I interviewed Steve Johnson who discussed Consumers Are Evolving Faster Than Supply Chain.
Today we're speaking with Steve Johnson who is the Grocerant Guru with Food Service Solutions. And Steve has 35 years’ experience in the food service sector. Today's interview is about why consumers are evolving faster than the supply chain.
So, Steve, my first question for this interview is what is a — and I might be pronouncing this wrong — a Grocerant?
A grocerant is any retail outlet that sells ready-to-eat or heat-and-eat fresh prepared food. And let's see. What does that mean?I'll give you a couple of examples. First example would be McDonalds. It's ready-to-eat food. You go through a drive-thru at McDonald's, you get the food to-go. 67% of all sales at McDonald's go through the drive-thru, are all packaged to-go. In the U.S. particularly, 50% of all Americans over the age of 18 are single. So meals to-go. The consumer thinks about meals.
What else is a grocerant? Restaurant food from Ruby Tuesday's, Bennigan's, T.G.I.Friday’s where they have pick-up and to-go. Olive Garden, buy one today, get one tomorrow. Most restaurants and sit-down restaurants have programs to get food, buy it today, take it home for tomorrow, ready-to-heat, and heat-and-eat, or prepared today for take-out, delivery, and to-go.
79% of all restaurant meals in America, 79% of all restaurant meals in America come from fast food restaurant. And over 67% nationwide of all fast food restaurants sell their food to go. It's a huge competitor.
One interesting fact for legacy grocery stores and people supplying grocery stores that they need to know, in 1960 there are eight restaurants for every grocery today. Today there are 25 restaurants for every grocery store. So this has become a battle of share of stomach.
Now let's get into the grocery stores and C-stores. Most recently, convenient stores have become fresh food and ready-to-eat prepared food retailers. From 7-Eleven, who builds 50% of their stores without offering gasoline. They sell food and prepared food as the key driver. Wawa, Sheetz, [inaudible 00:02:31], all do extremely well. And then the grocery store delis. Wegmans people know, Whole Foods. Central Market, HEB, Safeway, they all sell fresh prepared from the service deli, some better than others.
So those, that's the grocerant component right there. So, what's a grocerant? Any location that sells ready-to-eat, fresh prepared food or heat-and-eat fresh prepared food, where they heat it and use it right away.And it can be a day later.
Can you talk about why this is important, and in particular, how it's changing the supply chain?
Well, this is really an interesting fact that's happening particularly across the U.S., but it's happening in middle Asia and different parts around the world. Central kitchens in, let's say, if you had 10 restaurants in LA or a regional grocery store chain in Los Angeles or Portland, Oregon or Houston, Texas, they can provide and cook in one central location, a lot of food and package it up, single fresh pack, and run it out there three, four times a day.
In Japan specifically, the convenience store sector gets three deliveries a day at their convenience stores. They get fresh breakfasts brought in that are packaged, made in a central kitchen and dropped off. They get bento boxes at lunch and dinner that are fresh and targeted for each day part. So they're not sitting there all day long, even 24 hours. They're made fresh as the day goes.
In Dallas, Texas there is a place that's been around since '97, '98, Eatzi’s. They make fresh food all day long, and it sells all day long. At 9:00 at night, they put it on sale. Anything that didn't sell, they sell at half-price. It's all fresh all the time. Consumers respond to that.
One of the most important things about how it's evolving the supply chain, instead of getting all your chicken produced out of Tennessee in the United States coming from Tysons and shipped frozen all over, people are getting fresh chicken and cooking it fresh in a regional location and taking it out, or they're cooking it in house. There's a company called New Seasons Grocery Store and Green Zebra Grocery, both in Portland, Oregon that prepare food fresh in their stores. Makes a tremendous difference when they cook it fresh in the store.
And so how's the supply chain? It's decentralized. It's becoming more regional and more fresh, fresh prepared food. One of the things that 7-Eleven has done in the U.S., now they don't do it three times a day delivery, but they do get their sandwiches and salads pre-made. But they use a manufacturer, a production in many cities, at airports, Sky Chefs, where Sky Chefs, actually, at the airport caterers that cater to the airplane, they manufacturer the food fresh every day and run it out to the... 7-Eleven picks it up and runs it out to their store on a daily basis. So this regional outsourcing of fresh-prepared food, that's what's driving it. Customers are weaning themselves off their roller grill, that roll, roll, roll away roller grill, where you buy all the hotdogs and you get your hamburger buns would come in from the bakery. That's not happening so much. They want better for you, fresh prepared products.
So the decentralization of the supply chain is a real opportunity for those distributors who can adapt, and it's a great opportunity for young companies or startups that want to supply local restaurants and local outlets that sell fresh-prepared, ready-to-eat, to-go food.
What are the legacy retailers doing to address this?
Well, they are stumbling. Many of them have tried. Let me give them some real credit. Even though there are now 25 restaurants for every grocery store, the average person has to go by 25 restaurants to get to their grocery store. So there's a lot of competition out there.
Grocery stores used to sell people food to stock up in pantry. The grocerant sector...And the consumer doesn’t think anymore that they have to have soup for six months. They have to have food for three weeks at a time. They want to get meals for today or tomorrow. And they think meals, not pantry. And so the mindset of the consume has shifted, maybe because there is so many restaurants that offer very competitively priced, complete meals.
And the grocery store sector, you have to go home, you have to get it, you have to cook it. You have to start from scratch and spend hours. People say they like to cook. They simply don't do it.
But many of the grocery stores, they have a deli department that sells legacy packaged products, and then they have a service deli. But they've gone to, rather than regional manufacturing or local in a city, they might go to a six-state commissary, and they put stuff out that is problem not have good. They have chicken that's cooked somewhere in some other state that comes in cold and seasoned. And it sits there in the glass. And they've tried to make fresh, prepared food at CPG item. It's not working. The customers see through it.
Wegmans does a fabulous job using fresh food and doing it. Whole Foods is selling a lot of fresh food. 35% of their sales in their stores come from the fresh food at Whole Foods. Companies like Metropolitan Market sell about 44% of their food is all fresh-prepared food. So, it's happening at a few legacy grocery retailers, but they're selling fresh food, not legacy food, legacy CPG pantry products. And so they have to get a whole new mindset.
The traditional grocery stores are losing customers on a regular basis. If it were not for SNAP and WIC and some of these other programs, and if customers were empowered with more choice, they would lose even more customers. So they're not really combating it well enough, and they really need some more research, and they need to look at the consumer and not the pantry. They just still get fliers in the mail and sell you buy six, get six, or something like that. Or buy three, get six at a time, or buy 10 pounds of this, and you get five pounds of that. Those things don't work too well. They do, but for a very small sector of society in today's world. Particularly not for millennials who want fresh-prepared food, and they're migrating to fresh outlets to buy that food.
And do you have any final recommendations for supply chain professionals and executives?
Yes.Decentralization. Think fresh. Work locally. There is a company in Los Angeles called Every Table, which is selling meals and meal components. There are ways for specialty supplies to make and sell into them new product but that meets their format. The same with companies like Metropolitan Market, Wegmans, and Whole Foods.
Selling fresh-prepared food in a new format that's fresh, local, and sustainable in the mind's eye of the customer is a huge opportunity for people. But many of these large distribution companies need to think local and decentralize in order to drive incremental sales.
Thanks, Steve, for sharing today.
You're very welcome.
About Steve Johnson
Grocerant Guru® Foodservice Solutions® in Tacoma Washington