We Found the Missing Insights from McKinsey's Grocery Report

We Found the Missing Insights from McKinsey's Grocery Report

What you need to know (and didn’t already) about what's coming next in grocery—and consumer goods in general.

McKinsey recently released their annual survey on the state of grocery. We’ve had our eye on it, too. Over the last two-and-a-half years, our anthropologists have talked to hundreds of grocery shoppers and front-line staff. And our digital ethnography and strategic foresight practices are constantly scanning for signals of change in food, wellness and retail. So I was curious to see how their insight and advice matched up with our own.

To be honest, I expected more. The trends they outline are nothing new: the labour market is tight; people want to eat healthier; they want to spend less; they want better digital experiences; and, of course, the must-mention ESG. Admittedly the strategy of pursuing ecosystem partnerships that offer “innovative value” by unlocking “growth beyond the core” is fresh. But are “online tools to enable customers to build grocery shopping lists,” and healthier, cheaper private-label options delivered by DoorDash, enough to lead your market in 2022?

If you, like me, appreciate a more filling snack, I’ve dug deep into our larder of insight and foresight to pluck out something truly tasty. When it comes to health, sustainability, omnichannel, labour and the real ecosystem growth opportunity, here are two major things you need to know about grocery, retail and beyond in 2022.

1. Value-priced health is small potatoes compared to a path to personal transformation.

McKinsey’s survey shows that people are most likely to spend more on ‘naturally healthy’ foods, after regional or local ones. Combining this datapoint with a few others, they suggest grocers focus on developing better-for-you private-label offerings that cost less.

Based on our knowledge, this would be a mistake.

Of course price is a barrier, and democratizing access to wellbeing should be a goal for everyone. But cost is not what even the most value-conscious consumers tell us is keeping them from achieving a healthier diet. It’s their habits, tastes and desires.

The demand for more effortless wellness.
Behind that complex phrase, ‘naturally healthy,’ is a deeper meaning. Along with its cousin, intuitive eating, this desire for naturally healthy foods comes from an emerging demand for more effortless wellness. Wellness fatigue is growing: people are tired of reading labels, fact-checking and trying to keep up with the truth. The clutter of claims and compounds on packaging for everything from mushroom coffee to functional cookie dough is no longer a draw. Instead, people want foods that are simply healthy for you by their very nature. The new ‘clean label’ is ‘free from’ the complexity of adaptogens, flavonoids and continuous skepticism.

Just making it cheaper won’t help.

Turning discipline into desire.
The second, more important aspect of this effortless nature isn’t about the food or its package. It’s about the eater. In North American cultural logic, eating healthy takes effort. We have long told ourselves that healthier foods simply don’t taste as good as cake, ice cream and bacon burgers. This makes healthy eating a matter of discipline: forcing yourself to resist the temptation to eat less junk and choke down more vegetables, despite the taste.

Cost is not what consumers tell us is keeping them from achieving a healthier diet. It’s their habits, tastes and desires.

This logic is also fundamentally shifting. What’s emerging in the signals we’re gleaning is people discovering they can change what tastes good to them. This comes in part from trends like Whole30, which encourage you to find your own ideal diet through experimentation with and mindfulness about what you eat and how it impacts you.

When people stop eating sugar for a while, they’re noticing that the next time they drink a Coke it somehow tastes as gross as it makes them feel. The more they eat salad, and pay attention instead of powering through, the more they start to enjoy and even yearn to explore the unique tastes and textures of bitter greens and sprouts. They’re realizing that healthy eating can be not only easy, but pleasurable. And this idea, of exploring and transforming your desire so that eating well becomes effortless and joyful, is eclipsing the controlling logic of dietary restriction

What to do?
Consumers’ new approach of pursuing the transformation rather than the product is poised to shake up sectors as wide-ranging as consumer goods, financial services, real estate and education. People want brands and offerings that help them learn to love and enjoy what is good for them. They want to finally achieve their aspirations for self-actualization.

Companies who offer only value-priced wellness will lose out to others selling the same thing in terms of easy, accessible transformation. Grocers might start by boosting their offerings of simple and delicious, naturally healthy convenience options. Some of the most common desires we’ve heard are for seasonal berries, nuts, ready-to-eat baby vegetables, or hot and easy options like roasted sweet potatoes in the grab-and-go. But rather than promoting them as fast and cheap, offer them as an attainable step to a better you.

Similarly, focus longer-term product development or sourcing efforts on curating collections of products that offer stepping stones along the path to new, healthier desires and habits. Examples we hear over and again in grocery include reduced-sugar options that lead to no-sugar options—not because they’re a ‘better choice,’ but because they give your tastebuds a bit of what they used to like while training them to grow in a new direction. Or 50/50 plant-and-meat-based products that let you enjoy your meat and potatoes while you get used to Meatless Mondays, and queso made with beans.

Those who offer only value-priced wellness will lose out to others selling the same thing in terms of easy, accessible transformation.

These kinds of offerings tap into the true need behind consumers’ self-reported desires for naturally healthy foods. Beyond grocery, the same trend and response applies. Think about how you can serve the more fundamental goal underneath the obvious surface reasons people turn to you and your product. The winners in 2022, and the balance of the decade, will be those who can help people finally attain their deeper desires for personal transformation.

2. The growth opportunity for merchants is in their core ecosystem.

I have one other bone to pick with the advice in the report. It wouldn’t be fair to pin it on McKinsey, because it’s a common problem with traditional growth strategy. Market leaders whose growth is under pressure are often told future success lies in an entirely new direction. Regardless of sector, the unique strengths and capabilities that led to their leadership position are cast aside. In this case, the suggestion for grocers is to focus efforts to grow on the external tech ecosystem.

This misses a far more valuable opportunity: leading the evolution and expansion of the core marketplace they already own.

Retailers’ core strengths in buying, merchandising, logistics and operations have plenty of differentiation and margin ripe for the picking, right now. And there are plenty of innovators ready to reinvent grocery and the merchant arts for the 21st century if they don’t. Some are extending retail ecosystems into times and places before and instead of the store. Others are deepening that ecosystem’s value by fostering more direct, more meaningful connections to the communities, ecologies and economies that sustain us.

Don’t miss the more valuable opportunity: leading the reinvention of grocery and the merchant arts for the 21st century.

From omnichannel to omnipresence.
Omnichannel is just a stepping stone. Your end goal need to be omnipresence: making your wares truly accessible throughout people’s days and lives. One excellent example of this is the rise of personalized health apps and tech that combine prescription, personalization, and fulfillment. These new merchant-experts are curating not just what’s on the shelf, but also the knowledge required to bring it all together into a meal, diet and overall transformation that takes minimal time and effort.

Others are taking a similar ecosystem approach to last-mile logistics, as physical transformation catches up with digital transformation. D2C plays by CPG producers, or drive-through boutiques not only combine niche with convenience. They’re creating a new kind of micro-fulfillment that strives to make grocery physically accessible and convenient at all the places and occasions it’s needed throughout your day.

Ethical consumption is no longer enough.
This ubiquitous presence in life and the community leads us to the second aspect of this reinvention: deepening and sustaining the local ecosystems people spend their time in.

Returning to McKinsey’s survey, we see that the number one thing consumers were most likely to spend more on in 2022 was regional or local. As with value-priced wellness, adding the ‘local’ label to your private-label package won’t be enough.

The overlooked reality is that ethical consumption in general is no longer enough. Today’s consumers don’t want to just hear that the things they buy were made responsibly, so that they can lend their support in theory with their purchasing choices. They want to take part in creating and sustaining a better world.

This means having a much more direct and reciprocal connection with producers and merchants. The community-supported agriculture (CSA) boxes of old, for instance, are becoming experiential and relationship-driven, as marketplace and crowdfunding approaches to supporting food producers grow. Similarly, new types of production-consumption venues like pizza farms offer more direct and communal experiences that create new connections with how and where food is made.

Beyond grocery, this blurring of the lines between production and consumption is visible in everything from content consumers becoming content creators on platforms from Twitch to Substack, to the staying-power of ‘mompreneur’ ecosystems that turn niche shoppers into fans, and then business owners themselves—with infrastructure provided by marketplaces like Shopify and Facebook.

Today’s consumers don’t want to just hear that the things they buy were made responsibly. They want to take part in creating and sustaining a better world.

Desires for regional and local aren’t about being a better consumer. They’re about deepening and blurring the relationship between consumers, producers and merchants. People want to work together, in various roles at various times, to create a flourishing local community of mutual recognition and support. The immense power and resources of incumbent retailers like grocers has a valuable leadership role to play in curating, incubating and stewarding these communities towards more purposeful impact.

What to do?
Efficiency, reach and new value aren’t just tech plays. Expand your sense of the journey beyond ‘the store’ and ‘preparing to go to the store’ into all the moments of life—lunch, snack time and the commute are the occasions we hear about most in grocery. Consider micro-formats (of both stores and product) that offer ‘just-in-time’ availability on the road, by the breakroom or in the backpack. Don’t just digitize the shopping list. Deploy your digital and physical assets, as well as your sourcing capabilities, to replace it with what people really want: a path to a better meal, diet and life that doesn’t demand knowledge and time they don’t have.

Next, tie it back to the local ecosystem. How can you mobilize your resources to nurture your core, local ecosystem and economy, as well as enhance your ubiquity across more times and places? Use your sourcing, distribution and marketing strengths to bring consumers into relationships with promising local producers that offer high value but need support to grow. That might mean finding easier ways to get niche offerings on your own shelves, or creating new services and experiences that raise awareness and involvement.

Also look beyond typical grocery products to become visible in a whole new set of occasions. Partnerships with retailers and service providers in relevant adjacent sectors like health, beauty, fitness, events and home goods will offer more sustainable, reciprocal and localized value than the tech ecosystem ever could.

Expand your sense of the journey beyond ‘the store’ and ‘preparing to go to the store’. Don’t digitize the shopping list. Replace it.

This shift also has implications for staffing. Labour shortages aren’t just a matter of structural effects and wage pressures. They’re also a matter of the kind of work that gives people dignity and purpose. Front-line staff consistently tell us about their own interests in and passion for the food they stock and sell. Many have their own expertise and zeal to bring to your offering. If your operations, staffing and training aren’t set up to allow them to become the active parts of the ecosystem they also desire to be, you’re leaving opportunity to wither on the vine.

Merchants have an important role to play in this emerging world: applying their unique skills and assets to nurture a flourishing ecosystem people can participate in and support. The true, sustainable growth opportunity for today’s market-leading grocer or retailer is becoming the lead firm and lead merchant in this next-generation marketplace.

Well, there you have it. Market-leading insight and strategy is never going to come from a survey. It’s also not going to come from narrow, single-vertical expertise. Both can only ever put a finer point on what you already know.

Want to find out what’s really going on in your sector and what to do about it? Get in touch or book a call to connect.


Quick Hits:

Right to repair in the walled garden – Speaking of moving from consumption to participation, Apple’s Self-Service Repair program is finally underway—and its centrepiece is a 79-pound two-piece industrial-grade repair kit shipped to your door for a simple battery replacement. As The Verge’s Sean Hollister suggests, maybe Apple doesn’t want us to repair them.

How to say no: template edition – Between trying to make hybrid working actually work and enduring constraints in labour, supply chain and everything else, it can feel like there isn’t even time to decline these days. Perhaps some famous takes on 31 great ways to say no in any situation (ready to load into your Gmail) would help? [via Recomendo]

Annals of improbable reflexes“Today I learned about the hanger reflex and so should you!”

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