Research findings

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Research findings May 2017 Prepared by Consultant Group

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INTRODUCTION

Execu@ve summary •  The !me-compressed weekday dinner is the fundamental need that all consumers share and serves as the founda@onal need for in-store meal kits •  Answering that need is the founda@onal benefit for in-store meal kit marke@ng communica@ons (i.e., convenience) •  Due to its founda@onal role, all grocery stores are relevant channels for the !mecompressed weekday meal (from value to upscale loca@ons) – the need is pervasive, massive and unownable

•  To differen@ate, The brand must address the founda@onal convenience need, then target specific segments with benefits customized for their individual needs •  Segments 1 and 2 are now the top priority segments, and Segment 6 shiVs to a ter@ary target, due to: •  ShiV to tradi@onal grocery store as primary distribu@on channel and away from online, where Segment 6 is responsible for an outsized por@on of total category spend •  Rela@ve size of Segments 1 and 2 vs. Segment 6 2

INTRODUCTION

Execu@ve summary •  Benefits desired by each segment beyond convenience: •  Segment 1: Explora@on of new/exci@ng cuisines, health, freshness •  Segment 2: Break out of “rut” of same meals week aVer week •  Segment 6: Taste, explora@on of new/exci@ng cuisines, connect with kids

•  The introduc@on of an in-store meal kit creates an opportunity for retailers and The brand to re-imagine how they serve consumers shopping for meals rather than ingredients: •  Convenience-driven shoppers will require adapta@ons to floorplans to accommodate new displays, delivery and integra@on with digital services •  The brand is in a unique posi@on to help fill the gaps in the valuechain for its grocery partners

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In-store meal kit value chain (consumer version) Online meal selec6on or menu design Online ordering and payment In-store meal-kit displays In-store pickup Curb-side pickup

Category findings

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CATEGORY

Quan@ta@ve work in November 2016 revealed three priority market segments likely to have high resonance with an in-store meal kit

Segment 1 (XX% of pop.)

•  •  • 



High interest in cooking and exploring new cuisines Avg. $XXK household income Few kids in HH; moderately @me-compressed

Segment 2 (XX% of pop.)

•  •  • 

Moderate interest in cooking/new cuisines Avg. $XXK HH income Time-compressed due to high % of kids in HH 5

Segment 6 (XX% of pop.)

•  •  • 

High interest in cooking/new cuisines Avg. $XXK HH income Time-compressed due to high % of kids in HH

CATEGORY

The quant iden@fied consumers’ top wants when making dinners

Tasty

Nutri6ous

Fresh

Pleasing to others

Easy 6

CATEGORY

But the qual revealed that for most dinners, everyday obliga@ons interfere with akaining this ideal meal Connect with loved ones

Make it to prac6ce on 6me

Fresh

Don’t have energy to cook

Tasty

Must be pleasing to all Quick aNer work

Meals 7

Nutri6ous

CATEGORY

The quant showed that many of these obliga@ons tend to be @me-related 50% 40% 30% 20% 10% 0% I do not want to clean I do not have 6me to I don't like to cook just I oNen have to work Other food op6ons are late or travel and can't tas6er than the food I up aNerwards cook for myself be home for dinner can cook

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CATEGORY

Despite these barriers, the vast majority of consumers s@ll eat dinner at home 5-7 days per week # of dinners eaten at home in a typical week 35% 30% 25% 20% 15% 10% 5% 0% 0

1

2

3

4

9

5

6

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CATEGORY

This high volume of meals (5-7/week) shows there is a major opportunity in solving the @me-related barriers to dinners at home •  These @me constraints force consumers to compromise the ideal meal that was defined for us in the qual •  The qual also revealed that weeknight meals are the most common occasion for these compromises

“I would say the lesser important occasions … those are nights that I just need to eat. Just my family, everybody has to eat so we might be doing a grilled cheese and tomato soup.”

“I think the weeknight dinners are almost cruise control. You know what you're good at, you can expand on it to a degree, but for the most part, weeknight dinners are just kind of … there.“

Implica6on: Time-compressed weekday meals are the sweet spot for the brand 10

CATEGORY

Meal kits are well-posi@oned to do solve this problem – the quant work shows consumers see @me-savings as being the top benefit 80% 70% 60% 50% 40% 30% 20% 10% 0% Saving 6me on meal planning, shopping or cooking

Trying new recipes

Healthy food

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Fresh food (farm-totable ingredients)

Be]er tas6ng food

CATEGORY

In the qual, consumers explained how @me-savings laddered up to convenience-related benefits •  Consumers quickly iden@fied @mesavings-driven features and told us these laddered up to conveniencerelated benefits such as less stress

“It’s !me saving in a sense because it’s – if I didn’t get !me to prepare a meal then I just call and have it ready to pick up.”

•  The convenience benefits were similar across segments and loca@ons

“Saves !me. In general, from like going to the store, planning a meal, having to think about it. Just right there, look at a picture, and be like, oh, that looks good, and check the box, and you’re good.”

Implica6on: Convenience is the founda6onal benefit to be established with all consumers 12

CATEGORY

In the quant, consumers also spoke to other mo@vators beyond the search for convenience 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Cooking at home is I enjoy using different The primary reason I cook is to ensure preferred because it is types of foods and recipes healthy ea6ng cheaper than ordering from or visi6ng restaurants

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I tend to priori6ze taste over health

I prefer to eat foods and recipes I grew up with

CATEGORY

Consumers described these benefits in detail in the qual work •  Within the framework of convenience, there are key differences between consumers regarding the benefits they seek from meal kits

“I think it’s just a fun alternate way to be crea!ve and to try a different recipe… this is just another route to try something different.”

“Yeah, because this is actually going to try out your skills, you know, actually learn how to cook. And it gives you all ingredients, so maybe in the future, you'll remember the recipe and ingredients that you can, you know, cook.”

mplica6on: “Convenience + benefits” offers the brand and its retail partners the ability to provide th category founda6onal benefit while targe6ng on priority segments or localized needs 14

CATEGORY

Summary | Category Brand

Retail partners •  The !me-compressed weekday dinner is also an ideal opportunity for the grocery retailer because it is the most frequent need, thus bringing into the store more oVen

•  The !me-compressed weekday dinner is the sweet spot for marke@ng communica@ons •  •  • 

High-volume occasion (3-4x weekly) Significant unmet need High resonance with consumers when presented as an op@on for weekday dinner

•  We know from the quant that meal kits are likely to be an incremental purchase that may have been lost to a restaurant

•  Consumers unanimously saw convenience and @me-savings as top meal kit benefits •  Meal kit posi@oning should be grounded in convenience but made flexible enough to support specific benefits that individual segments desire

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Channel findings

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CHANNEL

In the grocery stores, consumers thought they would find meal kits in the same places they currently get the key ingredients for their meals – protein and produce, along with the deli sec@on due to its associa@ons with @me-savings and convenience Where you go for dinner meals Where you would find meal kits

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CHANNEL

The story changes when we ask about meal kits ordered in advance. Consumers almost universally expected to pick them up at the front of the store. Where you go for dinner meals Where you would find meal kits Where you would pick up meal kits

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CHANNEL

The current grocery store floorplan is not ideal for instore meal kit discovery and pickup

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The grocery store of the future MEAL KIT DISPLAY

Meats

Seafood Paper Goods Cleaning Supplies

Produce Canned Foods

Flowers

\ Door /

Baking Items

Self-Service Registers

Checkout Registers

Customer Service

Coffee Shop

Dairy & Eggs

Frozen Foods

Bakery

Soda & Spirits

DELI, MEAL KITS & DELI REGISTER

IN-STORE PICKUP

\ Door /

Parking lot 20

CURBSIDE PICKUP ZONE

The grocery store of the future MEAL KIT DISPLAY

Produce

Meats

Seafood

Dairy & Eggs

Bakery

A meal kit display should be posi@oned at the intersec@on of the produce and protein Paper departments to meetGoods consumers when they Soda Frozen Baking Canned & Foods areFoods shoppingItems for theirCleaning meals Spirits Supplies

Flowers

\ Door /

Self-Service Registers

Checkout Registers

Customer Service

Coffee Shop

DELI, MEAL KITS & DELI REGISTER

IN-STORE PICKUP

\ Door /

Parking lot 21

CURBSIDE PICKUP ZONE

The grocery store of the future MEAL KIT DISPLAY

Meats

Seafood

Dairy & Eggs

Paper The deli department should expand to Goods Produce Frozen Baking kit sec@on Canned accommodate a meal in order to Cleaning Foods Items Foods Supplies capitalize on the deli’s associa@ons with @me savings and convenience Flowers

\ Door /

Self-Service Registers

Checkout Registers

Customer Service

Coffee Shop

Bakery

Soda & Spirits

DELI, MEAL KITS & DELI REGISTER

IN-STORE PICKUP

\ Door /

Parking lot 22

CURBSIDE PICKUP ZONE

The grocery store of the future MEAL KIT DISPLAY

Meats

Seafood Paper Goods Cleaning Supplies

Produce Canned Foods

Baking Items

Dairy & Eggs

Frozen Foods

Bakery

Soda & Spirits

In-store space should be allocated for a meal kit pickup sta@on to accommodate consumers Self-Service and who haveCheckout Registers ordered one in advance want to DELI, MEAL KITS & DELI REGISTER Flowers Registers skip the standard register lines \ Door /

Customer Service

Coffee Shop

IN-STORE PICKUP

\ Door /

Parking lot 23

CURBSIDE PICKUP ZONE

The grocery store of the future MEAL KIT DISPLAY

Meats

Seafood Paper Goods Cleaning Supplies

Produce Canned Foods

Flowers

\ Door /

Baking Items

Dairy & Eggs

Frozen Foods

Bakery

Soda & Spirits

And a special zone should be established in Self-Service DELI, MEAL KITS & DELI REGISTER theCheckout Registers parking lot to allow consumers who have Registers ordered meal kits in advance to pick them up Customer Service without leaving Coffee Shop their cars IN-STORE PICKUP \ Door / Parking lot 24

CURBSIDE PICKUP ZONE

CHANNEL

There is strong demand by consumers for hyper-convenient purchase and pickup solu@ons for in-store kits •  Due to the meal kit’s associa@on with convenience, the segments expect the ability to order them online or via an app and pick them up in designated parking lot zones

“I would prefer if there was like a Red Box, like literally have the refrigera!on, type in your code of whatever your order was.”

•  We know from the quant that these segments are ahead of the curve in their use of new, convenience-focused methods of food purchase (online restaurant delivery, online grocery delivery)

“What’s the purpose of ordering it online, right? It’s so you don’t have to troll through the store and get everything yourself. So it’s either you have to get out of your car and walk to the front desk … or they just bring it out to you in the car.“

Implica6on: As the market develops, there will be a need for hyper-convenient purchase and pickup solu6ons for in-store meal kits 25

CHANNEL

Among major chains, only Ahold brands on the east coast offer in-store meal kit preorder and pickup Offers in-store meal kit pre-order and pickup •  Stop & Shop/Peapod •  Giant/Peapod

Offers grocery curbside pickup •  Stop & Shop/Peapod •  Giant/Peapod •  Kroger and sub-brands (via Kroger’s ClickList service) •  Walmart

Offers grocery home delivery •  •  •  • 

Stop & Shop/Peapod Giant/Peapod Stop & Shop and Giant pickup and Kroger and sub-brands delivery services are Peapod-branded. Meal kits are manufactured by Ahold Albertsons and subDelhaize (parent company of Stop & brands Shop, Giant and Peapod) •  Walmart •  Publix (via InstaCart) •  Target (via InstaCart) Implica6on: Few retailers are currently capitalizing on the opportunity for convenience-driven meal kit services, indica6ng opportunity for the brand 26

CHANNEL

Beyond providing retailers a gateway to the consumer market for meal kits, the brand has an opportunity to help retailers enhance the consumer experience with online ordering and pickup solu@ons •  Retailers such as Kroger and Walmart have already created digital tools to sa@sfy consumers’ need for convenience, but meal kits generate a different type and scale of need: •  Online ordering •  Ability to pre-pay •  Fric@onless checkout •  Curbside pickup Implica6on: The brand should develop its own consumer-facing app 27

CHANNEL

Implica@ons | Channel The brand

Retail partners

•  Consumers want mul@ple in-store opportuni@es for meal kit discovery and pickup – this creates an opportunity for grocery stores to think innova@vely about real estate

•  Give the people what they want: Grocery stores need to re-think real estate and/or develop new convenience-driven displays and services, e.g., Kroger’s ClickList •  Broad acceptance of the meal kit across geographies and socio-economic levels should jus@fy re-imagining the future of grocery

•  The brand should support the development of the full stack for its grocery partners: •  •  • 

Online ordering In-store meal-kit displays In-store pickup

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Thank you 29