Today’s consumers want food that’s fresh and convenient. The latest example of that trend is Google’s recent announcement that will launch fresh grocery delivery service to parts of San Francisco and Los Angeles — going head to head with Instacart and Amazon Fresh.
Google is hoping to carve out a piece of the fresh food market that food industry research firm Technomic estimates will reach $60 billion in sales by 2025. The tech giant’s move into fresh groceries might unsettle some food retailers, but it’s actually validating news for small-format stores taking cautious steps toward selling fresh. As Google knows, combine freshness and convenience, and you have a winning business strategy. And what’s even more convenient than shopping online for fresh foods? A five-minute fresh- and prepared-foods shopping spree on your way home from work.
That’s where the real opportunity lies for small-format stores looking to capitalize on the fresh trend, said John Guerrieri, vice president, Small Format Channel Group for Hillphoenix. Small formats have the compact size and on-the-way location that consumers already equate with convenience.
Data backs this up. Technomic forecasts convenience store sales will rise 3.5% annually over the next nine years and attributes much of the growth to “increased focus on fresh prepared foods.” A report by Nielsen shows North Americans already spend $17 billion a year on fruit and vegetable snacks — choosing these healthy, fresh snack options over cookies and cakes.
So, the business case is clear for small-format stores, Guerrieri said. Now they just need to increase their fresh offerings — and the infrastructure that can support that supply. “Fresh is both an opportunity and a challenge for small-format stores,” he explained. “The potential to grow sales through fresh goods is real. But to do so, small formats need to change their product mix, add more refrigerated cases and improve the quality of those cases to reduce the spoilage that leads to product shrink. And they need to make all of those upgrades within a traditionally tight budget and a finite footprint.”
Small formats need refrigeration solutions that can meet many of these needs at once. Guerrieri said that reality has driven interest in AdvansorFlex, the new CO2-based refrigeration system that’s part of Hillphoenix’s Second Nature line. AdvansorFlex is designed for small footprints; it’s about 20% smaller than standard commercial refrigeration systems and full-size CO2 options. It’s also less expensive than full-size CO2 systems, and it competes with traditional refrigeration systems on price if retailers consider total cost of ownership.
That’s because AdvansorFlex has the same advantages larger CO2 refrigeration systems offer. Alternative CO2 refrigerant is at least six times cheaper than traditional refrigerant. Energy, installation and maintenance costs are lower, too.
Plus, CO2 offers another advantage that’s particularly attractive to small-format retailers looking to expand their fresh offerings, Guerrieri said. CO2 case controllers use electronic expansion valves that regulate temperature better than traditional mechanical valves. The technology reduces case temperature swings, which extends the shelf life of refrigerated foods. Food stays fresher and salable longer.
“When we talk to small-format retailers who have a good handle on their product shrink rates, they quickly understand this is a key advantage of CO2,” Guerrieri said. “They know that if they can extend the salability of refrigerated foods — especially cut fruits and vegetables and prepared meals — by even a few hours or a day, they can dive more deeply into the fresh trend and make more money.”