To say that the presentation by Walmart Food EVP Steve Bratspies to the Bentonville Bella Vista Chamber’s WalStreet supplier group last week was well timed is an understatement. Retailers’ obsession with all things edible has been in full force for a few years, but it has recently escalated into a frenzy. Even though the much-feared European discount powerhouse, Lidl, recently postponed plans to hang hundreds of shingles in the U.S. (its stateside expansion is now slated for 2018), many others are ramping up on the grocery front. Target EVP Kathy Tesija recently called food a “critical area of the store” and its reinvention of the category, including increased specialization and a focus on health and wellness, is in early stages. Target has also hinted at aligning grocery with its other categories by backing off of national brands and strengthening its private brand bench. At the same time, fearless food juggernaut Kroger is showing no signs of slowing down, even as it gobbles up bricks-based regional competitors, digital wellness players, and big data powerhouses.
If that weren’t enough, oodles of digital upstarts promising various combinations of curated culinary experiences, dietary specialization, and rapid home delivery continue to hit the scene, including Blue Apron, Instacart, Plated, and Hello Fresh. Amazon’s relentless assault shows no sign of letting up either as it rolls out Amazon Fresh to new markets and partners with bricks-based retailers to fill the gaps.
The current competitive landscape paints a daunting backdrop for Walmart, a retailer for which grocery is a make-or-break business, even as it must also manage a multitude of other categories. Mr. Bratspies began his presentation by ticking off a litany of consumer trends that only add to the pressure, then offered a robust run-down on Walmart’s plan of action on multiple fronts.
Baby boomers are consuming less as they get older, Gen X is in its prime consumption years yet it represents a relatively small group, and even Millennials, the squeaky-wheel generation that is getting the most grease from retailers, are forming households later in life. At the same time, shoppers are visiting fewer retailers; according to Bratspies, trips are going down along with the number of stores shopped. That translates to fewer trips for retailers to capitalize on, fewer conversion opportunities, and fewer interactions with customers. These and other realities are a baseline buzzkill for the grocery business. As Bratspies said, it’s “just pure math.”
Even so, as consumer preferences shift, retailers have the opportunity to cater to new choice-drivers. Bratspies identified three as having particular relevance.
1. Food as experience, not just sustenance
Ethnic food in particular has gained popularity recently, with 75% of shoppers having purchased it in the past month and growth predicted at 20%. Millennials may drive a good portion of this growth, since they have more adventurous palates.
2. Dietary needs
Nearly two-thirds of baby boomers have a chronic health condition, and one in three Americans are predicted to have diabetes by 2050. 19 percent of baby boomers see food as integral to managing their health conditions.
3. Blurring of meals and snacks
One in five eating occasions is a snack, with 53% of consumers snacking two to three times per day.
Consumers are also demanding unprecedented transparency in product sourcing and processing as well as clean labels and fewer ingredients. According to Bratspies, “there’s nowhere to hide,” and, echoing themes from Walmart COO, Judith McKenna’s February presentation to the WalStreet group, complexity of any kind is to be avoided at all costs.
Bratspies outlined five customer promises that are foundational to Walmart’s strategy in the midst of these shifts.
- EDLP – Price is still “the decider,” even as the bar is being raised across other customer criteria.
- Quality you can trust – Customers are smart enough to expect one-dollar quality on a one-dollar item but won’t tolerate one-dollar quality on a five-dollar item. Quality is defined by the item being purchased.
- Everything you need – Despite its forays into small formats, Walmart is still very much in the supercenter business and is invested in facilitating a one-stop-shopping experience for its customers.
- Happy to help – Of Walmart’s three sub-promises (a fast, clean, and friendly shopping experience), friendliness makes the biggest difference at the end of the day.
- Shop your way – Customers must be able to access Walmart online from any device and from multiple locations.
GROWTH GAME PLAN
Walmart has enjoyed a 20 percent compound annual growth rate in food over the past 20 years. Bratspies identified several calls to action that are foundational to continuing and improving upon the trend.
1. Win in fresh