How the local supermarket became your new favorite restaurant

While sitting in the food hall section of New York City’s newest Whole Foods location, Natasha Beylis points out that most of the other people eating lunch in the packed space don’t have shopping bags. Like her, many have come to the supermarket solely to dine in.

“Either you come here to shop or to eat,” Beylis said. At this two-story Whole Foods, most of the second level is dedicated to dining, rather than shopping. On one side of the store’s second level there are cafeteria-style tables sandwiched between a Kano sushi bar and a Frankies Spuntino Italian restaurant. On the other side is a much smaller space with standard groceries. “I think they do a good job of separating the vibe,” Beylis added.

The concept of blending a restaurant experience with the grocery experience has been around for decades, according to self-described “supermarket guru” and food service analyst Phil Lempert. But the changing perspectives millennials and generation Z-ers have toward food and shopping are pushing more supermarkets to make their stores feel more like experiential food destinations than mere shopping markets. Analysts like Lempert predict that these “grocerants” will become the new standard for grocery stores in the more health-conscience future.

“You’re still going to have stores that pile it high and sell it cheap. That’s one type of consumer and that’s one type of supermarket, but you’re going to see less of those and more of this new hybrid concept,” Lempert said.

Lempert spends part of his time working with the National Restaurant Association to help grocery stores understand and jump on the trend. A slide during one of his presentations at the 2016 NRA Show, the association’s annual foodservice and hospitality trade convention, warned attendees that “The line between retail foodservice and restaurants will continue to blur.”

Data supports that claim. Revenue for prepared food service at supermarkets grew an average of 10 percent a year from 2005 to 2015, according to Technomic Inc., a research and consulting firm. And when dining out, more consumers are choosing their local grocery stores over traditional fast food and restaurants, the firm showed. As a result, grocers are seeing value in beefing up their prepared food experiences.

Representatives for Whole Foods were quick to clarify to Eater that Whole Foods Market locations have been offering salad bars, hot food, and casual dining spaces almost since the store’s inception more than 30 years ago. But Lempert distinguishes traditional kinds of prepared food offerings from the “grocerant” experience shoppers are seeing more of today. “The definition is a freestanding restaurant that is located either adjacent to or within a supermarket,” Lempert said. “It is not a prepared foods counter. It’s not a pizzeria that is in a supermarket that has a little area that you can take your pizza and walk over to. It’s more of a full-service type of restaurant or a semi-service type of restaurant.”

 Essentially the grab-and-go salad bars and prepared foods counters are evolving and looking more like fast-casual restaurant spaces, designed to keep shoppers in the store. Some offer massive food court seating areas with booths and dark, cozy atmospheres, while others feature enclosed full-service spaces. They often include free wifi, bars, host stations, even menus for made-to-order meals. They are designed to encourage customers to linger, as a restaurant or comfortable coffee shop might. And this is what consumers will likely see more and more in their local markets.

The person in charge of bringing these options to Whole Foods is Tien Ho, the vice president of culinary and hospitality. Ho said that while Whole Foods has always offered prepared foods in casual dining spaces, he and the company are taking note of consumer demands and are looking for ways to offer even better culinary experiences.

One of Ho’s priorities is what the company calls “strategic partnerships,” or collaborations between local chefs and Whole Foods. Ho’s goal is to bring more well-known chefs and restaurants into the national grocer’s stores. The chain has already teamed up with nationally recognized chefs and brands like Roy Choi in Los Angeles, Erik Bruner-Yang’s Paper Horse in D.C. and Michael Solomonov’s Dizengoff in Philadelphia. But Ho wants more. “The response has been amazing, so well so that they’re starting to be in more of our stores,” he said. The chain already has 30 full-service restaurants with waitstaff and 250 quick-service concepts, with plans to open more. One new location in Atlanta is expected to feature a Brazilian build-your-own-churrasco-bowl fast-casual concept.

But not every community is the right fit for restaurant-centric grocery stores, Lempert says. The newest Whole Foods in New York, for instance, is located in Midtown, just blocks from Times Square. It’s easy to see why the grocery portion of the space is considerably smaller than the prepared food sections: tourist and office-worker foot traffic demands it, as do people like Beylis who are just looking for a quick, comfortable meal from a brand they trust. That concept is harder to pull off in other places in New York City, a town of bodegas and food carts, where space is limited and there are already so many alternative dining options to compete with. While New Yorkers are quick to point out Mario Batali’s and Lidia Bastianich’s Eataly as their example of the grocerant experience, there are only two in the city, and to some, the brand feels more upscale and touristy than a local community food hub like other grocerants. Beylis calls it “bougie.”

But for people in less congested communities, the grocerant experience has become more of the norm and isn’t as stuffy. The Midwest-based Hy-Vee grocery chain has incorporated Hy-vee Grille, a full-service restaurant, into dozens of its locations since 2012. In 2013, when Chicago grocery fixture Dominick’s closed all its stores, other grocery chains, including Whole Foods, jumped at the chance to snag up the vacant spaces.

Another one of those brands was Mariano’s Fresh Market. The chain was new to Chicago then, but quickly made its mark with a new kind of grocery experience. At Mariano’s, shoppers might be greeted with live pianists, grill outs, wine tastings, gelato shops, and more. Now with multiple locations in Chicago, Mariano’s has become a leader in the grocery store as food destination concept. Even Walgreens drug stores in Chicago have incorporated “UpMarket Cafes” featuring made-to-order smoothies, sushi and alcoholic beverages, in an attempt to be seen as “wellness destinations,” as the press release put it.

This trend is largely driven by millennials, experts say. Forty years ago, baby boomers purchased food from grocery stores. Today, those places are competing with farmers markets, apps, home delivery, websites, and other options. Still, the concept of a “retail meal” is nothing new. Malls and department stores like Macy’s have had food courts for years. Then there is IKEA and its famous meatballs and cafeteria. Either in spite of or because of this progression, millennials have developed higher expectations for prepared foods at supermarkets. According to a recent Technomics survey, 52 percent of respondents said they see prepared foods as healthier alternatives to fast food. Meanwhile, a study by the NPD Group, which researches consumer behavior, showed that consumers rate prepared food higher in freshness and quality, turning to standard quick-service for affordability and convenience.

To keep up, grocery stores are transforming into destinations with food experiences. This feels more comfortable to young shoppers, who then become more connected to the brand, Lempert says. “It’s about what’s the kind of image and environment that you want to create,” Lempert said.

At Whole Foods, for instance, each store is tailored to fit its community, a representative with the company said. So pinpointing a specific strategy for all the stores is not really possible. Instead each store, whether food hall-focused, grocery-focused or events-oriented, centers around the brand and its mission of providing high-quality, natural food, even if that’s experiential. While the grocerant style may not take over every Whole Foods location, more may appear where they fit, grabbing the attention of loyal customers like Beylis who seek out a store’s prepared food.

While specific experiences may differ at grocerants, one thing most of them do have in common is booze. Alcohol plays a major role in the grocerant concept. It’s not only profitable from a sales standpoint, but a way to keep people in the store, Lempert said. At some Whole Foods, some of the internal tap rooms that sell beer also host trivia nights. One Mariano’s location in Chicago hosts Sunday mimosa parties.

Whole Foods bar

“All the ones that I have seen have included [a bar concept], and I think for good reason,” Lempert said. “As we continue to see, people like being able to walk around the store more relaxed and have a glass of wine or a beer while they’re shopping. The good news is for the retailer if they do that they’re slowing down and they’re taking more time in the store. They’re seeing more new products that maybe [they’d miss] if they’re just running in and out in 20 minutes.”

But happy hours, chef partnerships, and food courts might be just the beginning of the grocerant takeover. Supermarkets like Whole Foods are pushing the boundaries to keep communities and young shoppers engaged with their brands. And competition between grocery chains will only drive more experimentation.

“We’re not looking to [other stores] for inspiration, I’ll tell you that,” Ho said of Whole Foods’ approach. “We’re always trying new things to make the experience better for our customers. Wine tasting in a store? Dude, that was like early ‘90’s man. That’s nothing new. We’re pushing ourselves for the next new thing. I can only imagine that others will follow.”

by Vince Dixon

Source:  Eater, February 2017