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OCG Show Daily Sunday, June 4, 2017 3 4 KEY TRENDS SHAPING FUTURE OF GROCERY RETAILING What could be said 20 years ago is even truer today: the U.S. food retailing busi- ness has never been more competitive. According to "The Future of Food Retailing: Value Grocery Shopping in the U.S.," a brand new report by market research firm Packaged Facts, there are a number of trends that are putting pressure on food retailers of all stripes, from supermarkets whose bread and butter is groceries to supercenters and drugstores for which food is a smaller but still cru- cial part of the product mix. "Food retail is evolving. The cus- tomer is king, and perhaps more than any time in history, the consumers are firmly in control. Competition from multiple channels is unrelenting, and retailers must be creative and innovative in their marketing, products offerings, services, and even store designs just to garner even a semblance of consumer loyalty," says David Sprinkle, Research Director, Packaged Facts. In "The Future of Food Retailing: Value Grocery Shopping in the U.S.," Packaged Facts identifies several trends impacting the food and beverage retail market. Three of the most prominent are the incursion of e-commerce onto the food retailing landscape, the evolution and expansion of contactless payment options and the rise of the smaller store formats. The E-Commerce Effect For several years, e-commerce has been one of the fastest growth areas for gro- cery and consumable products. Retailers covet e-commerce shoppers because they tend to be less price sensitive, spending noticeably more than in-store only shop- pers and driving higher margins. E-com- merce shoppers are also desirable because they tend to stock up, placing two large orders per month on average, with items in their baskets often double or even triple what is typically found in the carts of in-store shoppers. Not surprising given Amazon's inex- orable inroads into consumables, many brick-and-mortar chains have begun making it possible for shoppers to order online and pick up in store. By some esti- mates, brick-and-mortar stores now aver- age more than 100 e-commerce orders per week. The practice is so popular that even Amazon wants a piece of the pie and is reportedly considering establish- ing up to 2,000 "click and collect" stores and possibly even some full-scale gro- cery stores. Unsurprisingly, even the ever savvy and mighty Walmart is not immune to the allure of e-commerce. The supercenter juggernaut is working to get up to speed and dramatically boost its digital opera- tions to better compete with the likes of Amazon, which presently has the advan- tage of a larger online presence in inter- national markets, a larger selection and number of products online, and a more successful mobile app and customer loy- alty program in Amazon Prime. Walmart's $3.3 billion acquisition of Jet.com in August 2016 was a decisive strategic step in boosting the retailer's digital operations. Use of Mobile Payments, Apps and Screenless Payment Accelerate Especially as Millennials and Gen Z come of age, a growing aspect of shop- ping convenience will be the ability to pay wirelessly or by tapping a card on a reader. Many experts predict 2017 will see accelerated growth in contactless transactions due to a variety of factors, including America's continued transition to the EMV electric standard for smart payment cards requiring insertion rather than swiping. Rapidly gaining ground are apps designed to speed up the payment process, keep track of transactions, cal- culate and apply customer rewards, and help shoppers bypass lines. For example, since introducing the popular Walmart Pay in 2016, Walmart has already added two new features to the mobile app: the ability to refill prescriptions and skip pharmacy lines and the ability for users of Walmart Money services to submit information for the transaction privately rather than filling out paperwork in stores, also skipping the line. Also get- ting into the app game, Target plans to introduce a mobile payment option in 2017, although it is not yet clear whether it will be embedded in the core Target mobile app, Target's Cartwheel dis- count/coupon app, or both. On a similar note, screenless pay- ment is shaking up online grocery shop- ping. A pioneer in this area is Amazon with its voice-activated Alexa home assis- tant and developing cashier-less Amazon Go brick-and-mortar stores, where sen- sors automatically calculate purchases as customers load up and leave the store." Smaller Stores Bigger Than Ever If there's one thing every grocery shop- per wants, it's the convenience of being able to get in and out of the store as quickly as possible, and for a growing number of shoppers and retailers, smaller stores are the ticket. In Europe, ALDI and Lidl have long wielded the smaller store advantage compared to the huge hyper- markets, and both chains are expanding in the U.S. As a result, the smaller store strategy will be even more important to Walmart and Target, both of which have been fielding smaller formats to offset inroads made by dollar stores and to fill the gap between full-sized supercenters and stores too small to warrant their invest- ment. Walmart's experiments with small- format stores include its Neighborhood Market stores – which measure approxi- mately less than one-quarter the size of a Walmart Supercenter – and currently number about 700, with expansion ongo- ing. Walmart also recently added two Walmart Pickup and Fuel shops as a way to test additional pickup options. Customers order online and pick up at the smaller stores, which carry convenience store basics as well as fuel. The orders are delivered from larger Walmart stores to the smaller stores. Target, too, has been opening small stores, though mostly in urban areas where space is tight. In late 2016, Target opened three smaller format stores in New York City, and according to reports, Chief Executive Officer Brian Cornell envisions opening hundreds of smaller Targets, making them a major part of future growth. Overall in 2016, Target opened 32 "flex-format" stores occupying less than 50,000 square feet, with plans for at least 16 more in 2017. The smaller stores afford Target entry into high-rent urban areas that can't handle typical big- box stores. Along with the smaller size, the stores' product selection is tailored to the surrounding demographic. As of early 2017, even the smallest value grocery format of all – dollar stores – is going even smaller. Looking to tap further into the all-important Millennial cohort, in January 2017 Dollar General began testing in Nashville a 3,400- square-foot concept called DGX, with plans to open a second DGX in Raleigh, North Carolina. SHELF-STABLE CLEAN LABEL FLAVORED BUTTERS FROM CHEF SHAMY Chef Shamy introduces Fresh Churned ® butter brand. The driving force behind all Chef Shamy brands is great flavor and clean labels. The new Fresh Churned brand does not disappoint. The idea behind fresh churned was to provide a 'never-frozen' product that would pre- serve the flavor and smooth mouth feel of butter fresh from the churn. Virtually all commercially manufactured butter is frozen immediately after packing to pre- serve shelf life. Chef Shamy takes butter fresh from the churn and mixes in its pro- prietary fresh ingredients and delivers straight to the grocer. With a little bit of science and a lot of common sense and testing, Chef Shamy now has certified shelf stable garlic butter, honey butter and real buttercream frostings to offer to grocery store bakeries and foodservice. Through a proprietary process, Chef Shamy butters, including its new Fresh Churned brand, are certified food safe at room temperature for four months. That means these butters can be packed in crystal clear clam shells with a fresh churned look and feel. They can be sold right out of the bakery, produce or meat department to enhance bread, meats and vegetables. Grocers will never need to worry about food safety and consumers can keep these butters out and near where they cook for quick and easy application. Keep in mind that all these butters are 100 percent real butter. Often demonstrated on the outside of a grilled cheese sandwich, the garlic butter reigns supreme for fla- vor. It carries the cleanest label of any commercially available garlic spread. Ingredients include: butter (cream, salt), garlic, parmesan cheese, fresh chopped garlic, salt, garlic powder, herbs & spices. Current industry offerings infuse similar products with oils, water and chemicals as they have done for years. Additional offerings include Onion, Pesto, Lemon Dill and Southwestern on the savory side. On the sweet side of the ledger are Cinnamon, Vanilla Bean and Strawberry Honey Butters. Consumers want clean label, healthier-for-you prod- ucts. Chef Shamy has produced a product on which any home chef would be proud to put their name. The newest addition to the line-up (2017 flavor) is Strawberry Honey Butter. With a light fluffy texture and flavored with real strawberry, it stays true to the Shamy mission. Included in a line-up that has seen double digit growth and is adding profitabili- ty to the dairy set and to the bak- ery and meat departments are three honey butters, two savory butters and four fin- ishing butters. Real Butter Cream Frosting Chef Shamy has now added a real butter cream frosting in two flavors, Vanilla and Chocolate. Each frosting is infused with only four ingredients, leaving them dozens short of the current commercial offerings. Once again, Chef Shamy leans to quality and provides a bakery solution and a retail solution with real buttercream. For more information, visit butter.chef shamy.com or stop by booth #4508. WIDMER'S AGED BRICK CHEESE Brick cheese is an American original and is among the first washed rind cheeses produced in the U.S. It was developed in 1877 by John Jossi, a Swiss born cheese- maker. As Jossi did, Joe Widmer uses real brick to press his cheese, the same bricks his grandfather used in 1922. After press- ing, the cheese is placed in a salt brine for 11 hours, then moved to a warm, humid curing room where it is washed and turned daily for seven days. It is then packed in parchment paper and foil. It reaches peak fla- vor at four to five months. This semi-soft cheese has a pleasant, earthy flavor that intensifies with age. Widmer's Aged Brick is also available with caraway seeds. Suggested retail price is $12.99 to $15.99/pound. For more information, call 888.878.1107 or visit www .widmerscheese.com.