On a recent afternoon, I saw two twenty-something women photographing vegetables at the bustling Whole Foods store on Sixth Avenue and 42nd Street in New York City. After taking several shots of organic beets and swiss chard in various arrangements, they posted the images on Instagram, giggling as the “likes” and “comments” began to arrive almost instantaneously. Were they food bloggers, I wondered? No, as it turns out, these young ladies were just highly engaged consumers going about their day.
Food has always been a social differentiator. For hundreds of years restaurants have been indicators of social status. Food shopping, preparation and consumption are more experiential than ever, and for young consumers, they are a manifestation of who you are, or at least how you want to be perceived, in person or on social media. The millennial generation has become larger than the baby boomer population, commanding a growing share of the estimated $1 trillion in annual grocery spending. Millennials and their unique attitudes toward food shopping have drawn the attention of grocery retailers. More and more, millennials want their food choices to fit into the ideal image they strive to portray—one that shows their social consciousness, sense of community, concern for health and wellness, and demand for quality and value. You are what you eat, and you’re as smart and amazing as your grocery shopping habits.
Convenience Is King
The millennial food experience cannot come at the expense of convenience, however. Millennials have long been known for their demand for ease and value, embracing online shopping and price transparency, forcing the food retail industry to address the technological advances that have become integrated into day-to-day life. Technology has enabled this generation to be independent, yet simultaneously able to understand the value of products. With the internet at their fingertips, millennials pride themselves with being “in the know” with what fair prices are, as well as whether they are getting the highest quality products. To the dismay of many consumer product companies, millennials will not clip coupons from the Sunday paper, and they also no longer want to pay the high prices charged by the old Whole Foods. Amazon will have to change Whole Foods’ ways.
Stocking up on basics can be difficult for the growing number of urban folks without a car, and inconvenient via taxi, Uber or Lyft, causing many to resort to online grocery shopping at Instacart (a well-developed app system that allows for grocery orders to local stores from the phone), Jet or Amazon Pantry. Arielle J., a 23-year-old recent college graduate living in Chicago, said, “I order online for things like cereals, soups, beans, pasta sauce…essentially any item that is bulky or heavy and can last on my shelf. I simply can’t carry that many grocery bags at once to my apartment, and after calculating the cost, getting an Uber would cost more than using one of these services.” Arielle said she often shares via Twitter or Snapchat news of her online orders with her network, recommending items that she particularly liked.
A recent Goldman Sachs report, “Supermarket Shift,” estimates that online purchases currently total 3 percent of grocery spending, but will grow to an estimated 20 percent by 2027, or over $250 billion in annual spend. The convenience of online grocery shopping is hard to beat, but with many different options available to consumers, food retail companies are still vying for the top spot. Amazon (AMZN) has gained traction with Amazon Pantry and Amazon Fresh, but other companies are still contenders. Ahold Delhaize (AMS), which owns Peapod, said it plans to double its e-commerce sales by 2020 from existing sales of 2.3 billion Euros ($3 billion) in 2016. Peapod sales grew more than 25 percent in New York in 2016. As it increases accessibility of its service beyond the current level of 40-45 percent, it has tremendous opportunity to grow. Kroger (KR), the largest U.S. grocery chain, offers online ordering through its Clicklist service at more than a third of its 2,800 U.S. stores, and plans to expand its delivery arrangement with Uber and others.
Experiential Brick and Mortar
To cultivate a food image worthy of social media, many millennials have also changed their in-store shopping habits. “Where I buy my groceries can often get just as much attention as where I go out to eat,” said Emily O., a 26-year-old law student who shops primarily at the Wegman’s and Trader Joe’s near her town home in central Virginia. “People look at the logo on your shopping bags and judge you. There’s this social pressure to buy food that has all-natural ingredients but is also cost-effective.”
Whole Foods Market (WFM) and Trader Joe’s have taken a creative approach to grocery retailing, and both recognized early on the value of stressing high-quality, health-consciousness and convenience. These retailers want to make grocery shopping an enjoyable and memorable experience rather than a chore, and the chains’ recognition of the desires and needs of millennials have made them favorites among young shoppers.
Trader Joe’s, the 50-year-old California-based retailer privately owned by the German family trust that also has a controlling stake in one of the Aldi divisions, has catered to many different demographic groups, but seems to be resonating particularly well with millennials for a variety of reasons. Stores are small with super-friendly staffs, giving the store a personal, specialty feel and “global” vibe, catering to a so-called the “bourgeois bohemian” consumer, yet also attracting the rich and famous, with frequent celebrity sightings. About 80 percent of its products are private label. Trader Joe’s has taken a new approach to millennial shoppers: understanding the desire for healthy, homemade meals without cooking from scratch. Their microwavable meals are far from Easy Mac. Instead, they are items like “Sweet Potato Gnocchi,” “Lamb Koftas,” and “Vegan Tikka Masala.”
“I love going to Trader Joe’s for my grocery shopping trip,” said Tyler G., a 24-year-old Californian (and self-proclaimed foodie) working at a Fortune 500 technology company raved. “I can go in there and buy really fresh bread, cheeses, meats, vegetables and packaged nuts and snack foods. For weekend meals at home with friends, I like to cook, and find I can add fresh food to amplify their premade items, which are of really amazing quality.” The only downside to Trader Joe’s, according to Tyler, is that it has not yet entered the e-commerce space.
Whole Foods, founded in 1980, takes a different approach to millennials, but boasts similar success. Although its acquisition by Amazon has sparked changes in the company, its underlying mission remains the same: to make responsible decisions regarding the community and the environment. “If it hadn’t been for Whole Foods, I don’t know what I would have eaten during my eight months of week-long out-of-town business trips,” remarked Ella, a 29-year-old NY-based management consultant. For a recent project, Ella spent Monday through Thursday at her client’s medium-sized city. On a food per diem, with few affordable healthy restaurant options, she would stop at Whole Foods each evening to pick up the dinner she’d later eat in her hotel room. “The premade food is delicious and easy, and fruit, yogurt and snacks healthy and fresh.” After discovering a particularly tasty combination at the salad bar, she’d share her find with friends and family on Facebook.
Amazon’s purchase of Whole Foods demonstrates the company’s belief in the various ways technology can integrate online and offline, an indicator that food retailing is ripe for big changes. The acquisition will no doubt create synergies between Whole Foods, Amazon Fresh, Prime now and other business, as well as new store formats.
Meal Kits: Convenience and Experience Without Waste
Food delivery services such as Seamless and Uber Eats have become second nature for young consumers used to having the anything they want at their fingertips. But having prepared food robs one of the skill development (and bragging rights) surrounding the cooking experience. Enter the meal kit. These products epitomize “cooking made easy,” or having ingredients in the right quantities shipped to your home along with directions to prepare delicious, interested, beautiful dishes specially selected for you.
A recent study by market research firm Fluent revealed that almost a quarter of millennials have subscribed to a meal-kit service at some point, compared to 15 percent of the typical grocery shopper. Hello Fresh and Blue Apron are among the leading companies in this space, appealing to the millennial need for convenience and keeping up with the latest health and food trends.
Meal kits have gotten the attention of major supermarket chains. Albertsons (ABS) recently purchased New-York-based “Plated,” the first acquisition of a prepared-meals company by a major grocery player. Plated allows customers to buy meals costing $10-$12 meals such as chicken with roasted potatoes, or feta-stuffed lamb burgers for delivery or pickup at Albertsons stores.
However, the success of the category is by no means guaranteed. Arielle J. complains that high cost was the main reason she cancelled Hello Fresh after the first few promotional orders. The other deterrent was far more unexpected: Two boxes were stolen from her front porch. In busy cities, packages clearly labeled as food often disappear after delivery from buildings without doormen, prompting Amazon to create its new in-house delivery service Amazon Key.
Since going public in June, Blue Apron (APRN) has lost more than half its value, one of the biggest valuation declines for an IPO in 2017, causing it to recently announce it was replacing its CEO. “Blue Apron doesn’t offer enough choice,” complained Liz O., a 25-year-old writer from Westchester County, New York. “They charge $10 per person per meal for the standard two-person plan, which comes with three recipes (six total meals) per week. Much of the preparation work is left to the customers. With the rise of Pinterest, Tasty, and other recipe websites at your fingertips, most of my friends and I are using Blue Apron several times to develop an interest in cooking, then flying solo.”
Blue Apron also fails to deliver much convenience or speed up the cooking process, except for saving time figuring out which recipes to choose or which ingredients to buy. However, millennials love choice—the internet has made them accustomed to finding anything they want at any point. Wouldn’t that be easier than designated recipes from Blue Apron?
Sometimes You Don’t Want Fancy
Not all grocery stores need to be trendy and fun to appeal to millennials, however. In fact, for produce and buying items in bulk, “no frill” stores are a breath of fresh air for consumers, providing reliable items for rock-bottom prices. Aldi and Lidl, whose growth strategies have brought them to the U.S. from their home country Germany, have excelled at selling a narrow assortment of curated, well-presented private label product. Another young company, Boxed, offers roughly 1,500 items that shoppers can order in bulk (think Costco without the membership fee), thereby saving money.
Increasingly, social media is dominated by images of farmers’ markets and local food shopping. Buying food and beverage grown, prepared and packed locally is viewed by millennials as a way to support small businesses and show a concern for community. It also cultivates an image of embracing natural foods and eschewing pesticides and artificial growth hormones. Farmer’s and other small independent local markets are a social activity that embraces the two most important aspects of buying groceries for millennials: seamless integration into their online persona, and a demonstration of health-conscious and price-conscious tendencies. They can also be a form of entertainment, an event to attend on the weekends or holidays, and then post about it on Facebook.
The Future of Food Retailing
Many in the grocery business feel that the industry is poised for disruption that it hasn’t seen since A&P and other supermarkets began to upend local mom-and-pop grocers in the 1930s. The rapid change occurring in the food retail space, driven by the growing purchasing power of unpredictable millennials and the explosion of new technology, has caused many traditional grocery retailers and other companies to take huge gambles to position itself for the future.
Though the major beneficiary of these changes, according to Goldman Sachs, will be Amazon, 15-20 percent of whose net sales it expected to come from grocery in 10 years, they will not be the only success story. There is no doubt tremendous opportunity for new concepts that deliver not only convenience and price, but also elevated experience, quality and social currency to a rapidly evolving consumer population.