Expert Interview – Dealing with Disruption in the Grocery Segment

The US retail grocery market segment is currently a $608 billion industry and growing. However disrupters including online retailers and meal-kit delivery services are creating competition for traditional supermarkets and consumer lifestyles are changing the way people shop. I spoke with two of my colleagues about this industry for this month’s Expert Interview. Bob Waxman, Director of Supermarket and Chain Store Sales and Oliver Munoz, National Account Manager, shared their insights and advice.

LC: How long have you each been in the industry?

BW: Over 35 years. I started as a sales rep for another New York-based distributor and joined Imperial Dade in 1987. Been here ever since.

OM: I’ve been with the company for 5 years focusing on sales, sourcing, and market research.

LC: What are some of the big changes you’ve seen in the grocery and supermarket industry in recent years?

OM: Mergers and acquisitions have been prevalent.

BW: I agree, consolidation of single stores and smaller chains into buying groups or larger chains has been the biggest and most defining difference. The consolidation has both added to the competitive edge as those retailers now have an expanded presence. But it’s removed some competition by lessoning the number of independents that the consumer can choose from. There is also a large European influence that has captured part of the market with the introduction of new chains.

BW: There has also been consolidation among distributors, including Imperial Dade. Fortunately, our expanded reach has opened up opportunities to partner with more customers.

OM: Non-traditional competition is also changing the landscape. Although online sales have not been a very profitable venture for most grocery retailers it is an important channel to consider. In 2017, online grocery sales were over $14 billion and that figure is expected to more than double by 2021.

LC: What the challenges that grocery operators are facing today and how do you get involved in helping solve those challenges?

BW: Economics continue to be a major concern and challenge. It is a delicate balance of image and cost that make up the dance we do every day.

OM: Costs are the big issue. In 2017, the data shows high increases in raw material costs, both for store supplies and agricultural products. These costs would have to be passed along to the consumer unless we can help find solutions. In these cases we work with manufacturers to identify alternative products that provide cost savings.

BW: We work as an agent for our customers. We listen and understand their needs. Then we work with a wide variety of manufacturers to source the best products at the best prices. We look at new products daily and stay on top of innovative ideas.

OM: For example, store-cut fresh fruit programs have been a hit in recent years. One of our customers was using an outdated container that came open easily and did not present a consistent look across the sizes offered. We introduced a square, tamper-evident container that has better clarity, an upscale look, and fit in the display case better. Their sales of increased by almost 30% following that change. Improved merchandising can be the key to driving sales and increasing profits.

BW: We also offer a variety of technology tools that help our customers manage their inventory more precisely which saves money. We help them prepare for sales and seasonal trends, as well as set controls on supply items such as gloves and bags. For some stores we offer VMI (Vendor Managed Inventory) which saves on labor costs and allows store management to focus on center store profit.

LC: What are the trends you each see for the coming year?

BW: I’m seeing more interest in sustainable packaging as well as more upscale packaging. Though cost is still a concern, keeping up with or outdoing other forward thinking retailers is important to the end-customer’s experience. Prepared foods and in-store restaurants are also going to be the flavor of the year.

OM: Yes, prepared foods is likely to continue booming. I work with our customers to help them initiate or grow this key category. Also, understanding the demographics of different neighborhoods is important. Understanding the ethnic foods that consumers are looking for and merchandising them correctly leads to higher sales and customer satisfaction.

LC: Any other suggestions you can offer retail grocery operators?

OM: Consider getting into the online space by partnering with a third-party grocery delivery service. This can help fend off the competition from other online retailers and help you grow your market share by capturing new sales. This space will continue to grow, but you need volume to make if profitable. Create a consumer-friendly website that is updated regularly with special deals and informative content that is of interest to your target market. Couple that website with online-ordering capabilities, either through a third-party service or your own platform.

BW: My advice is to let us help grow your business. We have been doing this a very long time. Put our resources and economies of scale to work for you!

The dynamic duo of Bob and Oliver are available to consult with retail grocers and related businesses about supply chain programs and solutions. They can be reached at bwaxman@imperialdade.com and oliverm@imperialdade.com.

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