M&S and Ocado strike £1.5bn online grocery deal

Marks & Spencer has formed a £1.5bn online delivery joint venture with Ocado to bring M&S’s ready meals to internet shoppers for the first time.

M&S will pay £750m for a 50% share of Ocado’s UK retail business to form the new business, which will trade as Ocado.com. The venture will not start trading until September 2020 at the latest, when Ocado’s present deal to deliver Waitrose products expires. Only 10% of the products on sale at Ocado.com will be M&S-branded goods.

Steve Rowe, Marks & Spencer’s chief executive, said he had “always believed that M&S Food could and should be online” and combining M&S’s food with Ocado’s technology and delivery network was a “win-win” and “compelling proposition to drive long-term growth”. He added: “Our investment in a fully aligned joint venture with Ocado accelerates our food strategy as it enables us to take our food online in an immediately profitable, scalable and sustainable way.”

Tim Steiner, the chief executive of Ocado, described the deal as a “transformative moment in the UK retail sector” that would combine “two iconic and much-loved retail brands set to provide an unrivalled online grocery offer”. Steiner added also that the joint venture would allow Ocado to “grow faster, add more jobs, and create more value as we lead the channel shift to e-commerce here in the UK. We are very excited by the many opportunities ahead.”

Source: The Guardian

Sprouts executives pleased with growth in e-commerce and store brands

On the e-commerce front, Sprouts officials said they’ve begun trialing store pickup through Instacart at select stores. The service, which Instacart launched nationwide last year, complements Sprouts home delivery service through the e-commerce provider, now available at more than 200 of Sprouts’ 313 locations.

During yesterday’s earnings call, Nielsen said Sprouts will introduce a white-label platform in the second half of the fiscal year that plays up the retailers’ branding and offers a more “unified” experience for shoppers.

“We’ll also be able to get better content personalization offers to our customers and partner with our vendor community to put the right type of promotions out there in order to offset some of these costs,” he said.

The company also reported significant growth in its private label products last year. Store brand sales grew 26% growth year over year and now comprise about 13% of the company’s total sales.

While Sprouts appears to have beat fourth-quarter earnings expectations, the company’s guidance for 2019 has fallen short with investors. Still, Sprouts leadership remains optimistic about last quarter’s earnings and the direction of the company in the coming year, despite an uncertain end to 2018.

The unexpected resignation of CEO Amin Maredia in December led to the largest one-day drop in stock prices in the company’s history. Since then, interim co-chief executive officers Brad Lukow and Jim Nielsen have stepped up to run the business. During Sprouts’ fourth-quarter earnings call, the pair reported that a search is still underway for a replacement CEO.

“In 2018 we continued to evolve and improve the Sprouts business model by focusing on the latest consumer and industry trends,” said Lukow on the earnings call. “Our focus on product innovation, guest experience and ongoing training and development of our team members continue to underpin the success and growth of the Sprouts brand across the country.”

Lukow reiterated Sprouts’ plans to open nearly 30 stores in 2019, with nine store openings anticipated in the second quarter when the state enters New Jersey, Louisiana and Virginia. According to Lukow, this year about 50% of new stores will be in existing markets and 50% will be opened in new markets, while historically about 70% of new stores were placed in existing markets and 30% opened in new ones.

In addition to store growth, Sprouts has continued to roll out store remodels and is focusing heavily on expanded deli departments and more convenient meals, with remodeling completed at half of Sprouts’ locations. These new locations offer customers elevated deli offerings such as a salad bar, prepared meals and freshly squeezed juice, Nielsen said on the earnings call.

In its earnings press release, Sprouts announced that it has voluntarily reclassified certain expenses on consolidated statements of income presentation to provide greater transparency and enhance comparability with industry peers.

Source: Grocery Dive

Costco explores farming prospects in Hawaii

Hawaii may seem like a surprising choice for Costco to launch its in-house farm operation, but the potential move would give Costco greater flexibility and quality control over its supply chain while cutting down costs, Timothy Campbell, senior analyst at Kantar Consulting, wrote in an email to Grocery Dive.

Considering the logistics required to keep store shelves stocked with fresh produce and other items, it could go a long way toward reducing the brand’s supply chain expenses. Costco is already at a competitive disadvantage compared to Hawaiian retailers who don’t have to pay steep shipping costs to transport perishable goods, so the bulk retailer could shift the money it spends on shipping and logistics to set up shop in town.

By having a local operation, Campbell noted that Costco could cut out the traditional supplier and pass on savings to its customers. In addition, by having full control of the supply chain, the bulk retailer could be more nimble in when to shift what items it plans to stock in its stores instead of sticking to the typical top-selling products.

“Even if Costco’s major competitors in Hawaii also face a level logistical playing field, Costco may sense an opportunity to use its scale and establish a local source of goods that could further undercut the competition whereas the cost savings of such a move in another state would not be as great because it would naturally already be more logistically integrated with the rest of its sourcing network,” said Campbell.

Costco has seen demand for organic products skyrocket. The retailer has been the top seller of organic food products in the U.S. for several years, Campbell adds, making it unsurprising that it would be looking for a way to dig into the sector at the farm level, perhaps to ensure organic compliance.

This move could, however, create concern among local farmers as the large-scale corporation, with its deep pockets and ample resources, would likely be able to immediately outpace small farmers’ production capacity. As noted by KHON2, Hawaii Farmers Union United President Vincent Mina has already indicated his hope that Costco would collaborate with local farmers instead of displacing existing small-scale operations.

Costco has previously made other moves to shift some of its initiatives in-house. In 2018, the company brought the production of its rotisserie chickens in-house after sales experienced an 8% growth rate since 2010. By doing so, the company is projected to save the company 10 to 35 cents per bird. Having a reliable supply and more transparency in its supply chain were also motivating factors. The company also is currently building a large-scale chicken processing plant in Nebraska that will serve as the center of a farm-to-table production system for its $5 birds. Once finished, it will be capable of processing two million chickens each week to support sales, which sit around 60 million birds annually.

Surety and margin slashing are driving other retailers to take control over aspects of their supply chains as well. Kroger and Albertsons started investing in milk processing and bottling facilities in 2017, with Kroger processing all the fresh milk it sells in-store. Walmart also announced plans to open a large dairy plant in Indiana that produces milk products for nearly 500 of its stores.

Source: Grocery Dive

Walmart e-commerce sales grow 43%

Despite worrying holiday metrics recently reported by the Census Bureau, Walmart didn’t have a problem driving customers to its stores or website. CEO Doug McMillon said the company’s positive report is thanks in part to a favorable economic environment, as well as accelerated growth in a number of initiatives. E-commerce, for example, benefited from the expansion of its grocery pickup and delivery efforts as well as a broader online assortment, the company said.

The “blowout” earning report is thanks to a number of investments that are beginning to bear fruit, especially in grocery, Charlie O’Shea, Moody’s Lead Walmart Analyst, said in a statement emailed to Retail Dive. “Food continues to play a critical role, and Walmart is upping the ante with its investments in this category, putting additional pressure on the entire category,” O’Shea said, adding that he anticipates 2019 will be a year of muscle flexing across multiple categories.

Many analysts are encouraged by Walmart’s growth online, which signals it may have enough competitive strength to compete against Amazon.

“Walmart has been successfully executing its online-forward strategy, laying down aggressive e-commerce growth targets and making some savvy geographic expansions and acquisitions across key verticals, like specialty apparel and grocery,” Michael Lagoni, CEO of retail intelligence firm Stackline, said in comments emailed to Retail Dive.

Last year, the company focused a large portion of its e-commerce efforts on grocery, which, as of December, accounts for 52% of Walmart’s sales. The retailer’s grocery pickup service is available at 2,100 stores — more than double what it was in 2017 — and will expand to 3,100 stores by the end of this year.

Its grocery delivery service launched in March of last year and has been expanding since. Along with its own delivery platform the retailer is partnered with many delivery service providers including Point Pickup, Skipcart, AxleHire, Roadie, DoorDash and Postmates. In addition, Walmart has been testing autonomous grocery delivery by partnering with electric and driverless car company Udelv in Phoenix and Ford in Miami. This was after its first driverless car test with Alphabet’s Waymo, which picks up customers and brings them into stores.

By offering a variety of e-commerce options, the retailer is hoping to attract new customers. Through its recent Jet.com website refresh, Walmart has zeroed in on wealthy, urban millennials. It’s not clear whether that message is resonating, but it does show that Walmart is bulking up to compete on Amazon’s turf.

Source: Grocery Dive

New grocery store with drive-thru pharmacy and eatery opening in Cleveland’s Midtown neighborhood

CLEVELAND — Dave’s Market, a grocery store that’s been a household name in Cleveland for nearly 90 years, is opening a new location in Cleveland’s Midtown neighborhood, according to a release from the company.

The new market, located at 1929 East 61st Street, will feature a food court style eatery with access to fresh food options.

The 55,000-square-foot market and eatery sits northeast of University Hospitals Rainbow Center for Women and Children, along RTA’s Healthline route.

Among the features in the market, there will be a food court style eatery with lunch and dinner options, as well as takeout, featuring hand-rolled sushi, Cleveland’s Maha’s Falafel and Japanese hibachi. Also, customers can still get the classics from Dave’s such as fried chicken and subs.

Inside the space, Dave’s and UH are partnering to create a teaching kitchen, which will serve as an instructional space where organizations across the city and general public can host classes and events focused on healthy eating.

A drive-thru pharmacy will provide convenience, along with a First Federal of Lakewood bank branch opening in the spring.

The new grocery in Cleveland’s Midtown neighborhood is one of many stores that Dave’s Market has built over the years. Tracing its roots back to 1930 with the location on Payne Avenue. Burt Saltzman, a third generation grocer, along with his two sons Dan and Steve, grew the business to 14 stores throughout Northeast Ohio, according to the release.

The Payne Avenue location will close its doors on Sunday, Feb. 24 before the opening the new location on East 61st Street, according to a spokesperson for Dave’s.

Dave’s is in the process of finalizing a transportation plan for customers from its former Payne location to the new store. The shuttle will pick up residents at two locations in the neighborhood and will take them to the new location where they will have an hour to shop. It’s unclear at this time where those two locations will be, but a spokesperson for the market says they will relay the information to its customers.

The store will open at 10 a.m. on Feb. 27. The market and eatery will open daily 7 a.m. to 9 p.m.

Source: News5cleveland

Insurance company pilots meal delivery program

As studies begin to solidify the link between food and well-being, more companies like BCBS and HCSC are experimenting with how to provide nutritional meals that can help people who struggle with certain illnesses.

BCBS’ partnership with HCSC — the fourth largest health insurer in the U.S. — isn’t the institution’s first foray into meal services. It partnered with Platejoy in February of 2018 to offer a diabetes-focused meal plan that is covered by five of its health insurance plans. HCSC also jumped on the meal delivery bandwagon as part of its Affordability Cures program, which it created to address the root-level issues in America’s health care system that can often lead to crushing medical debt for many patients.

A few other companies are dabbling with prescription-focused meal kits. San Francisco-based Sun Basket added Dr. David Katz as its chief science advisor to create what it describes as an “online food-as-medicine platform” connecting dietary and health needs to food. Celebrity chef Tricia Williams and New York City-based Dr. Frank Lipman launched Be Well Eats, offering grain-free, dairy-free organic meals focusing on adaptogenic herbs and backed by a team of certified nutritionists. Users still have to cook the meals from either outlet, however.

What’s notable about foodQ, however, is its affordable cost and convenience. The $10/month subscription package includes delivery of ready-to-eat meals. For patients with chronic illness, making drastic changes to their diets can be one of the biggest challenges. Prepared meal services take the guesswork out of food shopping, prep and cooking.

The meal delivery program also looks to broach the problem of food deserts, which are places that lack access to fresh food. Often, the most easily accessible food are high in cholesterol, sugar and fat, while any available produce is sold at a higher cost. There were roughly 2.3 million Americans living in a food desert in 2016, according to the Nonprofit Quarterly. Delivering prepared meals right to users’ doorsteps helps overcome food desert dwellers’ logistical challenges.

While some may be surprised to see the pilot focusing on major metropolitan cities like Dallas and Chicago, food deserts aren’t always in the middle of nowhere. A lack of reliable transportation to fresh food markets, economic blight and other factors can create food deserts even in metropolitan areas.

Source: Grocery Dive

Kroger announces 2 more Ocado sites

The locations of Kroger’s newest automated facilities highlight two very interesting parts to its Ocado strategy.

By planting a CFC in Florida, where aside from a smattering of Lucky’s Market locations it doesn’t have a store presence, Kroger is showing it intends to use the facilities to reach new markets. Kroger may place the facility between Orlando and Tampa — two cities separated by about 80 miles that have the density to support a high-volume e-commerce operation and have experienced significant population growth in recent years.

The move adds a new dimension to a grocery battle that’s unfolding in a state dominated by Publix. The legacy company has a first-class store fleet, unrivaled customer loyalty and same-day delivery as well as pickup through Instacart. In recent years, though, Walmart has challenged the grocer with remodeled stores and a growing e-commerce business, while new players like Sprouts Farmers Market, Aldi and Earth Fare have elbowed their way in.

Kroger’s move amounts to a hefty bet on e-commerce shopping — and particularly the pure-play online grocery model that has proven challenging for the likes of Amazon and Ahold Delhaize.

Its Mid-Atlantic CFC, meanwhile, can serve as a support center for its Kroger and Harris Teeter locations. CEO Rodney McMullen has said the automated warehouses would help supply click-and-collect orders. In a recent interview with Grocery Dive, e-commerce expert and Brick Meets Click chief architect Bill Bishop said the facilities could eventually stock store shelves, too.

A question mark with both facilities — and with the Ocado model overall — is speed. Its massive CFCs can quickly and cost efficiently assemble orders, but they have to be located outside metropolitan areas, making on-demand delivery problematic. Ocado is set to test a one-hour delivery service called Zoom next month in London, and CEO Timothy Steiner has indicated the service will eventually come available for its international clients.

Earlier this month, Ocado’s main fulfillment center in Andover, England, which handles 10% of the company’s orders in the country, experienced a massive fire. Nobody was hurt in the blaze, and the company plans to quickly rebuild, though experts are beginning to question the safety and stability of the CFC model in light of the incident.

As Coresight Research noted recently, “The fire highlights the risk of the centralized distribution model, which is virtually unique to Ocado in the U.K. online grocery space; most of Ocado’s online grocery rivals in the U.K. rely heavily on in-store picking, dispersing risk of disruption among hundreds of local stores.”

The company doesn’t appear to be making any public shifts to its strategy after the fire and the decision to announce two more CFCs shortly after the incident shows that it remains committed to its current model for the time being.

Source: Grocery Dive

Is the Future of Grocery Shopping B.Y.O. Container?

If you think this is going to be yet another column admonishing you for not doing enough to curb the amount of single-use plastic in our waste stream, you can relax. You don’t need a lecture at this point.

You might already know, for instance, that global consumer culture has generated more than 8.3 billion metric tons of plastic since the middle of the last century, and that we currently produce 300 million tons of it a year, half of which is made up of items used only once. And you’re probably aware that roughly 8 million metric tons of this discarded plastic ends up in the ocean, where it threatens marine life of all kinds. It’s unlikely anyone needs to tell you that every year we throw enough plastic away to circle the planet four times, or that a mass of plastic waste floating in the middle of the Pacific Ocean is three times the size of France.

So instead of piling on to the guilt you probably already feel, allow me to offer a glimmer of hope. Increasingly there are signs—not big ones, but signs all the same—that a new generation of businesses and manufacturers, and even some of the older ones, are ready to change the way products are packaged and delivered so that single-use plastic is all but removed from the equation. Right now, these companies’ actual impact on the waste stream is small. But if their solutions catch on and become the norm, the impact could be tremendous.

Last week brought news of a start-up called byHumankind, which delivers a variety of personal-care products directly to the doors of its online customers. At first glance, this doesn’t appear to be anything particularly new. But what is novel is the role of plastic in this most familiar of transactions. It’s practically nonexistent. Mouthwash comes in the form of a tablet that dissolves in water. Shampoo comes in a bar, like soap, and arrives wrapped in paper. Deodorant is delivered at first in an elegantly designed plastic container—but refills come paper-wrapped and ready to be popped into the original holder, turning what would typically be single-use plastic into something that can potentially last for years.

Another new startup, Loop, carries out its mission of reducing plastic waste by leveraging the popularity of other brands. Its creators describe Loop as a “circular shopping platform,” which sounds oh-so-disruptive but is actually just a fancy way of describing what used to be relatively common only a few generations ago, when the milkman would come around delivering fresh milk in glass bottles and collecting the empties from the previous week.

Loop has updated this admittedly quaint-seeming idea for the modern era. A wide range of products from big-name personal-care, household, and food and beverage brands come to you in durable, reusable containers. When you’re finished with them, you can either ship the containers back to Loop or schedule a pickup. That triggers the next shipment to come your way. Once returned, your discards are sanitized and refilled with products to be sent out to another customer, posthaste.

Loop is still in the pilot stage; it will begin testing its model in the New York City and Paris markets this spring. One of the people behind it, Tom Szaky (CEO of TerraCycle, a company that specializes in recycling hard-to-recycle items) has cited the travesty of ocean plastics as a primary motivator in getting the new company off the ground. Brian Bushell, the founder and CEO of byHumankind, writes on the company’s website that the idea for his start-up came while he was on a small boat off the coast of Thailand, exploring “tiny, uninhabited islands, in an environment I’d expected to be untouched,” when his boat became surrounded by plastic waste. “I’d expect to see these things floating in Manhattan’s East River, I thought. But here?”

A big part of Bushell’s pitch to customers—beyond the quality of the products he’s selling—is the opportunity to keep five pounds of single-use plastic out of the waste stream every year, “just by getting ready in the morning.”

With their emphasis on refillables and circular shopping, byHumankind and Loop join a vanguard of young, forward-thinking companies that are building sustainability into their business models, rather than simply offering customers a “green option” or vowing to reduce the carbon footprints of their operations and supply chains. This movement also includes zero-waste, packaging-free grocery stores like Brooklyn’s Precycle or Idaho’s soon-to-open Roots Zero Waste Market, where customers bring their own containers and buy items loose or in bulk. This new wave of entrepreneurs are banking on the idea that consumers are sick and tired of feeling like they’re hastening the end of humanity every time they buy hair conditioner or yogurt.

Whether their hunch is correct remains to be seen. (Zero-waste groceries can prove to be a tough sell even in famously progressive cities like Austin, Texas.) But certain retailing and cultural phenomena—online shopping, direct-to-consumer delivery, improvements in storage and shipping technology, and a growing environmental awareness among millennials, whose proclivities guide the decisions of some of our biggest brands—are definitely converging in ways that make it easier to opt out of plastic packaging.

Today, sure, it’s just a noteworthy trend. But with the right timing and the right amount of public buy-in, today’s trend might actually become tomorrow’s industry standard.

Source: EcoWatch

Amazon Go secures space in the heart of London

After a successful pilot and expansion in the U.S., Amazon Go is taking on the U.K., but will it be a winner overseas?

Currently there are just 10 Amazon Go stores stateside. Most are clustered in the same city, with four in its original location of Seattle, two in San Francisco and four in Chicago. The limited number of current stores suggest conservative expansion despite its announcement last year that it plans to open more than 3,000 additional spaces by 2021.

For Amazon Go, one of the largest hurdles to growth is customer adoption. When the retailer first launched in the U.S., critics weren’t sure shoppers were ready for a cashier-free experience where cameras and sensors track a customer’s every move. According to a survey of 1,000 Americans by Shorr Packaging Corp in July, 84% of people liked the idea of shopping at Amazon Go, but 20% said there were drawbacks. These drawbacks include not being able to use coupons, no social interaction and the inability to pay with cash.

Londoners, however, are already familiar with the idea of checkout-free stores. Two of the U.K.’s most popular supermarkets, Sainsbury and Tesco, tested a cashierless store in London just a few months after Amazon Go opened in Seattle. The Inquirer reported that Sainsbury had fairly decent adoption rates after its pilot, with 100,000 transactions on its “scan, pay and go” technology called SmartShop. The company also said that it was seeing 3,000 to 4,000 new customers registering for the tech each week.

This could bode well for Amazon, whose technology is more developed than both U.K.-based grocers. While all require a mobile device, Amazon’s sensors remove the friction of having to scan each product, automatically detecting what has been removed from a shelf and adding it to a customer’s virtual cart.

If the retailer’s expansion goes well, it could meet or even surpass the expectations that it will be a $4.5 billion business by 2021, according to RBC Capital Markets, since Amazon’s cashier-free stores generate 50% more revenue than traditional convenience stores.

Amazon has been planning its U.K. arrival for well over year. In 2017, the e-commerce giant filed many trademarks with the U.K. Intellectual Property Office for its slogans like “No Lines. No Checkout. No Seriously.” In addition, the retailer is already familiar with its British audience through its Amazon Fresh, Amazon Pantry and Prime Now services in the region.

Considering the retailer also has these three services in other countries like Japan and Germany, what starts with London could signal an international takeover.

Source: Grocery Dive

Jet to sell direct from NYC’s Fulton Fish Market

Operating since 1822, Fulton Fish Market is a New York City institution. Now, residents don’t have to trek to Hunts Point in order to snag today’s catch. One of the most popular aspects of the storied market is its commitment to sourcing sustainable seafood products. The seafood industry is rife with supply chain issues including everything from mislabeled fish to human rights violations.

New York City’s nearly 9 million residents tend to be particularly savvy when it comes to food policy issues and many of them have a preference for sourcing local items whenever possible. But they also have to battle the city’s traffic and congestion to do so. The high-density population, abundance of affluent consumers and a dearth of car owners makes New York the perfect habitat for online food delivery to thrive.

As Jet rolls out its fresh seafood offerings, one of the big questions will be whether consumers are willing to let go of their hesitancy towards ordering fresh proteins online in lieu of being able to see, smell and peruse offerings at the supermarket or local butcher shop. In this case, convenient, hassle-free delivery and a preference for transparent food products may prevail.

Despite the appeal of this new offering, Jet still has some stiff competition in the NYC food delivery scene. FreshDirect has been the reigning online grocer with 63% of the market share, according to Bloomberg, but now residents may be turning their favor elsewhere as FreshDirect’s expansion hasn’t gone as smoothly as planned. Some are even taking their grievances to social media, recounting missed deliveries and out-of-stock products.

Perhaps FreshDirect tried to bite off more than it could chew, offering prepared meals, adding new products and offering same-day delivery for some SKUs, while also constructing a new fulfillment center intended to secure its premier position. It also recently relocated its headquarters to the South Bronx, which was intended to double its business.

Hot on its heels are several competitors, including Amazon and Ahold Delhaize. Ahold Delhaize’s Peapod boasts three decades of online grocery under its belt and has NYC in its growth strategy crosshairs. While it reports $1 billion in sales and enlists 1,500 delivery drivers, however, Peapod hasn’t claimed the same market dominance that FreshDirect enjoyed.

There’s a clear lesson unfolding amid the battle royale for NYC’s online shoppers. Some companies are becoming so enamored with meeting demand that they’re outpacing their ability to put their money where the mouth is. Online food shopping is a rapidly growing industry and shoppers have little patience for delivery mishaps or missing products. As more companies enter the competition, the ones who focus on securing loyalty instead of seeing how many different products they can offer or how fast they can deliver will likely win the crown.

Source: Grocery Dive