Groceries: Smaller stores,  trend toward local ahead

By JD Malone
The Columbus Dispatch

The food we buy — and how we produce and buy it — is forever evolving.

Today, groceries offer online ordering. Online retailers own grocery stores.

If you don’t want to shop, you can order an entire week’s worth of meal kits to be delivered to your door.

If you don’t want to cook, restaurants wage war on all fronts with online ordering and delivery. And grocery stores offer dine-in opportunities along with their prepared foods for takeout.

Even how food is grown has many wrinkles. Rural farm operations have embraced technology, in seeds, chemicals, equipment and data analysis. Urban farmers increasingly till plots close to their customers. And restaurants have gotten into the act, cultivating some of their own ingredients just steps from their doors.

Consumer expectations and technology have blurred traditional roles of these various segments of the food chain.

Where does this lead in 20 years? No doubt things will look different, yet familiar.

“There is so much innovation and new technologies, and we do not know how far and how fast it could go,” said Christopher Pelletier, a global food futurist based in western Canada.

We have a reasonable idea of some changes coming to our groceries, farms, restaurants and kitchens, and of some things that will evolve, but stay more or less the same long into the future.

In 20 years, the Anheuser-Busch brewery still will be the biggest in town, Kroger will have more grocery stores than anyone else, big farmers will remain loyal to corn and soybeans, and Wendy’s

Frosty will still be a favorite dip for its French fries. These are the low-hanging fruit of central Ohio food predictions; much of the rest is an educated guess.

“Go back 20 years — iPhones, Twitter, Facebook did not exist,” said Leigh Heisel, principal and head of advanced analytics for ICC, a local information technology, research and consulting company. “Look at the velocity of how technology has developed. If we can put together an 18-month plan, that’s pretty good.”

Les Horn puts produce in container for ClickList online ordering customer at Krogers in Upper Arlington. [Kyle Robertson/Dispatch]

Smaller stores

Though computers and the internet have shifted the way we shop for many things — shoes, cars, clothes, books, even ice cream — physical stores will remain for as long as there are people, because we enjoy being around other people. We also prefer to touch and feel the things we eat, which makes sense because, unlike socks or a Harry Potter novel, food is essential to life. That doesn’t mean that the current iteration of the grocery store, a 50,000- to 100,000-square-foot or larger behemoth, is going to remain the model for the industry.

It isn’t.

One point that experts agree on is that in the future, grocery stores will be fewer and smaller.

Some of that trend is due to the success of European imports such as Aldi and newcomer Lidl.

Both are discount grocery chains. That market segment is expected to grow faster than any other in the years to come, and both are building stores at a furious pace.

Aldi, which has been around for some time in the United States, also is remodeling existing stores to lure customers leery of its low-low prices and former low-rent atmosphere. The stores are brighter, in ZIP codes with better demographics, with modern accents and small, easy-to-shop selections. Aldi has a large presence in central Ohio. Lidl, which just started opening stores on the East Coast this year, has plans to open stores in central Ohio next year.

“These two retailers bring something very different to the U.S. grocery market with smaller-format concepts,” said Stewart Samuel, North American program director for IGD, a global grocery research firm. “The investments Aldi and Lidl are making to stores are also likely to resonate with shoppers.”

Other chains are also dabbling with smaller formats.

Kroger, the largest grocer in the United States and the dominant chain in Columbus, is flirting now with smaller format stores in a few markets. It is testing a convenience-grocery-coffee-restaurant hybrid store called FreshEats in a few spots in central Ohio. The company also is investing in online ordering, at-store pickup, and is testing delivery in Cincinnati.

Customer wait at this pickup location for Kroger ClickList online ordering. [Kyle Robertson/Dispatch]

Giant Eagle has pushed the store format the most in town by building a two-story grocery with a restaurant and second-floor patio on a tight lot in the heart of Bexley.

Giant Eagle anticipates building more of these small urban stores. Even so, it remains committed to big stores like its Market District format because there is a sizable segment of shoppers who “really enjoy the treasure hunt at our stores, the products that they can’t get somewhere else, or the new thing they decide to try,” said Brian Ferrier, regional vice president of operations.

Food Spending

Consumers’ food dollars are expected to shift slightly toward online purchases and discount groceries, at the expense of “hypermarkets” and traditional grocery stores.

Projected five-year change

Percentage point increase or decrease 2022 vs. 2017

source: IGD, a global food consultancy

High-tech shopping

Smaller stores also play into the growth of digital, or online ordering, with pickup and delivery services seeing exponential growth in the years to come. If a shopper can order groceries at home and schedule a delivery, the retailer doesn’t need to stock those products at a giant store in refrigerated cases filled by hand.

That costs money. Deliveries could be pulled from a central warehouse in a business park, making it more efficient for the retailer.

Likewise, the use of automated services, such as preset shipments of items like paper towels, condiments, peanut butter and other non-perishable foods, will allow retailers to shrink their store footprints.

Online has a barrier, though. Shoppers prefer to choose fresh foods, such as vegetables and steaks, themselves.

“People kind of like to see the perishables before they buy them,” said Pelletier, the food futurist. He has some idea though about how that might change.

“Little drone that flies around the supermarket, or even the warehouse (which would cost much less than a store), to show you the products and maybe little robots will come and pick it up and send it to your place,” he said. “Why not? Technology moves so fast.”

The online meal planning company Emeals is adopting some of this in a new service that allows its members to select meal plans then have their shopping lists communicated to a number of local stores’ online platforms to automatically order all of the items. Shoppers then pick up the orders or have them delivered.

Coming shakeout

Just as chain and department stores have struggled as consumers’ shopping styles change, food outlets might also shrink not just in size but in number.

One issue is that, in places like central Ohio, there are a lot of competitors — probably more than the population needs. Players include Kroger, Giant Eagle, Walmart, Meijer, Costco, Sam’s Club, Aldi, Whole Foods, Fresh Thyme, Earth Fare, Weiland’s, Hills Market, Marc’s and Lucky’s. They’re all jockeying for part of the local food budget, and so are restaurants and convenience stores.

The gradual shift to purchasing food online — a category that IDG sees doubling from 1 percent to 2 percent (a growth of $20 billion) by 2022 — should create forces that whittle down the sheer number of stores and concepts.

No one knows who the winners will be, but David Hughes, a U.K.-based global food trend analyst, thinks he has a hint.

“I like to see more competition and options. It was increasingly dull when it was a Walmart economy,” Hughes said. “We like to shop, but more and more, we like to shop on our terms, and there are more and more routes to the consumer. The winning retailer is the one that can handle the most routes to the customer.”

Amazon comes to mind as the company that is leading the race in routes to customers. The Seattle-based retailer has tentacles in delivery services, both for product it sells and restaurant food, it bought Whole Foods this year, and it is experimenting with a grocery concept.

Amazon’s grocery doesn’t have physical checkout registers. The technology that allows that to happen is expected to spread.

Already, consumers have been pushed more and more to self-checkout lanes from grocers to hardware stores, but those are best for customers in a hurry with small orders. The next thing will be to shop for and purchase items without needing to stop at a checkout lane of any kind. It’s called “frictionless” transactions.

“It works at Apple stores,” Heisel said, nothing that almost every roving employee can take a payment and complete a transaction.
“But how do you do that with 47 items at Kroger? The no-checkout thing will only get stronger, but it has a long way to go.

And no one wants to be the first. They want to be the second after someone else has worked out the bugs.”

Molly Krannitz shops for produce at the Giant Eagle store in Bexley.  [Tom Dodge/Dispatch]

The local equation

If there is one recent food trend that has a long future, it’s “local.”

Locally produced items will find niches and spots to grow for many years to come.”It is a trend, not a fad,” Hughes said.

From farm-to-table restaurants that use seasonal, locally grown products to urban farmers growing mushrooms and microgreens year-round in warehouses, and the many farmers markets in the region, local food is here to stay.

Maybe no product illustrates the lure of “local” more than craft beer.

Central Ohio has more than 40 craft brewers, most of which didn’t exist five years ago.

Though the “boom” in craft beer is waning, no “bust” is envisioned. Many of the local breweries will survive and others will open in the years to come, especially because state law allows them to operate taprooms where they can sell their beer directly to the public.

For an idea of where Columbus breweries might be going, one need only look at Portland, Oregon, a mature market for craft beer that supports about twice as many breweries as central Ohio with roughly the same population.

The limits of “local” likely will come down to one thing, Pelletier said.


“Price is always going to be important to consumers,” he said. “You could produce pineapples in the north of Canada in a greenhouse, but at what price? Local will grow further, but only as the price is attractive for consumers and the price is good enough for the farmers or producers.”

As supply chains have gotten much better and faster and continue to improve, the tension between a local product — especially vegetables or fruits or other perishables — and a cheaper alternative will rise. Cheap usually wins, Pelletier said.

Urban farms, where small-scale growers use residential and other underused lots to grow a host of foods, have room to expand in number as long as the economy is good, given those products often carry higher prices. Another factor for the future in urban farming is that as real-estate markets heat up in cities, land for urban farming could become too expensive or simply unavailable.

Meanwhile, out in rural portions of central Ohio, the pressure is on commodity farmers to employ more technology to reap bigger gains off of less arable land. In places like Delaware County, where today’s subdivisions were soybean fields a few years ago, the sprawl of development gobbled up thousands of acres of farmland in recent decades, and that trend will continue as the region grows.

Changing egg business

One part of the central Ohio farm economy sure to see change is egg producers.

Ohio ranks second in the nation in egg production, with more than 30 million chickens laying eggs at any given time across the state. The industry has long housed birds in batteries of small cages inside large barns to efficiently manage feeding, waste, egg collection, disease control and other factors.

Those days are numbered.

Almost every grocery store chain, restaurant company and food-service outlet from Walmart — which buys more than 14 billion eggs a year — to Bob Evans has pledged to buy only cage-free eggs, or eggs from chickens not housed in cages. Most of the companies have adopted 2025 as the year they will stop buying conventional eggs.

This presents herculean challenges for egg producers, which operate a low-margin business to begin with and, in some stores today, you can get a dozen eggs for just 39 cents.

“The industry believes it will cost $10 billion to $12 billion to meet current commitments,” said J.T. Dean, vice president of Trillium, which owns several chicken farms near Croton in Licking County, along with other operations in Ohio and Iowa.

The required investment is equivalent to raising capital expenditures by 10 times across the entire egg industry and sustaining that level of investment for about a decade.

The industry also isn’t sure that consumers really want cage-free eggs in the sort of numbers that retailers and restaurants are working toward. Total cage-free hens today number less than 50 million, but the number will need to grow to about 227 million by 2026, according to the U.S. Department of Agriculture. Problem is, demand at a retail level isn’t that strong. Right now, the population of cage-free hens outpaces demand by five times.

Price is the big reason. Cage-free eggs today cost $2.60 a dozen on average and can run double that if they are organic.
“Regular eggs are still the biggest sellers, by far,” Dean said.

Burger of the future

A fixture yesterday, today and tomorrow is the hamburger.
“There will be hamburgers. People love hamburgers,” said Lori Estrada, vice-president of culinary innovation at Dublin-based Wendy’s.

What is going to change though is what people put on that hamburger. The bun, condiments, sauces, vegetables, cheeses, even the lettuce, could, and probably will, change. Estrada pointed to numerous things that have shifted in her 16-year career at Wendy’s. Like lettuce.

Iceberg was the lone choice not long ago, and even a switch to romaine brought frowns from a lot of her peers, Estrada said. Now Wendy’s uses several blends, its signature one being a spring mix.

“That was just unheard of even 10 years ago,” she said.
Wendy’s cooks up much of the future in its test kitchen, which Estrada runs. Her staff of 15 over the years has seen American palates change, and expects tastes to continue to develop.

Americans like much spicier food than ever before, and Estrada is interested in testing those limits.

“Twenty years ago, people were amazed that salsa outsold ketchup,” she said, “but now we have a ghost pepper sauce and we did a whole sandwich around sriracha. Even the bun was sriracha.”

In the future, we could be eating things we never thought of or only saw as fringe foods. Once not so many decades ago, avocado was generally only found in Mexican restaurants.

An example for the future?

“Lab-grown meat,” Pelletier said. “As consumption of food grows in China, meat is going to get more expensive, and it will likely drive alternative meat production.”

Estrada wasn’t ready to endorse that, but admitted that the buzz around Wendy’s black bean burger was a surprise, and the company is looking at other vegetarian options.

“We are constantly playing with things,” she said. “I’d love to see graviera (the cheese used in the flaming Greek dish saganaki), and figure out how to do avocados. It’s endless.”

Will people still dip their fries in Frosties in 2037? You betcha.
“Yeah,” Estrada said, laughing. “That’s part of human DNA, sweet and salty.”

Will we be less dependent on the grid?

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