2 Years Post-Pandemic, the Grocery Industry Remains in Flux
By Howie Kent
Though supermarket shelves are no longer bare like they were during the height of the pandemic, the grocery industry hasn’t fully stabilized, and some changes could be here to stay.
As we move from pandemic to endemic, the nation’s grocers continue to struggle with low inventory fueled by supply chain problems—a situation that’s further exacerbated by inflation, rising gas prices, and a shortage of workers.
How has the industry evolved a full two years after the onset of COVID-19?
At the store level, we believe that supply challenges will persist through the mid-to-end of this year, though some previously harder-to-find items such as canned soups/meals and shelf-stable juices are slowly beginning to creep back onto store shelves.
While supply-chain issues remain a key concern, grocers are simultaneously navigating other challenges, namely rising inflation coupled with the trimming of government programs that have helped lower-income shoppers stretch their food budgets.
On top of that, the still-limited supply of available merchandise puts added pressure on SNAP and WIC customers. But despite these challenges, we’re seeing store owners continue to serve their communities and rise to meet the moment.
Beyond the short term, we’re beginning to get a sense of how the pandemic has more permanently altered the overall landscape. One way is product mix. Prior to the pandemic, manufacturers offered product categories in multiple flavors, size segments, and varieties.
As demand increased, manufacturers limited their supplies to top sellers. Though we’re beginning to see some diversity return to store shelves, those options are not what they were pre-pandemic, nor do we expect them to return to those levels, as CPG manufacturers seem content to focus on core products, at least for the near term. Despite this, innovation is still very much alive, with new items continuing to enter the marketplace.
Secondary brands also seem to be owning more market share. As panic buying swept the nation throughout most of 2020, shoppers resorted to purchasing whatever items they could find. Today, many shoppers have remained loyal. For example, the paper towel brand Plenty was widely available when many of the larger brands weren’t, and shoppers have continued buying the product, not necessarily as a substitute.
In addition to changes in product buying, the pandemic has further accelerated the shift to e-commerce. According to a recent report, e-commerce in the grocery industry is expected to surpass 20% of the overall U.S. grocery market in the next five years—far outpacing pre-pandemic e-grocery sales, which had been on track to reach 5.4% of the total market in 2021 but accounted for 9.5% of total U.S. grocery sales last year.
Among our store owners, who serve diverse neighborhoods in the New York Metropolitan area, the Northeast and Florida, e-commerce is growing in popularity. We believe that ecommerce will continue to become a larger part of market share, though our customer base tends to use online shopping as a complement to in-store, not a substitute, as they gravitate toward experiential buying — preferring to pick their own meats and produce, for example.
This is a pivotal period for our industry. As we emerge from the supply-chain challenges of the past two years and adapt to the ongoing digital evolution, grocery owners will need to be nimble, responding to changes as they occur. If they can do that, they’ll set themselves up for success now and well into the future.
— Howie Kent, Director of Category Management and Sales Analytics, Krasdale Foods
About the Author
Kent is director of category management and sales analytics at Krasdale Foods, an independent grocery servicer that provides store owners with top-to-bottom service and support, from the purchase and delivery of goods within all departments, to marketing and personalized business consulting. The company serves more than 300 supermarkets under its C-Town and Bravo banners, which are spread across the Greater New York Area, the Northeast, and Florida.
We talk with Rob Mills, Tractor Supply EVP, chief technology, digital commerce, and strategy officer, about how they’re using things like wayfinding, mobile apps, and artificial intelligence to improve the consumer experience.
Dollar General is rounding out 2022 and heading into a new year with a focus on expanding digital capabilities, differentiating their customer experience, and adding to their store count – including to a number of international locations.
Welcome to the omnichannel experience 2.0, which moves beyond merely integrating selling channels, to retailers creating truly unified customer experiences. Read on to learn what retailers need to bulletproof their store experience in the year ahead.