US: 60 second update

Date : 03 November 2016

We review the latest news from Target, Safeway and Kroger and what it means for their suppliers.

Target: Progress made but reinvention taking longer than initially planned

Target’s Anne Dament is leaving the business this month. She originally joined the retailer last year to lead the reinvention of its food offer. While the retailer has made significant progress in this area, as demonstrated by the LA25 test stores, the latest quarterly results revealed that grocery comp store sales declined. Despite the improvements which have been made in terms of ranging and presentation, the retailer noted that it was revisiting its plans in this area to drive stronger traffic, and that the reinvention may take longer than initially planned. The business will be overseen in the interim by Chief Merchandising Officer, Mark Tritton.

Target: More radical thinking may be required as competitors raise the bar

The challenge for Target with its food offer is that it hasn’t fully defined its role in-store. While the offer has been significantly expanded over the last five years with the P-Fresh model roll-out, the range extends beyond meeting top-up missions but does not have the same depth as Walmart’s Supercenter food offer. For suppliers, it means more uncertainty with regards to the future direction of the offer, although it is likely the pivot which has been made towards fresh, natural and organics, and health and wellness will continue. However, the US grocery market is evolving quickly. The opportunities to purchase these types of products in mainstream and specialist grocery stores, which also focus on delivering an outstanding in-store experience, are growing at pace, and a more radical overhaul of Target’s food offer, including the in-store environment may be required.

Safeway: acquisition brings a new banner into the Group

Albertsons owned Safeway is acquiring San Francisco based chain, Andronico’s Community Markets. The five-store strong chain will see its stores re-branded as Safeway Community Markets. This modification of the banner is an interesting development as Albertsons typically retains the banners of acquired stores, noting their strong local appeal and ability to connect better with the community. Andronico’s has a strong reputation locally for operating stores with a focus on fresh and prepared foods, specialist ranges including locally sourced items, and offering a high level of service.

Safeway: opportunity to build a more specialist brand

Combining this with Safeway’s scale will enable it to also drive a strong value message and create a relatively unique proposition within the broader Albertsons company. These types of formats have been growing at pace in the US, including Lucky’s Market, Earth Fare and Fresh Thyme Farmers Market, as retailer have responded to changing shopper preferences. This is a key trend as retailers place an emphasis on creating a differentiated experience, with typically less space dedicated to mainstream products and national brands. For suppliers, it further embeds the notion of the polarising grocery market, with cupboard staples being bought in other channels such as online and mass merchants, and fresh and prepared foods being purchased in more specialist stores.

Kroger: grocery ecommerce pickup hits 500 locations

Following an accelerated roll-out program this year, Kroger’s grocery ecommerce store pick-up proposition, ‘ClickList’ has reached 500 locations. The model has been adapted from Harris Teeter’s ‘Express Lane’ program following Kroger’s acquisition of the business in 2014. Although the model is not yet profitable for the retailer, it does help it to protect its market share as other retailers also invest in the channel.

Kroger: expecting same pace of roll-out in 2017

Kroger has not been alone in expanding its grocery ecommerce offer this year, with Walmart also on-track to reach 500 locations with its store pick-up proposition. Other retailers have also been investing in the channel, many through partnerships with companies such as Instacart, Shipt and Deliv, which have enabled them to move quickly to build a presence. Although grocery ecommerce remains a small part of the overall market in the US, it is the fastest growing channel, and we expect to see the same pace of development in 2017. As it gains scale, it will be important for suppliers to have a deep understanding of the channel, and to have specific trading plans in place to maximise the potential growth opportunities.

Stewart Samuel, Program Director, IGD Canada
Based in Canada, Stewart heads up all of IGD's research and coverage on North America's retailers. He is also responsible for shaping IGD's research program acrossthe region. Contact Stewart at [email protected] for further insight on retailer strategies across the US and Canada.
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