IDDBA President and CEO David Haaf addresses a sold-out show audience in Anaheim, Calif.
The consumer wants to eat healthy, but doesn't want to spend a lot of money. The consumer wants breakfast, but doesn't want to cook it at home or eat it in restaurants. The consumer is cash-strapped, but still wants to indulge -- although not in large portions.
Those are just some of the trends that grocers, suppliers and other stakeholders in the industry learned about during the sold-out IDDBA Show 2023 in Anaheim, Calif., this week.
This year's big International Dairy Deli Bakery Association gathering explored eight key themes rocking the grocery industry and featured speakers such as Padma Lakshmi, Tom Hanks, Alton Brown, Rick Stein, and IDDBA President and CEO David Haaf, who spoke about the evolution of three of the eight key topics impacting the industry now: employees, customers and partners.
The 3 Qs
"Understanding how and why we should continue to invest resources in our strategies will be essential in the growth of our companies and industry," Haaf said. "Turnover in bakery deli is still running record highs. Productivity has been at an all-time low. In addition, average payroll in bakery deli is up over 12%."
What can grocers do to overcome these challenges?
"We have to rethink the key areas of staffing, which are recruitment, retention and training," Haaf said. "We also have to understand that it's an 'all-about-me' workforce. We need to focus on the three Qs. Quality of life, quality of work, and quality of schedule."
Haaf said recruitment now requires "great salesmanship." Wages, though important, are not the sole deciding factor. Applicants are asking, "Are you willing to work around my schedule? What does the workflow look like in my position? Do I have an opportunity to advance?"
"The tables have turned," he said. "We equally now have to sell our company and the three Qs to the potential employee versus them selling us on their abilities."
Drilling down, Haaf said more grocers need to invest in their career websites.
"Your career site is the first thing every candidate will check out, and we all know how important first impressions are," he said. "First, share employee stories. Next, create landing pages for each job function, which makes it easier for candidates."
The second evolving theme for grocers, Haaf said, is keeping up with new consumer shopping habits, which of course isn't new but is more difficult than ever.
"Savings continue to be top of mind for customers," Haaf said. "Though it presents challenges, it also creates acceptance by customers that they will have to pay more. Elevated affordability and value is still a top priority but customers have also come to expect and turn to higher quality products. This can be a win for retailers, allowing them to introduce new and higher quality products. Our job as retailers is to help educate our customers about the value in products. And I'll give you a hint: It does not always mean cheaper."
Retailers need to be looking at ways to present value to customers while at the same time feeding their permissible indulgences, he added.
"One example is half cakes and half pies. Programs such as these give our customers the quality they want at a value better suited to fit their budgets. As the leaders of our industry and companies, we have to coach and train our employees on communicating this value to our customers," Haaf said.
In addition to quality and value, customers now expect an experience. Meaning more service and customer-centric training with employees. It also means reacting and marketing to the dynamic shifts customers are demanding. Understanding that customers that have become more creative and engaged in meal preparation and not afraid to showcase exquisite creations for all the world to see, he added.
Finally, Haaf spoke about partners. Supply chain manufacturers have been and still are seeing challenges in sourcing ingredients, supplies and labor constraints. But grocers cannot let that get in the way of partnering together.
"Manufacturers can't survive without retailers, and retailers can't survive without products and services. Most important, our customers are depending on us to partner together to provide them products. Those of us who have maintained great partnerships know the true value of partnerships versus simply doing business with a company," Haaf said.
5 Guiding Trends
Joining Haaf on the stage also were Whitney Atkins, global marketing VP, and Heather Prach, VP of education, both of IDDBA. They gave the audience a deep look at five guiding trends that grocers should be focused on now: 1) whole health, whole heart; 2) consumer defined convenience; 3) ESG; 4) value; and 5) innovation and technology.
Atkins kicked things off by declaring that grocers need to realize: There is no longer one type of consumer. The need for balance in-store, online and marketing is evident. Prach presented (a lot) of the data behind this statement, starting off with consumers' persistent focus on health.
"Consumers are more educated about nutrition and physical health than ever before, and they want to know what they're putting in their bodies. It is no longer taboo to talk about mental health or the pursuit of happiness. Consumers want to combine indulgences while still remaining healthy. Health focus is not a constant. Very few people never think about health and at the same time, very few people eat healthy 100% of the time," Prach said.
There's also not one solo definition for healthy, she added. Healthy can vary based on viewpoints that are generational or regional. It can vary based on food allergies or results-based diets, but there's a wide range of these physical call-outs that each individual is looking for.
"So if you're trading up for ingredients, make sure that you're making those call-outs on your labels and on your packaging. This is also true with clean ingredients. Any and all attributes should be clearly called out. Whole grain, high protein, organic, non GMO, free range eggs, happy cows, et cetera. Labels matter and shoppers have become label readers," Prach said.
Along with ingredients, portion sizing and right sizing is important.
"Also, families are smaller, more people are living on their own. About 70% of households do not have children. The average household right now is 2.5 people and that's the lowest rate that we've ever seen. Sizing for the meal planning and the amount of guests is important here for health, for value and for waste concerns. Offering sizing options is key to covering your customer's needs and healthy plays out in many ways," said Prach.
The next key theme in grocery is consumer defined convenience.
"The on the go lifestyle is back. Feeding the family has become a balancing act between money, health, taste and time. There's not a single shopper that always saves money, always shops for healthy, or that always chooses new over nostalgia. Convenience in the right time for the customer needs to be important and a great example of this is pizza, which can be ready to eat and still be customizable, serving it hot and in store," explained Prach.
She said 41% of shoppers are cooking mostly from scratch while 50% mixed scratch with semi and fully prepared items. Only 9% are mostly shopping fully prepared items. Shoppers want convenience as an option and this is led by grab and go; 55% of shoppers want easier shopping in the grab and go.
"Shoppers may be thinking of future meals while they're in the store, so while they're grabbing their breakfast they may want to also grab their lunch and dinner for later while they're in the store," commented Prach. "Quick breakfast items, especially in the bakery, have been seeing huge growth since 2020. Donuts, croissants, pastries, muffins have all grown. Grabbing a quick piece of bakery and brew coffee can save time and still feel indulgent."
Retailers have an opportunity to take more share from restaurants when it comes to delivery and takeout.
"About 60% to 80% of people are doing restaurant takeout, whereas only 30% to 40% of people are doing grocery retail takeout or delivery," said Prach. "There's a huge gap here and where there's a gap, there's an opportunity to close it. When people run out of time or they're not in the mood to cook, the grocery deli hardly ever wins. In reality, restaurants are picking up those occasions. Why do they not go to grocery retail? It's not necessarily the selection. Only 32% felt that grocery retail is not a viable alternative. More important number here is that 68% of consumers don't even think about it. This is a great place to focus your marketing efforts, so when time is crunched or the consumers aren't in the mood to cook, they're thinking about the quick grab options at the grocery."
The next trend discussed on stage was all about the ABCs of ESG.
"ESG is going to be much more important to your later generations," Prach said. "These generations grew up learning the importance of the planet and recycling, and ESG now takes that conversation beyond just recycling and sustainability for the environment. It is shifting cultures to model a full 360 impact. It is taking into consideration the amount of energy used in all aspects of the product life cycle. It's the amount of fuel used in transport to promote local. It's voting with purchases that support local entrepreneurs, B corp, minority owned, fair trade, fair wage, and making social impacts. These marketing call outs are helpful as differentiators, but consumers are looking at the big picture and full companies. They're doing their research so this goes far beyond just launching a line of products that's sustainable."
The fourth trend highlighted was value, which is causing the consumer to behave unpredictably in the near-recessionary environment.
"Consumers are trying many different things: buying less, wasting less, looking for deals and promotions. Consumers are also reducing their restaurant spending. They are creating a lot of the restaurant meals at home, and this is really a space where grocers can maximize growth for many years to come," pointed out Prach.
When consumers feel economic pressure, they tend to fall back on the basics – the staples like bread, milk, eggs, but that doesn't mean that they're passing up indulgences that are affordable, Prach said. For example, that small box of donuts or dessert at the end of the day actually can present some relief to the stresses that they are facing.
One retailer Prach mentioned as an example said that cross merchandising is one of those areas that grocers can focus on. Take a value item like a grape and cross merchandise Gouda in that section. What you're doing is driving the basket size up as well as showing the consumer things that cross merchandise, she said.
Lastly, Atkins and Prach discussed how technology is reinventing the retail experience.
"Digital solutions and personalization continue to be imperative in the buyer journey," Atkins said. "Look how supporting digital is done in stores. You see best in class retailers are supporting digital and traditional media as well so that again, there's no one way. About 53% of shoppers believe personalized sales promotions are good or a great idea. From ad rewards to clubs and mix and match promotions, the value proposition for the consumer is there."
The Power of Bakery
FMI's VP of fresh foods, Rick Stein, also hit the IDDBA stage and shared some key data from the Food Industry Association's annual bakery report, and said that when it comes to how the American consumer is eating now, there is no one-size-fits-all definition.
"We asked customers about their eating approaches and most customers said they don't like using the term diet," Stein said. "65% of customers are trying to follow some type of eating behavior, and health mindedness is very much on their mind. About 70% of customers say they're looking for callouts. They're looking for information when they're shopping in the department so they can understand what resonates with them. The highest one is whole grains, 31%. That that's the number one thing." Stein said retailers "need to be speaking about health and well-being in the bakery."
FMI asked the consumer, "How should the bakery be laid out? Where do you see commercial bread? Where do you see the in-store bakery? Should they be together, combined or separate?"
Nearly 81% of consumers said they want to see the commercial bread pretty close to the bakery. Consumers are also shopping the bakery earlier.
"What I thought was interesting is the large percentage of people that are shopping before 2 p.m.," said Stein. "So they're looking for freshness and they understand that the earlier you shop, the fresher the product's going to be, the more abundant the choices you'll have. And I know we're always trying to mitigate shrink, so we have to be careful with our production schedules and how much we put out in the evening."
Stein said the next topic consumers were asked about was sustainability, and it's probably not a surprise that consumers want it all.
"We asked customers a little bit about how they think about sustainability and we got into packaging. Almost 73% want to see multi-use packaging; 89% want packaging that makes the item last longer. So they're looking for functional packaging. But at the same time, they are concerned about environmentally-friendly packaging. Almost 75% are concerned with that and being able to see through the package is off the chart at 93%. So we keep hearing how packaging is the devil right now because of sustainability issues, but customers understand that packaging also performs and it helps the product so that over half, 57%, are accepting that."