetables onto the plate. Single-serve packs; snack box combos; family meal-starter kits that include on-trend, seasonally relevant salads and side dishes; and party platters offer grab-and-go solutions for time-pressed consumers. Whether eating alone, feeding the family or entertaining a crowd, consumers want easy and convenient produce options that look and taste fresh.

Expand Local

According to IRI data, having locally sourced fruits and vegetables makes shoppers feel like the retailer cares about the welfare of the local community and is a contributing factor in where consumers choose to shop for and purchase produce. Food Marketing Institute’s (FMI) “Power of Produce 2017” report revealed that 54 percent of shoppers are hoping for an expanded local selection, with the attribute “local” often trumping “organic” when directly compared. Use signage to call out local produce offerings that support local farms and agriculture and signal a halo of superior freshness.

Increase Trial

Half of all shoppers are creatures of habit, buying the same produce items over and over. Yet more than 80 percent would like advice on ways to prepare unfamiliar fruits and vegetables. Introduce an unfamiliar produce item via your sampling program and ready-to-eat salad bar. Provide descriptive messaging about its healthfulness, preparation, and optimal methods of serving and storage at the point of purchase, as well as via social media channels and your web and print ad, with an overlay of promotional savings to drive new purchases.


Tap Latest Resources

Retail dietitians can provide credible, science-based messages to inspire consumers to eat produce as part of an overall healthful diet. To support these efforts, tap such resources as The Produce for Better Health (PBH) Foundation’s “Health and Wellness Resource Guide for Fruit & Vegetables” (2017); FMI’s “Best Practices and Excellence in Fresh Department Health & Wellness” (2018); and The American Institute for Cancer Research’s “Diet, Nutrition, Physical Activity and Cancer: A Global Perspective” (2018). Further, deliver produce-promotion messages throughout the year during National Family Meals Month and Fruits & Veggies More Matters Month (both in September); New Year, New You (January); American Heart Month (February); National Nutrition Month (March); National Cancer Control Month (April); National Grilling Month (July); and more. Karen Buch RDN, LDN, is a registered dietitian/ nutritionist who specializes in retail nutrition marketing and communications. One of the first supermarket dietitians, she is now founder and principal consultant at Nutrition Connections LLC providing consulting services nationwide. You can connect with her on twitter @karenbuch and at


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Pay Parity is Possible — Here’s How STARBUCKS SHARES ITS THREE-STEP SOLUTION FOR EQUAL PAY. hen the Equal Pay Act was signed into law by President John F. Kennedy, women earned 60 cents for every dollar men earned. Fifty-five years later, women still make only 80 cents on the dollar. For women working full time in retail, that number is just 70 cents. Progress has been glacial, with the gap closing by just 3 cents in the past decade. At the current rate, it will take 100 years to close the pay gap, according to the American Association of University Women. Meanwhile, the debate over the cause of the pay disparity rages on. Some point to motherhood or personal career choices. There’s no denying, though, that systemic gender bias is at the root of pay inequality. “Economists try to analyze all the factors that we know: industry, education, how long you’ve been at work, hours,” Ariane Hegewisch, of the Institute for Women’s Policy Research, told CNBC. “What is left over is what we can’t explain with anything that can be easily measured, and that’s basically the proxy for discrimination.”

Simple Solution The solution to pay inequality is simple: Pay everyone doing the same work the same amount. Simple, but not easy to accomplish. Even so, a growing number of companies are tackling the problem head-on, and some, including NEW partners Intel, Microsoft and Starbucks, have succeeded. Intel reached gender pay parity for women in the United States in 2015. Early last year, the company accomplished pay and promotion parity for U.S. women, African-Americans, Hispanics and Native Americans, calling both milestones “signals of the overall health of our company.” Another tech company, our partner Microsoft, now pays 99.99 cents on the dollar to women at the same job title and level as men. Racial and ethnic minorities earn $1.005 for every $1 earned by their Caucasian counterparts. This spring, after 10 years of single-minded focus, analysis and new thinking, Starbucks reached its goal to end pay differences between women, men and underrepresented


minorities in its U.S. operations. To help others achieve the same, the company is sharing its winning strategy, which it’s now applying globally. Adhering to Starbucks’ three principles — equal footing, transparency and accountability — will allow employers of all kinds to address the systemic barriers to pay equality.

Equal Footing Starbucks doesn’t ask candidates about their salary history. Starting pay is based on the candidate’s skills, abilities and experience — period. Plus a position’s pay range is provided upon a candidate’s request. “One of the most important things to get right is starting pay,” notes Sara Bowen, an attorney who leads Starbucks’ Inclusion, Diversity, Equity and Accessibility Team. “If a woman comes into a company low, she tends to stay low. If a job candidate comes to Starbucks making 70 or 80 cents on the dollar, and we use that as the basis for her pay at Starbucks, we simply import gender inequality into our own system. Prior salary can be tainted and should not dictate how we pay our partners.” The company also removes caps on promotional increases. Its pledge: “If you are promoted at Starbucks, your salary will not depend on what you made before.”

“The solution to the pay gap is simple, but not easy.”

Transparency Each year, Starbucks publishes its pay equity performance and provides updates on its efforts to achieve and maintain pay parity globally. A pay offer calculator is used to calculate the starting pay range for all store managers and district managers — and Starbucks won’t retaliate or discriminate against employees for asking about or discussing wages.

Sarah Alter is president and CEO of the Network of Executive Women, a learning and leadership community representing more than 12,000 members, more than 830 companies, 110 corporate partners, and 21 regional groups in the United States and Canada. Learn more at

Accountability The coffee retailer is conducting comprehensive compensation analyses — including base pay, bonuses, stocks and other rewards — to further its goal of pay equality for all partners. Raises and bonuses are statistically analyzed before they’re finalized to ensure that systemic bias doesn’t creep into the process. “We tried to create tools to help us approach pay in a consistent and objective way, and remove the kind of subjectivity that can lead to pay bias,” says Bowen. “These tools affect hundreds, if not thousands, of pay decisions every year. “This is a complicated issue, and it is not about one single moment, but about the ongoing work to make equity a reality,” she continues It took a decade of determined effort for Starbucks to reach gender pay parity. But don’t let the magnitude of the challenge keep you from taking action or reaching out to others for help. At NEW, we encourage partner companies to: Conduct (and regularly repeat) an equal-pay analysis by job title, based on required knowledge, skill and experience. Include pay adjustments in the budget. Ensure all merit pay supports equal pay. Never set salaries based on pay history. Evaluate how maternity or disability leaves affect employees’ career paths and wage increases. Bowen compares achieving pay equity to making exercise a habit. “It’s a huge muscle to build,” she observes, “and even when you reach a pay equity milestone, you have to keep working at it.” It’s that continuous work — changing behaviors, overhauling compensation policies, creating equal career opportunities, constant monitoring — that will ensure that women and men are paid the same amount for the same work.

FOR PACKAGING INSPIRATION, CONTACT US OR VISIT Bruce Jensen, TC Transcontinental VP Sales & Marketing • 866.439.6050




CHANGING WHAT IT MEANS TO BE A GROCER Kroger proves you can still be a hometown hero while leading the way to radically transform the grocery business. By Jim Dudlicek 28


here’s the Kroger that you see in the headlines: Buys meal kit company. Partners with Ocado. Pilots autonomous grocery delivery. Launches wellness app. Commits to removing single-use plastic bags. And then there’s the Kroger that consumers know, the folks who shop their neighborhood stores under Kroger’s many regional banners. The Kroger whose associates know shoppers by name. The Kroger that donates to hometown organizations and local nonprofits. The Kroger that sends hydrangeas to the funeral of a longtime shopper who bought the flower for herself every week for years whenever she came to the supermarket. » PROGRESSIVE GROCER October 2018



The Kroger Co.

Kroger calls itself America’s grocer — an audacious claim to be sure, despite the retailer’s nearly 2,800 stores in 35 states. But it’s not hard to reconcile that image with its actions that both drive industry growth and innovation, and endear consumers with its commitment to serving them day in and day out, above and beyond. “What we’re trying to do is to really allow a customer to engage with us, anything they want, anytime they want, anywhere they want,” says Rodney McMullen, Kroger’s CEO and chairman. “We think about those different channels a lot more than the customer thinks about the different channels. All they look at is, they’re trying to solve breakfast, dinner, lunch or whatever. Snacking. A bunch of kids showed up at the house, and I’ve

Everything Kroger does — from shopping apps to wellness guidance to personal engagement — aims to deliver a seamless retail experience.

got to feed them. All we’re trying to do is serve the customer and what their desires are.” It’s this commitment to solutions as part of a seamless shopping experience, this constant innovation to better serve consumers on their terms, this vision for what a grocer has to be to thrive in a constantly disruptive retail market that made The Kroger Co. our clear choice for Progressive Grocer’s 2018 Retailer of the Year. “If you think about allowing the customer anything they want to eat, anytime they want to eat it, anywhere they want to eat it, then how do all the pieces start fitting together to support that?” McMullen muses. “We find that a customer is constantly changing, so we have to be incredibly agile.”

Kroger Innovations Kroger Ship directto-consumer grocery delivery, being piloted in four U.S. cities, with additional expansion under way

Partnership with e-seller Alibaba to sell Kroger’s Simple Truth products in China via Alibaba’s Tmall Global platform

Partnership with U.K.based online grocer Ocado to introduce its delivery platform in the United States

Expanded partnership with Instacart to increase customer delivery coverage area to 75 additional markets throughout the United States by late October

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! s n o i t a l u t a r C ong o® Family Suprem V & V The From

2018 Retailer of The Year



The Kroger Co. Thinking Big

Analysts agree that Kroger is pursuing a wise strategy. “Kroger is expanding the definition of what it means to be in the grocery business, with investments in automation and their move to sell own-label products in China,” Bill Bishop, co-founder of Barrington, Ill.-based consultancy Brick Meets Click, tells PG. “Expect that these moves will drive not only faster sales growth, but will also make Kroger a much stronger company. Credit Rodney McMullen for this.” Likewise, Brittain Ladd, an omnichannel supply chain consultant who has worked for Amazon, Deloitte, Capgemini and Dell, notes that Kroger “realizes that in order to be successful against a nontraditional retailer like Amazon, [it] must think and act like a nontraditional grocery retailer.” Ladd, a contributor to Forbes, tells PG that he “encouraged Kroger to think big and to act with a sense of urgency. Kroger hasn’t disappointed.” An analysis that Ladd conducted as a consultant for Kroger “convinced me that the grocer has the potential to increase its annual revenue from $123 billion in 2017 to a staggering $175 billion to $200 billion-plus annually,” he says. “Grocery retailers are under intense pressure. Kroger has done an admirable job of preparing the company to be more competitive,” Ladd notes, adding that he estimates Kroger can increase its market share for groceries from 7.5 percent to 13 percent or more. That’s certainly the kind of growth Kroger’s leadership has in mind. A year ago, when unveiling the retailer’s ambitious Restock Kroger program, built on four pillars — redefining the customer experience, expanding partnerships, developing talent, and living the company’s purpose through social and environmental impact — McMullen envisioned a food industry that could double in size, from around $800 billion to $1.5 trillion.

How does he aim to get there? By being a solutions provider. “People are increasingly becoming foodies and paying attention to trends on food, trying new flavors, very open to trying new things,” McMullen observes. “How do you help support that customer’s desire? … I think for a long time, we looked at the industry a little bit too traditionally. If somebody’s eating, we want to be feeding you, and we want to help you eat something that you love and enjoy. If you’re the person that’s responsible for providing a meal to somebody else, we want to support you being a hero to your family, your kids, your significant other. … How do we use our infrastructure and our love of food? We’ve been in the food business for over 135 years. How do we use that insight that we have on the customers and help them be a hero?”

“What we’re trying to do is to really allow a customer to engage with us, anything they want, anytime they want, anywhere they want.” — Rodney McMullen, CEO and chairman

Kroger Innovations Seamless coverage area increased to 80 percent of Kroger households through curbside pickup and home delivery from stores

Piloting autonomous delivery in Scottsdale, Ariz., with driverless vehicles by Silicon Valley startup Nuro

OptUp, a data-driven app that helps customers make more informed, healthier purchase decisions, with 130,000 downloads in its first two months toward a goal of 1 million downloads in one year

Establishment of new digital headquarters in downtown Cincinnati, with plans to grow the digital team to more than 1,000 over the next three years

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The Kroger Co.

Available, Accessible, Relevant

Every initiative that Kroger has been launching (and has continued to roll out, even while this issue was in production) is designed with a single overarching goal in mind: to provide food to people how, when and where they want it, be it via click-and collect, delivery, grab-and-go, heat-and-eat, sit-and-dine, or a traditional in-store shopping experience. “We are on a journey to really transform Kroger and the customer experience, focusing on the digital aspect first, since these initiatives are digital-centric or -related,” says Yael Cosset, Kroger’s chief digital officer. “It boils down to three big pillars when you think about the digital engagement of the customer experience: You need to be available. You need to be accessible. And you need to be relevant.” Since last October, Kroger has nearly doubled the

Click-and-collect grocery pickup is among the services Kroger offers to let consumers shop as they wish, based on their current need.

availability of its click-and-collect service. “Almost 1,300 stores today offer that convenience of service, with unrestricted access to the assortment they would normally shop in the store available within a short period of time for pickup,” Cosset notes. (Launched under the name ClickList, click-andcollect and delivery services are being redubbed Kroger Grocery Pickup and Kroger Grocery Delivery, according to the retailer's website.) Delivery service has seen a similar accelerated rollout to as many store locations after being piloted barely a year ago. “The store really is becoming less and less relevant when you think about delivery, because the customer doesn’t really mind whether the order is picked from the store they shop or the store down the street,” Cosset says. “For us, it makes a big difference. It allows us to create density and make the service more sustainable financially to execute.” By the end of the year, Cosset anticipates, the service will be available for up to 90 percent of Kroger shoppers. That’s in addition to Kroger’s summer launch of direct-to-customer delivery, Kroger Ship. “It’s really an addition to the portfolio of modalities,” Cosset notes. “Ten, 20 years ago in the U.S. market, 100 percent of grocery and food retailers would generate their sales through a brick-andmortar footprint. Fast-forward to last year: We added the click-and-collect, the pickup service, the delivery service and now [are] really accelerating our direct ship-to-home service.” For McMullen, it’s all about taking the friction out of the shopping experience. “How do you just make it super-easy for a person to be able to do those things without having to think about it? It’s all pieces into that overall puzzle,” he says. “We’re figuring out ways to make it incredibly easy, and then have the right products located at the right spots. That’s what makes this

Kroger Innovations Agreement with the University of Cincinnati to operate an innovation lab within the school’s 1819 Innovation Hub


Third Natural Foods Innovation Summit in partnership with 84.51°

Launch of Boosted Products in searches on Kroger digital properties, which in one month delivered 200 million product impressions for advertisers

Plan to phase out single-use plastic bags across all Kroger banners by 2025, the latest component of the company’s Zero Hunger | Zero Waste philanthropic and sustainability initiative


Stand Out on a Crowded Shelf 8 ways digital printing can add value to the Brand/Retailer/Shopper Experience

Standing out on a crowded shelf has never been more important, or more difficult. As threats from online challengers increase every day, so must the brand’s your ability to grab the shopper’s attention at retail. Being able to stop the shopper at the shelf and convert this contact into a sale is made even more challenging by the sheer depth of our shoppers’ omni-channel experience. With messaging coming from all directions, how does YOUR brand get noticed by the shopper and make them pay attention to your message?

Digital printing is expanding the ways retail packaging can communicate your message to connect with your targeted shoppers. Great Northern is one of the first few companies to take advantage of this valuable, new technology. Great Northern has partnered with HP to offer new, high-speed inkjet digital printing for packaging. The installation and use of HP’s PageWide T400 press has allowed us the opportunity to lead the industry in offering digital printing for packaging to our customers in the primary packaging and club store markets.

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HP’s high-quality digital print rivals that of offset, offering striking shelf presence and a broad color gamut. This new print technology was developed by HP and utilizes its food-safe, water-based inks. Digital printing options are opening up a new world of opportunities for Brands and Retailers to improve their shoppers’ in-store experience. BRANDS can achieve success in their sales efforts by taking advantage of the following digital printing benefits: 1. Digitally printed packaging improves the overall speed to market for your products. With fewer manufacturing steps and a streamlined approval process, digital printing can help you get on the shelf faster. Ideas can be brought to life faster, and packaging changes can get to market on a tight timeline and a tight budget. Speed up the merchandise’s journey from product launch to shoppers’ baskets with digital printing. Example – Private Label Meal Kits This Brand’s challenge was to prove a new meal kit concept to retailers, then provide actual packaged samples to the retailer, all while having the flexibility to run numerous flavor options across several sized cartons. It all needed to be done affordably and quickly.

When you want to connect with your shopper and give them more options at retail, digital is the way to go. The flexibility of the digital printing process allows for customized programs that can get your brand recognized at retail. Example – Shelf Presence Variety The Brand’s challenge was to meet consumer demand for product variation by offering shelf variety in packaging. Hand towel and tissue products end up in a variety of rooms in the consumer’s home, and the ability to choose a package that blends with the customer’s décor is important.

This can be a complicated and costly process for box converters to blend runs and assure a specific print mix is delivered to offer variety at retail. Digital printing allows this to happen directly via the printing process while manufacturing. Numerous versions can be run and sequenced automatically, without manual combining. With digital printing, the product variety is only limited by your imagination, as it is now possible to run 4, 8, 12 or many more prints co-mingled. With a broader product selection at retail, the shopper has more choice and is more likely to find and purchase the packaging that suits their needs.

Digital printing was the perfect solution, because it offered the ability to meet the various flavor versioning requirements for the launch run. It was also able to shave several weeks off of the approval and manufacturing process that is typically used in traditional analog printing. Not only did digital printing allow the Brand to meet the demanding launch date, it made the project affordable. 2. Digitally printed packaging allows for product variation that improves shelf presence.

3. Digitally printed packaging provides specific shopper targeting opportunities. When you want to reach specific shoppers, digital allows your brand the flexibility to speak to different groups directly. Reaching multiple audiences within a single packaging run reduces costs. 4. Digitally printed packaging helps keep packaging order sizes flexible to meet your specific needs. Digital also allows for more flexible order

quantities, since you can easily gang run multiple print runs together for different flavors, colors and other variations. Short run charges are greatly reduced when orders are easily combined on a single setup.

run in combination, to allow the Brand to have team-specific packaging in certain high value markets. Digital printing allowed the Brand to grow incremental sales by targeting a specific demographic: the raving football fan.

Each of these benefits demonstrate how digital printing can help your Brand get to market more efficiently, stand out on the shelf more uniquely and sell your product to your shopper more successfully. RETAILERS are always looking for ways they can differentiate themselves from their competitors to draw the shopper to their specific store. The use of digital printing on packaging also offers opportunities for you to help retailers accomplish this goal in the following ways: 1. Digitally printed packaging meets increasing demands for retail customization. When retailers ask for specific packaging attributes, customized images, or retailer specific co-branding—all of these requests become easier and more affordable with digital printing. Individual packaging runs can be split into a series of customized runs at very little additional cost, making these retail-specific requests affordable. 2. Digitally printed packaging helps produce regional, local, and channel specific promotions. Regional promotions, such as area-based tie-ins with professional sports teams, college branding and local events, all become much simpler and economical to participate in and implement through the use of digitally printed packaging. These types of promotions can help drive shoppers to purchase, based on their allegiance to a particular team or upcoming event in their area. Example – Team Specific Promotions The Brand’s challenge was to capitalize on the launch of the NFL season by branding their products with team logos, tying into the beginning of the NFL season and giving fans a chance to show their team loyalty. To meet this challenge, the normal packaging run was supplemented with additional team prints,

3. Digitally printed packaging allows for affordable market segmentation of varied demographics.Targeting specific demographics is both easier and more cost-effective with the flexibility offered by digital printing for packaging. Reaching out to speak to your specific targets, and being able to offer multiple messages to these targets, can help reinforce your brand’s message at a variety of retail locations, specifically targeting their unique shoppers. Bilingual or multi-lingual packaging is one way to address the needs of populations in specific areas or regions, and digital printing makes this possible. 4. Digitally printed packaging helps to enable special retailer and brand promotional opportunities. Digital printing offers a variety of ways to connect with shoppers via specific promotional opportunities. Packaging that ties into exclusive time-sensitive promotions or holiday campaigns is now possible and easier to manage with the speed to market and quantity flexibility offered by digital printing on packaging.

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be leveraged to work with other media to provide timely communication in a very quick speed to market scenario.

The ability to produce shorter run in-and-out programs for U.S. Memorial Day, Independence Day and Labor Day, for example, now fall into the realm of possibility for those who want to take advantage of those timely opportunities.

DIGITAL PRINTING FOR PACKAGING opens up a future of new possibilities to elevate your brand at retail, gain better customer recognition, and increase product sales.

Tie-ins with social campaigns are another way to truly engage with shoppers and enable both the Brand and the Retailer to connect directly with their targets.

Digitally printed packaging can get you to market faster, easier, and at a competitive price point, while allowing you to differentiate your products at retail.

Example – Cause Marketing This Brand’s challenge was to work with a packaging converter in developing ways to raise awareness of a regional disaster, and to help the affected farmers and businesses recover from this event.

It also provides new ways to interact with shoppers, engage with social media and connect in ways that allow greater interaction at retail. All of these benefits contribute to an exceptional engagement experience for your shopper at retail, which is what will keep them coming back in the era of increased internet presence.

This interesting example was executed by a brand in Italy, who developed a promotion utilizing digital print to help farmers in an earthquakedamaged area of the country. The brand used a crowd-sourced campaign via Facebook to reach consumers, inviting them to send messages of encouragement to the farmers and businesses affected by the earthquake. These messages were then printed on apple boxes headed to grocers in the regions affected. With more than two million cartons produced within just a few short months, featuring almost 30,000 unique crowd-sourced messages, the program was a huge success. Shoppers visited stores to look for their own messages, and in the process, apple sales greatly increased. This allowed the Brand to donate over $100,000 from the profits of the sales to those affected by the earthquake. This is a great example of how digitally printed packaging can

Great Northern is leading the path for digitally printed packaging with our StrataGraph product line and HP’s high-speed inkjet printing process. We have seen much success in these efforts as we’ve utilized this technology in 2018. We have additional case studies about the valuable merits of digitally printed packaging at For more information about HP digital press technology, visit commercial-printers/pagewide-industrial/ products.html.

We would appreciate the opportunity to share how we may lead your company to its own digital printing success story. Standing out on that crowded shelf just got a little easier with Great Northern StrataGraph and digitally printed packaging.


business so exciting and so much fun.” The store, Cosset asserts, is being reinvented to be more centered on experiences. “As a customer, I may have different needs,” he observes. “If I’m replenishing my pantry with dry goods or paper towels, I don’t necessarily need to have the experience in the physical stores. Oftentimes, these are routine purchases that are on a regular schedule. That’s a perfect candidate for that item to be shipped directly to my home. It’s more convenient as well. Nobody wants to carry big items, whereas the delivery and pickup are more immediate in terms of service or expanse for the customer.”

Kroger Acquires Home Chef

Accelerating, Simplifying

It really shouldn’t have been a surprise to anyone, then, when Kroger announced its partnership with Ocado, the U.K.-based online grocer, with which Kroger aims to solve the “last-mile” question for grocery deliveries in the United States. “We had been having conversations off and on with Ocado for probably 2½ years,” McMullen acknowledges. “It took a while for [Ocado CEO] Tim [Steiner] to get comfortable with our ambition to serve America. It took him a while to get comfortable that we were serious. As they’ve grown in terms of talent and capabilities, their technology has made tons of progress over the last few years, so it really was a combination of Tim getting comfortable, in terms of what our aspirations were, and the technology that they had really started. ... They were improving upon something that was pretty good and making it great, and so it was really all those pieces working together. We’ve started the process on it. I’m working on seven cities for possible sites, but three where we’re doing the indepth analysis, trying to find specific real estate.” When reported on the deal last May, Steiner said, “As we work through

Launch of Feed Your Future continuing education benefit for Kroger associates; more than 1,800 applications received to date for financial support

Introduction of apparel brand Dip, developed by globally renowned fashion designer Joe Mimran

Last June, The Kroger Co. completed its $200 million purchase of meal-kit service Home Chef. Intended to significantly accelerate the availability of meal kits, the acquisition will help Kroger further lead the way in “revolutionizing how companies shop for, prep and cook their meals,” as originally reported at Home Chef will assume responsibility for Kroger’s meal solutions portfolio and become a subsidiary of the retailer, while also maintaining its ecommerce business through its website. The service also will maintain its distribution centers in Chicago, Atlanta and San Bernardino, Calif., which together reach 98 percent of all continental U.S. households within a two-day delivery window.

Introduction of Bromley’s For Men, an exclusive line of shaving and grooming products

Exploring the sale of its Turkey Hill dairy and beverage manufacturing business




The Kroger Co.

the terms of the services agreement with Kroger in the coming months, we will be preparing the business for a transformative relationship which will reshape the food retailing industry in the U.S. in the years to come.” Cosset elaborates on the U.S. introduction of the Ocado Smart Platform: “Ocado is a way for us to accelerate and simplify the fulfillment of delivery, by concentrating and consolidating

Kroger reportedly is closing in on sites for three U.S. automated distribution centers with U.K. grocery delivery partner Ocado.



volume. It creates automation and efficiency, which has a very positive financial impact for our shareholders and also allows us to provide a service to the customer that’s affordable. It also allows us to start distributing what’s referred to in the industry as a piece pack capability, and start bringing orders or small replenishment to different touchpoints for the customer. Smaller store formats can greatly benefit from that asset. When you think about reaching and being available to all of America, Ocado removes some of these barriers.” Kroger further shook things up in the last-mile equation with this past summer’s announcement of pilot-testing grocery delivery with driverless vehicles developed by Mountain View, Calif.-based Nuro. Tests are under way at Kroger’s Fry’s Food Stores banner in Arizona. “I think what’s going to be important for us is to make sure we have the right level of flexibility in how we execute delivery fulfillment,” Cosset says. “It’s very different, the constraints both physical and economic for a $150 weekly order versus a $25 ‘I am out of milk or I need a pizza or I need a meal kit in the next 15 minutes.’ The expectation from the customer, the complexity of fulfilling is very different. One is large-volume, typically planned ahead of time. The assortment in that basket and the size of that basket is financially very different than my $25 or $30 order.” Kroger’s innovations are likely to have ripple effects throughout the grocery retailing community. “This is a substantial opportunity in an industry with margins ranging between 2 percent and 5 percent,” Ken Fenyo, head of consumer markets at McKinsey Fast


“We are on a journey to really transform Kroger and the customer experience. It boils down to three big pillars: You need to be available. You need to be accessible. And you need to be relevant.”


— Yael Cosset,

* We produce enough electricity for our farm, our cheese factory and over 300 area homes.

36 FI18_Crave_ad_Green_SpecialtyFoodsMagazine.indd


Kroger’s chief digital officer

7/25/18 8:54 AM


The Kroger Co.

collect and even dedicated trucks.” According to Cosset: “We do not believe that it’s going to be one size fits all. The customer expectation will vary greatly depending on the time of day, depending on what their frame of mind is, where they live. The constraints for the customers are different; the constraints for Kroger to fulfill the orders are different. We want to make sure we create the most flexible and broad portfolio of capabilities so that we can be where the customer wants to be in an affordable and sustainable way for them, and a very efficient and scalable way for us.”

Investment in People Growth, and former VP of loyalty at Kroger, told PG Digital and Technology Editor Randy Hofbauer when the news of the Nuro pilot broke in August. “Most likely, retailers will need to adopt a range of last-mile delivery options depending on location, demographics, competition and other factors, including autonomous vehicles, drones, on-demand services, click-and-

Tests of grocery delivery with driverless vehicles are under way at Kroger’s Fry’s Food Stores banner in Arizona.

Initiatives of this scope need a talented group to make them a reality, and Kroger is investing in its team as well, to the tune of $500 million, including accelerating entry-level pay. Using a third of its tax reform savings, Kroger created Feed Your Future, a program through which full-



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The Kroger Co.

and part-time associates can receive $3,500 a year, up to $21,000, for continuing education — anything from a GED to an MBA. “When you invest in your people, they stay longer,” McMullen says. “When they stay longer, our retention significantly improves, and the people fall in love with the things that we’re great at.” He continues: “To me, there isn’t anything more pleasurable than watching somebody grow as a human being. I always want, when somebody comes to work for Kroger, for them to stay forever. But even if they don’t — the other day, I was

Kroger associates (whose ranks include some 449,000 people) do community outreach across the country, such as this cereal drive last year for the Children's Hospital of Michigan.

talking to a gentleman at the convention center in Cincinnati. He was telling me: ‘My first job was at Kroger. I loved it. I used to be really shy, and it helped me get used to talking to people, and I worked [there] through high school and college. After I got out of college, I went and did other things, but I still use some of those things today.’” Seventy percent of Kroger’s store directors started out as hourly associates. Getting in on the ground floor is something McMullen knows all too well: He joined the company as a teenager to pay for college. “I started at Kroger for less money than I could’ve started somewhere else, because you get a tremendous amount of responsibility at a very young age, and you get to do something that’s a constant change,” he says. “If you look at that, what we’re trying to do is to help support people, to help them fall in love with people and to help them fall in love with food.” McMullen hopes that connection will attract more young people to the business of food retailing. “You get to engage with people two to three times a week,” he notes. “You’re there for many of the most important moments in people’s lives. The other day, I was in one of our bakeries, and the associate was making cupcakes for a reveal party. The couple didn’t know whether it was a boy or a girl yet, because they wanted to learn at the same time that their family learned. Our bakery associate knew and made the cake. Being able to be part of that occasion is pretty darn special, because you get to be part of lifetime events for a customer, and helping make that lifetime event a

Kroger Partners with University of Cincinnati on Innovation Lab The Kroger Co. has signed an agreement with the University of Cincinnati (UC) to operate an innovation lab within the school’s 1819 Innovation Hub. “Kroger’s new partnership with the University of Cincinnati is one more way we are investing to create the now and future of retail,” Chris Hjelm, the grocer’s EVP and CIO, said in August, as reported by “This innovative collaboration is driven by Restock Kroger and provides the Kroger Technology team another creative space to partner and develop solutions to redefine the grocery customer experience.” Kroger will staff the hub with resources, including R&D engineers and software developers, alongside UC faculty. The partnership will also feature a dynamic student co-op and internship program. “The 1819 Innovation Hub is a co-working community where we will build and discover the next generation of technology and talent,” Hjelm said. “Our vision is to create a talent pipeline that supports our business and


positions the region as a place for digital and technology students and professionals.” The hub boasts a 12,000-square-foot makerspace and micro-factory, as well as state-of-the-art classrooms and multipurpose rooms. Kroger’s 2,500-square-foot lab is expected to be complete this month. Earlier this summer, Kroger announced its digital headquarters in downtown Cincinnati, with plans to increase its current digital team of 500 associates to 1,000 by 2020.

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The Kroger Co.

little bit more special is pretty darn cool. We have a tremendous success at getting people to come for a job that becomes a career.” Jessica Adelman, group VP of corporate affairs, says that she hopes as many associates as possible take advantage of Feed Your Future, “because that’ll be better for Kroger and, of course, better for them in the long run.” The workplace, Adelman notes, is transforming

From Hearts to Homes offers pre-packed bags of groceries that shoppers can buy at Kroger stores for donation to local food bank partners.

into something that offers purpose beyond selling. “Irrespective of generation, people want to work at an organization with a sense of purpose, and they want to know that the place where they work has values that match their values,” she observes. “So we did some really deep work on our purpose — research, focus groups. We talked to a huge portion of our workforce and really came across our purpose, which is to feed the human spirit. “There are two important legs of that,” Adelman continues. “One is our culture: our purpose, our promise, our values. The second one is Zero Hunger | Zero Waste, which is Kroger’s commitment to end hunger in our communities and eliminate waste across the company by 2025. … Living our purpose every day is really important to us. Every conversation we have at Kroger today, our purpose is right at the top: to feed the human spirit. And it’s unbelievable how motivating people find the idea that we’re going to try to end hunger in our communities and eliminate waste across the company. People really rally around it.” A cornerstone of that commitment has been Kroger’s partnership with Feeding America, a network

Kroger Opens Culinary Innovation Center, Expands Restaurant Concept Opened last February in downtown Cincinnati, The Kroger Co.’s Culinary Innovation Center is “an exciting state-of-theart test kitchen and education center,” said Daniel Hammer, the company’s VP of culinary development and new business. “As we focus on redefining the customer experience and developing talent through food inspiration and uplift, as outlined in Restock Kroger, this R&D lab will allow us to accelerate product development for Our Brands, produce new recipes for Prep+Pared Meal Kits, explore new restaurant concepts, host food tastings and focus groups, and increase our associates’ culinary knowledge,” Hammer noted. As reported earlier this year by, the commercial kitchen offers multiple cooking stations, spaces and capabilities, including technology that enables video streaming of educational sessions to Kroger associates across the country. “The center gives our culinary team a fun, modern space to innovate and experiment with food trends, flavors and ingredients to create new experiences for our customers,” Hammer said. Kroger introduced its first restaurant concept, Kitchen 1883, in November 2017 in Boone County, Ky., near Cincinnati, and rolled out the Prep+Pared line in stores


and via its ClickList online-ordering program earlier that year. In April, Kroger announced a second Kitchen 1883 stand-alone restaurant in the greater Cincinnati area. The restaurant concept offers a fresh take on American comfort food with a made-from-scratch menu inspired by American and international flavors, handcrafted cocktails, and a community-centered atmosphere.

veterinarian photo


The Kroger Co.

of more than 200 food banks that feed more than 46 million people in the United States through food pantries, soup kitchens, shelters and other community-based agencies. Last year, Kroger provided 330 million meals through the Feeding America network. “As a percentage of EBITA, we’ve been named one of America’s most generous companies, and as you know, the grocery margins aren’t banking margins,” Adelman says, noting that of Kroger’s $360 million in donations last year, about half went to food and food-related causes. “For more than three decades, Kroger has been a valued partner in the fight to end hunger in America,” Matt Knott, president of Chicago-based Feeding America, tells PG. “From philanthropic investments in local food banks in communities across the country, to food waste innovations that prevent good food from going to landfills, Kroger has demonstrated its commitment to helping children and families who face hunger.”

Making a Bold Statement

Zero Hunger | Zero Waste also encompasses sustainability, and Kroger is leading the industry here on several fronts. The retailer made waves with its announcement in the run-up to press time on this issue that it would phase out its use of single-use plastic grocery bags by 2025. Kroger’s sustainability goals are “pretty audacious,” Adelman admits. “We think that making a bold statement like ending hunger in our communities, and eliminating waste across the company, gives us a lot to work on. I feel really good about where we are on our waste diversion goals. We were already on track to become a zero-waste company by 2020, as we committed to in our sustainability goals. We’re at 77 percent, which is great. That is enormously helped by our manufacturing operations: 34 out of 44

Food waste is the latest issue to be tackled by Kroger's Zero Hunger | Zero Waste philanthropic and sustainability initiative.

our 36 plants are already zero waste, and our stores are coming along nicely. “The piece that’s new for us, which is why we need the 2025 add-on, is food waste,” she adds. “That is an area — certainly in consumer consciousness, even in a national consciousness — that people hadn’t really been talking about. Certainly, we’ve been talking about recycling, and some of the other environmental topics, for quite some time, but food waste really has just bubbled to the forefront of our national consciousness as a major issue.” Studies indicate that 40 percent of the food produced in the United States is thrown away, yet one in eight Americans experiences hunger. To address this, Kroger is partnering with World Wildlife Fund to conduct a comprehensive food waste analysis to identify where the company stands today in its journey to zero food waste, and to establish a framework for measuring and reporting food waste reduction going forward. Among the actions being taken: Kroger is starting to stock Apeel avocados, a variety with extra peel that extends the fruit’s shelf life. This move, revealed at the one-year anniversary of Zero Hunger | Zero Waste in the weeks leading up to press time, is a partnership with Goleta, Calif.-based Apeel Sciences, founded in 2012 with a grant from the Bill & Melinda Gates Foundation to help reduce post-harvest food loss in developing countries that lack access to refrigeration.

“Living our purpose every day is really important to us. Every conversation we have at Kroger today, our purpose is right at the top: to feed the human spirit. And it’s unbelievable how motivating people find the idea that we’re going to try to end hunger in our communities and eliminate waste across the company. People really rally around it.” — Jessica Adelman, Kroger's group VP of corporate affairs

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The Kroger Co.

Private Matters

Meanwhile, Kroger continues to grow its own brands, both in stores and online. As the company reported in its second-quarter earnings call, since the August launch of Kroger Ship, 41 of the


top 50 items sold are its own-brand products; in center store, Kroger premium labels like Private Selection, HemisFares and Abound grew by double digits during Q2, when own brands made up well over a quarter of unit and dollar sales. Leading the way is Simple Truth, which, since its launch five years ago, has become the second-largest brand Kroger sells. This year, Simple Truth reached more than $2 billion in annual sales, making it the largest natural and organic brand in America. Soon, consumers outside the United States will find out why, as Kroger has partnered with Alibaba, one of the world’s largest internet companies, to sell Simple Truth products in China on Alibaba’s Tmall Global platform. And products may be just the beginning. “It’s possible that there still may be further partnerships with Alibaba, particularly on in-store technology — mobile payments, ship-from-store in-store routing and logistics — as this has been where Hema [Alibaba’s supermarket chain] has been experimenting the most,” Tom Gehani, director of client strategy and research at New Yorkbased business intelligence company Gartner L2, told PG’s Randy Hofbauer in August. “In China, the importance of natural and organic

product is increasingly important, and customers are thinking about it and worrying about it just as much there as in the U.S.,” McMullen says. “[Alibaba President] Michael [Evans] is from Canada, but he lives in the U.S., so he has a broad experience. He obviously knew about the strength of our Simple Truth. “Alibaba with TMall, they really make it incredibly easy to introduce a product and introduce a store,” McMullen continues. “The amount of information that they have that they’re able to share back with you is very exciting. It was a conversation … and then [when] we started spending a little bit of time in China and understanding more [of] what the partnership could do, we got very excited. We’ll find out how it works. It’s one of those things where we’ll go test and we’ll continue to learn, but we really do believe the product, the brand itself, and the credibility in the brand has such strength that we believe there’s a lot of connection with the customer there.” Cosset expands on the opportunities to be had through the Alibaba partnership: “It allows us to leverage our brands and monetize them through a different market outside of our borders in a market that is extremely demanding of U.S.-made product, especially in this natural and organic space. China

is an almost ‘ecommerce-first’ market today. Their use of technology, the way they engage customers around payment, around subscriptions and repeat purchases, we want to learn. We want to be on the forefront of this, rather than catching up.” Logistics partnerships will be essential to the deal as well, Cosset asserts. “So far, because it’s the early stage and we want to learn from it and optimize as we scale, we’re leveraging partners who are experts at doing this,” he explains. “We have partnerships with a number of very strong leaders in the industry globally. That’s the path we’re taking right now, at least for the short term. The August launch is not an accident. The largest ecommerce sales day in the world is on Nov. 11, called Singles’ Day in China. Alibaba last year, I think, netted $29 billion in sales




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public charity,” she observes. “We could use it as an innovator, an incubator, an accelerator, under the premise that some of the best thinking in food waste solutions may not be coming from nonprofits; they might be coming from some interesting person in their garage in Silicon Valley.” The speed of change in the industry is unprecedented, according to McMullen. “You have to be comfortable with change, and you have to be comfortable with being uncertain,” he advises. ‘Every stress point creates an opportunity, and finding that opportunity is what makes it exciting and fun. It’s also one of the reasons why I think it’s going to be easier to continue to recruit higher talent going forward. You’ll be able to help people see that they make a difference, a role where you can see that you’re helping make the world a little bit better place.” in one single day. Millions of packages delivered the next day. We want to be there. We want to be there obviously and ready, and that’s why an August launch allows us to learn through the process, make sure we iron out any potential quirks in the process and the expanse.” McMullen anticipates that strategic partnerships will continue to be central to Kroger’s growth. “We’ve always been open to finding people that can help accelerate what we’re doing; smart companies working together can produce something that you can’t individually,” he says. “You have to have respect for each other, and really focus on the customer, do something for the customer they’re not getting today. I would completely expect that you’ll continue to see partnerships that are done both outside of us and for us as well.”

Comfortable With Change

What issues are going to be most significant to Kroger and grocery retailing in general in the foreseeable future? “I think this war for talent is certainly a big one,” Adelman replies. “We know that we have to earn everybody’s commitment every day. As a leadership team, we try to foster the right culture and be relevant to the workforce.” That goes for sustainability as well: “We are looking at how to get more renewables, how do we just get better at the whole reuse topic in general … making sure that you are being a good steward,” she says. “You have to make sure that you’re living those values and you’re matching the values of your employees and your customers.” Adelman notes that the Kroger Co. Foundation is establishing a $10 million innovation fund to address the issue of food waste. “We are in the process of creating an entirely new foundation, the Zero Hunger | Zero Waste Foundation, which will be a 48

Scan, Bag, Go allows Kroger shoppers to ring up their own items as they shop and pay via self-checkout or smartphone app.

Restock Kroger In fall 2017, The Kroger Co. launched the Restock Kroger initiative at the company’s annual investor conference. Restock Kroger has four main drivers, which together create shareholder value:


2 3


Redefine the Grocery Customer Experience (data and personalization, digital, space optimization, Our Brands, smart pricing) Expand Partnerships to Create Customer Value (infrastructure and technology upgrades, alternative revenue streams) Develop Talent (associate experience, investing in and retaining store associates, high-performing leaders and teams) Live Our Purpose (Zero Hunger | Zero Waste, Our Culture = Our Values + Our Promise)

—2017 Kroger Fact Book

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The Kroger Co. Scale for Good

What’s a typical day for a Kroger executive? Predictably, the ones PG talked to say that there’s no such thing. “They all start the same: A big fire in the belly, wanting to accomplish five gigantic things for the day,” Cosset says. “By the end of the day, you still have the fire in the belly and can’t wait for the next day. But the things that were accomplished and the new ones that are added to the list are different than what the day started with. What I’m excited about every day is getting to work with a team of very talented people coming from all over the world, all kinds of disciplines, all kinds of background. Everybody brings a very different perspective. The level of collaboration is energizing. Very transparent culture. Very strong commitment to making a difference. Changing the customers’ lives every day is really exciting.” Adelman says: “I have all the government relations, I have all the media relations, I have our Kroger foundations and all of our corporate social responsibility. I have our associate communications, too, so I’m responsible for everything that goes out to 452,000plus employees. So, no two days ever look alike. … We start our day with a daily huddle, where we’ll talk

“I think for a long time, we looked at the industry a little bit too traditionally. If somebody’s eating, we want to be feeding you, and we want to help you eat something that you love and enjoy. If you’re the person that’s responsible for providing a meal to somebody else, we want to support you being a hero to your family.” — Rodney McMullen, CEO and chairman

about one of our Kroger core values, or one of our behaviors. … Probably my favorite days are when I get to go out and talk about Zero Hunger | Zero Waste. That reminds me that what we have set out to do is really amazing and incredibly inspiring, and bold.” As for Kroger’s CEO: “Every Monday, I have a lot of meetings, and the rest of the week, I’m able to go and spend time learning, understanding what’s going on in the stores and learning at other places. … I feel

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How retailers are taking in-store experiences to the next level RESEARCH PARTNER


Digital Transformation: How retailers are taking in-store experiences to the next level

Step into an Amazon Go store in Seattle, and you’re entering the streamlined shopping experience of the future. Synced to the Amazon Go app, the store stocks grocery essentials, ready-to-eat meals and meal kits, and its connected shelves track the customer’s selected products in a virtual cart. When the customer is done shopping, she simply walks out of the store, triggering automatic payment through her Amazon account. The digital transformation of retail isn’t a marketing stunt or test case—it’s quickly becoming the new normal. To stay competitive, retailers are radically rethinking how they use technology to pursue new business models and shape optimized, just-for-you shopping environments that delight consumers and differentiate their stores. Beyond the shiny tech and cool gadgets, digital transformation is a philosophy of change in order to solve problems and fundamentally improve lives. It’s a universal concept, but one that hasn’t been fully defined in the universe of retail. How do we truly measure success, both in terms of meeting customers’ expectations and the goals of a profit-driven organization? And if the store of tomorrow is already here and open for business, what’s coming next—and will we be ready? Aperion and EnsembleIQ have partnered to provide the industry with a common lexicon, best practices, and case studies shaping the digital retail experience. In this paper, we explore some of the most innovative applications in digital transformation from leading brands and solutions providers across the customer journey.

Smart tools that communicate with shoppers

Far from being impersonal, digital technology can make it possible for retailers to provide personalized information and offers that multiply the shopper’s opportunities for meaningful interactions with both brands and stores. Coop Italia, the largest supermarket chain in Italy, started testing smart shelves in 2015 inside an 11,000-square-foot test location. There, a shopper could pick up a product and automatically trigger interactive screens carrying detailed information about that product. And in 2018, Kroger began rolling out Kroger Edge digital shelf signage that will eventually communicate directly with an app on the shopper’s phone—truly bringing the shelf to life. With its purchase of Whole Foods, Amazon will surely have an influence on the Whole Foods 365 store-of-the-future


concept, which is run almost entirely on digital price tags and digital promotional signage. The Whole Foods mobile app syncs shoppers with the store, enabling a digital loyalty program that provides customized offers. The app works with in-store kiosks, such as a wine display that helps shoppers find the right wines and a TeaBOT kiosk to help shoppers blend their own teas. For items with a shorter shelf life, the company Wasteless has introduced technology used with a smart shelving display system to track and dynamically price food products based on their level of freshness. The digital labels on the shelf adjust prices in real time, changing them based on the product’s expiration date. Wasteless,



BY 2023.

Digital Transformation: How retailers are taking in-store experiences to the next level

like many inventory management systems, uses RFID sensing on packaging to manage the real-time look at inventory and products. It then communicates with shoppers while they are standing in front of the shelf.

Online gets physical

Making space for augmented reality/virtual reality

The augmented reality/virtual reality market industry continues to grow: It’s projected to hit $94.4 billion by 2023 as it embeds further into smartphone penetration.1 And it’s no surprise why. With a few headsets, augmented reality (AR) and virtual reality (VR) can take shoppers virtually anywhere and give them new tools to use in making purchase decisions. IKEA, for example, has tested arming shoppers with equipment so they can play in a virtual kitchen—everything from opening drawers to interacting with product, including frying up food. The company most recently launched an AR app that enables consumers to overlay potential furniture purchases and more into their homes. That app is for smartphones, but IKEA tested a room for the app in a Dallas store that uses an HTC Vive headset. And many retailers are already using AR and VR technology in their stores. Lowe’s Innovation Labs team led the way with the Holoroom concept, outfitting shoppers with Oculus Rift headsets so they could design and renovate a virtual room, including seeing how appliances or paint colors would look in their actual homes. Lowe’s also tested an in-store Holoroom How To room where shoppers

The growing presence of online business models in the offline world— think Amazon bookshops and Go stores—promises to continue pushing the boundaries between virtual shopping and brick-and-mortar stores: *

Global giant Alibaba’s cashierless location in China, called Tao Café, for in-and-out prepared foods


Google’s flagship store in Chicago, a place to interact with products such as the Google Home voice assistant, Chromebooks, the Pixel smartphone and virtual reality (VR) headsets, as well as learn more about the brand


Rent the Runway’s locations in California, Washington, D.C., Illinois and New York City for speeding up fashion returns, exchanges and pickup orders, plus selfservice kiosks for shoppers to use with the help of stylists


Online eyewear company Warby Parker’s locations across the United States and Canada that sell books and other merchandise to go along with more personal service when trying on glasses


Home and housewares online retailer One Kings Lane’s large flagship location in a New York resort town


Amazon’s deal with Kohl’s to house an in-store concept shop for smart home products while also using Kohl’s as a place for returns and customer service


Digital Transformation: How retailers are taking in-store experiences to the next level

used headgear and handheld controllers to go through the motions of a home improvement project. In addition, the Innovation Labs group has piloted an indoor mapping mobile app in two stores called Lowe’s Vision: In-Store Navigation. It provided turn-by-turn directions to find products in the large stores and augmented an image of the product coming off the shelf, along with detailed info. On a smaller level, brands are leveraging AR through apps like Snapchat, creating location-based, exclusive lenses that users access when they’re inside a specific store. The late Toys “R” Us developed AR overlays of its Geoffrey the Giraffe to welcome shoppers, and Disney and Six Flags have rolled out lenses for park visitors. Food retailers are also taking advantage of AR/VR brand campaigns. Walmart worked with NBCUniversal and its mobile game for the “Jurassic World: Fallen Kingdom” movie on a program where shoppers visit a Walmart store to take an AR photo or video of an in-store dinosaur that can be shared socially.

Digital assistants find their voice

Two years ago, Gartner Inc. pegged virtual personal assistants and smart machine technologies as being five to 10 years out from fully disrupting retail. 2 Today, around 25 percent of consumers say they prefer to use voice assistant technology rather than a website to find information, and in three years that number is projected to rise to 40 percent. 3 As smart fridges and voice-assist devices like Amazon’s Alexa, Microsoft’s Cortana, and Google Assistant see more home use by consumers, brick-and-mortar could see some disruption. At the same time, retailers are becoming more comfortable adopting voice assistant and smart machine

technology in stores. Artificial intelligence (AI) and machine learning power digital assistants at retail, and the technology can include a voice-activated device on a display to find the right kind of craft beer, or an actual robot in the aisle. The key to the digital assistant is its ability to get hyper-personalized with a shopper. An AI machine, for example, can use facial recognition to read a shopper’s emotion, such as Softbank Robotics’ Pepper, a small robot that rolls around in 140 SoftBank Mobile stores in Japan to welcome, inform and amuse customers. Digital assistants have access to massive amounts of data so they can drill into shoppers’ specific needs; shoppers no longer have to do research on their phones or sync their phones to a retail experience. Machine learning, too, is already having a large impact on retail stores, turning big data based on demographics into actionable, personalized promotions. With its ability to analyze and automate big data, machine learning can create a tailored assortment for a store location, develop dynamic pricing to give stores the right price and manage promotions at a retail store. It can power a more personal feel for a store, even if the look of that store isn’t changing much.

The evolution continues

As technology continues to make the world smaller and becomes a more integral part of what it means to be human, the lines between online and in-store shopping will blur to the point of vanishing. The store will never again be simply a building to walk into, in the same way a screen isn’t just something to look at anymore. Change is the only thing that will remain the same, and retailers with a strategic vision will unlock powerful new ways to turn this era of digital transformation into a more fully evolved connection with their customers.

1 “Augmented Reality and Virtual Reality Market Overview,” P&S Market Research, May 2018 2 “Hype Cycle for Emerging Technologies, 2016,” Gartner Inc., August 2016 3 “Conversational Commerce: Why Consumers Are Embracing Voice Assistants in Their Lives,” Capgemini’s Digital Transformation Institute, January 2018

Are you ready for the digital transformation of retail?

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Aperion is helping to create the future of food retail through digital transformation. We focus on shoppers, what they buy, and the environments in which they buy. Our strategists, innovators and technology integrators come together to enable retailers to not only effectively compete, but to continuously drive tangible bottom line results that positively impact loyalty, revenue and profitability.

Kroger Management Team W. Rodney McMullen, Chairman and CEO McMullen joined Kroger in 1978 as a part-time stock clerk in Lexington, Ky. Over the years, he has held the roles of assistant treasurer, VP of planning and capital management, corporate controller, CFO, SVP, EVP, and vice chairman. He was elected to Kroger’s board of directors in 2003, to president and COO in 2009, to CEO in 2014 and to chairman of the board in 2015.

Jessica C. Adelman, Group VP of Corporate Affairs Adelman focuses on reputation management, including external communications and brand public relations, environmental sustainability and social responsibility, media, government and regulatory affairs, crisis management, cause marketing and corporate philanthropy, community relations, and associate communications and engagement. She is also president of The Kroger Co. Foundation. She has spent her career in the food and agriculture industry, working for Monsanto, Cargill and Syngenta North America.

Yael Cosset, Group VP and Chief Digital Officer Cosset leads Kroger’s overall digital strategy, ecommerce expansion and Vitacost. He focuses on establishing differentiated and personalized experiences for Kroger customers across all digital platforms using technology and innovative customer analytics as key levers. Cosset previously worked at Dunnhumby; 84.51°, a wholly owned subsidiary of Kroger; and MicroStrategy.

Mary Ellen Adcock, Group VP, Retail Operations In her current post since June 2016, Adcock has held the roles of VP of operations and merchandising for Kroger’s Columbus Division, VP of natural foods merchandising, and VP of deli/bakery manufacturing, in addition to leadership positions in manufacturing and human resources.

Stuart W. Aitken, Group VP In his current post since June 2015, Aitken is responsible for leading Kroger’s data analytics subsidiary, 84.51°. Prior to joining Kroger, he was CEO of Dunnhumby USA and brings experience from leadership roles with other companies, including Michaels Stores and Safeway Inc.

Robert W. Clark, SVP, Merchandising Having started his career as a Fry’s courtesy clerk in 1985, Clark has since risen through Kroger’s leadership ranks. He held various VP roles in the Fry’s, Columbus and Fred Meyer divisions before being named to his current post in March 2016.

Michael J. Donnelly, EVP and COO In his current post since December 2017, Donnelly has held the roles of EVP and SVP of merchandising, president of the Ralphs and Fry’s divisions, and SVP of drug/GM merchandising and procurement. He started with Kroger as a clerk in 1978.

Christopher T. Hjelm, EVP and CIO Helm was named to his current post in September 2015 after joining Kroger in 2005. His experience includes leadership roles with Cendant Corp., Orbitz, eBay, Excite@Home, Zoho Corp. and Federal Express.

Calvin J. Kaufman, SVP In his current post since June 2017, Kaufman oversees several Kroger retail divisions. He also been president of the Louisville division and of Kroger Manufacturing and Corporate Brands. He joined Kroger in its Fred Meyer division in 1994.

Stephen M. McKinney, SVP Named to his current post in March 2018, McKinney oversees several Kroger retail divisions. He has held leadership roles in the Fry’s, Ralphs and Southwest divisions since joining Kroger in 1981 as a clerk with former Kroger banner Florida Choice Supermarkets.

J. Michael Schlotman, EVP and CFO Moving up Kroger’s accounting ranks since joining the company in 1985, Schlotman was named to his current post in September 2015.

Erin S. Sharp, Group VP, Manufacturing Sharp joined Kroger in 2011 as VP of manufacturing operations after working in Sara Lee’s bakery division. With more than 30 years of experience, she was named to her current post in June 2013.

Alessandro Tosolini, SVP, New Business Development Named to his current post in December 2014, Tosolini held numerous leadership roles with Procter & Gamble for 24 years, most recently as SVP of global e-business and VP of global ecommerce.

Mark C. Tuffin, SVP Since joining Kroger’s Smith’s division in 1996, Tuffin has risen through the ranks, attaining his current post in January 2014. He oversees several of Kroger’s retail divisions.

Christine S. Wheatley, Group VP, Secretary, General Counsel Wheatley attained her current post in May 2014. She joined Kroger in February 2008 after being in private practice for 11 years.

Timothy A. Massa, Group VP, Human Resources and Labor Relations With more than two decades of experience at Procter & Gamble, Massa joined Kroger in 2010 and was named to his current post in June 2014. PROGRESSIVE GROCER October 2018



The Kroger Co.

About Kroger Based in Cincinnati, The Kroger Co. is one of the largest retailers in the United States based on annual sales, reported as $122.7 billion in the company’s 2017 annual report. Kroger holds the No. 18 ranking on the Fortune 100 list published in June 2017 and the No. 2 spot on Progressive Grocer’s Super 50 annual ranking of top U.S. grocers, published in May 2018. As of Feb. 3, 2018, Kroger operated, either directly or through its subsidiaries, 2,782 supermarkets under a variety of local banner names, of which 2,268 had pharmacies and 1,489 had fuel centers. Kroger operates 37 food production plants, including 17 dairies, 10 deli or bakery plants, five grocery product plants, two beverage plants, one meat plant, and two cheese plants. Founded in 1883 in Cincinnati and incorporated in 1902, Kroger operates stores in 35 states under some two dozen local and regional banner names, including Kroger, Ralphs, King Soopers, Dillons, Smith’s, Fry’s, QFC, Copps, Harris Teeter, Mariano’s, Fred Meyer, Food4Less and Murray’s Cheese.

so incredibly lucky that I get to work with people that are incredibly smart. They care about making the world a better place, and everything that we’re doing is trying to give a good value for our customers and help them solve a need. That’s so much bigger than any of us individually.” In Adelman’s opinion, the best part of working at Kroger is helping to create what she calls “scale for good.” “When Rodney was talking to me a little over three years ago about coming to Kroger, he asked me, basically, what makes you tick,” she recounts. “And I said, ‘I’ve spent my whole career thinking about how are we going to feed 9-plus-billion people and not destroy the planet at the same time.’ And he said, ‘Well, if that’s really what motivates and inspires you, come work for me, and I’ll let you do something big.’ I love the idea that I could work for a big company and make a difference. At Kroger, we’re doers. We roll up our sleeves, and we go get stuff done.” For his part, McMullen considers himself lucky to have worked alongside so many talented people during his 40 years at Kroger. “I’ve never had a boring day in my career,” he asserts. “You get to work with people that are so much better than what you are, and learn from them and together accomplish something. To be part of a journey that hasn’t been done before is incredibly fortunate.”

—2017 Kroger Annual Report





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his past summer, Portland, Ore.-based New Seasons Market decided to try something new. At that time, the community-focused food retailer, which operates more than 20 stores in Oregon, Washington and Northern California, “saw some of our … stores experimenting with replacing traditional end cap displays with mobile refrigerated units holding ice cream, with open shelves above to offer cones, chocolate syrup and sprinkles, driving sales of all complementary products, in addition to the priority local ice cream on sale for summer,” notes Director of Grocery Kevin Wiese. That’s not the only innovative cross-merchandising tactic adopted by the chain, though. “Currently, we’re experimenting with placing kombucha in the produce deck in some stores, and are considering placing yogurt in mobile refrigerated units in the produce [department] near fresh berries and peaches,” adds Wiese, taking care to clarify that “this is completely dependent on the layout of each store and department.”


Key Takeaways Besides providing a streamlined shopping experience for timestrapped shoppers, crossmerchandising refrigerated/ frozen foods across the store can boost customer loyalty and sales. Suppliers are coming up with creative programs targeting similar customer bases and offering easily repurposed coolers. Retailers must surmount logistical and operational barriers to become more consumer-centric in their merchandising and measurement procedures.

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Leading food brands make excellent decisions. Frozen and refrigerated foods fit perfectly with the concept of meal assembly — for example, taking a frozen meal and pairing it with a fresh salad, or pairing yogurt with frozen fruit and granola.” —Julie Henderson, NFRA

The reason for these recent moves, he points out, is that the grocer is “always open to trying new strategies and seeing which ones resonate the most with our customers.” And actions like the ones taken above do seem to be resonating. Observes Wiese: “The average customer may not even notice cross-merchandising in the store, but we see these products diminish from the displays and believe it’s ultimately due to the convenience provided to the customer. Our solutions team members see the impact and pull in the mobile refrigerated units and ice bins to sell priority items in a convenient location for the biggest impact.”

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Take it Easy

Unsurprisingly, convenience is a huge factor in creating such displays, saving customers much time and effort in tracking down every ingredient needed to create a certain dish. “We’ll cross-merchandise complementary products that may otherwise be located across other ends of the store, and display them around a central theme — such as ice cream sundaes, grilling staples, breakfast basics, etc. — to simplify the purchase for the customer and help them remember every item for their meal,” explains Wiese. “Consumers are looking for quick and easy meal solutions,” concurs Julie Henderson, VP of communications at the Harrisburg, Pa.-based National Frozen and Refrigerated Foods Association (NFRA). “Frozen and refrigerated foods fit perfectly with the concept of meal assembly — for example, taking a frozen meal and pairing it with a fresh salad, or pairing yogurt with frozen fruit and granola. The key is creating relevant groupings around a central theme.” In fact, Henderson goes on to note: “We always encourage our members to cross-merchandise to create complete meal solutions for customers. Younger generations are embracing semi-homemade meals, which offer a lot of opportunities.” “The key to these types of opportunities is to make them simple, such as a quick and easy meal or dessert solution,” agrees Jeff Nelson, VP of client development at Bosie, Idaho-based Impact Group, a national sales and marketing agency that works with 700-plus CPG brands, who is also a member of the NFRA board. “Some examples include incorporating extra pizza toppings near frozen pizzas — such as dried pepperoni, cheese or even pineapple. You can also try a frozen or refrigerated drink such as a blueberry lemonade margarita, or maybe even a spritzer made with fresh fruit and … chilled sparkling water or wine. For an easy entertaining solution, try a creamy avocado yogurt dip made with Greek yogurt. And for those customers with a sweet tooth, try whipped toppings — refrigerated or frozen — paired next to desserts. Plus, who doesn’t love a fresh-baked pie served with your favorite ice cream á la mode?” Continues Nelson: “For retailers, [cross-merchandising] creates a streamlined shopping experience for timestrapped shoppers who expect ease and convenience at every turn. We’ve seen cross-merchandising as an effective way for brick-and-mortar grocers to upsell and boost sales. On the other hand, cross-merchandising can be an effective way for consumers to discover new products in the frozen/refrigerated aisle because they’re grouped with products they already purchase regularly.” He concludes: “Through effective cross-merchandising, retailers can build customer loyalty, and potentially drive additional customers to the frozen/refrigerated aisles, thereby increasing sales.” For her part, Cindy Sorensen, founder and CEO of The

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Grocery Group, in Minneapolis, envisions “a meal solution center which might display dry spaghetti and shelf-stable spaghetti sauce, alongside a display of Italian bread and a cooler with fresh parmesan cheese and a bagged salad. Don’t forget the milk, positioned in an upright cooler next to this display. A bakery rack with a dessert item would complete the solution for the shopper.” This kind of display, “with complementary items from across the store, provides shoppers with meal solutions and grows sales, too,” adds Sorensen.

Go Fish, and More

On the supplier side, cross-merchandising refrigerated and frozen foods has also become a more creative enterprise. “In a grocery environment, companies want to extend their product’s footprint beyond their designated department to reach more people,” notes Peter Houghton, promotions manager at Woodinville, Wash.-based Ste. Michelle Wine Estates, which for the past six years has participated in a national cooperative promotion with the Alaska Seafood Marketing Institute (ASMI) that runs from June through September. “Because we share a similar consumer — wine buyers are highly likely to be fish consumers — we targeted wine consumers in the wine aisle with recipes and coupons off Alaska seafood — and wine, where legal — via bottleneck hangers driving them to the fish department, where Chateau Ste. Michelle wine displays, complete with POS, recipe tearpads and coupons, enticed purchase.” For autumn, there’s even more excitement on tap. “This October being National Seafood Month, we turn up the volume in and out of store, incorporating a consumer sweepstakes to win a trip to Alaska (where legal), recipes on Simply Eats and Serious Recipes platforms, and welcoming a second partner, Kona Brewing Co.,” adds Houghton of the promotion, which features Ste. Michelle portfolio wine Villa Maria. “We’ve been working very well together targeting fish, wine and craft brew consumers with an integrated campaign that reaches consumers in store where they can make an immediate purchase.” Among other ASMI efforts, “Alaska seafood and H-E-B partnered on a fish taco promotion June 1-3, featuring Alaska cod as the protein,” recounts Victoria Parr, domestic marketing director at the Juneau-based organization. “H-E-B brought other ingredient partners to the table and executed approximately 315

Mobile refrigerated units and ice bins are really effective tools to allow staff to merchandise products in high-traffic areas.” —Kevin Wiese, New Seasons Market


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in-store demos across Texas using Fresh Cart kiosks. Fresh Cart grilling events occur every Saturday in the meat market and feature rubs, spices, sauces, glazes or marinades for meat, poultry and seafood items. Statistics show 70 percent of all customers visit the meat market while grocery shopping. Since these people are in the store each week, customers look forward to seeing and tasting what is being promoted.” As a result of this promotion, ‘[s]ales increased over 20 percent and are trending double what H-E-B had projected!” enthuses Parr. “H-E-B management was extremely pleased with the results, and ASMI loves having their POS materials featuring the ‘Faces and Places’ of Alaska on hand to educate customers on where the delicious seafood comes from.” Chicago-based Conagra Brands, meanwhile, heeded research finding that secondary in-store placement of the company’s refrigerated products can drive consumer purchase. “In a Reddi-wip retail customer case study, product sales grew more in stores that offered coolers with secondary placement during peak season, versus non-cooler stores,” says Senior Brand Manager Carina Sarbaugh, citing retailer data gathered October through December 2017. What’s more, notes Sarbaugh: “Conagra Brands’ broad, focused portfolio of products provides retail customers incremental opportunities for secondary in-store placement. For example, Reddi-wip cooler side-panel creative can be flipped over after the holidays to Hebrew National hot dog creative, meeting consumer demand during Super Bowl and March Madness.”

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New Seasons Market's crossmerchandising of frozen and refrigerated product includes placing such shelf-stable items as store-brand crostini above its cheese bar.

Seizing Opportunities, Addressing Barriers The potential to create successful cross-merchandising programs incorporating frozen and refrigerated foods is undeniable, but so are the potential pitfalls. Ironically, although the aim is to make things easier for shoppers, selling refrigerated and frozen foods across the store is itself sometimes difficult. “Cross-merchandising can be a challenge with perishable items,� admits

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Cross-Merchandising Get Connected at the NFRA Convention The 2018 National Frozen and Refrigerated Foods Convention, taking place Oct. 20-23 at the Marriott Marquis in San Diego, will connect 1,200-plus top executives for the purpose of conducting one-on-one business meetings. The event is structured to help attendees make valuable connections with the people and companies that can make a real impact on their businesses. More than 75 retailer meeting rooms are currently reserved for the 2018 convention. This year, the National Frozen and Refrigerated Foods Association (NFRA) has added time on both Monday and Tuesday for speed meetings, during which small manufacturers and new NFRA members can meet briefly with more than a dozen retailers. Other convention features include the opening Taste of Excellence Reception, including a display of new products; the Café NFRA refreshment break area; the induction of NFRA’s new officers and directors; distinguished speakers; and the presentation of the Golden Penguin Awards and the Retail Patriot Awards. Additionally, the Distinguished Order of Zerocrats will induct its newest members into the Frozen Food Hall of Fame during the Zerocrat Dinner on Saturday, Oct. 20, preceding the convention. To register for the 2018 NFRA Convention, visit or contact NFRA at 717- 657-8601.

Attendees network with colleagues while sampling products at the Taste of Excellence Reception at the 2017 NFRA Convention.

New Seasons’ Wiese, “but mobile refrigerated units and ice bins are really effective tools to allow staff to merchandise products in high-traffic areas. For example, we can place ice bins filled with refrigerated juices, tea, kombucha, beer and canned wine upfront for impulse sales at checkout. We can also bring nonperishable items into the refrigeration aisle, using suction-cup displays on refrigerator doors to display products like our Partner Brand private label maple syrup in front of organic or gluten-free frozen waffles. Additionally, we’ll add packaged snack items to our refrigerated cheese, olive or yogurt bars, displaying sliced baguettes, local crackers or granola to accompany the dish. These tools are a great way to display fun, indulgent products that may not have made it on a customer’s grocery list but help satisfy a craving or surprise a loved one at home with a delicious treat.” If it isn’t possible to place complementary items together, Henderson suggests another way to link them. “When the logistics of cross-merchandising in another area of the store are prohibitive, price promotion could be a solution,” she observes. “For example, purchase frozen garlic bread and get a discount on pasta sauce.” Impact Group’s Nelson agrees that price can be key in getting shoppers to respond to such promotions. “If consumers can build a meal and get a deal, that will satisfy their strong desires for convenience and savings,” he says. The Grocery Group’s Sorensen, however, points out that when items can be placed together, “[r]esearch from many sources indicates cross-merchandising to provide snacking and meal solutions will increase all department sales represented on a display, and will do so without a price reduction on those products.” Still, obstacles persist. “There is a decades-long discussion about how to measure the success of displays which feature merchandise from multiple departments,” notes Sorensen. "The question is, which department gets the ring for the products displayed? For traditional retailers who measure success by comparing sales within a department and not at the

Cross-merchandising can be an effective way for consumers to discover new products in the frozen/refrigerated aisle because they’re grouped with products they already purchase regularly.” —Jeff Nelson, Impact Group


The Alaska Seafood Marketing Institute and Ste. Michelle Wine Estates are partners in a successful campaign capitalizing on the overlap between fish consumers and wine purchasers.

total store level, this will always be a barrier to supporting this type of activity throughout the store. This operational approach to measuring success does not put the shopper/consumer first in the merchandising of the store.” Another barrier she identifies “is in redefining standard operating procedures [SOP] such as which department is responsible for keeping the display fully stocked and rotated. Without commitment to changing SOP, the concept fails.” The way to overcome these issues, Sorensen believes, is for retailers to become “consumer-centric in their merchandising and measurement procedures. Those retailers must stay committed and not fail the consumer. This means they must make sure they have changed their SOP to support this philosophy. Out-of-stocks will kill the concept and decrease shopper engagement with the solution center. The competitive environment has made retailers more willing than ever to be open to trying new concepts to attract and retain shoppers.” Once more grocers have adopted a consumer-centric approach to cross-merchandising frozen and refrigerated product throughout the store, even greater success in such endeavors should follow. As Nelson notes, “The possibilities are endless, and good merchants will find ways to meet the needs of their customers.”


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Candy & Snacks


isions of sugar plums may dance in some children’s heads during the holiday season, but a glimpse of seasonal confections at a local grocer can get shoppers of all ages in the mood for celebration. Holiday candies aren’t anything new — Exhibit A: the iconic candy cane — but at a time when manufacturers and grocers are intensely vying for the consumer’s food dollar, there’s a greater variety of seasonal confections aimed at generating excitement and sales during a peak buying season. Candy fits the bill as a purchase for presents as well as for entertaining. “Consumers are looking for small, inexpensive ‘thankyou’ gifts for their friends and those they hold dear to them,” observes Clark Taylor, VP of sales for CandyRific, a Louisville, Ky.-based manufacturer and supplier of novelty confections. While people line up early before Black Friday — also known as the day after Thanksgiving — for deals on electronics, candy is part and parcel of the season, which also includes Christmas, Hanukkah, New Year’s and other winter occasions. The Washington, D.C.-based National Confectioners Association (NCA) estimates that Americans spent $1.93 billion on winter holiday

Key Takeaways Candy is suitable as a purchase for presents and for entertaining. These items will be available in perennially popular holiday flavors, packaged in innovative gift bags and in combination with small toys. Grocers can even meet healthand-wellness concerns with certain natural, organic or free-from offerings.



Candy & Snacks

treats in 2017, and that three-quarters of Americans said that they include chocolate and candy in stockings, or give confections as gifts, during the holidays. This year, consumers in this country will have more options when browsing confections for the season, which stretches roughly from the day after Halloween through early January, when those items will be swiftly replaced by Valentine’s Day sweets.

Favorite Flavors

Perennially popular holiday flavors will be featured in many of these items, much like how the now ubiquitous pumpkin spice is an autumn flavor that segues into — and sometimes past — Thanksgiving. For instance, Calico Cottage, an Amityville, N.Y.-based provider of in-store fudge-making programs, offers a range of flavors, including seasonal ones, for retailers to include in their fudge offerings. “Traditional flavors are the foundation for any fudge display, but adding holiday favorites like Pumpkin Spice, Gingerbread, Eggnog or Vanilla Rocky Road add seasonal variety and excitement,” notes Daniel Russo, Calico Cottage’s director of business development. “Shoppers are interested and react enthusiastically, knowing these flavors are only available for a limited time.”

Sweet Gifts

In addition to seasonal flavors, limited-time candies can be touted — and were developed to be touted — as a value-added gift item. For example, Jelly Belly Candy Co., in Fairfield, Calif., recently introduced new clear gift boxes with its candies neatly arranged in square compartments. The 1-pound boxes contain 20 flavors, while the 2-pound boxes have 40. Denver-based Hammond’s Brands, the parent company of Hammond’s Candies and Old Dominion Peanut Co., also offers added-value items for the holiday season, including a new holiday gift bag that retails for a suggested $5.49 to $7.99. The bags are filled with 5 ounces of nostalgic holiday confections, including classic mini ribbon candy, natural peppermint puffs, “art candy,” organic mint pillows and Christmas bear gummies “Hammond’s previous iteration of gift bags was the classic gusseted bag with a bow and hangtag that is pretty standard with manufacturers in the specialty world,” says company spokeswoman Kelsey Williams. “The new holiday gift bags have a more modern look and feel in the structure, while still keeping a nostalgic feel in the branding."

The redesign was inspired by designs in Europe, recalls Williams. “The gift bag segment was starting to feel tired, and as we were traveling in Europe, we noticed a very simplistic and clean bag style all the confectioners were using that allowed the handmade product to show through and maintained a classic feel, but at the same time felt a bit more modern,” she notes. “We fell in love with the look and immediately knew this was the new direction for our bags.” Other candy products this year can be merchandised as gift ideas for kids, as the items are designed to last longer than the day after Christmas, by which time the candy may well have been eaten. CandyRific, for example, has added new “Elf on the Shelf” light-up snow globes; “PAW Patrol” light-up character spinners, based on the popular Nickelodeon children’s show; and additions to its Surprise Candy Pal plush line. “We see that the surprise-toy category is still very strong and kids are excited about collecting these plush characters with candy in the package,” says Taylor, adding that accompanying toys are a long-term gift that children can play with in the ensuring months.

Better-for-You Treats

Meanwhile, in keeping with general marketplace trends, holiday candy offerings reflect consumers’ ongoing interest in health and wellness, encompassing items that can be deemed natural, organic or free-from.

Traditional flavors are the foundation for any fudge display, but adding holiday favorites like Pumpkin Spice, Gingerbread, Eggnog or Vanilla Rocky Road add seasonal variety and excitement.” —Daniel Russo, Calico Cottage



Candy & Snacks

In its educational and promotional efforts last holiday season, NCA shared information on how parents can teach children about the importance of balance during the holiday season, and also underscored the collaboration between the country’s leading chocolate and candy companies — including Mars Wrigley Confectionery, Nestlé USA, Ferrero, Lindt, Ghirardelli, Russell Stover and Ferrara Candy Co. — in an industry-wide commitment to the Partnership for a Healthier America. Grocers can carry candies that appeal to health-and-wellness-minded consumers and that also fit into demand for boutique-style, niche or locally made confections for the season. Berkeley, Calif.-based TCHO offers such items as a line of premium milk, dark and single-origin snacking chocolates that are certified Fair Trade and organic. At a time when transparency and traceability are increasingly important to retailers and consumers, TCHO has created bean-to-bar chocolate-making “labs” that enable farmers to make and taste chocolate crafted from their own beans. Chocolate Moonshine Co. is another example of a brand that meets the demands of discerning shoppers. The Pittsburgh-based artisan chocolate company sources cream from a local dairy, uses

only pure cane sugar as a sweetener, and follows up on its commitment to natural ingredients by buying chocolate from Belgium and vanilla from Madagascar. The brand offers gourmet fudge and colorful “Moonshine Bars,” and customers can create their own boxes, including assortments aimed at the holiday shopper.

Deck the Halls

Because it’s gift-buying season, merchandising of holiday candies may be a little different from other times of year. CandyRific's Taylor says that grocers can successfully mix up displays. “The best way to merchandise our products is to create a ‘Gifting Destination Location’ in their stores,” he explains. “This would be complete with color blocks for party decorations, as well as balloons and table service products. This helps their customers

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to think along the lines of gifting and parties.� For its grocery partners, Calico Cottage offers a variety of merchandising tools and ideas. “Grocers can generate consumer excitement with sampling events, eye-catching signage that promotes fudge, and by seasonally changing out their fudge flavor

offering to encourage return visits,� advises Russo. Calico Cottage also offers an in-store fudge-making program, with mixes and materials, for grocers that want to provide an experience for customers. “Groceries are facing new challenges with online retailers and need to find ways to keep shoppers coming back and enjoying their shopping experience,� observes Russo. “When grocers have a full-service kitchen, they can use that space to create an experience for shoppers with made-inhouse fudge that can be sold by the pound.� Recognizing that stores may not be able to make fudge on site, Calico also provides packaged, ready-to-sell fudge in a variety of package sizes and types.

We see that the surprise-toy category is still very strong and kids are excited about collecting these plush characters with candy in the package.� —Clark Taylor, CandyRific




2018 Retail Produce & Floral Review


roduce department managers have a lot on their minds these days. The product that arrives at stores must be fresh, but transportation costs can’t be too high. As one retailer participant in Progressive Grocer’s annual Retail Produce & Floral Review put it, he hopes for “procurement of the right item at the right price.” Also, product must be maintained in a fresh manner by employees who care about freshness to limit spoilage and shrink. All of these things contribute to the bottom line. In PG’s survey of retail produce and floral executives, profit is the second-highest-rated


issue facing produce departments today, after product quality. At the same time, produce managers are confronting competition from other supermarkets and online retailers.

By the Numbers

Produce sales were almost flat in comparison with last year, with an increase of only 1.1 percent, but the importance of produce as a consistent draw for supermarket shoppers remains as important as ever. Total produce dollar sales were $59.8 billion for the 52 weeks ending Aug. 12, according to IRI, a Chicago-based market research firm. A confident 72 percent of participants in PG’s survey projected that their samestore department sales would increase for the entire year of 2018. In last year’s survey, only 63 percent of respondents expected same-store sales to increase for 2017. The emphasis in media concerning healthy eating may have influenced this response. High-quality fruits and vegetables continue to be the top draw of all departments for

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supermarket shoppers, with 80 percent citing their availability as the reason that they select a primary store, according to the latest research from Arlington, Va.-based Food Marketing Institute (FMI) in its “U.S. Grocery Shopper Trends 2018” report. Shoppers expect more from brickand-mortar stores in terms of freshness, selection and price/value, according to the annual report.

Dealing With Challenges

When PG’s 2018 survey participants were asked what the most serious challenges are for produce departments today, more than half cited quality of product (56 percent) and profits (53 percent). These two responses are linked in most cases by respondents concerned about product received from suppliers, and the price charged. One respondent said that she was concerned about the “quality of products coming in the door. Our vendor has had quality control issues. Out-of-stocks and poor quality have had a bad image to the customer.” Another cited “freshness, and cost to the retailer to turn a profit.” The challenge for another retailer was “getting a reliable supplier of fresh, reasonably priced produce.” Meanwhile, Rob Larrison, store manager for Big John Store Inc., in Metropolis, Ill., notes: “We work with our wholesaler directly about quality of product.” Shrink and spoilage were concerns for 47 percent of those surveyed. “Shrink is always a problem,” one produce merchandiser admitted. “Not sure if it is any worse now than it has ever been.” For his part, Eddie Roberson, general manager at Miller & Sons, in Verona, Wis., observes: “We run about a 5 percent shrink on average. Shrink has been, and will continue to be, an issue in our stores if we don’t embrace it. We feel that we have outlets for merchandise that we shrink that helps somewhat, i.e., food pantries, reworking package products, using products on our salad bars if quality is still present, and training our employees in proper prep.” Terry Esteve, produce director for Robért Fresh Markets, a New Orleans-based six-store chain, combats shrink in a variety of ways. “As far as shrink goes, we do a big prepared food and salad bar business with cut fruit and vegetables,” Esteve says. “Salad bar is part of our

Produce Operations Current

Year Ago





Percent of total store



Gross margin percent



Net profit percent



Average produce department (square feet) Average total store (square feet)

Source: Progressive Grocer market research, 2018


2018 Retail Produce & Floral Review Produce Sales Change FIRST 6 MONTHS OF 2018



Decreased Stayed the same

2 2 .5%


6 4%



Net change

10.8% 13.5%

Net change


Source: Progressive Grocer market research, 2018

produce department. We grill veggies as well as chop, steam and send [them] to the kitchen. We pull early to convert to some kind of sale, even if it is in another department. Our guys are bonused on the department’s and store’s profitability, so we know that all departments are working together to stay fresh and convert whatever we can. Typically, our actual dump shrink is 2 percent to 3 percent.” Top efforts to reduce shrink ranked in PG’s survey include donation to food banks (56 percent), use in fresh-cut programs (56 percent), use in prepared foods (56 percent), and “ugly produce” initiatives (42 percent). Big John’s Larrison advises, “Keep track of inventory, kill items that don’t sell, and refocus on rotating product.” Labor and recruitment costs (42 percent) are also challenges for many stores. Working in a produce department can be hard, physical work — something that many potential associates spurn. While it can be rewarding, it takes a while to realize this, and many employees don’t stay long enough. “The grocery business is hard work with little pay,” Larrison concedes. “That’s not real appealing to people anymore.” According to one survey respondent, staffing is the biggest problem in the produce department: “It is challenging to find good talent that we can retain.” Another respondent noted the difficulty

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2018 Retail Produce & Floral Review Same-Store Projected Total Sales for 2018 YE AR AGO


Increased Decreased

23.6% 24%


Stayed the same

62 .9%




Net change

Net change 13.5%

Source: Progressive Grocer market research, 2018

of “finding, training and retaining friendly, self-motivated associates that can understand that we are a customer-oriented business and interaction is required.” A third survey participant suggested: “Supply more training versus less, and engage with new associates regarding expectations from the first day so that they understand what the job entails and what the expectations are. Also, make sure that associates are held accountable to the expectations while making sure that they are recognized when they succeed.” “Our stores are comprised of a lot of parttime schoolkids,” notes Miller & Sons’ Roberson. “I have explained to the department managers that we are trusting these young people to take care of our customers and our livelihood when we go home for the day. I feel that if we expect that from them that we have to make it as interesting as possible and to help them grow. A well-trained employee is the best and most rewarding experience that we can all have during our time in retail.” “Hiring is a big challenge,” asserts Robért Fresh Markets’ Esteve. “We offer employee discounts and free lunches, trying to attract more qualified people. We often — I am sure like many others — do not designate enough time to training. That happens more due to the fact that most new hires are rushed because there is a need to get them working — reactive instead of proactive. We try to


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2018 Retail Produce & Floral Review

encourage creativity and include everyone in display contests and reward the entire team at the winning store as a way to try and give the associates some sense of being part of that decision-making process.” In looking at departments’ physical needs, many managers and merchandisers are frustrated by the lack of space and display equipment for the many new products being introduced. “Most produce departments have a fixed amount of display space, and we continually have to find new space opportunities with the increased organic-segment sales,” one respondent said. Another contended that the biggest challenge of the department was “physical size, limited by our current offerings.” These executives know that if they can’t carry what customers want, competitors can gain an edge. The biggest competition specifically mentioned in survey comments was from local product markets. For example, one respondent mentioned “roadside markets” as the biggest challenge. Local markets weren’t the only competition viewed as a challenge, however. “Walmart, Kroger — Shrink we’re an independent, has been, and will and it gets tougher for continue to be, an us to compete with the issue in our stores big guys,” one produce manager said. if we don’t After all, as another embrace it.” respondent noted, —Eddie Roberson, “Customers can go Miller & Sons anywhere.”

Produce Components

The average gross margin percent reported in PG’s 2018 survey was 34 percent, up slightly from last year’s 31.8 percent. Net profit percent reported by respondents this year was 21 percent, the same as last year. Produce department average percent of total store sales was 16 percent, roughly the same as in the 2017 survey. Vegetables were the primary produce purchase for respondents, at 41 percent, compared with 37.6 percent last year. Fruits were a strong second, at 33 percent, almost the same as 2017’s 32.3 percent. Sales of nuts were flat according to respondents, at 6 percent in 2018 versus 5.7 percent in 2017. Premium juices and refrigerated dressings and dips were both at 6 percent in the current survey, down slightly from 7 percent and 7.7 percent, respectively, in 2017. The catchall category of “all other,” which includes exotics and mixes, was down slightly at 8 percent in 2018, versus 9.7 percent in 2017. In the 2018 survey, 59 percent of respondents said they sell exotic produce. Sales of organic produce have increased, according to respondents to the 2018 PG survey, with 46 percent citing a larger percentage of produce sold being


Produce Sales by Segment

Vegetables Fruit






Premium Juices Refrigerated salad dressings and dips All others, including exotics, mixes, etc.


3 3%

What percent of fruit sales are ... 17%

5 8%

Random-weight Packaged Value-added/ Fresh-cut


What percent of vegetable sales are ... 18%

5 3%

Random-weight Packaged Value-added/ Fresh-cut

2 9%

Source: Progressive Grocer market research, 2018

Compared with a year ago, sales of organic produce ... YE AR AGO


4 6%

2 8 .1%

70. 8%

Increased Decreased Stayed the same



Source: Progressive Grocer market research, 2018

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2018 Retail Produce & Floral Review

organic. According to research by Chicago-based Nielsen for the latest 52 weeks ending June 9, the top five categories in organic produce in order of sales are pre-packaged salads, apples, carrots, herbs and spices, and strawberries. At the same time, 46 percent of PG survey respondents said that there had been no change in organics sold; according to survey comments, some produce departments have limited or no room to add organic produce to their product mix. Signage for weekly specials within the department remains the most popular form of promotion, according to the current survey. According to respondents, 91 percent do this within the department, while 54 percent use signage elsewhere in the store. Signage promoting meal and eating suggestions is used elsewhere in the store by 52 percent of those surveyed, and in the department by 46 percent. Sampling items is still strong in the produce department, according to 63 percent, and deployed elsewhere in the store by 48 percent. Signage denoting the local origin of produce is used within the department by 85 percent of those surveyed, and elsewhere in the store by 52 percent, while signage providing country of origin is used in the produce department by 76 percent.


Floral Sales Change in the Past Year 3 0%

3 5%

Increased Decreased Stayed the same Don't sell floral in produce department


Net change

7% 2 8%

Source: Progressive Grocer market research, 2018

PM S A ee u Bo Fre s a ot sh t t h S he #3 um 06 m 2 it


2018 Retail Produce & Floral Review Promoting Produce In the Produce/Floral Department

Elsewhere in the Store

Social/Digital Media (CrossPromotion)

Don’t Use

Signage for weekly specials





Signage for meal/eating suggestions










Cooking/new product demonstrations





“Local” signage





Country-of-origin signage





Future Investment

Wish List

Investment Plans for Produce/Floral Recently Invested

Investment Within the Next 1-2 Years

No Interest/ No Response

Energy-efficient lighting




Energy-efficient chill cases











Mobile merchandisers






Portable bins






Floral displays/bins







11% 9

Total department renovation






“Ugly” produce












Donation of unsold produce






Source: Progressive Grocer market research, 2018

Produce managers and merchandisers know that cross-merchandising within the produce department and in other sections of the supermarket can bring added sales. The trick today is to get more creative with cross-merchandising. Potatoes displayed near steaks, and shortcakes near strawberries still create sales. Respondents mentioned new-item signage, one-day sales, seasonal displays with locally grown produce, use of the intercom, and sidewalk sales as viable cross-merchandising strategies. Outside the produce department, respondents’ cross-merchandising ideas included placing fruit near the deli counter, value-added items in the meat department and placing produce at the front of the store. Meal kits are the current rage in many supermarkets, as well as a way that produce can be easily cross-merchandised. In the 2018 survey, 41 percent of respondents said that their supermarkets have meal-kit programs, with 63


percent noting that their produce departments are involved in the offerings. A different idea is offered by Little House Green Grocery, with its weekly Veggie Box. According to owner Erin Wright, the Richmond, Va., store fills the above-named item for subscribers with unusual fruits and vegetables sourced from local farms.

Blooming Sales

According to 35 percent of survey respondents, in the past year, floral sales have increased — by 36 percent, roughly the same as last year — while 28 percent said that sales stayed the same, which was no real change from 2017’s

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2018 Retail Produce & Floral Review

Click and Shop Does your store offer a home delivery/grocery-ordering (with store pickup) service?

Have you expanded these home delivery/grocery-ordering (with store pickup) services in the past year?

42% Yes

Has the home delivery/groceryordering service increased produce sales?





Keep track of inventory, kill items that don’t sell, and refocus on rotating product.” —Rob Larrison, Big John Store Inc.

Rating Problems Facing Produce/Floral Department Rated on a scale of 1-6, where 1=not serious through 6=extremely serious Current

Year Ago

Quality of product






Labor/recruitment costs






Competition from other supermarkets



Employee training



Price perception of fresh produce



Competition from other outlets (Farmers’ markets, natural food stores, etc.)



Transportation costs



Wholesale prices



How to increase consumption



Produce/floral department overhead (building upkeep, energy costs, etc.)



Competition from Walmart






Leveraging produce as snacks



Traceability (point of origin)



Source: Progressive Grocer market research, 2018


Do you plan to add store pickup or home delivery services in the next year?

19% Yes

29 percent. An additional 30 percent said that they didn’t sell floral in their produce departments. Roberson, of Miller & Sons, says that his floral department is self-service, and that it’s a problem at times when customers request floral arrangements, which the store isn’t equipped to do. Meanwhile, Robért Fresh Markets’ Esteve notes, “Sales in floral have increased for us about 9 percent year to date.” He attributes this in part to a recently introduced consumer/grower bunch program in which all flowers are two for $12 and all fillers are two for $10, along with a $9.99 everyday dozen-rose bunch. “We have licensed florists; Louisiana is the only state that requires that,” he says. “They will arrange any of those combinations at no charge. It is an added value to the customers. This is where the bulk of our sales increase is coming from.” He also sources out the best cost on Phalaenopsis orchids and keeps the retail in the $12.99- $13.99 range every day. “That is another big item for the department that comes across as a value to the customers,” Esteve observes. Floral sales have increased slightly since last year at Big John’s, according to Larrison. “We have tried to grow our floral department over the last couple of years, basically to compete with one other florist and two nurseries in town,” he points out, adding that he thinks that growth in department size and offerings has helped his store’s sales.





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Search Engine Optimization

Got SEO? GROCERS THAT AREN’T TRYING THESE TIPS TO IMPROVE THEIR GOOGLE R ANKING ARE MISSING MAJOR INCREMENTAL SALES OPPORTUNITIES. By Randy Hofbauer very day, thousands of searches for retail businesses take place on the internet, with the majority of them occurring on Google. And if a retailer’s stores aren’t on the first page of search results in the paid, organic and Google Maps sections, users are far less likely to find any of those locations when searching for stores. Among mobile device users, 82 percent have reported trying a “near me” search on their devices, a number that rises 10 points among Millennials, according to recent research from Uberall, a San Francisco-based location marketing solution provider. These findings suggest that a growing number of consumers are placing proximity as their top priority, and brand loyalty below it. This is an especially big deal for grocers: When survey respondents were asked what they typically use “near me” searches for, 84 percent said food. And not everyone's searching for specific banner names: Nearly one-third (30 percent) of respondents said


that their “near me” searches are generic, such as “groceries near me.” Arguably even more convincing of the importance of proximity is that the 72 percent of consumers who perform a local search visit a store within 5 miles, Google has reported. This speaks to the importance of search engine optimization (SEO) and better rankings in Google. “Ranking better on Google really is an integrated approach to digital marketing” for grocers, notes Jonathan Camerata, sales executive with digital marketing and advertising service LocalIQ, a division of Tysons Corner, Va.-based media company Gannett Co. “It’s about the makeup of their website plus content on their website, as well as information about them across the web.” To better rank in Google and, in turn, drive incremental foot traffic, grocers should consider taking the following actions.

Design a Mobile-Friendly Website

Having a website optimized for mobile devices is smart not just for ease of browsing, but also for helping Google’s bots do their job of analyzing its content.

“We know that mobile is huge, so optimizing for mobile is a must,” Camerata says. Jonathan Obar, search and social manager with Chicago-based EnsembleIQ, a retail intelligence provider and parent of Progressive Grocer, agrees, noting that as of 2017, 57 percent of all search engine traffic comes from mobile devices. “That’s a huge opportunity to cater to consumers on the go,” he points out, “and the first step to getting those mobile searchers through your doors is having a mobile-friendly website.” This year, Google rolled out its Mobile First algorithm, which means that the engine now bases its rankings on the mobile version of websites. Before, sites were ranked based on desktop versions. This underscores the power and importance of a mobile strategy.

List Every Store Consistently, Accurately

Whether they operate two or 20 locations in a given area, grocers need to ensure that information is live and up to date on each store if they want all of them to rank. Obar explains that it’s also not enough to have basic information up on the stores — listings must be complete and identical. “You want to make sure that those store listings are on every reputable directory site — Yelp, Google My Business, Bing, Foursquare — because Google checks all of them for accuracy,” he says. “The more listings, the more trustworthy the location is.” “Retail businesses need to optimize their site and business listings to make sure content is consistent about them and all their locations across the web,” Camerata agrees. As a rule of thumb, when it comes to filling out store information on online directories, remember “NAP” — name, address, and phone number with area code. This information has to be identical to, and consistent with, the grocer’s website and all other listings. If there’s a discrepancy between listings, it can confuse Google’s bots. For instance, a store might located at “5204 Mott Street.” However, if its operator uses that format in one directory but lists “5204 Mott St., 60113” in another, Google’s bots might not see them as the same listed store. Listings should also house a unique description and images of each store. “Pay attention to all the details, because it could mean the difference between your store or a competitor’s being shown to a customer on the go,” Obar advises. “This is one time that taking a ‘NAP’ at work is beneficial for your business.”

Use Regional Keywords

When titling stores in a website’s local pages or directory listings, grocers must include a town, neighborhood or other indicator of the store’s specific location, whether in regard to one store in a smaller town or several within a larger city, Obar explains. “The key is to be specific,” he says. For example, if you have one store in a smaller town like Corinth, Texas, label it something like “Corinth Albertsons.” If you have multiple locations in a big city, however, label each one after its respective neighbor-

hood, such as “Ravenswood Mariano’s” for a Mariano’s store in Chicago’s Ravenswood neighborhood. Basically, when asking what to name it, ask yourself: If a local consumer searched for your store, how do you think he or she would label it?

Encourage Shopper Reviews With Incentives

Do you have a huge shopper base that loves to tell friends about how awesome your store, products and shopping experience are? Then leverage that power online by asking patrons to leave positive reviews on Google My Business. “It shows authority and trustworthiness to your customers and to the search engines,” Obar notes. Of course, people today are time-starved, so they might not have, or be willing to take, the time to write a review. That being the case, it’s important to offer coupons or other incentives to get a store’s great reputation shared online.

Advertise Local Listings Through Google Ads

In recent years, Google has been adding services that can help drive foot traffic to brick-and-mortar stores. Grocers can now find options designed to increase foot traffic through such platforms as Google Maps and Google Ads (formerly Google AdWords), the latter of which allows advertisers to sponsor specific keywords to display ads and listings to people in the Google ad network. “Some of these offerings include coupons on the business listing, promoted pins and the ability to display local inventory,” Obar observes. “You can even measure ROI by tracking store visits.”

Connect With the Community to Get Links, Mentions

Grocers already know that when they set up shop in a new community — or debut their first store altogether — publicity is key to having a successful opening day. This is also critical for SEO purposes: Every time they open a store, grocers should work to get mentioned on community websites, whether in the local news or on the city’s official blog. “It’s worth it to connect to the community,” Obar counsels. “This makes the locals aware of your store and helps Google verify that your store is legitimate. Taking part in local events, sponsoring local teams and holding events of your own are great ways to get picked up by a local blog or news source.” He adds that it’s even better if that local blog or news source ends up backlinking to a grocer’s site, as it “greatly helps” websites rank on search engines. PROGRESSIVE GROCER October 2018



Regulatory Outlook


n television, Donald Trump’s no-nonsense attitude — exemplified by his infamous phrase “You’re fired!” — helped generate high ratings for “The Apprentice.” But as president of the United States, his similarly tough stance on trade — including the somewhat awkward phrase “You’re tariffed!” — is turning out to be rather unpopular with numerous industries that rely on complex, globally dependent supply chains. So far, the grocery industry and American consumers in general have felt more of an indirect hit from trade rifts with


China, Mexico and other trading partners, as President Trump’s first series of tariffs focused on steel and aluminum. While these materials are certainly used in the industry — the most obvious example being aluminum cans for products like soda and beer — for the most part, higher costs haven’t trickled down too much to the consumer level. Meanwhile, China and other countries’ retaliatory tariffs on U.S. grocery-related products such as pork and soybeans will likely result in lower prices for consumers, since there’s now a surplus supply in the States. For the long term, however, the industry’s leading trade groups and analysts worry that a prolonged tit for tat — essentially a “trade war” — could not only affect consumer spending in the foreseeable future, but also disrupt supply chains and agribusiness in general, as countries that have typically relied on trade with the United States look elsewhere for goods.

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Regulatory Outlook

Renegotiating NAFTA Another trade issue that’s getting a lot of attention from President Trump is NAFTA (the North American Free Trade Agreement), the trilateral trade agreement between the United States, Canada and Mexico that was signed into law in 1993. After taking office in January 2017, Trump signed an executive order to renegotiate NAFTA. He has called it “the worst trade deal” ever signed by the United States and blames the agreement for wiping out U.S. manufacturing jobs. As of September, the United States and Mexico had reached a tentative agreement on some of the outstanding issues between the two countries, but Canada was still in talks with the United States and coming close to an Oct. 1 deadline. (Trump set the deadline because he wants Mexico’s signature before its new administration starts on Dec. 1). Once the countries reach their individual agreements, there will still be issues that will have to be discussed among all three parties, and then the respective government bodies of each country will have to grant trade authority (in the United States, that body is Congress). The leading supermarket-related trade groups are in agreement that NAFTA has been successful for the most part, and they don’t want to see it changed too drastically. Andy Harig, senior director of sustainability, tax and trade at the Arlington, Va.-based Food Marketing Institute (FMI), says, “We definitely believe that it needs to stay a trilateral agreement and not be broken into two separate agreements, so not a U.S.-Canada and U.S.-Mexico agreement. Part of the reason for that is the success of NAFTA was driven by the fact that it locked the whole region into a single set of rules, so it created a lot of certainty. It allowed people to then build supply chains around that certainty. When you break it into two separate agreements, you take some of that away. Then you have two separate systems in place. That’s harder to maneuver when you’re looking at how you develop supply chains.” Harig adds that NAFTA “has allowed us to provide consumers with high-quality, affordable produce and other products year-round.” FMI is open to updates to NAFTA, particularly changes that take into account ecommerce. “From the details we’ve seen, it sounds like there’s been an effort to do that,” Harig notes. He’s also pleased that the latest NAFTA outline has updated some of the bio-sanitary measures involved in food safety.

NAFTA has allowed us to provide consumers with high-quality, affordable produce and other products year-round.” —Andy Harig, FMI


Round Three

At press time, it seemed as if the trade wars and their impact on the economy were about to really heat up, thanks to the Trump administration’s latest round of tariffs announced on Sept. 17, this time specifically including food products imported from China (among the categories targeted: fruits, vegetables, nuts, seafood, flours and juices, as well as food ingredients, additives and processing aids). The action begins with 10 percent tariffs on $200 billion worth of Chinese imports, and will rise to 25 percent by the end of the year. The Grocery Manufacturers Association and other trade groups had urged the Trump administration to reconsider these tariffs during an open comment period. The Food Marketing Institute (FMI), based in Arlington, Va., has been among the trade groups that have opposed tariffs on imported products. Andy Harig, FMI’s senior director of sustainability, tax and trade, tells Progressive Grocer: “The longer the tariffs stay in place, the more problematic they become. And that’s when you can see it impacting decisions more. Even in the near term, though, I think companies have to build these higher costs into some of their investments. And certainly going forward, as they talk to their suppliers, they’ll have to take this into consideration.” Harig also expressed concern that taxes on imported seafood and other products from China could hit consumers right in time for the 2018 holiday season. “Think about the people who eat shrimp only once a year at holiday gatherings, or some of the produce that’s purchased around that time, like apples,” he says. While most retailers tend to stay out of politics, a few chief executives from the country’s largest retailers have acknowledged that the tariffs have forced them to consider “mitigation strategies” in the likelihood that costs will trickle down to consumers. In August, during Walmart’s second-quarter earnings call, the Bentonville, Ark.-based mega-retailer’s CFO, Brett Biggs, noted, “We are closely monitoring the tariff discussions and are actively working on mitigation strategies.” He also pointed out that in all of Walmart’s markets where the company has stores and ecommerce operations, the majority of its

As a guest-focused retailer, we’re concerned about tariffs because they would increase prices on everyday products for American families.” —Brian Cornell, Target

merchandise is purchased locally in that country. Minneapolis-based Target also addressed the impact of tariffs during its second-quarter earnings call. CEO Brian Cornell said: “As a guest-focused retailer, we’re concerned about tariffs because they would increase prices on everyday products for American families. In addition, a prolonged deterioration in global trade relationships could damage economic growth and vitality in the United States.”

A Matter of Trust

The long-range impacts of these ongoing trade wars are what particularly concerns supply chain analyst David Marcotte, SVP of retail insights for Boston-based Kantar Retail. “In the long term, these actions are eroding trust,” he says. “Because of the tariffs, the buyers in Mexico have been reluctant to commit to the United States. There’s also some question about the ability to deliver without having issues at the border. The part that’s difficult to see but easy to understand is that people who buy and sell dislike having disrupted markets. They dislike not being able to predict what next year is going to be like — and that’s exactly what’s going on at the moment. So they’ll do business with predictable markets where they know they can buy or sell.” With global trade, production in intricate agri-

business supply chains is particularly vulnerable, Marcotte notes. Looking at pork as one example, he explains: “We had an ideal situation in that generally, Americans prefer the relatively lean cuts of pork, and the Mexican consumer prefers fattier cuts. The U.S. got one part of the pig, and Mexico got the other. But with the tariffs, it doesn’t make as much sense. The economics of raising the animal changes, and in the long run, it’s going to create some disruption.” Marcotte adds that Mexico has been “very proactive about reaching out to other sources for just about everything they buy in the United States.” For example, the nation has been negotiating with Brazil and Argentina for chicken and pork, and with New Zealand for dairy products. China, for its part, has gone so far as to lower or eliminate tariffs on thousands of goods from India, South Korea, Sri Lanka, Bangladesh and Laos. FMI’s Harig points out another unintended target from prolonged trade disputes: small and midsized producers. “The longer tariffs stay in place, small and midsized producers can actually face some real difficulty staying in business, because the markets overseas aren’t there, and they have lower prices in the U.S.” Given Trump’s tough stance on trade, retailers and suppliers alike will need to think ahead to plan their supply chains and pricing strategies accordingly. PROGRESSIVE GROCER October 2018



andy Bayer, a digital strategist for various pet brands, including Organic Oscar and JoJos, notes, "We know a lot about pet people from the years of research and data compiled on them." He goes on to tick off that information: “They spend millions and millions of dollars a year on their animals across the board, including food, grooming products and services. They’re choosy about brands but still price-conscious. Upsells are effective. Convenience is a big draw. And when they get home from working all day, they want to unwind and play with their puppy — not drive down to the grocery store to stand in line for a bag of dog food.” The Amazon Effect has touched nearly every consumer industry in the world, and pet products haven’t been spared. Consumers have been trained to expect online and delivery options everywhere. “I don’t subscribe to the hype that retail is dead, but it is changing quickly — very quickly,” asserts Danny Halarewich, founder and CEO of Vancouver, British Columbia-based LemonStand, an online retail platform that powers fast-growing ecommerce businesses. The company works with online retailers across various verticals and has seen firsthand how industries have changed. “Businesses

who don’t adapt to these changes will die and be replaced by digitally competent entrepreneurs who capitalize on the missed opportunity,” Halarewich adds. “More than ever, today’s consumers are more digitally connected and informed, using multiple channels simultaneously,” says Don Yee, senior consultant for Short Hills, N.J.-based FitForCommerce, a boutique ecommerce consulting agency. With nearly 20 years of retail and ecommerce experience, he knows what consumers want. “They expect a consistent experience, and are in the driver's seat as to how, when, where and whom they shop with,” Yee observes. “If their needs and shopping experiences are not met, they will shop elsewhere.”

Ready for Growth

Traditionally, food retailers have been slow to enter the online grocery realm in general. “When you look at the way grocers are entering the ecommerce space, most are sticking with the order-online-and-pickup-in-store



model, because it is the path of least resistance in grocery,” Bayer explains. “But if they want to get deeper into a traditional ecommerce model, there’s no better space to start than pet products. Pet people are busy but have a recurring need for the items they’re buying. Those items are generally nonperishable, so transport is easier. And unlike someone who is a looking for or grapes or melons, a pet person isn’t looking to taste or smell the product before buying it.” The landscape for ecommerce in grocery categories is primed for disruption, because there’s incredible room for growth. “Ecommerce is important and an essential channel to survive and strive in today’s and tomorrow’s retail environment,” Yee notes. “The numbers prove this point: U.S. online grocery sales amounted to about $14.2 billion in 2017 and are expected to rise to nearly $30 billion by 2021. Ecommerce accounts for about 20 percent of all apparel sales, but only 2 percent for groceries. To me, that signals great opportunity, especially as logistics, infrastructure and technology improve.” Pet product consumers have embraced ecommerce shopping for a number of reasons, including the ability to shop 24 hours a day from the comfort of their own homes, and more choice both in products and brands. Convenience is a high priority for today’s shoppers, so avoiding parking and long checkout lines is a big plus for them. Online shopping can also be incredibly efficient, considering that the online shopping portal can store various data. This makes features like reordering favorites or storing digital coupons possible. But retailers are reaping the benefits, too. The most obvious one is that product sales are no longer limited to local buyers. “Ecommerce opens you up to a much larger customer base,” Yee says. “You don’t have to only sell to people who live nearby, but can sell nationwide or even worldwide. That is very powerful.” He also wants grocers to remember that ecommerce is conducive to harvesting information from customers in ways that local retail purchases aren’t. “Retailers gain access to more real-time customer data that can be leveraged to personalize experiences and optimize business performance,” Yee points out. “Since ecommerce transactions capture customer email information, sending out automated and customized emails is quite easy.” Customer data has proved to be an invaluable asset in marketing to new and returning customers over a number of industries. Imagine knowing the size, breed and age of a customer’s pets as well as their buying frequency for items like food or grooming products. Grocers could use that information to retain current customers, market new products to the current customer base and gain insight into what marketing tactics might be necessary to bring in new customers.

Avoid the Common Pitfalls

That’s not to say that ecommerce is the perfect answer to every grocer’s pet product needs. There are still plenty of mistakes to be made. For instance, Bayer warns grocers to avoid trying to reinvent the wheel when selling pet products online. “The best ecommerce efforts will tie the in-store experience with the online experience,” he cautions. “It should feel like an extension of the shopping they already do with the company, not a brand-new, completely unrelated experience.” According to Halarewich, marketing efforts should be thought of in terms of the big picture rather than


If grocers want to get deeper into a traditional ecommerce model, there’s no better space to start than pet products.” —Randy Bayer, digital strategist

short-term gains. “A common pitfall that I see is underestimating the role of marketing for your brand and website, and not committing to it for the long haul,” he says. “Driving quality traffic to a website takes a lot of work, and doesn’t happen overnight. I see many businesses get frustrated and give up when they don’t get results quickly.” Halarewich further notes that putting the marketing pieces together can yield exponential results, “but the amazing thing about building an ecommerce business is that good marketing is compounding. Creating quality content, engaging with your customer and nurturing raving fans through excellent customer service have a snowball effect.” The logistics of building and maintaining an ecommerce website, or adding a pet product section to your existing website, can also be expensive in regard to money and manpower. There are also concerns about branding, security and user interface to be addressed. And all of that comes before delivery/pickup logistics are even added to the equation. To avoid overwhelming the organization and burning through current resources, Yee advises grocers to explore their options using the existing infrastructure. “It’s OK to test and learn,” he notes. “Grocers can leverage their physical store locations to fulfill customer orders, and fulfill the last mile with delivery and pickup (click-and-collect) services. These services are also provided by third-party companies, which allow grocers to quickly test the waters, and with minimum upfront investment.” Even with all of the possible pitfalls, however, Yee believes that it’s all worth it, because the future and the internet go hand-in-hand. “The evolution of technology and the internet has a direct correlation with the acceleration of digital commerce, challenging the survival of traditional retail,” he asserts. “There is more pressure than ever for retailers to reinvent traditional retail by assigning greater focus on digital channels and delivering a complete and unified shopping experience.”

The time is ripe to

expand your pet department How you can capture new pet-owning customers, while keeping your existing shoppers and driving more revenue across the whole store.


f there was ever a perfect storm of opportunity in the pet department, this is it.

Pet care has been a $69.5 billion star of the center store, drawing shoppers who tend to spend liberally across the entire store. But now, a convergence of pet specialty brand migrations and lucrative e-commerce opportunities is putting grocers with a strategic focus on pet care in a position to reap even bigger rewards.

Brand migrations and e-commerce In the last year, several popular pet food brands have gone from being sold exclusively through pet specialty stores to testing out, and then expanding broadly into, the grocery and mass channel. Compounding that is the incredible boom in pet care sales through the e-commerce channel, up 68 percent in 2017, with estimates that 20 to 25 percent of the business will migrate online by 2020. Each development is significant. But, together, these dynamics are reshaping pet care opportunities for grocers— dissolving the boundaries between the pet specialty and mass channels and creating opportunities to reach a new group of shoppers who spend big on typically higher-margin super premium pet foods.

How to make the most of these trends? So, what can you do to take advantage of these dynamics, right now? Here are five ways to do just that. Follow the data. If you’re deciding whether or not to add a new pet food brand to your shelf, look to demographic insights—at the regional or even store level—to ensure the products you carry garner the greatest demand from shoppers in your area. Natural or super premium brands may not align with shoppers in some of your stores, for instance, so they shouldn’t take away from your current best-sellers. Expand, don’t replace. When bringing in a new pet food brand, it’s important to allocate space by expanding your pet department, rather than reducing your current assortment and squeezing the new brands into your existing footprint. The latter strategy risks alienating your base by eliminating their brand/SKU preferences, which could cancel out the potential of gaining a new specialty shopper. Call out “better for you” foods. Highlight natural segments and category innovations with navigational signage, in-aisle merchandising, weekly promotions, and dedicated

end caps. Even if you’ve yet to bring in a new specialty pet food brand, having an in-store focus on premium and natural items can lead to increased sales, because some shoppers still don’t realize that mass and grocery retailers already have these high-quality options that rival that of the former specialty pet food brands. Balance your approach. Your sole goal shouldn’t be to convert shoppers to specialty offerings, but, rather, to appeal to the largest group of consumers and meet all their needs, from the private label brand to the premium and natural products you carry on your shelves. Every retailer needs a strategy to win across the full selection of pet products, which includes not only capturing the trade-up, but also maximizing revenue from your core consumers who are satisfied with their current brand of choice. Integrate physical and online. Pet food is a fast growing e-commerce category, and it can be a key player in building out your digital strategy. But you need an integrated approach: 1) Develop a great in-store pet experience with robust signage promoting your e-commerce capabilities; 2) Beef up your online pet offerings, but align them with in-store pricing and promotions; and 3) Offer a variety of fulfillment options: in-store pick-up, curbside collect, and home delivery. Market dynamics are clear: the pet department is poised to impact your business in a bigger way than ever before. But you can’t sell in the same space and expect to be rewarded. To max out this unprecedented opportunity, the time is now to expand your pet department to better meet the needs of your current, and potentially new, customers. n


Health, Beauty & Wellness

“Supermarkets are adding more SKUs in this segment as consumers become more aware of the products and their benefits,” affirms Ernie Johnson, a Los Angeles-based consultant. Quincy, Mass.-based Ahold Delhaize banner Stop & Shop, for instance, includes the Good Clean Love niche brand of natural products in its mix as well as top category performers. With space at a premium, selection can be limited, with retailers paring down to the highest-turn SKUs in each segment. “When you’re dealing with limited space, unless they’re advertising a new product like crazy, you stick with the proven winners,” notes Jeff Garey, nonfoods director at Woodman’s Markets, a 16-unit chain based in Janesville, Wis.

Category Gains

Peak Performance GROCERS STAND TO BENEFIT BY OFFERING ROBUST SE XUAL WELLNESS SECTIONS IN THEIR STORES. By Barbara Sax ockets of innovation in an otherwise sleepy category are providing some growth opportunity in the realm of sexual wellness. Supermarkets are outpacing other mass channels in dollar sales across a number of sexual wellness segments, despite the limited space many chains are devoting to such products. Typically, retailers house sexual wellness in a 4-foot set, cramming in contraceptives, personal lubricants, and pregnancy and ovulation kits, plus a number of female ancillary categories in the section. Even with small sets, though, dollar sales of personal lubricants surged nearly 14 percent in the grocery channel for the 52 weeks ending Aug. 12, according to multichannel data from Chicago-based IRI, while dollar sales increased a mere 1 percent across all outlets for the same time period.


Astroglide personal lubricant is dominant in the category. “Astroglide dollar sales are up 16 percent, and most of the gain is from the supermarket channel,” says a representative of Vista, Calif.-based BioFilm Inc., manufacturer of the Astroglide brand. “We’re delivering what the customer wants: a high-quality product at a value price.” Promotion is also important to the category. “I see promotion across all brands, with BOGO and discounts driving sales,” says Johnson. Premium-priced silicone and natural/organic products are also boosting category sales. “While water-based products still represent about 85 percent of category

Key Takeaways Despite limited space, sexual wellness category sales dollar growth in supermarkets is outpacing that of other mass channels. Although consumers are becoming more aware of products and their benefits, overcoming customers’ discomfort when it comes to shopping the category is still a challenge for retailers. Innovative products and marketing are positioning the category for future success.

sales, silicone-based product dollar sales are up 9 percent, and we still see upside in that segment,” notes the BioFilm rep. The company’s Astroglide Natural Feel Liquid, a product made with natural ingredients, has seen 40 percent dollar sales increases in the food channel. “People are more and more interested in body-safe ingredients,” observes Julia Skorupka, a spokeswoman for LELO, a Swedish manufacturer whose water-based personal lubricant is glycerin- and paraben-free and fortified with aloe vera. Education about the category, while challenging, could create upside for personal lubricants. According to BioFilm’s rep, the category could grow significantly with more point-of-sale educational materials that describe the benefits of the products, and the company is evaluating options on how to reach consumers with education as well as how to drive in-store sales through its website. “We’re committed to growing the category,” the rep says. “Household penetration for lubricants is lower than expected, and we think supermarkets can win in the intimacy category and boost their market basket sales.” The company is also entering other sexual wellness segments, having begun rolling out its Verge male genital-desensitizing spray at mass retail, including Walmart and Supervalu, in September. The product will be supported with a multipronged marketing campaign that includes coupons on Astroglide’s website.

Discomfort Zone

The challenge, though, will be attracting male shoppers to the products in a supermarket. “We’ve tried bringing some of these products into the store, and we’re down to one SKU,” admits Woodman’s Garey. “We just discontinued K-Y’s product.” Getting shoppers comfortable purchasing sexual wellness items in the supermarket continues to be tricky. Research from Chicago-based Mintel reveals that adults are still uncomfortable purchasing contraceptives and sexual health products, and that 17 percent of condom users agree that a more discreet buying process would incentivize purchase. Similarly, 18 percent of contraceptive users agree that shopping for emergency contraception is uncomfortable. IRI data suggests that shoppers may be loosening up, however. Sales of sexual devices in the supermarket channel jumped nearly 8 percent for the 52-week period measured by IRI, with Parsippany, N.J.-based Reckitt Benckiser’s expanded Durex line of sexual devices experiencing a dollar sales gain of 27 percent in grocery stores. “The toy category is becoming more prevalent in the supermarket channel,” affirms Johnson.

When you’re dealing with limited space, unless they’re advertising a new product like crazy, you stick with the proven winners.” —Jeff Garey, Woodman’s Markets

New Products, Positioning

Manufacturers, in an effort to expand their distribution channels to include mainstream mass outlets, have shifted their marketing strategies and packaging design to target couples and position the products as healthy choices for sexual well-being. “LELO transformed the look, feel and function of personal massagers, and helped usher in the newer perception of pleasure products,” says Skorupka. “Customers are becoming more open to owning sex toys, and it’s becoming acceptable among the general public.” The condom segment is down across all outlets, according to IRI data, but supermarket dollar sales were weaker than those of other channels. One key to boosting performance in this underperforming segment may to include new products or niche items. For example, Rochester, N.Y.-based Wegmans Food Markets added Hollander Sustainable Brands condoms to its offerings. Last year, Ewing Township, N.J.-based Church & Dwight introduced XOXO by Trojan, a condom marketed to women. XOXO features Softouch latex, an aloe-infused lubricant and innovative discreet packaging that includes a mini travel pack option that stores up to two condoms for added convenience while carrying the items on the go. LELO, meanwhile, has introduced Hex, an ultra-thin condom with a hexagonal pattern designed to deliver a snug fit. “LELO wanted to bring people back to the condom and change people’s attitudes about it,” explains Skorupka. “To do that, we had to change the condom itself.” She adds that the next evolution in the category will likely be dictated by the availability of a new generation of supermaterials, such as graphene, carbon nanotubes, self-healing polymers and aerogels. “Until then, latex remains the best condom material,” notes Skorupka. In other innovations, last year Australian manufacturer Ansell launched an antiviral condom, advertised as the first to offer protection against HIV and other viral transmissions, in the Canadian market, and the product may hit U.S. shelves in the future. Higher-performance products can boost category sales that have lagged as retailers focus on lower-priced products that are often discounted. Stop & Shop, for instance, uses shelf talkers to communicate reduced pricing in the category to consumers. According to Woodman’s Garey, his chain takes an EDLP approach to sexual wellness: “We’re competitive, but we’re not giving it away.” PROGRESSIVE GROCER October 2018



Food, Beverage & Nonfood Products

Protein-Packed Pasta

Nuts for Milk

As more Americans work plant-based products into their diet, they’re trying to replace at least some of the traditional cow’s milk they consume with alternatives made from soy, cashew, almond and more. Now add macadamia nuts to the list: Milkadamia, a non-GMO, gluten- and soy-free brand of milk and creamer alternatives made from raw, never-roasted macadamia nuts, is an excellent source of vitamins D and B12, and contains 50 percent more calcium than 2 percent dairy milk. With a smooth flavor and creamy texture, the product is suitable as an alternative to milk in recipes, and the nuts it’s made from are regeneratively farmed with techniques that create new soil and conserve water. Current varieties include Original, Unsweetened and Unsweetened Vanilla in both shelf-stable and chilled options, as well as the Latte Da barista blend.

Cauliflower Power

Today’s health-conscious shoppers are consuming fewer carbohydrates and more lean protein, encouraging brands to develop plant-based alternatives to carbheavy foods. One option is Barilla’s line of one-ingredient legume pastas, made with just chickpeas or red lentils and combining the “al dente” texture of traditional pasta with the nutritional benefits of legumes. Gluten-free, Non-GMO Project Verified, and rich in plant-based protein and fiber, the shelf-stable pastas include such varieties as Red Lentil Penne, Red Lentil Rotini, Chickpea Rotini and Chickpea Casarecce. They cook on the stove in just seven minutes (nine for softer pasta) and retail for a suggested $2.99 per 8.8-ounce box.

Wholesome Energy

Parents are always seeking less-processed and -sugary snacks for their little ones’ lunchboxes. Thankfully, Bobo’s has a solution in its Stuff’d Bites: jam-filled morsels rich in protein and fiber that let kids enjoy a delicious stuffed oat bar in a snack-sized portion. Baked with whole grain oats and real organic fruit jam, the bites are an alternative to sugar-laden, highly processed snacks and bars, and help provide long-lasting energy. The snacks are gluten-free, vegan and non-GMO, and come in two varieties: Apple Pie and Peanut Butter & Jelly. They retail in packs of five for a suggested $4.99 each.

Cauliflower-based pizza crusts are all the rage today, so Kraft Heinz is collaborating with Oprah Winfrey to harness the power of the vegetable with a line of better-for-you frozen pizzas. Part of the Mealtime Stories series — which also includes soups and sides — O, That’s Good frozen pizzas have a crust featuring one-third cauliflower and contain no artificial flavors or dyes. The pizzas come in four varieties: Fire Roasted Veggie, Pepperoni, Supreme and Five Cheese. Of Mealtime Stories’ profits, 10 percent will be equally split between the charitable organizations Rise Against Hunger and Feeding America.



UNITED STATES MARKETS • Convenience • Grocery/Drug/Mass Store Brands • Specialty Gourmet Technology • Hospitality • Apparel CANADIAN MARKETS • Convenience • Pharmacy • Foodservice

Aperion (A Hussmann Company)


Beaver Street Fisheries


Biro Manufacturing Blount Fine Foods Bord Bia Brill BuzzBallz Calico Brands


Campbell Soup Company

SENIOR SALES MANAGER Theresa Kossack (MIDWEST) 214-226-6468

46 8-9 45

Domino Foods






21 Inside Back Cover

Crave Brothers Farmstead Cheese, LLC Creekstone Farms


38 7, 19




Insert 51

Avery Dennison

Del Monte Fresh Produce Inc. E&J Gallo Winery Enjoy Life Natural Brands, LLC

4 23 3 37 Inside Front Cover

Fibre Box Association




General Mills Inc.


Giorgio Foods, Inc.


Great Northern Corporation Hallmark Cards, Inc. International Paper Jana Foods

Insert 35 39 Back Cover 60

Jasmine Vineyards


Juan Valdez


Kimberly Clark



Mann Packing Co., Inc.


Mars Chocolate NA/ Wrigley


NORTHEAST, MARKETING MANAGER Mike Shaw (MID ATLANTIC) 201-855-7631 • Cell 201-281-9100

MasonWays Indestructible Plastics


ADVERTISING MANAGER Jackie Batson 224-632-8183

New Pig

Naturipe Farms LLC


Nestlé Worldwide


OSI Industries Perfetti Van Melle USA Inc.

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

83 56-57 69

Private Label Manufacturers Association


Sealed Air


Smart.Market for Business


Smithfield Fresh


Stemilt Growers, Inc.


Supervalu Inc.


The Center For Consumer Freedom


The Garlic Company


The Holiday Gift Check Program


The Little Potato Company, Ltd.


Thermal Technologies Inc


Tosca Ltd.


TC Robbie


Trion Industries Inc.


Tyson Foods


Uniweb Inc


V & V Supremo Foods, Inc.


Viking Cold Solutions


Zumex Usa, Inc.




Produce at the Local Level BARONS MARKE T’S GREG DUNNE TELLS HOW IT’S DONE. ocal is a hot trend in produce departments, but the benefits double when it’s a local, family-owned business buying from local farmers to sell the product to consumers. Barons Market, based in Poway, Calif., and one of Progressive Grocer’s 2018 Outstanding Independents — VP Rachel Shemirani also is a Top Woman in Grocery this year — takes that local message to heart, with up to a quarter of the department sourcing product from local farmers. Produce Operations Manager Greg Dunne and his team have spent years cultivating the relationships needed to supply the company’s seven stores. Dunne is also on the receiving end of one of the advantages of working for a family-owned company: He’s preparing to leave soon to trek the Pacific Coast Trail, an endeavor that will take several months and has the full support of his “family” at Barons Market. I had a chance to chat with Dunne before he struck off into the wilderness. Kat Martin: Describe what the Barons Market produce department is like. Greg Dunne: We are definitely into local and organic. We have

a larger-size organic section than any conventional stores, and we buy a lot of our seasonal stuff locally, whether it’s avocados or pomegranates. We have seven stores, and all of our produce managers basically are independent buyers. They have to run everything through me, but they’re all pretty much on their own. We have a produce meeting once a week. We discuss things like what’s coming in season, what’s going out of season, what fruit or vegetables are looking really good.

“When peaches and nectarines go out of season here, a lot of the big-box stores will bring in peaches and nectarines from Chile. We will not. We’ll just wait until the next season that starts in early spring.” —Greg Dunne, Barons Market

Call for Outstanding Indies To nominate a great independent for Progressive Grocer’s Outstanding Independent Awards, visit


KM: Do the farmers have to be able to supply enough products for all seven stores? GD: Yes, and sometimes that can be difficult. We have

Persian cucumbers that we buy direct. Since they can’t ship up to the North County because the farmer is in San Diego, then we drop them off at our Point Loma store, and then one of our Barons trucks takes them up to our other stores. We have our warehouse and our Barons trucks, and they deliver to the other stores when we’re buying locally, if the vendors can’t. Some vendors are so small they can’t deliver to all the stores. KM: How does Barons define local? GD: We try to do it within 100 miles [excluding

Mexico]. It’s usually less, but anything local is going to be California-grown. KM: Because you’re so focused on local, are there times where you’re willing to just not have a product and have to explain to your customers, “It’s out of season, we can’t get it?” GD: If the product isn’t good or we can’t get it lo-

cally, yes, we’ll be out and then we’ll just get it back in, because we’re just focused on the quality and the service to the customer. KM: And customers are OK with that? GD: They really are, for the most part. They re-

ally know Barons is looking out for them. We very seldom bring in any imports. We wait for the season to come in. For example, when peaches and nectarines go out of season here shortly, a lot of the big-box stores will bring in peaches and nectarines from Chile. We will not. We’ll just wait until the next season that starts in early spring. KM: While you’re gone, you’re lucky to have talented co-workers who can pick up the slack in the produce department. GD: Our staff is really,

really awesome. They love what they’re doing. They’re good at it. And they enjoy the company. ... We have almost zero turnover, so that tells you a little bit.


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