CREJ

May 2021 — Retail Properties Quarterly — Page 21 www.crej.com Trends 2 021 saw massive uncer- tainty for food and grocery vendors: Restaurants were forced to close, supply chains were disrupted and the food routines people had come to know changed overnight. In Colo- rado, food businesses still have to adhere to restrictions around indoor dining and stringent guidelines regarding regular cleanings, staff temperature checks and more. But in the face of these ongoing chal- lenges, the drive to support local businesses is as strong as ever, with the Colorado Office of Economic Development and International Trade extending its #ShopLocal- Colorado holiday campaign into an ongoing campaign to spotlight and support the state’s small busi- nesses. Despite undeniable challenges, the global pandemic has ushered in a new era of innovation in the food world. Grocery stores and food vendors are stepping up with new solutions to meet changing cus- tomer needs and desires. Below are some key innovations and business model evolutions in the food and grocery world that will persist well beyond the pandemic. n Local for the win. After witness- ing the devastating impact of the pandemic on small businesses, people had a desire to support local restaurants. Supporting local has long been a priority for Colorado, and grocers like the employee- owned Leevers Local in Denver have always focused on sourcing prod- ucts locally. Rather than running its own deli, butcher and bakery, the store partners with local vendors. Across the U.S., other gro- cery stores have amplified local food efforts. Hy- Vee is hosting quarterly “Best of Local Brands” summits in 2021. At the beginning of the pandemic, Texas grocer H-E-B partnered with local restaurants to carry ready- made meals, with proceeds going directly back to the restaurants. Quality Food Centers (Kroger) in the Washington area teamed up with Tutta Bella in Seattle to expand its grab-and-go and take-home dinner selections. In response to restaurant shutdowns, the local Kroger stores in the Seattle area also hired Tutta Bella employees. n Pop-ups and nontraditional formats. The modern suburban supermarket tends to be a huge space designed to display an overwhelming variety of products. But as people continue to work remotely and consumers’ lives shift closer to home post-pan- demic, there will continue to be a desire to stick close by for necessi- ties. Increasingly, we’re seeing tradi- tional retailers and vendors explore pop-ups and smaller, more flexible footprints designed to better cater to consumers. In 2021 and 2022, Sprouts Farmers Market is rolling out several “next-generation small- format model” stores that empha- size efficiency and product discov- ery. Schnuck Markets is launching a new small-format store in Indiana, with a focus on fresh produce. Pop Up Grocer is a traveling grocery store that sets up in U.S. cities for a month at a time and features a wide variety of products from inno- vative food, beverage, home, pet and body care brands. Having flexibility with location, including how the store shows up and how long it stays, unlocks huge opportunity for both landlords and tenants. Pop-ups also can be a valu- able research and insights tool for testing new concepts quickly and inexpensively. n “Groceraunts.” Even before the pandemic, the lines between res- taurant, grocery and consumer packaged goods were blurring, but COVID-19 accelerated this trend. Restaurants increasingly offer private-label products, while large consumer packaged goods providers like PepsiCo, Kroger and Heinz have launched direct-to-consumer plat- forms. Grocery stores are evolving to include dining spaces – meeting the pent-up demand for experi- ences and benefits traditionally pro- vided by restaurants, including food that’s different from home cooking, the convenience of not having to cook or do dishes, and the unique atmosphere. Food and grocery vendors are capitalizing on the opportunity to attract and retain consumers by bringing the dining experience in- store. Whole Foods opened its sec- ond Ideal Market store in Denver last October, featuring a beauty and lifestyle boutique, a “bottle bar” sell- ing local craft brews and in-store seating. Walmart is bringing the French bakery and café chain la Madeleine’s new Express fast-casual format to 10 stores in the Dallas- Fort Worth area. n Cloud kitchens. In a year when dining was restricted and food delivery surged, many restaurants explored virtual brands and ghost (or cloud) kitchens to expand rev- enue streams and scale their offer- ings. There are clear benefits to using a single kitchen for multiple brands: lower costs, higher profit margins and increased operational efficiency. While third-party plat- forms like UberEats and DoorDash have been leading ghost kitchen development, food and grocery vendors are exploring the space too. Last year, Kroger opened two in-store ghost kitchens, operated by ClusterTruck, serving more than 80 menu items. Walmart Canada recently partnered with Ghost Kitchen Brands to trial in-store ghost kitchens offering restaurant meals and consumer packaged goods items from popular brands such as Saladworks and Ben & Jerry’s. As we approach the end of the pandemic, food and grocery spaces must reinvent themselves to keep up with consumers’ changing behaviors and expectations toward Innovation is coming for food and grocery vendors Stefan Read Senior vice president engagement advisory, strategy practice lead, Jackman Please see Read, Page 27