If you take a look through past editions of the Food Institute's Today in Food daily newsletter, you won't run out of stories concerning meal delivery, grocery shopping and other food-related technology. For example, our Feb. 8 edition includes a story on Kroger looking to expand its digital shopping service to new markets, our Feb. 5 edition includes a story on GrubHub and how it is likely to acquire more businesses in 2016, and our Feb. 2 edition features a story on Peapod by Giant launching grocery pick-up options at three Washington, DC Metro stations. Like the rest of the business world, emerging digital technologies are affecting the way consumers acquire their food and how they envision what a "food" company looks like, from meal kit services to grocery shopping companies to restaurant delivery apps. (Editor's Note: Food Institute members can view those respective editions in our archive, located here.)
The increasing popularity in the news for such companies shouldn't come as a surprise when armed with these facts: food technology investments totaled nearly $5.7 billion worldwide in 2015, a 152% increase from 2014, according to CB Insights. Since 2011, nearly 25 venture-backed upstarts in the on-demand food delivery industry received funding. However, there are only so many markets for these companies to operate in. Take Denver, for example: Postmates, Gobble, Blue Apron, Favor, Green Chef, Sprig, Greenling, Fresh Dish, Plated, Farm Hill, Fluc, Forage, Maple, Munchery, Peach, FoodJunky, Real Food Works, Spoon Rocket, Bento and Made all operate in the city, and those are just the companies that have received venture-capital investments since 2011.
That's to say, most major metropolitan areas are saturated in food technology companies.
Grocery delivery is another hot industry. When it comes to grocery stores, Barb Stuckley, Author of TASTE and Chief Innovation Officer Mattson, sees a major shift in operations coming. Consumers are often swayed heavily by convenience, and Stuckley offers the following argument for the rise in popularity of grocery delivery services:
" The average American grocery store is 46,000 square feet. The average Millennial resents having to drive to said grocery store, park their car, walk 50 feet to claim a cart, traipse all 46,000 of those square feet to collect their groceries, pile them into the cart, stand in line at the register, walk 50 feet to their car, drive home, and carry them from the car to the kitchen. Do you blame them?"
Stuckey notes that online grocery shopping allows consumers (with very little tech savvy) the ability to shift the real-world experience of shopping at a Safeway store to the online version at Safeway.com. Although selection will vary slightly between in-store shopping and its digital counterpart, the convenience offered is important to most consumers. However, most grocery companies don't have the technological departments to create seamless, functioning apps for this digital grocery shopping method. Third-party services, including Instacart and Google Shopping Express, are bringing near-flawless technological execution to the industry.
Stuckey says that the consumer relationship is being slowly hijacked away from the grocery retailer, who for years served as the consumer face of food purchasing. Stuckey envisions a not-so-distant future where the grocery store's primary role will be to serve as a distribution center from which these third-party companies pick their inventory. This also helps the delivery services, as they don't need to invest in designing or maintaining supply chains and warehouses. She also quips:
"This new business model introduces completely new power players to the grocery space. I’ll bet there isn’t a supermarket executive in the world who 5 years ago predicted that one of his biggest competitors would be Google. Google!"
There's a lot of truth in what Stuckey says, but it's not entirely certain whether or not these services will completely hijack the consumer experience from grocery stores. Many consumers will still want to pick their own food from the shelves, but grocery companies would be wise to develop in-house delivery programs to ensure that they keep their brand in front of the consumer.
Chris is a business writer and market analyst that focuses on the Markets, Legal and Washington sections of the Food Institute Report. In addition, he assists in compiling data for various Food Institute publications throughout the year. He invites you to contact him via email at firstname.lastname@example.org to talk about anything food-related.
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