What will shoppers eat and how will they buy groceries in 2030 – and how should retailers react?

The way in which consumers eat and shop for food around the world is changing at a more dramatic pace than ever before.

Trips to large out-of-town supermarkets have become a thing of the past in bustling cities where consumers are increasingly time-pressed and crave convenience.

The discounters are rapidly encroaching on the territory of traditional supermarket operators, wooing consumers with rock-bottom prices and an increasing focus on quality and provenance.

Online is increasingly becoming the place where the ultimate convenience can be found with the likes of Amazon and Ocado investing heavily in automated warehouse technologies and ramping up their fulfilment credentials to offer rapid delivery services at low prices in markets across the globe.

The lines between retail and foodservice are becoming increasingly blurred, as Tesco builds a wholesale business through Booker and Sainsbury’s seeks to tap into the lucrative home delivery market by selling takeaway pizzas via Deliveroo.

Traditional ideals of eating three meals a day at home with the family are also starting to look increasingly outdated as people eat on the move at times that suit their busy lifestyles.

The sorts of food consumers want to eat is evolving rapidly, too.

Today’s more conscious consumer seeks food that is good not just for them, but the environment too. In turn, that has driven a need for unparalleled innovation across the grocery sector.

Investment of time and capital into plant-based alternatives has reached unprecedented levels, as retailers and food-to-go specialists enhance their vegan and vegetarian ranges, not just to suit those groups of people, but to meet the demands of the increasing number of “flexitarians” seeking to reduce their meat consumption.

Yet the seismic shifts in the ways people are shopping for groceries, and the food they are eating are far from finished. In this long read, Retail Week takes an in-depth look at the future of food, analysing what consumers will be eating, how they will be buying it and what that will mean for established retailers the world over by 2030.

Future of Food infographic 2

1. What food will we eat?

Cast your mind back to what the contents of your fridges and cupboards looked like 10 years ago – the chances are their make-up will be markedly different from the assembled groceries that fill them today.

At the start of the last decade, a whole host of foods and dietary demands had barely made an impact – or perhaps hadn’t even been considered at all in large parts of the planet.

Avocados. Sushi. Cauliflower steaks. Oat milk. Healthy fats. High-protein. Low-sugar. Gluten-free. The list of foodstuffs and culinary preferences that have exploded over the past few years and are now mainstays of modern shopping baskets is lengthy.

Avocados

Avocados are part of the trend of people increasing fruit and vegetables in their diet

That pace of change shows little sign of slowing – so what are the trends that will drive the next phase of evolution in the food we eat?

Sustainability

It is hard to have a conversation with any grocery retailer, restaurant chain or food-to-go operator without the word ‘sustainability’ featuring heavily. Since Blue Planet II thrust sustainability into shopper consciousness, consumers and businesses alike are increasingly thinking about how the food they eat and produce is impacting the planet.

One shift already accelerating is the trend towards sustainable sources of protein and plant-based options as people consume less ‘traditional’ meat and dairy products. Research by the Oxford University last year, which analysed almost 40,000 farms in 119 countries, found meat and dairy produces 60% of global agriculture’s greenhouse gas emissions and takes up 83% of farmland, but delivers just 18% of calories and 37% of the protein needed by Earth’s population.

Such stark statistics lead Charles Banks, co-founder of global food trends agency TheFoodPeople, to believe the sustainability agenda is far from “a here today, gone tomorrow fad”.

“Momentum is already building in plant-based eating, and that’s not going to go away,” Banks says, suggesting that consumers have more information than ever to help them make “positive choices”.

That mindset is already driving a change in buying habits. Orders of plant-based dishes placed through food fulfilment platform Deliveroo have rocketed 330% in just two years, as more people seek healthier, more sustainable alternatives to more traditional meat options.

At Greggs, just 16% of the people buying its vegan sausage roll are actually vegan – the remaining 84% are simply seeking meat alternatives as they adopt a ‘flexitarian’ mindset.

Greggs

The vast majority of people who buy Greggs’ vegan sausage rolls are not actually vegan

As a result, the global vegan food market is expected to expand at an average rate of 9% every year between now and 2026, according to forecasts from research and consulting firm Acumen, giving the rapidly growing category a value of $24.3bn (£18.8bn).

In contrast, Banks predicts red meat such as beef, pork and lamb will ultimately become “a super-expensive luxury” and will be eaten “in a completely different way” in the future.

Jellyfish, coconut ‘meat’ and chickpea tuna

Where will the alternative sources of protein and dairy come from? Iceland’s head of product development, David Lennox, insists many “are already out there” waiting to be developed. The frozen-food specialist has recently launched a vegan ice cream in a cone, for example, made using ingredients such as chickpea flour and soy protein.

He says the focus of retailers’ new product development will increasingly be placed on “recreating favourites, like the burger, and turning it into something really delicious that doesn’t contain meat”.

Tesco has arguably set the bar with its Wicked Kitchen and Plant Chef ranges – it stocks close to 300 plant-based products in its stores following the launch of the latter brand in September. But others are innovating at a similar pace.

Pret A Manger is placing a huge emphasis on its vegan and vegetarian credentials, with plans to open 20 of its Veggie Pret shops by the end of next year. It will roll out a number of sustainable meat and fish alternatives in the coming months, including its ’chuna’ baguette – a tuna substitute made using chickpeas and seaweed.

It is also looking at other options such as coconut meat as it develops new vegetarian lines.

Pret’s UK managing director, Clare Clough, believes such products will ultimately become commonplace. “There is no doubt in my mind that the core [business] is going to move over 10 years,” she says. “More of the stuff that we see as innovation at the moment will play into the core, but it’s hard to tell how quickly that will happen.”

Pret Chuna baguette

Pret A Manger’s veggie expansion includes ‘chuna’ baguettes

Sainsbury’s head of quality and innovation Claire Hughes is taking an equally future-gazing approach. She singles out jellyfish – a species whose population is increasing as a result of climate change – and lab-grown meat as two particular areas with potential.

“Jellyfish are already eaten in other cultures. It might be that we have to find ways, similarly to seaweed and algae, to harvest these types of ingredients and grow them to replace some of the other products we’ve had in our diets,” Hughes suggests.

Sainsbury’s has form in stocking innovative ranges – it became the first grocer to sell insects when it piloted stocking packets of crickets a year ago.

Edible insects 1

Sainsbury’s started stocking crickets – a source of protein – last year

But TCC Global’s global insights director, Bryan Roberts, believes we are still “a long way off” those products becoming staples on supermarket shelves. Instead, he thinks insect proteins will feature more as a “base ingredient” in other products such as sauces in 10 years’ time.

Waitrose head of corporate social responsibility Tor Harris believes there are other uses further down the supply chain – using insect proteins to feed fish, for example. “We are quite a long way down the road with some trials around that,” she says. “And I think that sort of thing will be much more palatable to the customer than eating insects directly.”

However, Mintel associate director of food and drink Emma Clifford believes there is a market for eating insects. “There are definitely young consumers there who are experimental, switched on to certain issues around the environment and open to trying new things,” she says.

 

Food as medicine

It’s not just the health of the planet that will occupy consumers’ minds in 2030 – concerns around their own health and wellness will rise in importance too.

The Co-op’s director of product development, Breige Donaghy, pinpoints health as “the big buzzword that is screaming out to us” as the next big food trend.

Sainsbury’s Hughes believes this will evolve to such as extent that consumers will start “thinking of food as medicine”.

It is a movement already underway in the Netherlands, where research by the Netherlands Organisation for Applied Scientific Research (TNO) has investigated the impact of personalised nutrition.

“Not everybody responds to a low-fat diet and loses weight, not everyone responds to a high-protein diet and gains muscle,” Hughes explains. “I think in future we will be able to find out more about people, put them into groups, and be able to create more personalised nutrition labelling.”

Hughes predicts that by 2050, retailers and producers will be able to “make a product to fit someone’s individual profile” based on the macros, nutrients and vitamins they need.

Hyper-personalised food

It is the sort of request that Julian Hearn, founder and chief marketing officer of nutritional powdered food specialist Huel, is already starting to receive from his customers.

“Having a bespoke product blend for each unique person’s needs is almost impossible to do,” Hearn says, “but if you’re looking 10 years ahead, someone could work out how to do it.”

Banks believes DNA testing – something he refers to as “the ultimate in personalisation” – will become the norm, particularly in tech-savvy countries such as the UK, the US and China.

Waitrose & Partners piloted a tie-up with DnaNudge last year to help its shoppers choose healthier foods based on their genetic make-up. Banks admits that was “clunky and quite alien” for shoppers, but suggests the technology will become “fully integrated” into consumers’ online shopping profiles and their smartphones in years to come.

“Where it will go, ultimately, once supply chains and the tech are connected, will be personalised solutions for each individual. You’ll be able to have your favourite meals tailored for you – that’s the direction of travel,” Banks predicts.

DnaNudge opened a store in London’s Covent Garden last week, which offers shoppers genetic testing to better understand their dietary needs. After shoppers take a DNA test, they are given a guide on which food items they should purchase based on their genetic predisposition to a variety of factors, ranging from risk of obesity and high blood pressure to the time it takes them to metabolise caffeine, within an hour of having their cheek swabbed.

DnaNudge

Waitrose has trialled matching food to shoppers’ DNA

Graze chief executive Anthony Fletcher reckons “entrepreneurs are swarming” over the idea of DNA mapping and believes dozens of businesses offering such services will come onto the market by 2030. “Consumers are intrigued by the ritual and like the idea of something unique for them and the overlap of food and medicine,” Fletcher reckons.

Whether or not DNA mapping does catch on, Fletcher says existing products can be made in a “fundamentally different way” to the benefit of consumers’ health.

He explains that new types of natural fibre, such as chicory root fibre, are already being used by Graze as a replacement for sugar.

Fletcher says: “Scientists are coming up with radical new solutions for consumers who don’t want stuff that’s out of a lab, but want stuff with origins in natural ingredients. It’s the rise of the ‘science of natural’ in terms of solving these problems, but also coming up with food that tastes amazing.”

Transparency and localness

Consumers of the future won’t just demand food that is good both for them and the planet, they will increasingly want locally and transparently produced groceries.

Another bi-product of the new sustainable mindset will see shoppers wanting to support local businesses and have clear visibility of where the food they are putting on their plates has travelled – from farm to fork.

Mintel’s Clifford says its consumer research shows people want to buy things which are grown and made locally, but she points out that supermarket availability of these products is “fairly limited”.

She predicts much development in this area over the next decade and believes the concept of urban farming “could really take off” on a global scale.

Urban farming is already building up a head of steam on the continent, largely driven by the emergence of vertical farming tech business Infarm.

Its technology can grow vegetables and herbs to a retailer or restaurant’s requirements, creating local produce, grown in a transparent way, using no chemicals or pesticides.

The business is already working with more than 25 retailers, including Edeka, Metro and Auchan, growing more than 150,000 plants a month from its 350 in-store farms. In September, it launched its first vertical farm in the UK, joining forces with Marks & Spencer to bring its technology to the retailer’s refitted Clapham store.

CLAPHAMJUNCTIONINFARM

Vertical farming company Infarm has partnered with Marks & Spencer in Clapham

Infarm co-founder and chief brand officer Osnat Michaeli tells Retail Week: “People are really thinking about the food they consume and question the region it came from, who grew it, and what resources and practices were used to grow it. People are demanding better transparency and more clarity from stores about their supply chains.

“Therefore, we believe that vertical farming will play a huge role in food production. We hope that it will be integrated within cities so that we can save thousands of food miles and give the people – 70% of whom are expected to live in urban city centres by 2050 – access to produce that was grown as close as possible to them.”

Roberts believes vertical farming will allow retailers to “expand the growing seasons” of certain fruit and vegetables that they would otherwise have to import from overseas.

However, he thinks the increased consumer demand for local and “seasonal” produce could spell the end for year-round access to products grown outside a retailer’s domestic market.

“There’s a generation growing up now who realise that ‘permanent summertime’ is unnatural and that we should go back to seasonality of produce,” Roberts believes.

“It is semi-ludicrous that we should expect to have strawberries 365 days a year. That makes localness an important opportunity for retailers – supporting local farmers, delivering the best local produce at the right times of the year.”

2. How will we buy our groceries?

The future of food won’t just be defined by what consumers buy, but how they buy it.

Over the past decade, online, convenience and discount have emerged as the fastest-growing channels in the grocery sector. But increasingly, new, nimble competitors such as online delivery platforms Deliveroo, Just Eat and Uber Eats, and recipe box specialists Hello Fresh and Gousto, are eating into the market share of traditional grocers.

Social and populational factors will also play an increasing role in shaping the food industry in the coming years. The UN predicts that 68% of the world’s population will live in urban towns and cities in 2050, compared with around 55% today. Coupled with population growth, this means an additional 2.5 billion people are expected to live in urban areas in 30 years.

Deliveroo 2

With such seismic shifts already afoot and set to accelerate, how will the consumer of the future buy their food?

Craving catering and convenience

The changing role of the home will be one of the chief drivers of change as far as grocery shopping habits are concerned.

As Edge by Ascential director of go-to-market intelligence Boris Planer puts it, the increase in the proportion of people living “more centrally, in smaller flats, with less storage space” will lead to the home being “redefined as somewhere where you stay and sleep, but not somewhere where you cook and socialise”.

As a result, consumers are expected to shift even further away from buying larger baskets at out-of-town hypermarkets and make more purchases through convenience stores and restaurants.

The traditional ideals of eating three meals a day and cooking dinner at home to eat with the entire family will also continue to fade, as a 9-5 working life makes way for more flexible working patterns, prompting people to eat on the go at times that suit their lifestyles.   

Food-on-the-go operators such as Pret and Greggs have long provided competition to c-store operators in that regard, but the emergence of online food delivery platforms has left convenience specialists further exposed to restaurant and fast-food businesses.

In Europe in particular, the out-of-home food market, which takes account of sales via platforms such as Deliveroo and Just Eat, looks set to mimic trends already playing out in the US by soaring in the coming years.

The National Restaurant Association predicts that overall sales at catering outlets will hit $863bn (£672.7bn) across the pond by the end of 2019 – up 46% on 2010 levels. Such a sum would account for 51% of all food spend in the US.

This compares with the £56.6bn spent on foodservice in the UK last year, according to NPD Group. Although this figure is set to rise to £59.5bn by 2020, that would still only account for around a fifth of all food spend. 

“The reason we have started working with grocers like the Co-op and Sainsbury’s is because there is a convergence of shoppers who are driven by this convenience trend”

Tom Peters, Deliveroo

TCC’s Roberts believes online delivery platforms thrusting more catering companies in front of the customer will mean the share of food consumed out-of-home in European countries “won’t be as far behind America in a few years”.

Indeed, 10% of all McDonald’s UK sales are now made through Uber Eats, merely a year after it launched on the platform. And, privately at least, restaurant chains such as Nando’s and Pizza Express suggest that half of their sales made through Deliveroo is money that would otherwise have gone to grocery retailers.

Some retailers in the UK are therefore taking a ‘if you can’t beat them, join them’ approach. Both the Co-op and Sainsbury’s, for example, now offer delivery of selected products through Deliveroo and more retailers are likely to follow suit in the future.

“We have an ambition to feed people three times a day, at breakfast, lunch and dinner,” Deliveroo’s global director of health and special projects Tom Peters explains. “The reason we have started working with grocers like the Co-op to deliver convenience food and Sainsbury’s on hot food and snacks is because there is a convergence of shoppers who are driven by this convenience trend. 

“They are used to using platforms like ours for on-demand food delivery and there is an increasing expectation that they will be able to order more than just restaurant food on our platform. With a 10-year view, I think we will see that increasing convergence from a consumer perspective.”

This drive towards convenience will mean that grocery stores need to be better located for urban dwellers. Consumers of the future won’t want to walk more than three minutes between their homes and a c-store, one retail advisor says.

Planer says: “Behaviours are switching gradually towards frequent, smaller-basket missions. Much of the future is in the small box close to people’s homes. Retailers will need to mould their store portfolios accordingly.”

Online

How will the rise in Deliveroo and Just Eat impact the ecommerce businesses of supermarket giants?

Ecommerce growth is already slowing in the UK. According to Mintel, 7% of all grocery retail sales were made online last year, but that is expected to plateau at around 10%, or £19.8bn, by 2023. 

Other countries, however, remain in rapid growth phases. Online grocery sales in the US, for example, are on course to jump 23% to $22.6bn (£19.5bn) this year to gobble up 7.1% of the market and will almost treble to $295bn (£255.1bn) in China by 2023 to account for 7.6% of total grocery sales, according to IGD.

Ocado delivery van

A number of younger, tech-led businesses such as Ocado in the UK and Picnic in the Netherlands are helping to stimulate grocery ecommerce spend across the board.

Ocado Solutions chief executive Luke Jensen says: “The growth of the market has generally been supply-constrained rather than demand-constrained. If you start getting reasonably good value and good service online, that stimulates competition between various retailers to improve their offer – and that’s when you rapidly see very substantial growth.”

In the Netherlands, that phenomena has become known as “the Picnic effect”. In cities where the pureplay launches, the share of grocery spend going online increases rapidly as competitors such as Ahold seek to rival its proposition. In 2017, 29% of Dutch consumers purchased food online, overtaking the UK’s 28% on that metric for the first time.

“We need to get away from this feeling that you can have whatever you want, whenever you want, wherever you want, at more or less whatever you want to pay for it”

Guy Singh-Watson, Riverford Organic

But how much further can online penetrate global grocery markets?

While Roberts believes 10% will be a “natural ceiling” for online grocery market share, one former supermarket executive believes that the online grocery market in the West, India and parts of Asia “could reach 20% in 20 or 30 years”.

Jensen is confident: “Our firm view is that there will continue to be a place for stores, but there will be a growing place for online ordering and home delivery. On a global level, there is no doubt that technology-enabled online ordering and home delivery is going to multiply many-fold over the coming years.”

But how will delivery expectations change over that time?

Amazon Prime Now has made one-hour fulfilment the norm in cities such as London, Birmingham and Manchester, prompting ripostes from others. Sainsbury’s ChopChop service promises one-hour deliveries by e-cargo bikes, Waitrose and the Co-op are both trialling similar services, and Ocado has launched its rapid Zoom delivery offer.

Yet Jensen does not believe the demand for one-hour grocery deliveries will become widespread across the globe, suggesting that families living outside of bustling cities will remain happy to wait a few days for their baskets to be delivered.

“When you analyse the total grocery market, it is not dominated by single urbanites. The bulk of the total grocery market is families in suburban areas,” Jensen says. “Those are the people that will drive the key trends in grocery, not just the urbanites.” 

Guy Singh-Watson, founder and boss of organic vegetable box delivery company Riverford Organic, believes the mindset of an increasingly ethical consumer could quell demand for rapid fulfilment. He suggests same-day and one-hour food fulfilment represents an “environmental disaster” because businesses have to hold more stock, end up wasting more produce and send vehicles on inefficient delivery routes to meet time pressures.

“We have one delivery slot a week, determined by your postcode, and certainly in rural areas we don’t have any intention of changing that,” Singh-Watson says. “We need to get away from this feeling that you can have whatever you want, whenever you want, wherever you want, at more or less whatever you want to pay for it.”

He firmly believes the shopper of the future will realise there are environmental “problems” associated with that delivery model, which will allow retailers to eventually “break out of that mantra”.

Can Amazon conquer?

The large elephant in the digital room is Amazon. Having disrupted the general merchandise market, Amazon has taken steps to have a similar impact on grocery.

Its $13.7bn (£11.8bn) acquisition of Whole Foods Market in 2016 sent shockwaves around the world from Seattle to Sydney – and arguably proved the catalyst for the likes of Kroger and Coles to pen deals with Ocado.

In the UK, Amazon has a supply partnership with the country’s fourth-largest grocer, Morrisons, selling thousands of the supermarket chain’s fresh, frozen and ambient products.

Boosted by the Whole Foods deal, Amazon is comfortably the largest online grocer in its native US, where it raked in $8.2bn (£7bn) in ecommerce food sales last year – 18% of the market – according to Edge by Ascential, compared with Walmart’s $2.8bn (£2.4bn).

But Amazon has found grocery growth hard to come by outside of America. It launched Amazon Fresh in the UK in summer 2016, but its market share remains below chief rival Ocado’s 1.4%. A similar story can be told in Germany, where Amazon Fresh operates in Berlin, Hamburg and Munich.

Amazon Fresh 2

Planer says: “Their start in Europe hasn’t been as promising as many thought it would be. What size of investment do you have to make to become a leading player in a low-margin part of the retail market? And why would you do that when you can dominate general merchandise? My bets would be on them looking more at health and beauty and pharmacy than grocery.”

Singh-Watson agrees and doubts whether one of Amazon’s key USPs, low prices, will be enough to win over food shoppers. “I think it will find grocery more difficult than the other markets it’s conquered,” he says.

“Price isn’t everything – of course it means a lot – but I think there is a lot of culture and emotion invested in food. I think that makes it difficult for Amazon to take market share.”

Roberts argues differently: “I think Amazon will have an impact and the main reason for that will be things like its Prime subscription service that lure you in and incentivise you to spend there rather than somewhere else.

“In time, you can imagine them offering free same-day deliveries for groceries – they will throw the kitchen sink into making sure you are not shopping anywhere else.”

That is unlikely to prove enough. With the potential for consumers to rebel against rapid delivery, and with the discounters proving its equal on price, Amazon will face the gargantuan challenge of needing to carve out a new USP, from effectively a standing start, in order to woo shoppers from established rivals.

With the prize at stake being a small share of a low-margin market, Amazon may well decide to place its bets on more lucrative categories.

Emerging models – disruptive or doomed?

It’s not just Amazon encroaching on the grocery landscape – other emerging models are disrupting the status quo, too. Recipe box and subscription businesses such as Riverford, Gousto and Hello Fresh – the latter is already the fifth-largest food etailer in the US – and the threat of FMCG businesses such as Unilever and Procter & Gamble selling direct to consumer looms heavy over supermarket operators.

Nielsen data published last March revealed that meal-kit spending was growing three times faster than other channels in the US. Almost one in 10 Americans said they had purchased a meal kit in the previous six months, suggesting there is plenty of appetite for them.

hello fresh classic box

Gousto founder and chief executive Timo Boldt believes recipe box businesses like his are capitalising on the fact that traditional supermarket players have been left on the back foot by discount, convenience and online competitors.

He points out that the market share of the big four grocers is in decline. The most recent Kantar grocery market share figures shows that the big four held 67.2% market share, compared with 76.4% 10 years ago.

Boldt suggests that this erosion of share has placed pressure on them to retain profit margins, sparking shorter-term strategic thinking. As a result, he says the multiples have “lost their licence to innovate” in new product categories, store layouts, or making pushes of their own into new models such as recipe boxes.

“I think the licence to innovate now rests with companies like Gousto, who can be much more agile and move forward and do risky and big things without restrictions,” Boldt concludes. 

Clough believes businesses like Gousto “sit very neatly” within modern consumer trends, particularly because they help an increasingly conscious consumer keep a lid on food waste by “getting exactly the right amount of food” delivered – “a big consideration for sustainable-minded, younger shoppers”.

She believes the ability to “access more recipes and flavours” also keys into the desires of “modern, adventurous consumers” and allows recipe boxes to “remain very relevant”. 

But others doubt whether the time-pressed consumer of the future, spending less time in their homes and cooking less, will have the appetite to prepare meals at home.

Roberts explains: “The fundamental problem with meal kits in terms of their broad appeal is that I can’t see it working in urbanised areas, where people aren’t eating the traditional three meals a day and families aren’t meal planning and cooking together.”

Overcoming that challenge will prove almost impossible and, in a highly fragmented market – around 200 meal-kit businesses operate in the US alone – building market share in a profitable manner will prove equally difficult.

A shake-out of the industry through M&A consolidation and ‘survival of the fittest’ is likely in the coming years, but Blue Apron should serve up a cautionary tale. Valued at $2bn in June 2015, the company’s market cap has plunged below $100m since floating on the New York Stock Exchange. Just as it has among investors, appetite from consumers will ultimately subside. 

DTC damp squib?

Similarly, buying products directly from a plethora of brands could ultimately add an unwanted level of complexity for a consumer craving speed and convenience.

Direct to consumer (DTC) has established itself as a key trend in other sectors including fashion and footwear, with sportswear titan Nike, for example, aiming to rake in half of sales through its own stores and ecommerce platform, rather than through third-party retailers.

But when it comes to food, consumers prefer to shop with grocery retailers that curate branded ranges for them.

Despite that, FMCG giants such as Unilever and Procter & Gamble are increasingly building their DTC capabilities. Arla, the largest producer of dairy products in Scandinavia, is doing likewise.

Five years ago, three-quarters of Arla’s UK sales came through Tesco, Sainsbury’s, Asda and Morrisons. That figure has dropped to 55% as the discount, convenience, foodservice and ecommerce channels take a greater share of revenues.

Arla Milk Brands group product shot

“Where do I see the growth coming from in the next five to 10 years? It’s in those areas,” Arla’s UK managing director Ash Amirahmadi predicts. “Consumer trends are changing the way that we shop – and therefore changing how we go to market is not an evolutionary change, it’s a revolution.”

Arla now has a 17-strong digital and ecommerce team – a team that didn’t exist two years ago. Like others in the sector, it has shifted its marketing spend to digital and is producing its own content as it bids to use data to build a more direct relationship with consumers – something Amirahmadi says will be “an important trend for the future”.

No matter how well such suppliers know their shopper, commentators doubt whether consumers will ever want to buy their grocery products directly from a clutch of brands, rather than completing one shopping trip with a traditional grocer.

Amirahmadi concedes that selling direct to consumer is not Arla’s main motivation and admits that its ecommerce platform will “never threaten existing supply relationships” with supermarket chains.

He says forming a direct relationship with consumers allows Arla to interact with them.

“We will then use that to get direct information to help with innovation pipelines, testing new ideas. That competency is something I can really see us doing something around in the next five to 10 years. But our routes to market will still predominantly be through retailers.”

As both Amirahmadi and Roberts suggest, suppliers will build stronger relationships with consumers to aid product development and build loyalty to their brands, but selling DTC will only ever constitute a side hustle as retailers retain pole position as global brands’ chief route to market.

3. How will traditional retailers adapt?

The pace of change in what consumers will buy and how they choose to buy it is unrelenting – and retailers have to respond to remain relevant in a world where the online, convenience, discount and foodservice will play an increasingly important role. 

Some of the world’s biggest grocery retailers are already taking action. Walmart has purchased Indian ecommerce giant Flipkart, is piloting the use of robots in stores to clean aisles and replenish stock, and has penned a partnership with Microsoft to help it drive “innovation projects” that leverage machine learning, AI and data platform solutions.

It hopes that blending the best of the digital and physical worlds will help speed up and simplify the shopping trip, driving the convenience that shoppers crave.

In the UK, Tesco has bought Booker to give it a bigger foothold in the lucrative and fast-growing foodservice market and kicked off a buying alliance with Carrefour to help it lower prices to better compete with the growing online and discount retailers, and open up access to ingredients and products from continental Europe to feed hunger from more experimental customers.

For its part, the French grocery titan has joined forces with Google to grow its online capabilities. 

Such moves constitute the tip of the iceberg. The future will hold plenty more collaboration, consolidation and innovation. 

Can tech make big boxes relevant?

The growth of the convenience, discount and ecommerce sectors has piled pressure on larger out-of-town stores that have become out of kilter with modern shopping habits. 

In the coming years, supermarket operators will continue to expand their smaller-store portfolios to help meet those demands, kicking off a fresh c-store space race as retailers rush to take units in the urban conurbations that will spring up across the globe.

Tesco has already stated its desire to open 150 c-stores in the UK and 750 in Asia over the next three years, and will no doubt grow that presence further in the future. But grocery retailers will also need to address the challenge of transforming their bigger sheds into places that consumers actively want to visit.

To do so, it will ramp up efforts to blend the best of the physical and digital worlds. 

Developments in China illustrate the direction of travel. In Alibaba’s Hema stores, customers can use the retailer’s app to scan barcodes to find out detailed product information, such as where it was sourced and how long it took to reach the shelf.

Tech is at the forefront of Hema's big boxes in China

Tech is at the forefront of Hema’s big boxes in China

Using customer data to assess previous purchases, Hema’s app suggests products shoppers might be looking to buy, and offer to deliver them directly to their home within 30 minutes, if they live within a three-mile radius. But the stores also offer a plethora of counters and foodservice options, such as live seafood counters, sushi bars and ice cream bars, to enhance its experiential credentials. 

Elena Gatti, managing director at Chinese retail expert Azoya, believes there is appetite for this; however, she says there are several hurdles to overcome before the format is adopted in the West. she says: “I think there is consumer appeal, but there are some challenges. One of those is the question of mobile payment and whether it is very well used in a particular country.

“The second is data and how much of their personal information customers are happy to give away. And the third is the logistics behind it. To get delivery within 30 minutes takes incredible logistics. Doing that in territory broader than 3km would be difficult.”

Businesses in the US are also innovating at pace, to shape the store of the future. Tech firm Alert Innovation, which counts Walmart as a partner, is piloting its Novastore concept.

It uses its Alphabot technology to pick and pack customers’ shelf staples, allowing the store to become a “fresh emporium” for fruit, veg and counters such as butchers, bakers and delicatessens. 

Marc de Speville, partner for digital commerce at international strategy consultancy The Partnering Group, believes these tech-driven stores have potential: “I think the principle of buying the experiential stuff from a bakery, a butcher, a fishmonger, picking your own fruit and veg in the store, having tastings, eating at in-store restaurants, is one that will need to be leveraged.

”There needs to be much more of that and much less of the formulaic stuff like picking packaged and heavy goods off the shelf and taking it to the checkout. That will be key to the store of the future – getting technology to do the heavy lifting so that people go there to buy their fresh food and learn about what they are buying.” 

Smart trolleys and checkout-less stores

‘Frictionless’ technologies are also set to redefine the store experience by allowing customers to check out without queuing. But which ones will come to the fore in the coming years?

Amazon Go has created plenty of headlines with its ‘just walk out’ functionality. Cameras and shelf sensors track shoppers’ movements and register which items they pick up, before charging their Amazon accounts as they leave the store.

Tesco has invested in Israeli tech firm Trigo, which offers a similar solution – one the grocer is trialling at its Welwyn Garden City HQ. But commentators doubt whether those technologies could be rolled out widely.

Amazon is understood to have spent $3m per Go store to kit it out with the required technology – a sum the majority of retailers would baulk at.

The hefty costs mean other solutions could usurp checkout-less stores.

Canadian grocery giant Sobeys launched a smart shopping trolley pilot with tech firm Caper last month. The trolleys have built-in cameras and sensors, which identify products as customers put them in their trollies, and interactive screens can suggest tailored offers and complementary products based on what is already in a shopper’s trolley, thus boosting average transaction values.

Caper founder and chief executive Lindon Gao believes his business will “dominate” the global grocery market in years to come. “We will be able to replace all shopping carts out there in the future,” he says.

Gao argues that Caper’s experience is better than Amazon Go: “When you toss an item into a cart, we can identify the item. You don’t even need to download an app to use it, so there is no barrier to adoption. And on top of that, we can interface with the customer during their shopping trip.”

Partnerships

It won’t just be shoppers that grocery retailers need to build relationships with in the future – they will increasingly need to collaborate with third parties to add different dimensions to their businesses.

Grocers such as Kroger, Sobeys, Coles and Casino have already tied up with Ocado to enhance their online grocery propositions, Tesco and Carrefour have joined forces to form a buying alliance, and Walmart is working with Microsoft to better leverage machine learning, AI and data platform solutions. But what new partnerships will the future of food bring?

carrefour-tesco

As consumers demand a greater line of sight across supply chains and increasingly switch to buying from smaller and local businesses, new suppliers could become a differentiator for grocery retailers. Roberts believes the grocery world will “go back to the future” with some of its practices, building on some of the strategies already being deployed in parts of Europe.

Major Dutch chains including Albert Heijn, C1000 and Super de Boer only stock MSC-certified sustainable fish that has been sourced in Europe, for example, while Italian grocers such as Esselunga regularly promote “the things you should be buying this month”, Roberts explains, alongside “recipe cards to help consumers know what to do with that produce”.

Roberts says: “It’s almost taking the food industry back 40 years, but I can see that being the future.” 

Urban farms could also become a crucial part of the grocery store of the future. For Planer, not only would this add “a great experiential differentiator” to stores, it would also boost the freshness of produce, giving it a longer shelflife once it reaches a consumer’s home, while also enhancing a retailer’s sustainability credentials and slashing waste.

Michaeli says: “Transparency is a movement that’s really being driven by consumers worldwide – they want more information about the food they are buying and their suppliers. It’s a good opportunity for retailers to choose whom they work with based on better practices for the quality of food and better practices for the planet.”

Using technology at the shelf edge will also help retailers shout about those credentials. Carrefour is trialling technology with IBM that allows shoppers to scan QR codes on certain products to gain a wealth of product information, including nutritional details, recipe ideas and videos providing more details on where and how the food was produced. 

“People want that information,” Planer says. “And in time, offering it won’t be a point of differentiation – people will expect it.”

Building buying alliances

The theme of doing good for people and the planet will also begin to shape the sorts of third-party concessions and services that are introduced to stores.

That could come in the form of start-up brands that are sourcing ethically, or even DNA and health experts who could hold appointments with shoppers prior to their shopping trip to help draw up a personalised shopping list of food they should consume for the good of their bodies. In reality, such concessions may still constitute ‘nice to haves’ as opposed to necessities.

One thing grocers may have to do is to build buying alliances.

A look at the Danish market could offer a window into the future of other global markets. In Denmark, around half of the retail market is now controlled by discount operators such as Fakta, Netto, Rema 1000, Aldi and Lidl, with the middle market accounting for around 20%. Retailers have had to choose whether to lower prices, or swim upstream to place emphasis on choice and quality.

“You are going to have to become part of bigger and bigger buying groups to be able to compete”

Matt Hood, the Co-op

One adviser goes as far as to warn: “Any grocer who doesn’t build global purchasing scale in the future simply won’t have much of a future. You will need that sort of buying power in order to compete with the likes of Aldi, Lidl and Amazon on price, or offer something a little different in terms of your product proposition.”

The Co-op’s retail trading director, Matt Hood, agrees that retailers – including his employer – are already thinking this way. “From a global perspective, the world is becoming smaller – you see that in the Tesco-Carrefour alliance,” Hood says. “You are going to have to become part of bigger and bigger buying groups to be able to compete.

“We are a £7bn or £8bn buying group, but we are 10-times smaller than Tesco, so we know we need to continue to expand that. Buying Nisa has brought a significant increase in cost of goods, and my ambition would be to continue to grow that over the next three to five years so that we become a major player.

“You can see a time when we are bringing more and more people into our buying group so that they benefit from the scale, as we do. That’s where my ambition would be but also where I think the market will have to go.”

As competition authorities take a more hardline stance on M&A activity, and budgets to make such acquisitions become increasingly constrained, building buying groups offers grocery chains a capital-light way to cut prices and increase choice – two things that the customer of the future will demand.  

Takeaways from the supermarket

Much has been made of takeaway restaurants, powered by Deliveroo, Just Eat and Uber Eats, stealing spend that would have gone to supermarkets, but retailers are not going to take this lying down. In fact, they will move onto takeaways’ turf.

Retail Economics chief executive Richard Lim believes that supermarkets of the future will double up as takeaway restaurants, transforming excess space, such as the areas once dedicated to butcher and fishmonger counters or room left vacant by the expected reduction in general merchandise floorspace, into dark kitchens.

“The takeaway market is growing faster than the overall food market, it’s larger than the online grocery market and grocers are looking for new avenues to grow revenue. Takeaways are going to be an effective way of doing that,” Lim predicts.

“Deliveroo and Just Eat are becoming really disruptive and retailers need to react. They’ve got the space in stores to have dark kitchens, they’ve got the capacity, they’ve got the urban density and they’ve got the buying power to source ingredients cheaply.

“At that point it becomes a discount takeaway offer. They can offer traditional takeaway cuisines like pizza, like Chinese, like curries, but they will be able to buy at scale and pass those savings onto consumers to make it an attractive proposition.”

Sainsbury’s is already testing a takeaway pizza offer through Deliveroo, while the buying power of Tesco and its ownership of wholesaler Booker mean a similar move could be on the cards, one former grocery executive suggests.

Deliveroo rider and Sainsbury's Groceries Online driver set off from Hor.._

“Tesco have got access to the wholesale market, where they are driving efficiencies and driving lower unit costs. They have got the biggest store network in the country, with coverage right throughout the UK and excess space to fill.

“Will launching a takeaway service be top of their agenda? Of course not. But if you’re thinking about the direction of travel, these are the things retailers are going to have to start thinking about and getting creative with if they want to be a part of the future of food.”