2022 proved to be a tough year for grocery retailers, distributors/wholesalers and manufacturers. The sharp changes brought by COVID-19 in 2020, which required all players to adapt quickly, have begun shifting back as consumers and businesses try to put the pandemic behind them. But much of the economic fallout remains: Elevated inflation, lingering supply-chain snarls and fears of a looming recession.
The uncertain environment has created both challenges and opportunities for grocery industry stakeholders. With 2022 drawing to a close, Winsight Grocery Business highlighted 10 grocery industry trends (among many others out there) that made headlines during the year:
1. Food-at-home demand is still going strong.
While some momentum has swung back toward restaurants, as consumers felt safer returning to public activities, many shoppers have retained their preference for eating at home due to habits generated during the pandemic, hybrid work environments and high menu pricing at restaurants. Grocery industry executives have continued to remark about the ongoing strength of food-at-home, and their sales growth has attested to the trend, even after the companies cycled exploding sales from 2020.
2. Supermarket foodservice rebounds.
COVID-19 forced grocers to shut down much of their self-serve and other prepared food operations and shift to packaged grab-and-go fare. With pandemic restrictions now largely removed, foodservice at the supermarket is back on the upswing. FMI-The Food Industry Association’s latest “Power of Foodservice” report cited NielsenIQ data showing that deli prepared food dollar and unit sales have risen in 2022, along with purchase frequency among heavy buyers. What’s more, the extended food-at-home trend exposed many shoppers to all of the foodservice options at the grocery store as these operations have reopened, and they have become a part of weekly planning for meals at home.
3. Perimeter back in the spotlight.
The resurgence of foodservice is part of an overall comeback by the fresh departments—produce, meat/seafood, deli, bakery and floral. During the thick of the pandemic, supermarkets were compelled to shift some of their focus away from the main money-making store areas to the center store grocery sections as they battled supply shortages. With much of that headache now subsided, supermarkets are again investing to enhance the perimeter—and with good reason. According to Kroger Chief Merchant Stuart Aitken, fresh is the No. 1 determinant of store choice, as 70% of customers base their preferred shopping venue on fresh offerings.
4. Return of shopping at stores.
The rebound of foodservice and perimeter departments reflect an even larger trend: Grocery customers are back to shopping regularly at brick-and-mortar stores in the wake of the pandemic. This year, food retailers of all stripes have reported upticks in store traffic, and grocers have gotten back on track with store opening and upgrade programs.
5. E-commerce sales growth levels off.
With many food shoppers going back to stores, U.S. online grocery sales growth has moderated following the breakneck pace triggered by the pandemic, which pushed consumers away from risky in-person shopping and toward safer delivery and pickup services. Still, strategic advisory firm Brick Meets Click noted that e-grocery sales have maintained the “significantly high plateau” reached since the onset of COVID-19, as the U.S. online grocery market remains more than three to four times bigger than it was pre-pandemic.
6. Big third-party grocery delivery players thrive.
Instacart, Shipt, DoorDash and Uber Eats (the latter two coming over from the restaurant sector) have continued to grow market share and enter new retail sectors. More recently, these companies have bolstered their technology and expanded their services and solutions for grocers. Amazon, too, has dipped its toes back into the third-party grocery delivery pool after largely exiting it a few years ago.
7. Rapid delivery players recede.
The proliferation of online-only grocers offering ultra-fast delivery (10 to 15 minutes) crashed during 2022 as bigger third-party delivery players countered and major brick-and-mortar grocers upped their omnichannel ante in key metro markets. And, of course, rapid delivery providers encountered the same problem as everyone else: Achieving profitability remains a high hurdle.
8. Inflation, inflation and inflation.
High food prices probably was the lead story of 2022. Signs at the end of 2021 had pointed to elevated inflation for the new year and, sure enough, that’s what the industry got. Food shoppers became more cautious with their pocketbooks and sharpened their focus on value. Meanwhile, retailers and suppliers did as much as possible to avoid passing on higher costs to customers. Toward the end of the 2022, fortunately, there has some light at the end of the inflation tunnel.
9. Private brands come to the fore.
Private-label market share increased in 2022 as high inflation steered grocery shoppers to products offering greater value. Grocery retailers responded by expanding their own-brand product lineups and stepping up store-brand promotions. Private-label offerings also have benefitted from greater exposure on retailers’ digital properties.
10. Retail media takes off.
Grocers ranging from small operators to major chains are getting into retail media in a bigger way, investing in technology to build digital media networks that make it easier for CPG brand partners to advertise on their virtual properties. Why? With grocery store margins typically around 1% to 2%, the profit potential from retail media is high and could provide a big addition to the bottom line, as well as help offset the cost of investments in omnichannel technology, stores and other initiatives. A study by dunnhumby, citing Forrester Research data, said the global industry for retail media could be worth around $50 billion by the end of 2022.