Faster, Fresher, Cheaper: The Grocery 

Shopping Revolution

Supermarkets are improving quality and convenience. 

CR shows you how to save money and still make healthy choices.

By Tobie Stanger

May 23, 2017

Marie Henry cares a lot about the food her family eats. During growing season in her town of East Nottingham Township, Pa., the 35-year-old stay-at-home mom walks down the street to her Amish neighbors’ farm to buy fresh eggs and pesticide-free strawberries, vegetables, and herbs. She skips the supermarkets near her home to purchase the “perfect” organic oranges and lemons that she says she can get only at Wegmans, a 30-minute drive away. About once per month, she’ll also make a special trip to Trader Joe’s, 40 minutes away, to load up on the organic brown rice and quinoa noodles she feeds her 1-year-old, Adam.

When Henry and her husband, Bill, 34, a public-school music teacher, feel pressed for time, they grab the basics at a local Giant supermarket. Bill goes to BJ’s Wholesale Club on occasion. They sometimes have meal kits delivered by Blue Apron and HelloFresh. And they use AmazonFresh, the online grocery delivery service, which charges $15 monthly on top of the $99 annual Amazon Prime subscription. Henry admits that getting organic produce and meats delivered to their door is an indulgence. “But the convenience factor is worth every penny,” she says.

Few families have the good fortune of having an Amish neighbor, but in every other way the Henrys typify the new American food shopper, who wants food that’s very fresh and minimally processed, and satisfies an ever-more-adventurous palate. We seek out specialty grocers and farmers markets to get it, even if it means literally going the extra mile. Each month 68 percent of Americans do their grocery shopping at five or more types of food retailers—convenience stores, discount supercenters, farmers markets, specialty/natural-food stores, supermarkets, and warehouse clubs. In addition, we might go to more than one of each type of store, according to the Hartman Group, a food and beverage industry consulting company in Bellevue, Wash. “Today the choices are extraordinary,” says Laurie ­Demeritt, the company’s chief executive officer.

End of the Middle-Class Market?

Where does the traditional grocery store fit into this mix? Experts say the supermarkets that have anchored many a community are struggling to compete with higher-end retailers such as Wegmans on one hand and bargain vendors like Walmart and Costco on the other. Witness the disappearance of the Great Atlantic & Pacific Tea Company, otherwise known as A&P, which folded in 2015 after 156 years.

“Just as the middle class is shrinking, the middle class of grocery stores is being challenged,” says Leslie Sarasin, president and CEO of the Food Marketing Institute (FMI), a grocery industry group.

The supermarkets that are doing well are premium stores such as Wegmans, specialty stores like Trader Joe’s, and discounters such as WinCo. “Traditional supermarkets are stuck in the middle,” Demeritt says.

Consumer Reports subscribers’ preferences mirror these trends. In our latest ratings of 62 supermarkets and food retailers, based on survey responsesfrom almost 58,000 subscribers, ­East Coast chain Wegmans earned the top spot, a place it has held since 2006. It’s beloved for most everything, from the quality and variety of ­produce to the courtesy of staff. (Our supermarket and grocery store ratings are available to subscribers.) 

Other stores that did very well overall include Trader Joe’s, Publix, and the family-owned Market Basket chain, serving the Northeast. Walmart, with the largest market share for food and beverages of any U.S. retailer, scored well for competitive prices but otherwise was at the bottom of our ratings.

Mainstream grocery stores still have fans. Our survey that found 70 percent of CR readers were either completely or very satisfied with the supermarkets where they do most of their grocery shopping. By contrast, only 48 percent told us they’re very or completely satisfied with their markets’ healthy offerings, and only 29 percent said the same about the price of their markets’ organic options.
Keys to Shopper Satisfaction

What draws us to a market week after week? A wide selection, high-quality produce, and good prices are the main attractions, our survey respon­dents say. But stores that offer an alluring sensory experience while grocery shopping—the scent of cinnamon-­apple pies from the bakery oven, the sight of plump purple and ivory eggplants in a rustic wooden case—bring us back.

Attention to these details might ­explain Wegmans’ popularity. The chain, with 92 stores from Massachusetts to Virginia, charmed our survey respondents with its selection of healthy options, customer service, reasonably competitive prices, and fresh store-prepared foods, and the quality of its poultry and meats, among other standout features. “Wegmans produce is the freshest in town, and the selection is huge,” Barbara Goldenberg, of Frederick, Md., says of her local store.

What else contributes to appreciation of a grocer? Stores with the highest scores for staff courtesy all did well. Increas­ingly, a commitment to principles that shoppers deem important—for instance, fair-trade goods, sustainably and locally farmed foods, and fair labor practices—also wins loyalty, says David Fikes, FMI’s vice president of communications and consumer/community affairs. “It’s now values as much as value,” he says.

But price is and always will be a great motivator. Grocers with the highest scores for competitive prices are for the most part near the top of our ratings. One such store, Woodman’s, which oper­ates in Illinois and Wisconsin, passes savings on by selling certain items in bulk. WinCo, with 115 stores in the West, also sells bulk items, and takes no credit cards to avoid transaction fees.

The growing variety of both low- and premium-priced food stores means a dedicated WinCo bargain hunter could be the same person frequenting Whole Foods for pricey organic cherries, Demeritt says. “People go to different places for different things,” she says.

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The Changing Landscape

To respond to our evolving food-­shopping tastes, supermarkets are offer­ing novel formats, products, and services:

• Smaller footprints. Rather than taking a one-store-fits-all approach, some grocers are hypertargeting a single customer type and scaling back in size as a result. Those new locations offer a more “curated” grocery shopping experience—say, selling just a few choices of organic olive oil instead of many—saving shoppers the work of distinguishing among brands.

To attract time-pressed millennials, Whole Foods has opened new Whole Foods Market 365 stores in four U.S. locations. The smaller-format stores feature primarily Whole Foods’ 365 Every­day Value products. Focusing on the higher-profit store brand and managing fewer square feet also could help the company’s profit margins, notes Asit Sharma, senior consumer goods analyst at the investing website Motley Fool.

Aldi is a fast-growing, no-frills vendor that operates stores about a third the size of a typical American grocer. It sells a limited selection, mainly of private-label goods; our readers rated it highly for competitive prices.

• Local farm partnerships. Many super­markets have added locally grown produce sections. Dierbergs, which debuts in our ratings this year, is one example. The family-owned chain, with locations mainly in Missouri, shows a photo gallery of local partner farms on its website. Readers gave the quality of Dierbergs’ local produce top marks.

• Meal kits without the wait. To compete with online meal-kit vendors, Giant Food Stores, based in Pennsylvania, offers fresh meal kits through its partnership with the Peapod grocery delivery service. Each $15 box comes with enough premeasured, fresh ingre­di­ents to make two servings following a provided recipe. (See our reviews of five meal-kit services.)

• Home delivery. Responding to the threat from online grocers, many chains now offer this amenity. (For more, you can check our ratings of four online grocers.) Safeway charges $13 to deliver orders of less than $150 and $10 for orders of $150 or more. Kroger and Walmart have begun testing door-to-door delivery in certain locations, with Walmart using ­the delivery service Deliv and car services Lyft and Uber. Publix is testing home delivery in certain ­areas of the Southeast.

• Curbside service. Walmart offers a “click and collect” system called Online Grocery Pickup in more than 30 states: Consumers buy online and drive to a Walmart store to pick up their bagged orders at designated times for no fee. Kroger’s ClickList service, available in about 300 locations, works the same way. Patrons pay a $5 pickup fee, waived for the first three deliveries. AmazonFresh is experimenting with curbside pickup in two Seattle-area locations. The retailer plans to expand the service to Amazon Prime members without requiring an additional AmazonFresh membership fee.

The Rise of the Virtual Market

Amazon’s real impact on the industry, though, is in food delivery. In 2016 Consumers used its food and beverage channels—including Prime and Pantry for packaged goods and AmazonFresh for fresh and non­perishable groceries—more than any other online grocery retailer, says Cowen and Company, an investment research firm.

AmazonFresh tops our satisfaction ratings of four online grocers, though its competitors—Instacart, Peapod, and FreshDirect—are close behind. Sixty-one percent of readers who used AmazonFresh for their grocery shopping told us they were highly satisfied with the service. Grocery shopping through online grocers is still a modest portion of the marketplace; in the U.S., just 23 percent of households are buying food and beverages this way, according to research released in January by FMI and Nielsen. But interest is projected to climb; 72 percent of all ages surveyed—and 80 percent of surveyed millennials—expect to buy groceries online in the future, the report notes.

Amazon’s innovations could eventually influence the operations of walk-in stores as well. Bucking its virtual roots, the retail giant last year announced the opening of a new grocery store prototype: a location in Seattle with no checkout lanes. Instead of paying at a cashier (self-checkout or otherwise), customers would simply grab what they wanted and leave, without ever engaging with an employee. This would be made possible through a smartphone app and sensors placed throughout the store. Payment would be made automatically when the app linked to customers’ mobile-payment services. Initial customers were Amazon employees; in March the company postponed a public rollout, citing technical problems.

Could the success of online groceries spell the end of the traditional kind? Not likely, analysts say. Stores will “just be smaller, more efficient, and focused on value-added shopping,” says Tré Musco, CEO and chief creative officer of Tesser, a brand-strategy and retail design firm based in San Francisco. “There will be more delivery and ordering online. Even if there’s no one at checkout, you might have face-to-face conversations with an in-house dietary consultant or the person who loads your groceries into your car, or a chef preparing meals to order.

“As long as people want to see, touch, and smell their fresh food,” Musco adds, “the brick-and-mortar store is here to stay.”

Sprig, a food-delivery startup that has raised over $56 million, is shutting down

• Biz Carson

Melia Robinson

The San Francisco food-delivery startup Sprig will be shutting down Friday, Business Insider has learned.

The company had raised over $56 million from Silicon Valley's top investors for its new spin on food delivery. 

Sprig's business was a high-end meal-delivery service in which customers could get anything from a shredded raw zucchini bowl with shrimp and basil-walnut pesto to the ever-popular lemon-Parmesan kale and quinoa salad.

It will stop operating Friday, a company representative confirmed. Its 200 employees will receive two months' pay, and the company will be having a career fair to help them find a new job. The Information first reported its pending close.

"No question, I'm sad that the Sprig model did not work out — but the food delivery space on the whole is growing," its CEO and cofounder Gagan Biyani wrote. "The demand for Sprig's convenient, high-quality food was always incredibly high, but the complexity of owning meal production through delivery at scale was a challenge."

Sprig is the latest food-delivery startup to close its doors after struggling to scale. Earlier in May, the New York-based Maple suddenly closed and sold its parts to Deliveroo. Last March, SpoonRocket, a California-based delivery service, shut down and sold its IP to a Brazil-based company. In its footsteps, startups like Din and Bento have also closed down. Other startups trying to revolutionize food delivery, like Munchery, are still struggling. 

See the memo, obtained by Business Insider, below: 

Dear friends and customers,

It is with a heavy heart that my co-founders and I share that Sprig, Inc. will be shutting down the app today. We apologize to those of you who relied on Sprig for daily meals, and to our extended Sprig team for how this will impact them.

Food delivery has a bright future, and I’m proud of the work we have done at Sprig that has had a positive impact on the space.

To our employees: thank you. You provided the best customer service in the industry and created innovations that were admired by your peers. You created a daily rotating menu with hundreds of different dishes served, you prepared the most delicious delivery food I’ve ever tasted, you built a 100% self-engineered system that delivered industry-leading transparency and accountability in our ingredient sources and nutritional data, and you created a logistics engine that let us bring food to people hot and ready to eat often in less than 15 minutes. All of our employees, including our servers, kitchen, hub and HQ staff, will receive two months pay as part of the close down. More importantly, we will be hosting career days to help you on your next path. You are armed with experiences that will help accelerate your career and we will be there to help you succeed. (Note: If you are a company that is hiring and interested in talking to our team, please e-mail us at jobs@sprig.com.)

To our customers:you have been our inspiration on this journey. Thank you for the tremendous word-of-mouth growth and feedback you’ve provided us: your messages, phone calls, photos, and reviews made this all worthwhile. We’re proud to have delivered millions of meals to you, and hope you keep demanding the best from the companies that feed you. Four years ago, food delivery was a pain -- expensive, hard to find, and poor quality. Today, there are thousands of restaurants delivering amazing food to you; we’re hopeful for the future.  

To the press and public: No question, I'm sad that the Sprig model did not work out -- but the food delivery space on the whole is growing. The demand for Sprig’s convenient, high-quality food was always incredibly high, but the complexity of owning meal production through delivery at scale was a challenge. After spending four years as a food-tech industry insider, I’m amazed at what the space has become. Food is one of the foundations of society and I believe strongly that it must become more sustainable and ethical. I’m hopeful that the food delivery companies that are succeeding will make this a priority. Please continue to help us inspire change: encourage sustainable food systems, better treatment of workers and more awareness of nutrition. These are serious issues and they cannot have enough attention.

As for me, my primary goal for the coming weeks is to ensure our team members find their next steps. After that, some time for personal reflection, then off to the next venture.

Thank you for everything,

Gagan

Alibaba reportedly plans to lead a huge $1 billion investment into a food delivery startup

• Sam Shead

Alibaba billionaire Jack Ma.Sean Gallup/Getty Images

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Alibaba is planning to lead a $1 billion (£770 million) investment into food delivery service Ele.me, Bloomberg reports, citing sources familiar with the matter.

The funding will reportedly give Ele.me a valuation of $5.5 billion (£4.27 billion) to $6 billion ($4.66 billion), possibly making it the most valuable company of its kind in the world.

Ele.me is one of the biggest companies operating in China's busy food delivery market, which is itself enormous due to the sheer number of people in the country.

While relatively few companies in the space are turning a profit, tech giants such as Amazon and Uber have launched their own food delivery services (Amazon Restaurants and UberEATS) in the last couple of years in a bid to capture a slice of this new market.

But the US tech giants are yet to infiltrate the Chinese market, leaving a number of local players trying to battle it out — albeit with a little bit of competition from European companies like Delivery Hero, which is backed by Germany's Rocket Internet.

Ele.me has already raised $2.34 billion (£1.81 billion) but the fresh influx of capital would reportedly help it to take on one of its key rivals, Meituan, which has been heavily backed by Tencent — another Chinese tech behemoth.

Sources familiar with the investment reportedly told Bloomberg about the upcoming investment, saying that Alibaba will team up with its financial affiliate, Ant Financial, on the funding round.

The investment would reportedly be the second largest into a privately-owned Chinese startup, losing out only to Uber rival Didi Chuxing, which raised a $5.5 billion (£4.27 billion) round last month.

Will independent grocers turn it around in 2017?

23 EXPERT COMMENTS

DISCUSSION

Photo: Cubby's Marketplace, Talkeetna AK/Facebook

May 26, 2017

by George Anderson

Operating independent grocery stores has never been for those who shrink from formidable odds. When it comes to today’s independents, that means going up against chain store giants such as Walmart and Kroger while dealing with changes in technology and consumer shopping behavior, not to mention deflation in key product categories and increased competition for labor and the associated costs that go with it.

According to the “Independent Grocers Financial Survey,” recently released by the National Grocers Association (NGA) and FMS Solutions (FMS), 2016 was a challenging year for the small guy.

Sales were down 1.62 percent in 2016 from 2015. Food deflation affected grocers in key categories, including dairy and meat, which hit independents squarely in the bottom line as net profits fell to 0.98 percent compared to 1.44 percent in 2015.

The survey of more than 100 grocers operating stores in 33 states found that independents managed to hold the line on margins at 27 percent. Labor and benefits climbed to 14.84 percent of sales last year, the highest level tracked to date.

Lower unemployment rates across most of the country helped drive up labor costs (12.63 percent of sales) while leading to higher turnover among associates. Turnover at independent grocers averaged 48.9 percent among part-time workers and 17.1 percent among full-timers.

“Low profit margins and constantly changing consumer preferences make it challenging even for the best operators,” said Peter Larkin, president and CEO of NGA, in a statement. “But as independents continue to invest in their local communities and work diligently to stay ahead of rapidly changing consumer trends, they are differentiating themselves in a fiercely competitive marketplace to become shoppers’ stores of choice.”

Independents identified as “profit leaders” among their peers averaged net profits of 4.70 percent before taxes. This group, which represents stores in the top 25th percentile, improved net profit performance in 2016. Profit leaders, according to NGA and FMS, tend to operate slightly larger stores generating a greater number of weekly transactions and higher average rings. These stores focused on fresh foods while aggressively managing inventories; reinvesting in their businesses while limiting debt.

• 2017 Independent Grocers Survey Released – National Grocers Association
• Independent Grocers Financial Survey (Executive Summary) – National Grocers Association

DISCUSSION QUESTIONS: Is it more difficult to be an independent grocer in 2017 than it has in the past? What are the keys for today’s indies looking to differentiate from the wide variety of rivals competing in the grocery space today?