Retail kit growth could impact restaurant business
Recently we learned that Walmart is planning to introduce prepared foods and meal kits to their stores nationally. This action is in response to an increased interest among Millennial shoppers for more convenient and higher quality, fresh ingredient meal solutions.
Given Walmart’s massive size, the impact of this move could create more challenges for an already stressed restaurant marketplace and help trigger other supermarket companies to upgrade their own meal kit strategies, compounding the impact. Technomic reports business has slowed for the last two years at the nation’s top 500 restaurants. At casual chains like Olive Garden and Chili’s, growth went from an average 4.7 percent in 2015 to flat in 2017.
Millennial preference for home cooked meals
According to Port Washington, NY-based NPD Group, 83 percent of Millennial consumers report more cooking at home and fewer restaurant visits, while 63 percent of Millennials say they want to cook more.
Concurrently the supermarket business is in the midst of transformation as Millennial shoppers flipped the script, causing a move away from traditional center store packaged foods, to shopping the perimeter departments for fresh, real food options. The fresh trend is seen as evidence of their preference for home prepared meals. Thus, also helping explain why legacy “big food” brands have seen their market shares decline in key packaged food categories over the last 10 years.
- At the core of this behavior is a central theme: virtually all generation cohorts – from Boomers to Gen Z – have connected the dots between higher quality, real food experiences and desire for a healthier lifestyle.
The interest in cooking at home is an outgrowth of efforts to assert greater control over ingredient quality, preparations and portion sizes along with the ability to better manage household food spending. At Charlie Baggs Culinary Innovations we see another explanation: the consumer’s love affair with food and culinary inspiration continues. The desire to exercise that creative calling in the kitchen is strong as it fulfills the number one driver for food purchase and consumption: healthy lifestyle. Consumers tacitly believe that home cooked food is healthier.
Boxed food adventures
Perhaps one of the most important, embedded features of meal kits is the ability to experiment with new cuisines and flavors at low risk and with ingredients already portioned and in some cases prepped.
When dinner is now often decided at 5 pm the day of consumption, kits are an enticing just-in–time option to solve the meal need, without having to shop a 50,000 square foot store for five to seven items. It’s a form of high quality culinary convenience that meal kit companies like Albertson’s Plated brand often deliver with a backstory and ethos sitting underneath.
Millennials passed Boomers in 2016 to become the largest domestic audience of shoppers, numbering some 75.4 million topping the Boomer generation’s previous lead of 74.9 million mouths. This generation has grown up with global cuisine; the mergence of specialty food markets, locally-sourced ingredients, unique restaurant concepts, and even chef-driven bar food.
It’s telling to note that fully 24 percent of the entire Millennial cohort shopped Whole Foods last year even though the chain has only 430 stores – a remarkable statement about their interest in higher quality food options.
As e-commerce gobbles up more transactions for pantry stock-ups, the food retail business will depend increasingly on its ability to curate unique food experiences and fresh ingredient solutions – and that plays right into the hands of grab-and-go kits. What’s not to like, as kits deliver:
- Curated don’t-have-to-think-about-it menus
- More convenient scratch cooking solutions
- Wholesome, higher quality ingredients
- Easier and quicker prep time
- Experimentation vehicle for new cuisines, new techniques and personal customization
The meal kit business is symptomatic of larger changes looming ahead in food retail as e-commerce disintermediates the packaged foods category. As a result, supermarkets will be forced to redefine their models once built around selling those packaged products at volume to fuel the balance sheet.
CBCI believes the future of food retail lies in mining culinary inspiration and food experience. Creating the Disneyland effect of “magic” around food adventure and the consumer’s interests in more innovative and interesting food solutions.
Can the food enthusiastic grocery be far behind? The growth of groceraunt concepts will continue to gain ground as food retailers look to leverage their expanding commissary investments for meals to be consumed on site – yet another customer relationship building opportunity! We anticipate more supermarket jobs for classically-trained chefs as a result.
What’s next for foodservice?
Restaurants are entering a new era of innovation competition to more rapidly evolve menu boards and offerings that reflect the cutting edge shifts in tastes, new ingredients and food culture. Restaurants have always been the tip of the spear in new food trends that then trickle down into other channels in the food industry.
Now more than ever the call to action gains momentum for restaurant companies to explore tastes, preparations and ideas to stay ahead — as supermarkets improve their fresh food quality, ingredient standards and Deli menus.
It seems to us that restaurant companies also need to explore further the equity in their own brands to potentially create new signature food products that compete in other channels – much as Dunkin Donuts has done with their superb coffee line and Panera with their soups. This is an important practice area for CBCI and our team of culinary and food science experts.
This may be the most exciting time ever to be in the food business!