RETAILER DEEP DIVE

It’s been 18 months since Amazon opened its first full-size supermarket, and a question on the mind of everyone in the retail industry is: What’s next for the e-commerce giant’s grocery aspirations?

The chief of the company’s Amazon Fresh grocery banner answers that question in an exclusive interview with Progressive Grocer.

“Amazon’s cultural bedrock is customer obsession, which drives all of our various businesses to innovate for customers in big and small ways, and to agonize over the things that matter most to them,” says Jeff

Helbling, VP of Amazon Fresh. “As we open more

Amazon Fresh stores, we will continue to invest in technology — like our Just Walk Out shopping and the

Amazon Dash Cart — to make the grocery shopping experience more convenient for customers.”

Leveraging the lessons from its $13 billion acquisition of Whole Foods Market in 2017, and continuing to focus on ruthless execution and experimentation,

Amazon is on the cusp of transforming grocery with what is expected to be an acceleration of openings for its Amazon Fresh format this year.

Key Takeaways

Amazon Fresh store openings are poised to accelerate this year. Cashierless technology is expected to launch in more stores and provide another revenue stream. A veteran from Tesco has joined the team just in time for scaling the grocery business.

EXPERIMENT AND By Gina Acosta CONQUER

How Amazon plans to transform grocery in 2022.

“As is true across all of our businesses, if we see an opportunity to deliver something different or better to meet a customer need, we do it. And that’s what we’re doing with our Amazon Fresh business. We’re serving customers in ways they prefer to be served, which includes physical stores and, increasingly, omnichannel shopping.”

—Jeff Helbling, VP of Amazon Fresh

Since the company launched its first foray into traditional grocery in Woodland Hills, Calif., in August 2020, Amazon has opened 23 Amazon Fresh stores across six states and the District of Columbia. At this very moment, there are at least two dozen Amazon Fresh stores in various stages of planning or construction across the United States, and Amazon reportedly has plans to open dozens if not more of these stores in major U.S. metros in the next three years. The Amazon Fresh stores, which range in size from 25,000 to 45,000 square feet, join the company’s other U.S. physical locations selling food and consumables: 511 Whole Foods Market stores and 24 Amazon Go stores.

“We give ourselves the ability to innovate, test and learn, and adapt to meet the changing needs of our customers,” Helbling says. “That’s why, for example, as our grocery offering has grown, we moved Prime Now to the Amazon app and website so customers can shop all Amazon has to offer from one convenient location, and we opened Amazon Fresh grocery stores to give customers a convenient shopping experience thanks to Just Walk Out technology and the Amazon Dash Cart.”

Just Walk Out technology (cashierless checkout) and the Dash Cart (shopping carts with checkout functionality) join other grocery experiments currently scaling up, such as Amazon Key In-Garage (grocery delivery straight to customer garages), Amazon One (palm-payment technology), and private brands.

According to Helbling, the Amazon Fresh experiment has been a big success so far.

“Our efforts to evolve our grocery experience into a seamless omnichannel offering have been well received by customers — and the industry,” he says.

Retail analytics firm Placer.ai recently examined the performance of Amazon’s first Amazon Fresh grocery stores in California and Illinois, and found that those stores are gaining market share against traditional grocery operators.

“The relative steadiness in visits shows that a core group of customers have added a trip to Amazon Fresh to their regular grocery routine, indicating that Amazon Fresh has successfully integrated into the grocery mix for the neighborhoods it entered,” observes Shira Petrack, a Placer.ai blogger.

Amazon One is a fast, convenient, contactless way for people to use their palm to make everyday activities like paying at a store, presenting a loyalty card, entering a location like a stadium, or badging into work more effortless.

A Top 10 Grocer — Twice

Last month, in a second year dominated by the COVID-19 pandemic, Amazon cemented its leadership position in dunnhumby’s Retailer Preference Index (RPI) for U.S. grocery by landing the No. 1 and the No. 5 spots in the ranking. Amazon took first place, and Amazon Fresh took fifth place (the first time a food retailer has nabbed two spots in the top 10).

“The pandemic has massively accelerated changes in how customers buy their groceries, and their behaviors are continuing to evolve,” says Grant Steadman, president of North America for dunnhumby. “2021 was the year that grocery retail became truly omnichannel. Retailers who delivered on their customers’ evolving needs in-store and online performed best. This was mostly the larger players, who used their advantages to consolidate their positions. The challenges for most other retailers are significant, but a number of midsize grocers gained momentum by understanding their customers better and differentiating their offering accordingly. The report aims to provide some direction on why and how retailers can best position themselves to win with customers, in this era of the Great Reinvention.”

The overall RPI rankings are the result of a statistical model that predicts how retailer execution on various customer needs — preference drivers — affects lasting emotional bonds formed with customers, as well as near- and long-term financial performance. The study includes key findings such as:

Price and quality are no longer head and shoulders above all other customer preference drivers in securing superior, long-term sales growth and emotional connection with shoppers.

Retailers in the first quartile have long-term sales growth that’s nine times higher than retailers in the fourth quartile, two times higher than retailers in the third quartile, and one and a half times higher than retailers in the second quartile. They also have superior short-term momentum to those in the other three quartiles.

Grocery retail is now truly omnichannel, as digital’s share of total grocery sales more than doubled during the pandemic, from 5% to 10% of sales, yet half of the U.S. grocery shopping population doesn’t buy online and has no plans to. Nearly all online shoppers still buy in brick and mortar, where roughly 90% of all customer dollars are currently spent.

Digital is king in driving momentum as Amazon has demonstrated over the past two years by being ranked as the top U.S. grocery retailer.

With a strong balance sheet, a burgeoning software-as-a-service business and a strengthened physical stores team in place, Amazon’s grocery ambitions are ready for liftoff.

‘New Capabilities in Grocery’

When Amazon reported fourth quarter earnings on Feb. 3, the company was still growing sales by double digits from the pandemic-elevated levels of 2020. Amazon said net sales increased 9% to $137.4 billion. Net income increased to $14.3 billion, a near-doubling of profits. Amazon also reported that its physical store sales (including food retail banners Whole Foods Market, Amazon Fresh, and Amazon Go) were up 16% during the quarter. It was the third straight quarter of double-digit growth for the company's physical stores.

Amazon CEO Andy Jassy said the company is seeing "higher costs driven by labor supply shortages and inflationary pressures" and that these issues are persisting into the first quarter due to Omicron. But, he said, despite these short-term challenges, "we continue to feel optimistic and excited about

Amazon Fresh Footprint

CALIFORNIA

Amazon Fresh Store — Fullerton 1100 S Harbor Blvd Fullerton, CA 92832

Amazon Fresh Store — Irvine 13672 Jamboree Rd Irvine, CA 92602

Amazon Fresh Store — Long Beach 6235 E Spring St Long Beach, CA 90808

Amazon Fresh Store — Ladera Heights 6855 S La Cienega Blvd Los Angeles, CA 90045

Amazon Fresh Store — North Hollywood 5101 Lankershim Blvd North Hollywood, CA 91601

Amazon Fresh Store — Northridge 19340 Rinaldi St Northridge, CA 91326

Amazon Fresh Store — Whittier 15225 Whittier Blvd Whittier, CA 90603

Amazon Fresh Store — Woodland Hills 6245 Topanga Canyon Blvd Woodland Hills, CA 91367

Source: Amazon.com Amazon Fresh Store — Cerritos 11340 South St Cerritos, CA 90703

Amazon Fresh Store — La Habra 1610 W Imperial Hwy La Habra, CA 90631

ILLINOIS

Amazon Fresh Store — Bloomingdale 404 Army Trail Rd Bloomingdale, IL 60108

Amazon Fresh Store — Naperville 3116 S Rt 59 Naperville, IL 60564

Amazon Fresh Store — Oak Lawn 4031 W 95th St Oak Lawn, IL 60453

Amazon Fresh Store — Schaumburg 16 A East Golf Road Schaumburg, IL 60173

Amazon Fresh Store — Westmont 30 W 63rd St Westmont, IL 60559

Amazon Fresh Store — Morton Grove 6931 Dempster St Morton Grove, IL 60053 MARYLAND

Amazon Fresh Store – Chevy Chase 5463 Wisconsin Ave Chevy Chase, MD 20815

PENNSYLVANIA

Amazon Fresh Store – Warrington 389 Easton Rd Warrington, PA 18976

VIRGINIA

Amazon Fresh Store — Franconia 7005 Manchester Blvd Franconia, VA 22310

WASHINGTON STATE

Amazon Fresh Store — Factoria 3901 Factoria Square Mall SE Bellevue, WA 98006

Amazon Fresh Store — Seattle 2301 S Jackson St Seattle, WA 98144

Amazon Fresh Store — AVA Capitol Hill 610 E Pike St Seattle, WA 98122

WASHINGTON, DC

Amazon Fresh Store – Logan Circle 1733 14th St NW Washington, DC 20009

the business as we emerge from the pandemic." Jassy specifically referenced excitement over "new capabilities" the company is building in grocery.

Amazon is still following the same “short-term pain in exchange for long-term gain” growth strategy it has championed since the company first went public in 1997, one that occasionally disappoints investors but strikes fear into the hearts of competitors.

The company’s forecast for fourth-quarter revenue calls for year-over-year growth between 4% and 12%. The guidance for operating income is between $0 and $3 billion. Of course, part of the reason for decreases in profitability is that costs are exacerbated by the current labor environment.

“Across Amazon, we have hired more than 600,000 people globally during the pandemic,” Helbling says. “For Amazon Fresh, every time we open a store, we’re creating hundreds of new job opportunities to help us deliver a shopping experience that customers will love, right in their own communities. These are great jobs with industry-leading pay and benefits.”

By the end of 2021, Amazon Fresh stores had created more than 6,000 jobs, according to the company.

“Our Amazon Fresh store team is strong and growing,” affirms Stephenie Landry, VP of Amazon Grocery. “I’ve enjoyed getting to know employees and seeing first-hand how they support each other and our customers, while visiting our stores. Because of this amazing team, we’re able to bring customers a new, innovative shopping experience.”

At the end of the third quarter, Amazon had 1.5 million employees and its starting hourly wages were at least $15 per hour for all full-time, part-time and seasonal employees and contractors. In addition, employees now have opportunities to own Amazon stock, participate in 401(k) plans with a 50% company match, and enroll in paid life and accident insurance. Last year, Amazon began offering signing bonuses of up to $3,000 as it aimed to hire 125,000 delivery and warehouse workers across the United States. The company also raised its average starting wage to $18 an hour.

“All of our full- and part-time positions offer employees highly competitive wages, along with a variety of benefits packages starting on the employee’s first day on the job,” Helbling notes. “We also provide employees the opportunity to learn new skills and grow with us at Amazon, as well as access to our innovative Career Choice program, which provides education and training for in-demand jobs.”

The other short-term hit on Amazon’s profits has been supply chain-related. Helbling admits that the company hasn’t been “immune to the supply chain challenges everyone is facing currently.

“To address it, we are continuing to add staff, creating work opportunities for people who want them, innovating across our supply chain, and working to get inventory closer to customers so we can provide products and improve delivery speeds,” he adds.

As for how the retailer is replenishing its Amazon Fresh stores, Helbling says that it’s using local and national suppliers, and leveraging the Whole Foods Market supply chain already in place.

“We use a variety of suppliers, including both national suppliers and local suppliers, and we do share some suppliers with Whole Foods Market,” he explains. “For example, we source many of our meat products, fresh seafood and produce from some of the same suppliers and farms that supply Whole Foods Market.”

In October 2020, Grand Rapids, Mich.-based SpartanNash, which has been working with

Amazon on dunnhumby’s Retailer Preference Index

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Amazon since 2016 and supplies Amazon Fresh stores, filed paperwork to sell as much as 15% of its stock to Amazon by 2027. If Amazon is looking to build an integrated grocery distribution vertical, a minority stake in SpartanNash will provide all of the learnings it needs to do that.

Just Walk Out

It seems longer ago, but it’s only been four years since Amazon debuted technology at an 1,800-square-foot Amazon Go store in Seattle that allowed shoppers to exit a store without stopping at a checkout. Amazon’s Just Walk Out (JWO) technology offers shoppers the ability to enter, shop for the items they want and simply exit the store. Shoppers using Just Walk Out also have the option to use Amazon One, a contactless way for people to enter, identify and pay using their palm. After customers leave the store, those who use the Just Walk Out experience receive a digital receipt.

In September, the company revealed that it would be rolling out JWO to full-size supermarkets: select Whole Foods Market and Amazon Fresh stores. Amazon scaling contactless payment options and its JWO innovation in 2022 couldn’t be more ideally timed. The pandemic has prompted consumers to favor the perceived safety and convenience of innovations such as JWO. According to Amazon, it’s hearing from shoppers across its grocery ecosystem that they want to skip the hassle, stress and pandemic-unfriendly crowding associated with checkout lanes.

“We’ve heard from customers how much they appreciate the checkout-free shopping experience that Just Walk Out technology offers at both Amazon’s stores and other retailers’ stores,” says Dilip Kumar, VP, physical retail and technology at Amazon.

For Amazon, the artificial intelligence-driven technology could dramatically reduce labor spend and improve inventory management and overall in-store operations. In addition, it makes sense for the company to want to showcase the capabilities of JWO technology in as many stores as possible as other retailers mull whether to buy the tech. According to Bloomberg, Amazon has deals to provide its JWO technology to Starbucks Corp., British grocery chain Sainsbury’s and airport c-store operator Hudson Group. Amazon is also selling its Amazon One technology to third parties. Amazon One is now available at more than 70 Amazon physical retail stores and Whole Foods Market stores, along with third-party locations.

As for Amazon Fresh, JWO is poised to roll out in more of those stores as well.

“To date, we’ve opened 23 Amazon Fresh stores in the U.S. that enable customers to skip the checkout line thanks to our Just Walk Out technology or the Amazon Dash Cart,” Helbling says. “We look forward to bringing this convenient grocery shopping experience to even more customers in California, Illinois, New Jersey, Pennsylvania, Virginia and Washington state, where we’ve confirmed more Amazon Fresh stores will open.”

Last month, Amazon showed how serious it is about scaling its grocery business when it welcomed Tony Hoggett to its headquarters in Seattle. Hoggett had been with Tesco, the United Kingdom’s biggest food retailer, for more than 31 years and was chief strategy and innovation director. Hoggett has joined Amazon as SVP of physical stores, reporting to Dave Clark, chief executive of its worldwide consumer business.

In a Jan. 7 LinkedIn post, Hoggett wrote: “Well, today is officially my last day at Tesco. It’s time for me to say farewell to a truly amazing set of work colleagues. … I wish you all the very best of luck for the future. Hello to the Amazon team, very excited to be working with you all.”

Hoggett had a reputation at Tesco for running exceptional multiformat retail operations, a perfect fit for Amazon’s grocery ambitions. He will need to partner with Helbling and Landry as the company looks to scale its grocery business over the next three to five years.

Helbling says that he’s focused on applying learnings as the company continues to open more grocery stores.

“All customers want a neighborhood grocery store that offers a broad selection of high-quality foods available at low prices, and a convenient shopping experience,” he continues. “Our Amazon Fresh stores deliver on that. But we also recognize that each community where we open a store is unique and has different needs. We focus on listening to customer feedback and adjust selection based on what we’re hearing to meet the needs of customers shopping that store. For example, at our Amazon Fresh store in Seattle, we kept hearing from customers that they wanted collard greens in our prepared foods hot bar, so we added them to our menu.”

Amazon reportedly has plans to open dozens if not more Amazon Fresh stores in major U.S. metros in the next three years. Amazon Fresh stores range in size from 25,000 to 45,000 square feet and join the company’s other U.S. physical locations selling food and consumables: 511 Whole Foods stores and 24 Amazon Go stores.

In Rare Form

AS A CONFLUENCE OF UNUSUAL FACTORS AFFECTS THE BEEF MARKET, DEMAND IS STILL STRONG FOR THIS TOP PROTEIN.

By Lynn Petrak

eef is one of those stalwart foods, a staple of the American diet and a centerpiece of the retail meat case. While there has been some historic predictability about cycles of beef supply and demand, and fairly steady consumption trends over the past several years, the market for the king of animal proteins is bucking tradition lately.

Part of the disruption, of course, is linked to concurrent and high-profile challenges of supply chain issues, labor shortages, inflation and the pandemic. COVID-related shutdowns in cattle, feedlot and slaughterhouse operations in 2020 still reverberate in today’s market, given the unique lagging structure of the beef industry. At the same time, the labor crunch and bottlenecks in everything from fertilizer to feed to cattle tags are affecting the amount of available cattle.

This confluence of trends, along with other factors, has inevitably affected beef prices. As of November, the consumer price index (CPI) for beef was 20% higher than it was the previous year. For 2022, the

Key Takeaways

Challenges such as supply chain issues, labor shortages, inflation and the pandemic have inevitably affected beef prices. Despite mounting price pressures, consumers are still drawn to the meat case, but are turning to value cuts of beef. Even before COVID-19, health, wellness and sustainability were driving consumer perceptions and purchases of beef.

Despite high retail prices, industry data group CattleFax reports that beef demand is the highest it's been in more than three decades.

Economic Research Services arm of the U.S Department of Agriculture (USDA) projects price inflation for beef to slow somewhat to a rate of 2%-3%.

Also in recent months, the beef industry has garnered national attention as the Biden administration castigated the industry’s top beef companies for their hold on the market. In revealing the federal government’s $1 billion support of independent livestock producers and meat processors, the president called out industry consolidation, asserting, “Capitalism without competition isn’t capitalism — it’s exploitation. That’s what we’re seeing in the meat and poultry industries now.”

The administration’s public comments and actions received a swift industry response. In a statement released in mid-January, the North American Meat Institute (NAMI) said: “The Biden administration has alleged that meat and poultry industry concentration is to blame for rising consumer prices. The truth is not so convenient.” Washington, D.C.-based NAMI used USDA data to show that although the four-firm concentration of fed cattle beef packaging has remained constant for more than two decades, the beef CPI has been variable over that same period. Meanwhile, a number of independent and smaller beef suppliers and processors applauded the federal support of their efforts to stay afloat and competitive.

It’s What’s for Dinner — Still

In this operating environment, what does the beef market look like for grocers and their shoppers?

As 2022 gets underway, consumers are keenly aware of inflation trends. According to data from San Antonio-based market research firm 210 Analytics, beef, along with pork, produce and poultry, tops the list of categories in which most people notice inflation. The research firm also found that 45% of shoppers are looking for sales specials around the store more often.

Despite mounting price pressures, consumers are still drawn to the meat case. Overall meat sales were flat in 2021 compared with 2020 but still 17%-20% above pre-pandemic levels. Fresh beef slid 7.6% in volume sales last year, but remained 4.1% higher than in 2019. On a dollar sales basis, fresh beef was up 6.7% from December 2020 to December 2021, and 26.9% higher than in December 2019.

Other research shows that while inflation is real, so is interest in beef. Centennial, Colo.-based industry research group CattleFax reports that beef demand is the highest it’s been in 33 years. A recently released global animal protein outlook from international corporate and investment bank Rabobank predicts that demand for beef should remain solid and cattle prices should be stronger, even as processors grapple with ongoing issues.

With and Against the Grain

In a climate marked by inflation, COVID, regulations, and shifting consumer shopping and eating habits, there have been some accompanying changes in beef shopping.

Reacting to higher prices, many consumers are turning to value cuts. According to data from 210

While big-picture issues like health, the environment and price shake up the category, taste and variety remain other key drivers of product innovation in beef.

COVID caused some disruptions in the cattle market that, in turn, affected supply and price. For 2022, experts project stronger cattle prices.

As inflation continues to affect the retail meat case, many consumers have shifted to value cuts like ground beef.

Shopper interest in sustainably raised beef is climbing, and processors are responding with products like JBS' line of Right to Roam natural beef.

Analytics, ground beef sales rang up $11.3 billion in 2021, continuing the upswing in ground beef purchases that began in 2020.

Beyond price, other factors are influencing beef product development and merchandising. Even before the pandemic, health, wellness and sustainability were driving consumer perceptions and purchases.

A recent report on sustainably raised meat from Chicago-based industry insights firm Midan Marketing revealed that more than a third (34%) of meat eaters have become more concerned about the sustainability of meat products they buy. The 2021 “Power of Meat” report from FMI — the Food Industry Association and the Meat Institute Foundation showed that 76% of shoppers feel that meat should be part of a healthy diet, up from 64% in 2020. At the same time, the number of flexitarians has grown and younger consumers are less inclined to say that meat belongs in a healthy, balanced diet than their Baby Boomer, Gen X and older Millennial counterparts.

As preferences shift, beef companies are responding. Last year, major processor JBS, based in Greeley, Colo., added a line of Right to Roam natural beef, with free-range, hormone-free and antibiotic-free beef offerings. Also, many traditional beef brands, including the largest processors and smaller regional and niche providers alike, are complementing their portfolios with plant-based products.

Other protein companies are starting to invest in cell-cultured meat, including beef. Springdale, Ark.-based Tyson Foods, for example, has backed lab-based meat firm Memphis Meats, while JBS is investing in a cultivated meat firm based in Spain. Even celebrities are getting into the act, like actor Leonardo DiCaprio, who recently invested in Aleph Farms and Mosa Meats as they pursue cultivated meats like cultivated hamburgers and steaks. For its part, Centennial, Colo.-based National Cattlemen’s Beef Association recently submitted comments to the USDA’s Food Safety and Inspection Service, noting that the term “beef” should be applied only to products derived from livestock raised by farmers and ranchers.

While big-picture issues like health, the environment and price shake up the category, taste and variety remain other key drivers of product innovation in beef. One example is a new line of Angus beef bacon from Pennsylvania-based Godshall’s, available at Sam’s Club locations. Meeting simultaneous demand for flavor, quality and organic profiles, Organic Prairie, a sister brand of LaFarge Wis.-based Organic Valley, has rolled out a new line of seasoned ground beef made with all-organic spices.

In addition, even as many shoppers shift to ground beef due to price concerns, there’s a segment of consumers seeking high-quality beef products as an indulgence. In 2021, Bentonville, Ark.based Walmart debuted a high-quality line of Angus beef under the McClaren Farms label. Salt Lake City-based grill maker Traeger Grills responded to interest in higher-end beef by recently introducing a line of Traeger Provisions meal baskets that include cuts like Wagyu beef brisket, and one of Instacart’s partners is Boston-based ButcherBox, an online grocery platform that offers products like grass-fed, grass-finished beef portions.

Nourishing the Next Generation

SKINNY BUTCHER CEO DAVE ZILKO PUSHES THE BOUNDARIES OF PLANT-BASED INNOVATION.

By Gina Acosta

ood trends come and go, but the demand for plant-based protein doesn’t seem to show any evidence of fading away. The volatile pricing and shortages of animal proteins, as well as concerns about health, wellness and animal welfare, are driving increasing numbers of consumers toward meat-free alternatives. Now the driving force behind one of America’s most popular fresh salsas has his sights set on leveraging the opportunity in plant-based protein. Dave Zilko, the strategic innovator behind Garden Fresh Gourmet, talks to Progressive Grocer about his entrepreneurial journey, how to build a No. 1 brand and what’s next in the plant-based category.

Progressive Grocer: During college, you spent some time in France. How did your time there jump-start your career in food innovation?

Dave Zilko: I was going to Michigan State, getting a degree in finance, and I spent a summer in France studying French. I was in a city called Tours in the Loire Valley, and I would take a train to Paris every weekend. I became enamored with the attention to detail, the flower boxes everywhere, the cobblestone streets, the human scale of everything. This was in the early 1980s, and I could not believe how much better the food was there than here, could not believe how great the glasses of Bordeaux were. The beauty of France connected with me immediately, but it was really the food experience. I just love how they appreciate how food brings people together and how important a meal is. That was even more important to me than the food itself.

PG: But the United States has come a long way when it comes to food quality since then.

“If 25% of the $290 billion U.S. animal protein market gets converted to plant-based, this will represent the biggest opportunity in food in our lifetime.”

—Dave Zilko, CEO, Skinny Butcher DZ: Yes, I’m very proud of this country because today I can find baguettes in Detroit every bit as good as what you find in Paris. I think our wine is every bit as good as theirs — a little bit different, but I think we’re on their level. We’ve definitely caught up, maybe not yet on an everyday basis, but our progress has been remarkable and is something to celebrate.

PG: So you went back to the U.S., graduated and decided to become a food entrepreneur?

DZ: Coupling my fascination with strategy and the creativity of business, my desire to be an entrepreneur, with my experience in France, the food space just seemed to be where I was drawn to. I decided to go to George Washington University to get an MBA in marketing. After that, I came back to Detroit; I’ve got a very strong sense of home — I love the area. I started a little company with a credit card loan from my girlfriend. People always ask: I did marry her. Struggled for 11 years, and then I met

Skinny Butcher's Crazy Crispy sub-brand capitalizes on the popularity in the QSR space of the Southern fried crispy chicken sandwich, but with a plant-based twist.

Jack Aronson at the Fancy Food Show in New York in the summer of 2002; we became partners almost instantly.

PG: Starting a successful salsa company isn’t that simple!

DZ: Ours is an “Only in America” story. Jack, who passed away in August, started a salsa company in 1997. He was in his late forties, had to declare bankruptcy to hold on to the lease of his 1,200-square-foot restaurant just outside of Detroit, and, out of desperation, pulled out a 5-gallon bucket and in 15 minutes he made what is today Garden Fresh Artichoke Garlic Salsa. He was a food savant: He had no formal training, no formal education. He built a plant, invited me to be a partner, and before we knew it, we were, improbably — fresh salsa from Detroit? What could possibly go wrong? — the No. 1 brand of fresh sauce in the country. When we sold to Campbell Soup Co. in 2015 for $231 million, we were making 85 tons of fresh salsa a day. We were still peeling onions by hand, and making our salsa in 5-gallon buckets, just as Jack did for the very first time in that back of that bankrupt restaurant. We never compromised on our quality, no matter how big we got.

PG: How did your success with Garden Fresh Gourmet lead you to start Skinny Butcher?

DZ: My approach to building great food concepts is I want to win on branding then I want to win on flavor profile. If you can do that, the world’s going to beat a path to your door. That’s really what we did at Garden Fresh. So, in terms of the brand, we wanted a tension between the progressive nature of this category but still have a retro feel to speak to flavor profile more than we think other plant-based protein brands are doing. We’re no longer appealing to vegans and vegetarians, which are at most 5% of the population. We’re now reaching out to the flexitarian movement, people who are saying, "Yeah, it is better for the environment and better for me if I reduce my animal protein consumption.” If 25% of the $290 billion U.S. animal protein market gets converted to plant-based, this will represent the biggest opportunity in food in our lifetime. PG: What is the origin of the company’s jovial winking logo?

DZ: There’s an old joke that says, “Never trust a skinny butcher or skinny chef — if they’re skinny, they’re not eating their own food.” He’s winking because he’s saying, “Look, this is so good even I’m eating it. You can trust me.” So we’re trying to communicate with the consumer at the point of sale; the butcher is literally winking, embracing him or her in the store. I think a brand should have a distinct voice and personality. I think people buy food with their eyes. You really need to connect there.

PG: How were the company’s plant-based offerings — patties, grounds, breasts, sausage, tenders, strips, etc. — developed?

DZ: We found a vegetable fiber strain in Europe, from Italy in particular. We’re the first ones in this country to have it. From there, we put a proprietary blend of chicken flavorings together. We really believe we’ve got a superior texture and a superior taste; we’re really thrilled with the flavor profile. With respect to taste, there is no sacrifice between, say, a Skinny Butcher Chick’n Nugget and an animal-based chicken nugget. I personally prefer plant-based just for the bite; real chicken can be muscly – especially a lot of chicken nuggets, which are made with dark meat. So with plant-based, with Skinny Butcher, you get more of a consistent mouthfeel and it’s just an easier process on your body right from the get-go. From there we said, “What’s the hottest thing going in the QSR space right now?” It’s the Southern fried crispy chicken sandwich. So we came up with the “Crazy Crispy” sub-brand, which is an important strategic differentiator. We’ve got Crazy Crispy chicken breast, chicken nuggets, chicken patties, and chicken tenders. And we have handed all of it over to Golden West Food Group, who are not just Skinny Butcher’s

contract manufacturers but are significant equity partners in this venture, who can produce at national scale right out of the gate. They’ve got a 350,000-square-foot plant, 1,600 employees, and a national sales and distribution network that we will be tapping into.

PG: What’s the most challenging part of what you are doing, creating a new market or creating the product?

DZ: I give Beyond Meat and Impossible Foods a lot of credit because, if you think about it, Morningstar Farms have been out for a long time — I think they were founded in 2004. Boca Burgers go back to like 1989. So plant-based protein is already an established category. But I think it was established largely for vegans and vegetarians. What Impossible and Beyond did was they came out and they hit everybody with a two-by-four. They created this craze; they kind of did for plant-based protein what Sabra did for hummus, what Grey Poupon did for specialty mustards, what Robert Mondavi did for American wine. Impossible and Beyond are great brands, world-class brands, but they’re brands of the moment, though. With Skinny Butcher and the approach we’re taking, I think we’re going to have longer legs as a brand because we’re speaking of flavor profile. We’ll see. Nobody has all the answers. But I think there’s wind at the back of this category like nothing we’ve seen in our lifetime.

PG: Can you tell us what else is in the pipeline and when it will be available at retail?

DZ: Later this year, we’re going to have spicy varieties of our Crazy Crispy nuggets, tenders and breasts. Many retailers have asked us if we could make some pre-packaged sandwiches and sliders too. We’ve developed some fish items, and we’re going to have fish sticks and fish filets probably coming out in the second quarter. One of my biggest surprises is how many buyers and brokers are asking for this, because there’s an increasing concern among moms regarding mercury in fish. We’re going to have some turkey items, with a Mayflower hat on the butcher. On the fish versions, we put a sea cap on the butcher. So the branding has a lot of personality; we don’t want to take this too seriously. These are chicken nuggets, for crying out loud. We just think they should put a smile on people’s faces.

“The branding has a lot of personality; we don’t want to take this too seriously. These are chicken nuggets, for crying out loud. We just think they should put a smile on people’s faces.”

—Dave Zilko, CEO, Skinny Butcher

PG: What accounts for the rising popularity of plant-based proteins, and where do you think the trend will go next? Is it likely to become a permanent feature of consumers’ diets?

DZ: We’ve got something no other plant-based brand to our knowledge has. We have developed a virtual restaurant program. We are now live on Uber Eats, and we are partnering with one of the premier virtual restaurant development groups in the nation: Wow Bao, originally developed by Lettuce Entertain You, out of Chicago. Wow Bao has deals signed for 650 dark kitchens nationwide right now, I think they’re up to 550 that are open and operating. They’re going to take our Skinny Butcher virtual restaurant concept and they’re going to add it to their existing program. We’ve got our barbecue Crazy Crispy chicken sandwich, a buffalo Crazy Crispy chicken sandwich, chicken parmesan, chicken tenders, chicken nuggets, and salads with our Crazy Crispy chicken and chicken wraps, all now live on Uber Eats.

PG: What do you think the food industry will look like in five years?

DZ: With the plant-based market already established by Beyond Meat, Impossible Foods, Tyson’s Raised & Rooted, etc., we’re kind of looking beyond that and saying that in three, five, seven, 10 years from now, you’re no longer going to have to hit people over the head with this. Plant-based is going to continue to grow. It just has to because of the better-for-you issues and the environmental sustainability issues and the animal cruelty issues. So I just think it’ll be a long time before there’s a crescendo to this wave, probably a decade, maybe 15 years, but it’s going to be a really nice wave. And then we’ll just see what next wave comes up. There’s always something really cool that comes around, and that’s a testament to the American spirit and how open we are to trying new things.

The exhibits at the recent NRF 2022: Retail's Big Show revealed a breathtaking range of technology solutions to help retailers.

5 Key Trends Noted at NRF 2022: Retail’s Big Show

AUTOMATION, CRYPTO, FRICTIONLESS STORE EXPERIENCES, E-COMMERCE AND SAFETY/SECURITY ARE TOP PRIORITIES.

By Bridget Goldschmidt

othing could stop NRF 2022: Retail’s Big Show — not icy winter temperatures and inclement weather, not even the latest iteration of a lingering pandemic. According to National Retail Federation President and CEO Matthew Shay, despite these challenges, the event, which ran Jan. 16-18 at New York’s Javits Center, managed to draw about 20,000 attendees and 800 exhibiting companies, along with a range of speakers.

Even a cursory trip around the show floor was enough to reveal a breathtaking range of solutions to help retailers, from sourcing of products to the in-store customer experience, and all points in between. Following are five particularly noteworthy trends observed at NRF 2022: Retail’s Big Show: 1Automation Rules: This one was pretty obvious, from the sheer number of such solutions in evidence at the show, including Locus Robotics’ “co-bots,” designed to work alongside humans in fulfillment warehouses, zipping around the company’s display area; Autostore’s grid-based picking system, also being demoed; Avidbots’ state-of-theart robotic floor cleaner; and Ottonomy, whose proprietary technology enables fully autonomous curbside and last-mile delivery, reducing retail’s carbon footprint, to name just a few.

According to BJ Santiago, CEO of Nicholasville, Ky.-based Badger Technologies, a maker of inventory control and hazard mitigation robots that traverse store aisles at such grocers as Woodman’s and Ahold Delhaize USA banners Giant/Martin’s and Stop & Shop, automated in-store tech is becoming much more the norm, with units offering additional capabilities, such as robotic arms for stocking shelves, probably rolling out in the next five to 10 years.

Sam Saad, VP of strategy and growth at Gatik, a provider of “middle-mile” solutions through its fleet of autonomous trucks that are currently moving items for Walmart and

AutoStore's grid-based robotic picking system, empowered by Dematic, and Badger Technologies' in-store inventroy control and hazard mitigation robots were two examples of automation at NRF 2022: Retail's Big Show.

largest Canadian retailer Loblaws, noted that the company was “scaling up rapidly” in anticipation of “explosive growth” in terms of new partnerships, expansions of existing partnerships and infusions of new capital. As to when fully automated vehicles shuttling products from warehouses to stores and from store to store on public roads becomes the industry standard, Saad predicted “big shifts in the next five years.”

2Crypto is Coming: With all of the buzz surrounding cryptocurrency, particularly Bitcoin, of late, it’s only natural that retailers would increasingly be looking into crypto as a payment option for consumers, and tech companies are meeting that need. Atlanta-based NCR, for example, recently acquired cryptocurrency software provider LibertyX, which enables customers the ability to buy and sell cryptocurrency, conduct cross-border remittance, and accept digital currency payments across digital and physical channels. NCR will use its Pay360 platform to offer the LibertyX capabilities as part of its solutions for banks, retailers and restaurants.

Unsurprisingly, Peter Jensen, CEO of San Francisco-based RocketFuel Blockchain, a global payment-processing company offering one-click checkout solutions using Bitcoin and other cryptocurrencies, is particularly bullish on crypto, explaining that retailers that accept cryptocurrencies as a payment option in-store or online will increase revenue by gaining access to a new wealthy group of customers, many of them younger, and reduce cost, since, unlike credit cards, crypto never gets declined and there are no chargebacks.

Additionally, in common with David Wilkinson, president of NCR Retail, Jensen views crypto as particularly beneficial for the unbanked and underbanked populations of the world, as it enables them to take part in the digital economy, in which “your phone becomes your bank,” as Jensen put it.

Jensen noted that in stores, grocers could integrate a cryptocurrency payment option into their point-of-sale system, allowing shoppers to pay by phone, as they already do with such options as Apple Pay. Although he acknowledged that on the whole, the United States is lagging behind in the adoption of crypto, despite Miami’s reputation as something of a hub in this regard, he believes that the main driver for change will be when the U.S. Central Bank comes out with a plan for cryptocurrency, a move that he thinks could happen as soon as this year.

3Frictionless is Here to Stay: Although Amazon’s much-touted “Just Walk Out” technology predates the pandemic, there’s no doubt that consumers’ enthusiasm for quick, convenient, contactless shopping experiences skyrocketed during the age of COVID-19. Of course, once consumers discover an easier way of doing anything, that becomes the expectation, and retail tech must rise to the occasion. Other retailers to explore such technology include Ahold Delhaize USA, Giant Eagle, and Hy-Vee at its fuel stations and convenience stores.

More recently, Wakefern Food Corp. revealed a partnership with computer vision company Trigo on a forthcoming pilot this year of an autonomous supermarket employing Trigo’s artificial intelligence-based frictionless checkout technology, marking the Tel Avivbased vendor’s first foray into the United States, while tech-enabled convenience store chain Choice Market is rolling out cashier-less Mini-Marts in such nontraditional locales as hospitals, airports and college campuses.

There were plenty of examples of frictionless tech at the show, including self-checkout options from NCR; Accuvia Software Group, in partnership with Toshiba; and Mashgin, which offers a completely touchless system, as well as solutions from such companies as barcode-scanning technology provider Opticon; retail store fixture manufacturer Lozier Corp., in conjunction with Cornerstone Automation Systems LLC (CASI); and Edgify, developer of a distributed artificial-intelligence training framework solution. From the looks of things, ensuring a frictionless shopping experience for customers that will enable them to get in and out of a store as quickly as possible — and often without any human intervention — will only become more of an imperative for retailers going forward.

4Evolution of E-Commerce: Speaking of contactless shopping experiences, e-commerce options such as home delivery orders left at front doors and curbside pickup gave consumers rattled by COVID-19 a sense of comfort that they wouldn’t have to encounter possibly infected store associates or delivery people in person. As a result, online ordering surged during the pandemic and is poised to remain a major shopping method, due to its anytime convenience — a feature especially exploited by so-called instant-needs platforms such as Gopuff and Gorillas, which are continually aiming to narrow the delivery window.

Part of this evolution of e-commerce is Santa Monica, Calif.-based Robomart, a service that enables consumers to shop for necessities by “hailing” a mobile store via app, whose average engagement, from hailing a vehicle to the completion of an order, lasts just nine minutes. Robomart has recently been issued a patent for its one-tap store-hailing and seamless checkout-free technology, which should make the service even easier to use as it transitions to a marketplace model. The company’s Retailer Platform, introduced last September, enables retailers to deploy branded mobile stores. (For more about Robomart, read the Ahead of What’s Next column on page 74.)

Other providers that offer branded marketplace e-commerce solutions include Rosie, Wynshop and NCR’s Freshop, as food retailers, particularly smaller independents, seek to create their own identities in the realm of digital grocery.

5Safe and Secure: There are many ways to interpret these terms, but if the pandemic has taught us anything, it’s that people want to know that the places that they shop are looking out for their well-being. One example of this is to ensure that sanitary and hygienic standards are enforced across all stores in a chain, which Qvalon, a cloudbased solution for multiple-location retailers, can help with. The New York-based company assists retailers in creating customized criteria, including cleanliness, and then provides visibility into how each store is performing, so that retailers can see what needs to be improved and where, resulting in a more consistent — and safer — experience across locations.

Meanwhile, a major security issue for grocers is loss prevention, which Mountain View, Calif.-based spatial intelligence platform Pathr. ai is able to offer with a solution that tracks the movements of people in a retail location to gauge behavior patterns — anomalous behavior can be flagged and reported to the retailer for further investigation.

Germantown, Md.-based Hughes Network Systems, a managed services provider whose offerings include security services, among them protecting retailers from cyberattacks, is ramping up its offerings in the SOC (security operations center)-as-a-service area, which Jeff Bradbury, senior marketing director, North America, likened to “having a cybersecurity SWAT team on standby.”

One fascinating byproduct of in-store robots such as those deployed by Badger Technologies is the apparent chilling effect that they have on retail theft. Santiago related an anecdote that one retailer that deployed the robots in its HBC aisle at a peak time for theft observed a 14% decline in such incidents, since would-be perpetrators believed that the robots were monitoring their behavior, although the units are designed for inventory control and hazard mitigation only.

In terms of additional trends to look out for, Bradbury noted that in the area of networking services, Hughes is working with satellite communications service OneWeb on a low-earth-orbit connectivity solution akin to SpaceX’s Starlink venture but tailored to B-to-B enterprise businesses. According to Bradbury, the solution will be widely available later this year, although there are already some early adopters in the market.

He went on to note that grocers stepped up to the plate and helped people during the pandemic by taking on new tech offerings, so it was up to vendor partners like Hughes to help move food retailers from being reactive to proactive in this realm, thereby “creating a new baseline” for the industry.

As for retailers’ ability to meet this present moment and beyond through their adoption of pertinent technology, NRF’s Shay has no doubt that they can and will: “There are a lot of initiatives underway, and we’re confident that retail is going to continue to step up and meet the biggest challenges of today.”

Opticon was one of the vendors displaying a frictionless shopping solution at NRF 2022: Retail's Big Show. Autonomous-vehicle company Gatik is scaling up rapidly in anticipation of explosive growth, according to VP of Strategy and Growth Sam Saad.

Healthful chef-created meal kits are one of many turnkey meal solutions available to grocery retailers.

Prepared to Accelerate

THE PANDEMIC SPED UP INNOVATION AND SALES IN THE RETAIL PREPARED FOOD REALM, AND INDUSTRY LEADERS ARE MAKING THE MOST OF THE FORWARD MOMENTUM.

By Kathleen Hayden

e are at the point in the pandemic where some silver linings are emerging. The food industry has survived supply issues, staff shortages and ever-changing safety protocols, among other operational problems. With restaurants facing even bigger challenges and longer recoveries, the past two years have reminded consumers just how essential grocery stores are to our daily lives.

Key Takeaways

This time in the history of food retail is the perfect opportunity to reinvigorate and reinvent the industry, thanks to the ability to provide convenience, freshness, better health, and the flavors and styles of chef-created meals. Grocery stores have made great strides in advancing technologies, apps and online interactions so that out-of-store ordering and experiences can compete with those of restaurants. Retailers can play a role in providing better, fresher meal options, particularly those specialties for which they’re known in their local communities, with convenience and speed.

Now the industry is ready to innovate and find even more creative ways to help people get food on the table. Nowhere is this clearer than in the prepared food category. The 2021 “Power of Foodservice at Retail” report from FMI — The Food Industry Association notes, “In 2020, the share of fresh items as a percentage of total store sales declined” because early pandemic patterns meant that shoppers made fewer but larger trips and relied on shelf-stable items from the frozen and center store aisles.

Yet good news emerged by the first half of 2021, when the fresh perimeter regained lost share and reached 31.5% of sales. “The deli department, including meat, cheese and prepared foods, reached $41.1 billion in annual sales, reflecting an increase of 4% versus the same period a year ago,” observes Arlington, Va.-based FMI.

Even with this encouraging rebound, the fresh perimeter can’t rest on its laurels. We’re already seeing how quickly pandemic fatigue can hit the kitchen, pushing people back into takeout and delivery patterns. FMI finds that the power and opportunity for convenience-driven retail meal solutions lie in “[continuing] to serve as differentiation strategies for their businesses.”

“With the right formula that caters to the customer with supportive technology, retailers can increase their significance as a destination for health, well-being and food solutions,” Rick Stein, VP of fresh foods at FMI, notes in the report.

The Time is Now

For Michael Lippold, founder, and CEO of Ventura, Calif.-based FreshRealm, the right formula is about providing solutions to shoppers, some of whom may need a heat-and-eat option, some of whom may want a meal kit that helps them learn how to cook, and others who may need daily convenience options that fall in the middle of that spectrum.

With the November 2021 launch of its Kitchen Table brand, FreshRealm is aiming to help retailers offer a turnkey menu of chef-created fresh meal solutions. Lippold sees this time in the history of food retail as the perfect opportunity to reinvigorate and reinvent the industry.

“We see fresh meal solutions at the end of an 80-year history of how people have shopped for and cooked food,” he notes, explaining that eight decades ago, shoppers bought from fresh outdoor markets, bakeries, and the neighborhood fishmonger and butcher. From the 1950s to the 1980s, stores got bigger, and food became more processed and shelf-stable for convenience. By the 1990s, however, consumers had realized that processed food loses some of its nutritional value and quality.

“Now we have evolved back to where consumers want food that is closer to the original source, and with its nutrition intact,” says Lippold. “They also demand convenience, freshness, better health, and the flavors and styles of chef-created meals they experience in restaurants.”

FreshRealm’s in-house expertise supports culinary design, sourcing, implementation, logistics, marketing, promotion, and delivery that brings meals to retailers within 24 hours of assembly.

“We have end-to-end solutions,” observes Lippold. “On one end are fully prepared heat-and-serve meals that are chef-created and available with an array of specific diets and tastes in mind. We have solutions for retailers who want to scale up their own brands. Or, if you want to develop a full product line, we can do that, too. We allow grocery stores to stay within their core competencies and we can support them with what we know.”

Jewel Hunt, group VP of deli, foodservice, bakery and branded concepts at Boise, Idaho-based Albertsons Cos., has seen how a full array of prepared options was especially important over the past two years. “The pandemic has taught us that many of our consumers are focused on healthy eating and well-being, and we offer a wide variety of meal solutions that meet that demand,” she says, noting that likewise, “[c]ulinary styles and preference vary by customer; therefore, we offer several choices from our Ready to Eat, Ready to Heat and Ready to Cook options, which makes our Ready Meals an easy choice to fulfill and meet their needs.”

FMI’s Stein is also enthusiastic about how fresh grocery store options fit into the future of how Americans eat.

“Meal solutions from the fresh perimeter can compete on convenience, and we excel in health and wellness, which has never been more paramount,” he notes. “Grocery meal solutions have more options for people who have underlying conditions and need to eat

“Meal solutions from the fresh perimeter can compete on convenience, and we excel in health and wellness, which has never been more paramount.”

—Rick Stein, FMI

LOOKING BEYOND POTATOES:

The Benefits of Marketing “Quick Prep Starch Sides”

SPEAKING WITH RYAN ELLIS,

Vice President, Retail Marketing & Business Development

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PG: Can you share some of the new strategies you’re using to market to consumers — approaches that ultimately will help grocery retailers move more product?

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certain foods, or those who see food as medicine. Our research finds that the most popular diet now is your own diet, which means that people have highly personalized ways of curating what they eat, whether it’s ‘keto light,’ intermittent fasting, cheat days. They need the kind of ingredient transparency they can’t get from the drive-thru, and they can get it from their local grocer.”

Cross-Category Hybrid Meals

Teresa Sabatino, director of customer marketing at Home Chef, the meal kit and food delivery company owned by Cincinnati-based Kroger, notes: “We anticipate at-home meals will continue to dominate in 2022. With people returning to stores to shop, we’re focused on continuing to innovate our in-store meal solutions and offer convenient products that don’t sacrifice quality or flavor. We’re focused on not only making mealtime simple and delicious, but we also want to help make mealtime your way. In stores, you can select from a variety of Heat & Eat single-serve entrées, separate proteins, sides and more to mix and match and create your perfect meal.”

Stein sees this mixing and matching as part of an evolution in the way that shoppers experience and use prepared meals. “Fresh prepared foods are part of meal solutions that now involve more parts of the store, from a prepared pasta main dish to bagged salad, bakery bread and frozen vegetables,” he says. “People want ideas about putting these components together. We used to think that shoppers needed cross-merchandising in the deli section, but that’s not necessarily the case anymore. They want suggestions through signs, menu boards, staff, lists and directions. Apps can provide this ideation outside the store, and really drive home the fact that hybrid meals are where groceries shine.”

Stein points to great strides in the way that grocery stores have advanced technologies, apps and online interactions so that out-of-store ordering and experiences are up to speed and ready to compete with those of restaurants.

For her part, Hunt believes that technology is vital to category growth. “Now more than ever, consumers are engaging digitally, and we understand that we must be nimble and adaptive to our multigenerational consumer base,” she asserts. “We continue to offer prepared meals that are high quality and fresh, but now consumers can order these meals conveniently online to be either delivered to their home or picked up at our store through our Drive Up & Go program.”

Beautiful images and plating ideas help a brand speak to consumers, both in-store and at-home.

Insta-Ready

Hybrid meals and the need for convenience have also been sweet spots for Instacart, which on Jan. 13 launched its Ready Meals Hub, a focused in-app section featuring prepared meal ordering and delivery from more than 4,100 grocery stores. According to Daniel Danker, VP, head of product at San Francisco-based Instacart, grocers need to step up their prepared meal production and sales as business booms.

Danker notes that consumers’ shopping habits and frequency revealed new patterns during the pandemic. “Beyond the weekly shop, we are seeing much more quick, smaller convenience shops for fresh fruit, fresh vegetables and dairy,” he explains. “These are items that grocery stores do best, and our service allows them to do it with speed. We wanted to apply this convenience business model to another category grocers do well, and that’s fresh healthy meals.”

Instacart’s Break Up with Takeout campaign recognizes that takeout burnout has peaked in year two of the pandemic. The company’s delivery data shows that retailers could play a role in providing better, fresher options with convenience and speed. Danker notes that the typical prepared meal order is for two meals, plus 19 other items. In addition, shoppers ordering from the hub are shopping twice as frequently as regular Instacart users.

Apps and store merchandising help shoppers see prepared entrées as centerpieces of hybrid meals that include packaged salads, fresh bread and other extras. Dedicated prepared meal displays add speed and convenience to the in-store shopping experience.

“Our hub creates a dedicated ordering category where shoppers can find options like ‘sushi under $10’ or ‘salads for $6,’ he says. “This approach plays to grocery store strengths. If you’re known for your great soup or your burritos, your shoppers will find them easily.”

Welcome to the Future

The study of shopping patterns is already revealing more ways to personalize both the ordering process and the options that grocery stores make available. For instance, it’s easy to see where special meals for two would be a hit, or how recommendations for add-on items would enhance the ready meal experience.

Sabatino says that as Home Chef looks ahead, the development team will “plan to expand our options of family-serving sizes, offer more items focused on convenience, and launch new products in other prepared food categories such as dips.”

Likewise, Danker sees other ways that ready meals can grow. “It’s important to capture those ‘in the hunger’ moments we capture with our ‘add, add, add’ ordering function that makes the Instacart experience so easy,” he notes. “I can see where people will want to load up their fridges with some lunch options, a few packaged snacks and salads. Instacart can help meet new behaviors while enabling the local grocery stores to be the beloved neighborhood brands for getting food.”

The 4 Ws of Packaging Priorities

ASKING WHAT, WHEN, WHO AND WHY WILL KEEP YOUR PACKAGING ON TRACK.

What: Focus on the food. It must look and taste good, have ingredient integrity, and keep, cook or retherm well. “Functionality is paramount to packaging,” advises Rick Stein, VP of fresh foods at Arlington, Va.-based FMI – The Food Industry Association. “Consumers tell us that packaging is wasteful only if it doesn’t serve a function. Food safety and integrity are the biggest considerations.”

When: “Shoppers want to know when pre-packaged grocery and deli-prepared foods were made — more so than where,” Stein stresses. “Provide clear use-by or best-by dates on the package.”

According to the 2021 “Power of Foodservice at Retail” report from FMI, 38% of pre-packaged grocery deli-prepared foods are typically purchased for immediate or sameday consumption, and 46% are intended equally for same-day or later-in-the-week consumption.

Who (and How): Consider who your end user is and what they need to know. “Our packaging complements lifestyle needs,” says Jewel Hunt, group VP of deli, foodservice, bakery and branded concepts at Boise, Idaho-based Albertsons Cos. “For example, we offer Ready to Eat and Ready to Cook options in packaging that works in both microwave and ovens.” Hunt notes that package developers need to be sure that customers, no matter their kitchen skills, know their next steps, such as whether the meal is ready for the oven, the microwave or the table. Does the consumer need to pierce the top? Is there any mixing involved? “It’s important to offer easy-to-read labels and ingredients that complement the packaging,” she advises.

Why: Ask your customers for their opinions on packaging as well as the food. “We are consistently listening to feedback from our customers and implementing packaging that resonates with them,” says Teresa Sabatino, director of customer marketing at Home Chef, which is owned by Cincinnati-based Kroger. “Based on customer feedback, we’re refreshing our retail packaging with new top-down photography [and] a balance of white space and color, among other new packaging elements.”

Packaging is an extension of in-store branding and experience. It’s also an opportunity to talk to your consumers as they spend time with it in their homes. Make sure it’s worthy of their attention.

Water With Benefits

FUNCTIONAL OFFERINGS CONTINUE TO INUNDATE THE BEVERAGE CATEGORY.

By Barbara Sax

onsumers are increasingly looking for more benefits from their beverages. Chicago-based market research firm Mintel reports that nearly one-third (31%) of bottled water users are willing to pay a premium for waters with added health benefits. Manufacturers are happy to oblige: Innovative formulations and packaging attributes have become key drivers in the functional water category, and industry experts predict continued growth in the segment over the next few years.

“Functionality is the most prevalent trend in the water market as brands enhance water’s inherent healthfulness with other functional benefits,” says Caleb Bryant, associate director, food and drink at Mintel. Sales of flavored still water (which includes many functional water brands) increased 60% from 2016 to 2021, Bryant adds.

“We’ve seen the functional water category explode over the past 18 months,” notes Adam Gauer, co-founder of Sheridan, Wyo.-based Plus Brand Industries, maker of Agua Plus, a pH9+ alkaline water enhanced with electrolytes and minerals. “The result is a breeding ground for even more innovation.”

The popularity of functional waters is attracting major players to the category. Last year, Purchase, N.Y.-based PepsiCo introduced Soulboost, a functional sparkling water brand, in two varieties: Lift and Ease. The product contains real juice and functional ingredients. The Lift variety contains 200 milligrams of panax ginseng to help support mental stamina, and is available in blueberry pomegranate and black cherry citrus flavors. The Ease variety, formulated to help people relax, contains 200 milligrams of L-theanine, and is available in blackberry passionfruit and strawberry rose varieties.

According to Gauer, the category is expanding across age demographics. “Older consumers see the added health benefits of functional waters as an opportunity to be more efficient in their pursuit of all-around better health,” he explains. Younger consumers, meanwhile, are open to options beyond supplements.

More Than Just Your Average Water

Marketers can alter the makeup of water to increase health benefits, such as adding electrolytes to boost hydration, oxygen to increase energy, or hydrogen to ease inflammation. Increased hydration is popular with consumers: Mintel research indicates that 30% of them are interested in waters that provide superior hydration. “The strong growth of alkaline water opened the door for other waters that claim to provide enhanced hydration using varying elements and pH levels,” says Bryant. “Oxigen water is enhanced with oxygen and electrolytes, and Jove claims its alkaline water provides ‘cellular hydration.’”

As an example of this trend, Reno, Nev.-based Takeover Industries expanded distribution of its NXT LVL Hydrogen

Key Takeaways

Innovative formulations and packaging attributes have become key drivers in the functional water category. Immune support, gut health and relaxation benefits are growth areas for functional waters. Manufacturers are positioning functional sparkling waters as alternatives to alcohol.

Water this past summer to Hy-Vee stores across the Midwest.

Bryant notes that the pandemic has fueled consumer interest in immunity-boosting beverages, paving the way for waters enhanced with ingredients/vitamins with inherent immune support benefits. According to Mintel, 3.2% of waters launched in the United States in 2021 carried an immune support claim. Only 1.9% of waters launched in 2018 featured such a claim.

Pure Life + Protect, which contains zinc, is one example. “Expect to see more vitamin D waters,” says Bryant. “In 2021, Anheuser- Busch announced it would distribute ShineWater, a functional water brand enhanced with vitamin D.”

Rochester, N.Y.-based Wegmans Food Markets recently featured Karma Water, which is based in nearby Pittsford and makes wellness and probiotic varieties, on an immune health display table along with Poppi functional sodas, Olly vitamins and other immune-boosting products.

Gut health is another growth area for functional waters. According to Bryant, 24% of consumers are interested in waters that promote gut health, and Mintel research indicates that 1.8% of waters launched in the United States in 2021 carried a probiotic claim, compared with 0.3% of waters launched in 2018.

The stress associated with the pandemic has also accelerated consumer demand for beverages boasting relaxation benefits. CBD-infused products have been showing up on more shelves as states allow the products to be marketed. “CBD waters represent a fast-growing segment of the water market,” affirms Bryant.

“The amount of positive press CBD has received regarding general wellness, particularly stress relief, has driven the demand in all age groups,” agrees Ricky Wright, president and CEO of the Alkaline Water Co. The Clean Beverage Co., a division of the Scottsdale, Ariz.-based beverage manufacturer, recently launched A88CBD, a line of six natural CBD functional waters

In 2020, mainstream brand Ocean Spray, based in Lakeville-Middleboro, Mass., launched CarryOn, a line of CBD sparkling waters, through its Lighthouse Innovation Incubator. The line consists of Elevate, a grapefruit flavor that blends choline for energy and focus with 10 milligrams of CBD, and Descend, a blueberry flavor designed for relaxation and containing L-theanine for calmness and 20 milligrams of CBD. The products are sold in Sprouts Farmers Market locations in Colorado and will likely gain wider distribution.

Among the new products introduced this year is Karma Water’s CBD Water, a cannabidiol beverage that the company just added to its portfolio of waters. Karma Culture CEO C.J. Rapp calls CBD “the next evolution of our premium infused waters portfolio.”

In addition to health benefits, consumers are using CBD beverages as a base for creating next-generation cocktails. “A lot of our flavor profiles, such as lemon lime, pineapple coconut, citrus, are being developed to meet this need,” says Wright.

Manufacturers are also positioning sparkling waters as alternatives to alcohol. “The sober-curious/mindful drinking trend is gaining speed as more consumers

“The strong growth of alkaline water opened the door for other waters that claim to provide enhanced hydration using varying elements and pH levels.”

—Caleb Bryant, Mintel

Consumers are snapping up water with added benefits, such as Aqua Plus, which is enhanced with electrolytes and minerals.

rethink their alcohol consumption behaviors and opt for [betterfor-you] alcohol alternatives,” observes Bryant. “Sparkling waters are already popular with health-conscious consumers and waters featuring unique flavor profiles and enhanced with ingredients that provide relaxation will become alcoholic drink substitutes.”

Bryant cites Barbet, a sparkling water positioned as a nonalcoholic option for alcohol consumption occasions, with a lineup of flavors including Love Bite (grapefruit, ginger and juniper) and Wild Card (blood orange, calamansi and jalapeño), as an example of this trend.

“Recess launched a margarita flavor to coincide with Dry January, and sparkling water brand Hopwtr claims its flavor profile will remind consumers of their favorite IPA, and that its blend of adaptogens and nootropics provides a feeling of relaxation without alcohol,” says Bryant. As consumers rethink their pandemic alcohol consumption patterns, retailers can expect to see more sophisticated flavor profiles entering the sparkling water category.

The Packaging Point of Difference

Even more category innovation is coming from the packaging side, however.

Karma Water products feature a patented protective Karma Cap that helps maintain optimal potency. The Alkaline Water Co.’s new launch features first-to-market patented Freshcap technology that

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Wegmans Food Markets recently featured several functional beverage brands in end cap and table locations at its Montvale, N.J., store.

stores the CBD and other active or functional ingredients in a pressurized chamber in the bottle cap until the consumer twists it open for an instant infusion of flavor and functionality.

“Freshcap not only has functional capabilities, it has a wow factor,” asserts Wright. “Unlike a lot of other functional ingredients delivered through powder packs or technology, there are no floaties or shaking required.” The company is currently developing a line of non-CBD functional Alkaline88 waters related to energy, collagen, inflammation, digestion, memory/brain/ cognitive and sports performance/endurance benefits.

Agua Plus comes in a bottle featuring All-Scratch Technology, a unique patented feature that allows a user to scratch their name, initial or other identifying marks directly on their bottle to eliminate bottle confusion, a leading cause of unnecessary waste and the transmission of germs, viruses and bacteria.

Cans are becoming a more popular packaging choice, and the eye-catching graphics that have dominated cans in the craft beer category to set brands apart are moving into the functional beverage category as well. According to Mintel’s Global New Products Database, 46% of all water product launches last year were canned.

More manufacturers in the paper product space, including Naturezway, are turning to bamboo to develop more sustainable and renewable products for consumers looking to make less of an impact on the environment.

Paper Products Shift to Sustainability

RETAILERS MUST MEET INCREASING CONSUMER DEMAND FOR CPG BRANDS THAT PRIORITIZE ENVIRONMENTAL RESPONSIBILITY.

By Marian Zboraj

ousehold paper products like toilet paper and paper towels can have a devastating impact on climate change, due to the amount of these products used by Americans. For example, toilet tissue was the top-selling general merchandise category in the multioutlet sales channel in 2020, according to Hamburg, Germany-based market data company Statista. For the 52 weeks ended Oct. 4, 2020, the toilet tissue category had sales totaling approximately $10.4 billion, while paper towels were approximately $6.5 billion.

From an environmental standpoint, while paper towels individually have a small carbon footprint — a single sheet of paper towel contains just 0.06 pounds of carbon dioxide, according to Chicago-based nonprofit organization

Key Takeaways

Rising concerns about the future of the environment are often driving what products today’s consumers purchase. Retailers must place greater emphasis on sustainability to remain competitive and reach the growing number of consumers who support prioritizing these efforts when making purchasing decisions. Some brands are touting the use of bamboo or recycled paper to manufacture their paper goods, while major CPG players are aiming to be more environmentally responsible with their products, and many retailers are developing their own private label products designed to be kind to the earth.

Two Sides North America — collectively, they’re among the tons of paper products used by Americans that clog our landfills and contribute to deforestation and global warming.

Luckily, rising concerns about the future of the environment are often driving what products today’s consumers purchase.

Changing Purchasing Habits

Now more than ever, sustainability is becoming increasingly important in consumers’ purchasing decisions. Acosta’s recent “Sustainability Impact on Purchase Behavior” report shows that 59% of shoppers are making it a priority to live a more environmentally conscious lifestyle, and that 85% of those who buy green products will always or most likely buy them in the future.

“Consumers are continuing to place an emphasis on sustainability when making purchasing decisions, showing that eco-friendly lifestyles are here to stay,” affirms Colin Stewart, EVP, business intelligence at Jacksonville, Fla.-based Acosta. “Retailers have an opportunity and responsibility to think through their environmental footprint and deliver value in ways that matter increasingly more to their customers.”

The report also shows that younger consumers are more actively taking steps toward being sustainable, as they are more likely to modify their buying habits. Seventy-five percent of Millennials say that sustainability is very/somewhat important when buying consumer packaged goods.

Furthermore, 75% of Millennials are willing to pay more for an environmentally sustainable product, compared with 63% of Gen Z, 64% of Gen X and 57% of Boomers, according to a recent study from Atlanta-based GreenPrint, an environmental technology company.

Retailers must place greater emphasis on sustainability to remain competitive and reach the growing number of consumers who support prioritizing these efforts when making purchasing decisions. Dedicating a planet-friendly section in the paper product aisle is a good start.

No-Guilt Paper

More manufacturers in the paper product space are turning to bamboo to develop more sustainable paper products. Bamboo, which is a grass rather than a tree, is easily renewable because it grows quickly and matures in only three years. It takes up less land, uses less water than trees and requires zero pesticides to grow. In addition, bamboo reduces soil erosion and greenhouse gases while capturing more carbon dioxide from the atmosphere than trees or cotton.

A relative newcomer to the U.S. market, The Cheeky Panda, based in the United Kingdom, has secured major distribution deals with such notable companies as Rite Aid and United Natural Foods Inc. for its biodegradable bamboo products, including toilet paper and paper towels. The Cheeky Panda products are carbon-balanced Forest Stewardship Council (FSC) approved. FSC certification ensures that products come from responsibly managed forests that provide environmental, social and economic benefits.

Another brand that has opted to go tree-free and use bamboo for household items is Los Angeles-based Naturezway. The company uses the renewable sustainable plant-based material for its facial tissue, paper towels, bath issue, napkins, and even in single-use plates and bowls. Naturezway products can be found at retailers such as Walmart.com, Albertsons Cos., Whole Foods Market, Lowes Foods and Costco.

Seedling paper products from Grove Collaborative are also made from sustainable bamboo. The San Francisco-based company even claims that its durable paper towels can be reused for up to a week. Grove recently made headlines in December 2021, when it entered into a definitive business combination agreement with Virgin Group Acquisition Corp. II, a publicly traded special-purpose acquisition company, that will result in Grove becoming a public company. Anchored by a strong and loyal customer membership, Grove has a significant opportunity for growth and to pursue omnichannel initiatives. The company recently debuted at physical retail for the first time in Target stores nationwide, with high performance during the first year.

Products touting recycled paper are also gaining ground. Household and personal care product company Seventh

“Retailers have an opportunity and responsibility to think through their environmental footprint and deliver value in ways that matter increasingly more to their customers.”

—Colin Stewart, Acosta

Seventh Generation manufactures unbleached household products made from 100% recycled paper.

Generation helps shoppers reduce their impact on the environment by using 100% recycled paper with a minimum of 50% post-consumer content in its paper towels and facial tissues. The Burlington, Vt.-based company additionally offers unbleached paper towels that don’t use any dyes, inks or fragrances, and are made from 100% recycled paper. By 2025, Seventh Generation is on track to have 100% of its materials and ingredients be sustainable, bio-based or recycled.

Other Green Solutions

Major CPG players are also aiming to be more environmentally responsible with their products. While criticized in the past for its less than environmentally friendly sourcing methods, Cincinnati-based Procter & Gamble, the parent company of the Bounty paper towel brand, is now working to ensure that its sourcing practices have the greatest impact on responsible use of the world’s forest resources. P&G is investing a total of $20 million by 2025 to accelerate research into non-wood fiber alternatives and FSC-certified fast-growing fibers. The goal is to develop fibers that are consumer preferred and sustainably sourced, and that can be produced at scale. The company aspires to include greater than 50% of these environmentally preferred fibers in its products. Moreover, P&G claims that for every tree it uses, at least one is regrown.

Not to be outdone, many food retailers are also developing their own private label products designed to be kind to the environment. For example, Boise, Idaho-based Albertsons Cos.’ Open Nature brand uses 100% recycled paper for its paper towels to help consumers live green.

More recently, in November 2021, San Antonio-based H-E-B launched the Field & Future by H-E-B brand of household and personal care products. Currently, there are more than two dozen products on shelf, including bath tissue and paper towels made with 100% recycled fibers, a portion of which is post-consumer, and baby wipes made with only five ingredients and featuring no fragrance, alcohol, chlorine or parabens. More Field & Future by H-E-B products are set to hit stores this year, including paper and plastic and personal care.

“Many of our partners, customers and communities are on a green journey, and our goal with Field & Future by H-E-B is to meet them wherever they are on that path,” notes Bonny Akers, director of H-E-B Brand Products. “With these environmentally minded products, along with our growing sustainability efforts, we want to take whatever steps we can, big and small, towards improving the well-being of our planet, our communities and ourselves.”

Launched in November 2021, the environmentally minded Field & Future by H-E-B brand of household and personal care products includes bath tissue and paper towels made with 100% recycled fibers, a portion of which is postconsumer, to reach the growing number of consumers placing an emphasis on sustainability when making purchasing decisions at the grocery store.

Flushing Money Down the Drain

The use of disposable wipes has skyrocketed over the past year, thanks to the pandemic. The convenience, efficacy and performance of disposable wipes help consumers meet their need to maintain a healthy home, and the retail shelf space dedicated to them continues to grow.

As the Seattle-based nonprofit Responsible Flushing Alliance points out, however, with the growing popularity of sanitization products comes some challenges as a result of improper disposal: sewer clogs and backups. The United States currently spends more than $440 million in taxpayer money repairing wastewater systems and clearing sewer clogs and backups caused by disposable wipes not designed to be flushed down the toilet.

On Jan. 1 of this year, a new California law, AB 818, which aims to curb this trend and help promote responsible flushing habits, came into effect. Specifically, in July, the law will require all manufacturers of nonflushable wipes sold in California, including wholesalers, suppliers and retailers, to properly and prominently label a “Do Not Flush” symbol on baby wipes, hard-surface cleaning wipes and other disposable wipes, particularly those that contain plastic and are most often used for household cleaning and personal care.

The law also requires the industry to lead consumer education regarding the “Do Not Flush” symbol, and to inform consumers on what can and can’t be flushed down the toilet. The Responsible Flushing Alliance has already kicked off its #FlushSmart consumer education campaign with materials for consumers and stakeholder groups to improve awareness and keep homes and communities healthy through proper flushing practices, ensuring that waterways stay clear and preventing municipal pipes from clogging.

How H-E-B Is Leveraging Livestream Shopping

THE TEXAS GROCER IS BUILDING ENGAGEMENT (AND SALES) WITH ONLINE SHOPPERS.

By Gina Acosta

-E-B is tapping into authentic content from its relationships with top influencers to embrace a new digital marketing strategy. The company has become the first grocer to leverage Facebook’s new shoppable livestream through a variety of events, including the recent “A Very Texas Holiay with H-E-B,” hosted by James Van Der Beek. “When a customer is viewing the video, if they saw, for example, an ornament they liked, if they click on that, they can actually see all the different products,” says Giovanna Dimperio, senior director of digital marketing at San Antonio-based H-E-B.

The beloved Texas grocery retailer has become the first grocer to leverage Facebook’s new shoppable livestream through a variety of events, including the recent “A Very Texas Holiday with H-E-B,” hosted by James Van Der Beek.

The grocery chain is also hosting a weekly cooking show on Facebook that has live shopping capability; H-E-B runs the stream on YouTube as well.

“The chefs talk about different ingredients or different accessories; the products that they use are a pop-up and are featured in the bottom corner so that customers as they watch can easily see what they’re talking about, click on them, and actually add them to their curbside order or their cart right away,” Dimperio explains.

H-E-B started the live virtual classes in 2020, and then this past year, “Facebook rolled out this capability and asked if we’d like to test it,” Dimperio recounts. “And so we tested it this summer [and] found success. Then the shopping part was added this summer.”

Unique Opportunity

H-E-B is increasing engagement and reaching new audiences on Facebook and YouTube, as well as the retailer’s websites and mobile apps — even TikTok, too.

“We are across all the different platforms, and we’ve got a lot of stuff that’s currently a part of our mix,” Dimperio says. “We’re really excited about the future of live shopping and livestreaming with the shopping integration. We’re always looking to test in these spaces, and as customers are spending more time online, we’re shifting some of our platform mix to really meet the customer where they are spending time.

Key Takeaways

H-E-B is the first grocer to leverage Facebook’s new shoppable livestream through a variety of events. The grocer is boosting engagement and reaching new audiences on various social media platforms, as well as its websites and mobile apps. The company’s digital marketing plan will also focus on hyperlocal and wellness content.

The focus we have is on that customer-first mindset and really tailoring our digital marketing, just like we tailor our stores to meet the consumers that use them. So we’re creating content that we think is useful to Texans, and then tailoring it to their needs.”

According to Dimperio, live events are a unique opportunity for brands to create meaningful and long-lasting relationships with consumers, and to connect them with other members of the community.

“One of the things that we really loved seeing was not only that people liked it because they learned something, but also that they started to create a community in the chat, whether it was on Zoom or on Facebook, really talking to each other,” she notes. “And then, because we provided an interactive part of the classes where people can ask questions, that reinforcement really helped fill that void that people had in the past from not being able to ask in-store or do something there. So when we saw that having this interactive participation really made customers feel positive about it, we started testing more interactive content.”

Over the summer, H-E-B hosted a 12-hour live event called the Grilling Open that ran from 8 a.m. to 8 p.m.

“For 12 full hours, we talked about everything from grilling breakfast and scrambling eggs, to how do you grill pineapple and different types of fruit, to what about seafood and desserts and pound cakes and everything you could think of grilling,” Dimperio says. “We had that shoppable as well and found that was not only something that was kind of fun for customers, but also that interactivity — they really liked where they could ask questions and get answers, like ‘Hey, show us the other side of that steak.’”

Ranked Near the Top

Dimperio adds that the company’s digital marketing plan will also focus on hyperlocal and wellness content.

“We’ve been focusing on how do we bring some of our friends of H-E-B into the cooking class to share their kind of localization or their tweak on different things,” she says. “When we think about localization, it’s ‘How do we make sure everything is relevant for Texas? How do we bring on friends of H-E-B in the chef community who can talk about different regional tastes?’ and then, when it comes to products, really showcasing some of the things that make some of the great products that we have. Highlighting some of those things as well will be really important in the next year.”

For 2022, the company’s digital health-and-wellness content will focus on what makes a “healthy plate” and meal prep.

“One of the most popular classes we did this year was for back-to-school, where we talked about how to meal prep for kids in a way that saves you time and sanity, but also doesn’t have a lot of processed items in it, by doing batch cooking ahead of time,” Dimperio observes. “You will see more things from that digitally, beyond the cooking classes as well … [W]ith a couple of the things that we have coming up this year, you’ll see a lot more in the health-and-wellness space.”

In January, H-E-B was ranked second in an annual consumer survey by dunnhumby. The Texas company came in behind Amazon, but beat out such other major grocers as Costco, Walmart, Target and Publix in the survey taken by shoppers.

According to dunnhumby, H-E-B maintained its spot at No. 2 in the list this year by “continuing to display its strategic superiority over the competition by holding its ground on its traditionally strong balance of great price perception and great quality perception, driven by its best-in-class private brand, while also making some of its biggest improvements during COVID in digital.”

H-E-B cooking classes are also an opportunity to make video content shoppable. When it comes to products, the grocer is focused on showcasing whatever is local, plus many of its most popular private brand and wellness-related items.

“The focus we have is on that customer-first mindset and really tailoring our digital marketing, just like we tailor our stores to meet the consumers that use them.”

—Giovanna Dimperio, H-E-B