Webinar Series May 2016: Retail Grocery Trends Webinar Series 2016
Webinar Series 2016: Retail Grocery Trends
Retail Strategies Webinar Series 2016: Grocery Trends
Covering Today Lacy Beasley, President, Retail Strategies: •
Welcome from Retail Strategies
Joe Kucharski, Business Development (Northern Region) Retail Strategies • • •
25 Years of Retail Real Estate Experience 18 Years of Grocery Real Estate Experience Food Lion, Supervalu, Save-a-Lot, Weis Markets, Costco
Retail Strategies Webinar Series 2016: Grocery Trends
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Retail Strategies is at ReCON 2016
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Why Should a Municipality Invest Resources in Retail?
Increase Tax Revenue
Attract Desired Businesses
Retail Strategies Webinar Series 2016: Grocery Trends
Improve Quality of Life
Create Jobs
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Overview of Today’s Discussion
Current Trends within 5 Different Categories of Retail Grocery • Big Box Grocery Retailers • •
Supercenters Warehouse Stores
• Conventional/Traditional Grocery Retailers • • •
Conventional Chains (Kroger, Publix) Regionals Will not be covering every retailer – too many
• Specialty Grocery Retailers • • •
Organic / Health Food Limited Assortment Ethnic
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Overview of Today’s Discussion (cont.)
Current Trends within 5 Different Categories of Retail Grocery • Non-Traditional Grocery Sellers • • • • •
Dollar Stores Drug Stores Farm/General Merchandise Retailers Convenience Stores Farmers’ Markets
• E-Commerce
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Overview of Today’s Discussion (cont.)
Current Trends with Ownership in the Retail Grocery Industry • Mergers •
Divestiture of stores
• Acquisitions
What all of this means to site selection for grocery retailers in your communities Retail Strategies Webinar Series 2016: Grocery Trends
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Webinar Series 2016: Retail Grocery Trends
General Trends within the Retail Grocery industry
Retail Strategies Webinar Series 2016: Grocery Trends
General Trends (continued)
Top 10 in Retail Grocery Sales #1. Walmart #2. Kroger #3. Costco #4. Albertsons #5. CVS #6. Target #7. Walgreens #8. Publix #9. Ahold #10. H-E-B Retail Strategies Webinar Series 2016: Grocery Trends
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General Trends (continued)
Top 3 in customer satisfaction: #1 – Wegmans #2 – Publix #3 – Trader Joe’s Retail Strategies Webinar Series 2016: Grocery Trends
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General Trends (continued) Majority Of Grocery Retailers continued to expand in 2015 Conventional grocery store market share stabilized 2015 over 2014 Grocery Market Share Trends
Source - Willard Bishop
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Retail Strategies Overview Forecast Future Category Growth
Source - Willard Bishop
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Consumer Trends – What to pay attention to… Continued split between “Quality” shoppers and “Price” shoppers Traditional grocers “in the middle” will continue to struggle where competitors are better at quality or pricing Greater consumer interest in eating healthier – label information More attention to and more demand to know the source of meats and perishables – Country of Origin labeling / GMO Farm-to-Table and locally sourced products continues to gain in importance and market share Meals-ready-to-eat and Take-and-Bake remain an important part of consumer buying patterns
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Webinar Series 2016: Retail Grocery Trends
Big Box Grocery Retailers
Retail Strategies Webinar Series 2016: Grocery Trends
Walmart
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“Wal-Mart is accelerating the growth of its Neighborhood Market stores from 105 new locations in fiscal 2014 to 170 new locations in fiscal 2015 and up to 200 additional stores the following year.”
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Big Box Trends in Retail Grocery (cont.)
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Sam’s Club “Sam’s Club Aims to Be Less Like Wal-Mart Warehouse club wants go more upscale, but has hard time shaking Bentonville’s influence”
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Sam’s Club Locations
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Big Box Trends in Retail Grocery
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Walmart (continued) What to expect from Walmart when they are considering new locations Emphasis will be on Walmart Neighborhood Grocery – about 38,000sf which will “fit” on 6-8 acres. By promoting a better quality of perishables, Walmart is attempting to broaden their demographic appeal. Walmart (especially Sam’s Club) will consider locations with a higher median income. With the emphasis on Neighborhood Markets, this does not mean Walmart is abandoning Supercenters. Look for them to be more selective in sites (especially where new stores will cannibalize sales in existing Supercenters). Also, look for Walmart to upgrade facilities through remodel or relocation in markets with greater competition.
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Costco Wholesale
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Big Box Trends in Retail Grocery (cont.)
Sam’s BJ’s Target
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Costco Trends
What to expect from Costco when they are considering new locations: Costco builds only 2 prototypes – approximately 148,000 and 162,000 square feet – on approximately 15 to 18 acres. Costco is looking for locations in markets with affluent demographics. They are selectively looking at 2nd tier MSA’s, with the desired demographics. Costco will remain conservative in their approach to new locations. It is not unusual for a new location/market to take 4-5 years for Costco to approve.
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Webinar Series 2016: Retail Grocery Trends
Big Box Chains to Watch
Retail Strategies Webinar Series 2016: Grocery Trends
Meijer
Meijer
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Big Box Trends in Retail Grocery (cont.)
Current Store Count: Michigan = 112 Ohio = 41 Indiana = 36 Kentucky = 11 Illinois = 27 Wisconsin = 5
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Big Box Grocery Retailers (cont.) Kroger Supercenter concepts Fred Meyer – AK, WA, OR, ID 161,000sf avg.
Marketplace 132,000sf avg. Kroger Smiths Fry’s
Retail Strategies Webinar Series 2016: Grocery Trends
Dillons King Soopers
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Kroger “Supercenter” Banners
Kroger operates Marketplace stores under several banners
“At the end of 2014, we operated 98 Marketplace stores, and we expect this format to be one of our primary growth formats of the future”
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Webinar Series 2016: Retail Grocery Trends
Conventional Grocers
Retail Strategies Webinar Series 2016: Grocery Trends
Only 2 Remaining National Grocery Retailers
“Kroger to buy Harris Teeter chain in $2.4B deal”
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Kroger Locations as of January 31, 2015
Map does not include 2015 purchase of Roundy’s stores in IL & WI
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Only 2 Remaining National Grocery Retailers
“Albertsons will acquire remaining Haggens”
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Albertsons Locations and Banners
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Remaining Conventional Grocers are Regional or Multiregional chains
Top 10 Conventional Grocery Chains 1. Kroger (Nation-wide) 2. Albertsons (Nation-wide) 3. Publix (Southeast) 4. Ahold (Northeast & mid-Atlantic) 5. H-E-B (Texas) 6. Supervalu (upper Midwest) 7. Delhaize (Southeast & New England) 8. Wakefern (Northeast) 9. Southeastern Grocers (Southeast) 10.Giant Eagle (Midwest)
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Top 5 Small Chains
Top 5 Small Chains 1. Vallarta (California) 2. Rouses (Louisiana) 3. PAQ (CA/HI – multiple banners) 4. Jerry’s (MN – multiple banners) 5. Marsh (IN, OH)
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Trends in Conventional Grocery
Major chains will continue to increase store size as they bring in more organics and private label products to compete against the Specialty stores Mid-price / mid-service will continue to be pressured in markets where better price and service retailers are present (relative to each market) “Value-added” offerings will continue to increase. More service departments and prepared foods. The national chains will continue to operate under multiple banners which gives them the flexibility to cater to local tastes and preferences. Regional grocers who cater their offerings to local demographics can still compete against Walmart.
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Conventional Grocery Preferences in New Site Selection
Look for new locations in higher traffic areas. As grocery stores increase in size, needed store volumes increase. Trade areas need to be larger. Neighborhood grocery-anchored strip centers are becoming obsolete. Grocers want larger trade areas, drug stores want free-standing, and demand for local shop space is down. Local and regional chains and limited assortment grocers may backfill vacated grocery stores in submarkets which have unique demographics.
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Webinar Series 2016: Retail Grocery Trends
Specialty Retailers
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Categories of Specialty Retailers
1.Fresh / Organic Foods 2.Limited Assortment / Private Label 3.Ethnic
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Fresh / Organic Retailers
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Fresh / Organic headlines
“Sprouts sinks on cautious outlook” “Fresh Market sets 13 store closings” “Apollo completes tender offer for Fresh Market” “Whole Foods: 365 will help transform legacy stores”
“Trader Joe's is reportedly slashing prices”
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Whole Foods 365 by Whole Foods – “Quality meets Value” •
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Scaled down store offering lower prices Smaller size – about 30,000sf. Response to market gains by Sprouts. All stores will have in-store restaurants by “partnering” with a local business 5 opening in 2016. 8 more identified for 2017. Retail Strategies Webinar Series 2016: Grocery Trends
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Fresh / Organic Preferences in New Site Selection Retailers in this category are demographics-driven in site selection. Incomes, age, education attainment, etc. Lifestyle segmentation analysis is also important. Because they are not the shopping choice for everyone, they need locations which can pull a larger trade area. Power centers, regional retail locations, etc. New technologies in refrigeration enable them to take existing buildings not specifically constructed for grocery use. Competition from conventional grocers in organics will continue to put price pressure on specialty grocers.
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Webinar Series 2016: Retail Grocery Trends
Limited Assortment
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Limited Assortment Grocery
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Limited Assortment Headlines
Claus: 5 ways Save-A-Lot will become 'America's Choice' Aldi to open 45 stores in California in 2016 “…are in support of a corporate initiative announced a year ago to open 650 stores over five years, which would help Aldi reach the 2,000-store plateau by 2018.” GFS now has over 170 locations along the eastern half of the US. Each store is between 15,000–25,000 sq ft. Save-A-Lot files for potential spin-off
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Lidl Entry in US (pronounced “LEE-dell”)
36,000sf prototype 80% larger than Aldi Searching for sites in NJ, PA, DE, MD, VA, NC, SC, GA. Distribution u/c in Mebane, NC and Fredericksburg, VA 100+ locations open by 2018
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Limited Assortment Preference in New Site Selection
Decisions are demographic based. Concentrating on shoppers who are price-oriented. Save-a-Lot tends to be more urban-oriented than others. Aldi prefers to build new but, will take existing buildings when necessary. GFS prefers to build new but, will take existing buildings when necessary. Save-a-Lot prefers existing buildings, but will build new. Sizes for each vary with GFS and SAL smaller and Lidl largest. Lidl and Aldi to be most active in expansion over the next few years (competitors in Europe)
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Webinar Series 2016: Retail Grocery Trends
Non-Traditional Grocery Retailers
Retail Strategies Webinar Series 2016: Grocery Trends
Non-Traditional Grocery Retailers
“Dollar General seeking consumables improvements” “Are Grocery Stores Doomed? Study Shows More Shoppers Buying Food At Target, Walmart, Pharmacies” “Consumers are creating demand for groceries from non-traditional retail sources” “More Americans buying food from nontraditional grocery stores” “Food trips to nontraditional stores — mass, dollar, drug — on rise”
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Non-Traditional Grocery Retailers
Dollar Stores Drug Stores General Merchandise Stores Convenience Stores Farm & Home Stores Home Improvement Stores Farmers Markets Road-side Produce stands The sale of grocery products increases the frequency of customer traffic to the store
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Webinar Series 2016: Retail Grocery Trends
e-commerce
Retail Strategies Webinar Series 2016: Grocery Trends
E-commerce headlines
“Raley's relaunches e-commerce site” “How Sam's Club Is Widening its ECommerce Lead Over Costco” “Davis Food & Drug strikes e-commerce deal” “U.S. primed for continued e-commerce growth: Study” “Peapod launches service in Lehigh Valley” “Ahold USA Expands Curbside Pick-Up”
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E-commerce
Majority of Grocery retailers are implementing on-line ordering with store pick-up Peapod and Freshdirect are examples of full-line internet grocery retailers with delivery Amazon is getting more into grocery – challenge is in perishables.
Headwinds to Grocery e-commerce: Perishable products – (frozen must stay frozen, etc.) Variation in “same” Products and differences in consumer preferences for those items – reluctance to have store employees select produce or meat products Shelf-life of products Viability of e-commerce model outside of urban areas
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Webinar Series 2016: Retail Grocery Trends
Corporate Moves
Retail Strategies Webinar Series 2016: Grocery Trends
Corporate Moves – Mergers and Acquisitions Acquisitions: Kroger acquired Roundys (WI, IL); Harris Teeter (mid-Atlantic); and operating agreement with Lucky’s (Kroger also attempted to buy Fresh Market but was unsuccessful) Apollo (private equity) acquires The Fresh Market Cerebus (private equity) acquired Albertsons, and then merged with Safeway. Albertsons to acquire Haagen stores in select markets. Mergers: DelHaize and Ahold to merge (contact Retail Strategies for list of stores to be divested) Walgreens and Rite Aid to merge Consolidation in grocery will continue as companies seek efficiencies to remain competitive.
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Q&A
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Connect
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Key Takeaways Research Isn’t the End
Research is critical but Real Estate always wins
Retail Recruitment is a Challenge
Retail Recruitment is Economic Development but it is a commercial Real Estate function. Enlist professionals to assist the community
Retail Recruitment is a Marathon
Retail Recruitment is not an event. Manage expectations. This process takes time.
Retailers are Expanding
70% of Retailers will expand this year. Get in the game!
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Our Process Retail Strategies is a full-service consultant firm that develops and implements long term retail commercial real estate strategies for municipalities. Our process involves a team of experienced experts making connections between the public and private sector in a complex industry. Information, persistence and focus minimizes hurdles, accelerates timelines and increases economic development in a competitive environment.
Retail Strategies Webinar Series 2016: Grocery Trends
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