“I’ve Never Seen Such A Time of Challenge” Grocery Industry Ripe for Disruption from Small- to Mid-Sized Brands

/ / Businesss, Consumer

The grocery market is being disrupted in a way never seen before – and the opportunity for success is great for small- to medium-sized food brands wanting to get in the door.

“I’ve never seen such a time of challenge up and down the value chain from the seed all the way to the table,” says Walter Robb, former CEO of Whole Foods and the founder of investment firm Stonewall Robb. “We’re going to see a whole explosion in the new types of foods that are coming to market.”

A report by Biodiversity International found that three-quarters of the world’s food supply comes from just 12 crops and five livestock species. That jarring lack of diversity in the average diet is changing, Robb said. We’re in a frontier where food “will come back in a way we’ve never imagined.” More than 10,000 new products are introduced to the grocery market every year, and customers Robb said are “clamoring” for something new.

“We have a disruption up and down the value chain like I have never seen,” Robb said. “Your chance to come and bring a new product to market is there.”

Robb spoke at the NOSH Live event in New York, and shared insights into where the food industry is headed. Here are Robb’s five main points.

  1. Integrated Shopping

“The integrated retail is the table stakes for the future,” Robb said. “We’re going to see the line between digital and physical is going to collapse and it’s really going to be all about the customer and how you’ll serve the customer.”

The food industry will thrive on an “extended experience,” a term Robb came up with in the ‘90s while at Whole Foods. The extended experience extends outside the four walls of the stores. The problem at Whole Foods, Robb pointed out, was the natural grocer didn’t digitize fast enough. So in 2017, Amazon bought Whole Foods in a $13.7 billion deal.

Though customers are making more digital purchases, they are not abandoning physical stores. In five years, 50-60% of business will be done via retail stores.

“The future is one that integrates humanity and technology,” Robb said. “Why? because human beings are human beings and they want connection and community and that’s simply not available online. The most successful brands today and the ones that do more physical and digital.”

He pointed to Target as an excellent integration example for modern shoppers. Shoppers can still go to the store, where Target is remodeling physical locations to enhance the in-store experience, but they can use the Target app to prepopulate a shopping list, check real-time stock and order at home for drive-up pickup.

“Data shows the customers likes to do both (online and in-store shopping),” Robb said. Brands who want a lifetime legacy need to be in both places. “The customer is clearly saying ‘Let me do what I want, when I want.’ And brands that don’t serve them in that way will not see the type of growth that they could if they would. The customer is in charge of the choices now.”

  1. Microbiome is the Future

The microbiome will “completely revolutionize the food industry” as the future of grocery retail is driven by customers who want to see authenticity with the brand they’re supporting.

Robb pointed t a New York Times article on personalized diets, “The A.I. Diet.” As more research publishes on the microbiome, personalized diets will play a huge role in shopping habits. Medicine and technology are converging with food.

  1. Create Purpose-Driven Brand

Brand leaders in the 21st Century must be authentic, vulnerable and humble. They must be purpose-driven to be successful, Robb said.

“The whole reason you’re in business is not to make money, money is a byproduct,” Robb said. “What you’re in business to do is to bring change to the world. That’s what purpose is. Purpose is the why, why do you exist as a company. You damn well better have a good answer to that question as to what you’re doing in business. You better be here for some great reason to make an impact on the world. And if you’re not playing on that level, either w your customer or your team members, you’re going to fall behind because the companies that are going to lead with some sense of purpose are going to be the companies that win in the next number of years.”

He advised brands to get fired-up about principles that support values. The company culture is a result of that principles and values, and culture is dependent on how team members feel working for the brand and customers feel buying from the brand.

“The winning formula today is road runners and roots,” Robb said. Roots ground a brand in purpose, but brands can’t cement themselves in the ground. They must be a road runner and change on a dime as the marketplace shifts.

  1. Solve Customer Confusion

The International Food Council found 80% of customers are confused on their food choices. There are dozens of food tribes dominating grocery shelves, like gluten-free, keto, paleo and Whole 30. With an overload of information, customers don’t know exactly what to buy for their desired health benefits.

Robb said one of the business opportunities for brands today is to figure out how to communicate more clearly with the consumer. Consumers want to make informed choices, but “that last mile of data has not been solved for.”

He pointed to solutions in connected homes devices like Amazon that will now populate a shopping list for the consumer based on past purchases. Consumers don’t even need to pick out what they want, their only roll will be to confirm the purchase.

  1. Natural Reigns

Organic has grown to a $65 billion industry, with a 7-8% growth rate; conventional food, meanwhile, is only growing at 1-2%. Major mainstream retailers are rushing to get into the natural food business today.

Robb said the best way for brands to get on the shelves at Whole Foods is to push the envelope. Whole Foods continues to lead the natural market, and the grocer wants to see edgy, new products with a new take.

Customers expect food brands today to be transparent, accountable and responsible. Robb said there are 2,000 natural flavors approved for use in food by the Food and Drug Administration. But Robb encouraged brands to solve that problem – use less processed ingredients and more natural ingredients, “let’s continue to lead by showing there’s a new edge in the food industry.”