Do grocers need to reset the center store?

Discussion
Photo: RetailWire
Sep 06, 2017
Bryan Pearson

Through a special arrangement, what follows is a summary of an article from COLLOQUY, provider of loyalty-marketing publishing, education and research since 1990.

Kellogg, Kraft Heinz, General Mills and other major food brands are seeing their sales slide due to a consumer preference for more natural foods. But the declines are more directly caused by supermarkets.

Many grocers are dedicating more space to healthier options, including wholesome prepared meals, private labels and in-store dining, all of which crowd out national brands in the middle aisle. Few events may accelerate this change as dramatically as Amazon.com’s acquisition of Whole Foods.

Private label foods, which are becoming a staple for more retailers, are penetrating packaged foods in greater numbers and with more natural ingredients, threatening to shoulder out big food brands.

In response, many manufacturers are reformulating recipes to include cleaner ingredients, either for the kitchen or the shelf. Recently, Kraft Heinz partnered with Oprah Winfrey on a line of comfort foods called O, That’s Good, all of which are free of artificial flavors and coloring.

Many big food companies are also creating or buying up healthy labels. General Mills bought Annie’s Homegrown; Pinnacle Foods owns Evol and Earth Balance; Unilever, owner of Ben & Jerry’s, is investing more in natural ingredients. Meanwhile, Tyson and Perdue are now producing chicken and meats in line with Whole Foods’ clean label standards.

But if the middle aisle is shrinking, where will these healthier options be stocked?

I think the solution may be a new merchandising categorization that blends all healthy foods — packaged and fresh — to reflect the shopper’s path. Think of the refrigerated salad dressings in the produce aisle. All-natural cereals can be displayed near organic milk and berries, sugar-free condiments near the fresh meat case, and canned soups near whole-grain, fresh breads. Those labels that make the cut will simply meet the shopper’s desire for honest nutrition at a fair price.

It would require a complete shakeup of the food store format, and such change might not be well met, but small format stores can serve as tests. After all, smaller food footprints will likely become byproducts of the transition to fresh.

DISCUSSION QUESTIONS: What do you see as the pros and cons of intermingling healthy versions of packaged and fresh foods in grocery aisles? What do you see as the hurdles preventing grocers from rethinking their layouts in this way?

Braintrust
"What we need to remember is the shopper is in the driver's seat -- they choose what to buy."
"It will likely take a massive crisis to change center store, to introduce new product offerings, new departments and innovative shopper paths."
"The decline of big brands isn’t just about health and nutrition. It’s also about consumers switching to own-brand to save money..."

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17 Comments on "Do grocers need to reset the center store?"

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Ben Ball
BrainTrust
The pro of intermingling versions of a given product or category on the shelf is that there is no clear standard for “healthy” versus “not healthy.” Rather we have variations of physical attributes (low trans fats, gluten free, organic, all natural) that represent some range of “healthiness” to consumers. To complicate matters further, different consumers have different health triggers. A person with celiac issues has different triggers from a heart patient avoiding cholesterol. The most obvious way to show consumers their range of choices is to merchandise them in some logical sequence. What that logical sequence is — not to… Read more »
Tony Orlando
BrainTrust
There is a need to re-do the center store for a variety of reasons. I have eliminated a lot of SKUs due to our area competition, as regular price does not sell in stores around here. I am expanding more deal-to-deal products and have been discounting healthy options for years with limited success — high-end gourmet is a tough sell here in Northeastern Ohio. We are bringing in a new line of gourmet dog treats made from all natural Black Angus beef. Of course it’s discounted, but still profitable. We are building displays inside the aisles as if they are… Read more »
Neil Saunders
BrainTrust
The decline of big brands isn’t just about health and nutrition. It’s also about consumers switching to own-brand to save money, a lack of innovation, the rise of niche manufacturers, a desire for convenience and so forth. The fact that consumers visit the center store less often because of changed shopping habits also plays a part in reducing big brands’ exposure. As such, I am not sure that this idea is a holistic solution. In any case, a large number of grocers — Wegmans, Shaw’s, Hannaford, Market 32, etc., — already have dedicated healthy and organic sections where products are… Read more »
Cathy Hotka
BrainTrust

There’s no question that shoppers power through the center store and linger near the edges, where fresh and “clean” options beckon. It would make sense to do what Bryan suggests and cross-merchandise around the store — if there’s an app that will help customers find the item they’re looking for.

Art Suriano
BrainTrust
This article makes excellent points and suggestions. The two biggest issues are change and uncertainty. The grocery business continues to shift, moving so fast with new concepts and ideas it is challenging for grocers to keep up. Some grocers are adding additional healthier food choices and some are not offering enough. Going forward, I see more niches created with grocers catering to select customer preferences. This concept is ideal for the small local store, which has more control. And I do agree with Bryan that a re-design of the store layout would be wise, offering a better mix of healthier… Read more »
Dr. Stephen Needel
BrainTrust
The question might not be whether the center store needs to be reset but rather, what is the center store? It’s only the center store in that it’s mostly not dairy, meat or bakery. That leaves most of the store. So can we design better stores? Sure we can — there are lots of retailers doing it. Can we mix in healthy and not-so-healthy — sure we can. What we need to remember is the shopper is in the driver’s seat — they choose what to buy. You can put all the healthy cereals you want in the cereal aisle… Read more »
Roy White
BrainTrust
The center store issue has been with us for some considerable time, and no acceptable solution has surfaced. Research study after research study has documented the sluggish performance of center store compared to the perimeter. It’s true center store isn’t completely dead: It generates a very substantial amount of dollars, but it isn’t contributing a lot of growth to supermarket revenues. And it hasn’t changed from the standard inline gondola configuration in seemingly forever. Indeed, the supermarket has been built around this layout paradigm for seven decades. Even great stores like Wegmans, whose entrances and perimeters are truly beautiful, eventually… Read more »
Michael La Kier
BrainTrust

What will prevent grocery stores from rethinking their store layouts? Legacy thinking and lack of availability of capital investment. Unfortunately, these two hurdles are hard to overcome in many cases and can lead to further decline.

Bob Hilarides
Guest
3 months 2 days ago
For decades we’ve witnessed the balance of power shift from the manufacturer to the retailer, driven by consolidation, private label development and retail marketing prowess, among other dynamics. The shrinking of center store has long been a concern for big CPG as retailers have sought to differentiate their stores with the perimeter departments that are less dependent on the brand power of manufacturers. But now we’re witnessing the power shift from the retailer to the consumer/shopper, who wants to and can control when to shop, what assortment to consider, what price to pay and how it reaches the home. This… Read more »
John Karolefski
BrainTrust

Sure, grocers need to reset the center store layout. But they need to do so dramatically. Shorter aisles would be a good start. Blending “healthy” packaged foods with traditional fare and private label makes sense because it gives shoppers a visual choice in terms of variety and price. How about a coffee station in the coffee section with a free flavor of the day funded by one of the manufacturers? Ditto for soft drinks and water. Integrate mini-sampling stations throughout center store. Overall, give the shopper a reason to venture into the center store.

Warren Thayer
BrainTrust
As refrigeration technology continues to progress, it will become more feasible to have milk next to cereal, etc. But it’s still not very practical financially because of necessary piping and equipment. When we hit that tipping point, there can be more creativity in merchandising synergistic categories together rather than apart from each other. We chase our tails when we try to find one-size-fits-all merchandising magic for the center store. Specific hands-on suggestions (rather than “you’ve got to update your merchandising”) are needed, with an understanding that they will work in some regions/stores, but not others. You’ve got to do your… Read more »
James Tenser
BrainTrust
The proportion of floor space devoted to Center Store should probably decline in favor of so-called perimeter departments in many supermarkets. The math will decide this — what’s the profitability per square foot? It’s also high time for a re-imagination of the time-worn practices that group rectangular boxes in one section and the round cans in another. I don’t believe the addition of “healthier” packaged foods products is a primary driver of this change, however. That’s more of a response by CPGs to the intense competition for store selling space. Just as when “low fat” products proliferated in the 1990s,… Read more »
Kai Clarke
BrainTrust
Intermingling healthier products in an effort to cross-merchandise to increase appeal is not a new concept. Creating an accepted standard that allows the consumer to become familiar with the store layout without “thinking” is part of the issue which needs to be addressed. So is the shift to natural foods, healthier foods, and better foods. Retailers need to align their stores to this (which is what Whole Foods did) to become successful. The model is shifting rapidly and Amazon is leading the way. We can see the changes at our local Costco as they shift to healthier eggs, milk, etc.… Read more »
Dave Nixon
BrainTrust

Instead of a redesign, what if we streamlined the WAY we shop the center store? The use of wayfinding, navigation and real time curated shopping journeys using mobile devices could make the center store relevant again. Keep the high impact items on the perimeter, but create a more efficient replenishment core and leave the emotional/impulse/higher emotional quotient items on the edge.

Ralph Jacobson
BrainTrust

The traditional center-store-based supermarket format has ebbed and flowed for far more than a century. Seriously. Let’s employ just a bit of imagination to try something different. How about “micro aisles”? (Yes, I just thought that up). Take categories or even sub-categories and have short runs of shelving interspersed among fresh foods throughout the store. Totally mix it up!

William Passodelis
Guest
3 months 2 days ago
Yes, the center store needs to be redone, but it is difficult although not insurmountable. Short angular aisles may be a start and a reshuffling of where things are might be helpful. This is just placement … easy. As for big brands slipping, it is so difficult to make a penny! If private brands do more for the retailer, that’s great and they are usually at lower cost, which is great for the customer too. I personally have found private labels to be very good. Kroger, Publix, Meier, Giant — all have great private label offerings! Kudos to them!
Paul Donovan
BrainTrust
Roy makes a great point regarding what is the stimulus or tipping point that will motivate the center store paradigm shift. In my view it is possible that an effort to do digital in store merchandising, a revamp of the infrastructure will be needed. This would allow the grocer a chance to change the existing footprints. The larger question may be what % of trade funds come from traditional center store vendors. I can hardly think these smaller more innovative vendors can pitch in the amount of co-marketing funds the larger established players do. That may be a tipping point… Read more »
wpDiscuz
Braintrust
"What we need to remember is the shopper is in the driver's seat -- they choose what to buy."
"It will likely take a massive crisis to change center store, to introduce new product offerings, new departments and innovative shopper paths."
"The decline of big brands isn’t just about health and nutrition. It’s also about consumers switching to own-brand to save money..."

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