In 2000, the food retailing industry was in a state of upheaval.

A wave of consolidation had created supermarket giants with a scale built to rival Wal-Mart, the once-hot Internet-grocery segment appeared ready to flame out and home-meal replacement was all the rage.

Ten years later, the landscape has changed significantly — the consolidation race has slowed to a relative crawl, the online model has shifted and home-meal replacement has evolved from a small section of the deli to a thought process that reverberates throughout the whole store.

What will the next 10 years bring?

“We've been talking about 2009 really being the start of the next century,” says John Rand, director of retail insights at Cambridge, Mass.-based Management Ventures Inc., which is part of Kantar Retail. “The first eight or nine years of this century were really just playing out old trends.

“We've got a different shopper now. Coming out of the recession, we are starting to move our attention away from the Baby Boomers and toward the younger generation.”

Marketing will require new tools. Data will be a prized commodity, and retailers and suppliers will need to work together in new ways to satisfy consumers who want answers at the touch of button.

The concept of marketing to the younger generations presents the single greatest challenge to the industry during the next decade, Rand says.

One of the places such marketing will show up is in-store digital marketing.

“It is one of the most important things the supplier and retailer can cooperate in learning how to do right now,” he says.

He expects that in-store shopping devices, such as the handheld scanners in testing at a few chains, will be replaced by an application that works on smartphones.

“However we work it, communicating with the shopper in the aisle, at the point of purchase, in a way that is much more personal and holistic, is probably one of the bigger trends that we ought to grapple with in the next decade,” he says.

This converges with other trends, he explains, including the increasing demand for information on packaging about nutrition and dietary concerns that manufacturers are unable to accommodate.

He expects shoppers eventually will simply point their phones at a bar code to access a wealth of information about allergens, calories and other dietary concerns.

In addition, he says, comparing prices at various retailers while shopping in a store and gaining access to product recommendations and reviews from peers will become much more commonplace.

Niche formats

Neil Stern, senior partner at McMillan Doolittle, Chicago, says he expects to see a continued fragmentation of food shopping over the next 10 years.

“We've already seen a lot of fragmentation over the last 10 years with supercenters, clubs and dollar stores, and that trend will continue with even more fragmentation coming in at least three ways.

“First, there will be more ethnic fragmentation, and the demographics of the U.S. will feed into this trend. We're in the middle now of laying the groundwork for expanded ethnic-themed markets, whether Hispanic or Asian, but right now no one has anything beyond a small footprint.”

Over the next decade, however, Stern expects the industry will see the emergence of chains pursuing ethnic markets “on a full scale.”

In addition, he expects growth in discount retailing, including hard discounters like Aldi and Save-A-Lot.

He also expects a small-format, convenience-oriented supermarket format to emerge.

“The shopper's mission is fragmenting. We used to have the notion of a housewife doing her weekly grocery shopping in a store organized to meet all her needs. For years, stores were separated by specialty departments, but going forward, they will be designed to accommodate different shopping missions.”

Jim Hertel, managing partner at Willard Bishop, Barrington, Ill., agreed that changes in the industry during the next decade will drive increasing diversity among consumers, “with the rich getting richer, the middle class declining and the country becoming more ethnic.

“If one size didn't fit all before, it really won't in 2020,” he adds.

Value retailing

Hertel also predicts that small-format value retailing will be a big winner by the end of the decade.

“Supermarkets will get small formats right,” he says. “Most won't be like Fresh & Easy but more like Aldi, Save-A-Lot and PriceRite, with a strong value emphasis, strong store-brand orientation and a neighborhood focus, catering to Hispanics, African Americans and other ethnic groups, especially in perishables.”

Hertel also predicts store brands will reach 35 percent of dollar sales and 45 percent to 50 percent of unit sales — double the unit sales of today — “and retailers will become leaders in innovation rather than fast followers,” he adds.

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