By Sally Lyons Wyatt and Jonna Parker

Due to cultural shifts, widening economic inequality and generational influences, the U.S. now has the most diverse consumer landscape in history. All these changes are significantly impacting how, where and what consumers are buying, creating new households with new needs. Brands and retailers that can identify and meet these needs early on have incredible opportunity to stand out from the crowd and experience new levels of growth. This is especially true in fresh foods.

The fresh perimeter of the store has grown by more than $7 billion since 2014, but that growth has now slowed, and it is lagging behind food and beverage. The key to growth in fresh is to “get it right” with three critical shopper groups: high-income multi-generational consumers, diverse middle-class families and small urban households. Combined, these groups represent a $5 billion opportunity. Retailers that arm themselves with the right data, act fast and move decisively will win the gold medal in the competition to gain the loyalty of these high-value shoppers.

Multi-Generational Upper Income Households
Consisting of millennials who have moved in with their parents or older parents who have moved in with their younger families, this segment is currently the largest purchaser of Fresh and accounts for more than 11% of Fresh dollars. Unfortunately, their spend on Fresh as well as center-store food and beverage is declining. There is a risk that some of these shoppers are abandoning traditional supermarkets and moving to specialty markets such as natural markets, specialty grocers and premium grocers. Retailers that are winning back this group are focusing on a few areas: appealing to the group’s focus on receiving good value for the price, health and wellness benefits, and online delivery/curbside-up. The most effective way to influence this segment is to connect with these consumers both online and in-store. Multi-generational upper income households are highly digital, going online for digital coupons and grocery planning, but they also expect enjoyable in-store experiences.

Middle-Class Diverse Families
Retailers should place special emphasis on this segment as they have the largest opportunity for growth. Currently, grocery and mass super hold the largest share of where this segment buys, but this group also over-indexes at discount and ethnic grocers. These families are known to try different things and will go out of their way to find new stores, and the key to getting them in the store is change. Additionally, while freshness, taste and competitive pricing are important, these aspects do not fully attract these households. Instead, they gravitate towards what is convenient, including pre-prepared meals and organics. Incentives that will drive these shoppers to a store include unique holiday offerings and in-store event opportunities, such as “Breakfast in Bed” for mom.

Small Urban Households
This segment includes empty nesters, single parents and sometimes racially and economically diverse families. Although they currently spend less than the aforementioned segments, they are increasing their spend in fresh and center-store food and beverage in mass merchandisers, dollar stores and convenience stores, pulling them away from traditional grocery stores. More than half of urban households seek solutions for fresh and will go out of their way to try new stores. They are less likely than the general population to choose where to shop because of freshness or produce assortment but more likely to seek new ideas and new ways to get the foods they want faster. Seafood is a destination category for this group and is a key to increasing shopper engagement and basket size. Differentiating a store with personal mailers that showcase fresh seafood, such as in weekly ads, and offering coupons for other departments will go a long way to enticing these shoppers.

For traditional supermarkets that are currently losing out to other retail formats, collecting the right data, analyzing it effectively and acting on insights quickly will help them be more successful. Retailers should 1) communicate beyond the Fresh department and collaborate cross-department, 2) compete on more than price by changing up promotions, 3) create unique food options to match each segment’s lifestyle, and 4) embrace technology to create more personalized experiences for shoppers.

As it always does, the consumer pendulum will continue to swing based on a variety of factors. One thing we know for sure: the strategies used to attract shoppers in the past are unlikely to work in the future. Success in fresh requires more than fresh products, it requires fresh thinking.

Get a deeper dive into this topic by watching our webinars on Balancing the Consumer Pendulum and Balancing the Geographic Pendulum.

Questions? Please reach out to us at Sally.LyonsWyatt@IRIworldwide.com and Jonna.Parker@IRIworldwide.com.