Issue #103: Grocery Gets A Glow Up

(Editor’s Note: This piece was initiated prior to the NYT putting out a big piece on Sammy Nussdorf, the founder of Meadow Lane today. Great minds think alike? 🤝)

It feels like every month a new trendy grocery store is popping up. The characteristics of these stores tend to be very similar. Small footprint, low SKU count, good lighting, wooden shelves, space to walk in the aisles, and many grab-and-go items. At first, there will be a line out the door at the store when it blows up on social media, and then the hype will die down. For some, it will still be integral to their lives, but for most, they will stop going. All these markets popping up are not a coincidence. Recently, I was chatting with someone who asked me why this was happening, and I thought it could be an interesting topic. With that, let’s dive in.

For starters, grocery as a whole is getting a glow-up, which is the underlying trend for this. Things that used to be a boring staple, like olive oil, are now getting pretty packaging and fun ingredients. Partially, that is due to American consumers wanting more flavor and becoming more exploratory in the kitchen. But also, that is because grocery has become a status symbol. It used to be that more generic things about grocery were status symbols, like organic versus non-organic. However, that has changed, and just like with clothing, what brands you buy says something about you. As coined by Andrea from Snaxshot, grocery is seeing a hypebeast rise just like fashion saw with all the streetwear products, like Kith, Supreme, etc over the past decade. People want to display their pantry items just like they have a logo on a t-shirt.

However, these new stores are not seeing success just because grocery is seeing a hype beast/status shift. There are genuine gaps in the market these stores are filling. First, like many industries, anything experiential is seeing a rise in popularity. These stores are considered experiential since you can try out new products and see everything visualized so beautifully. The product discovery opportunity is another reason people want to frequent these stores. Second, despite many customers seeking out more premium grocery items, there is a dearth of true premium grocery stores. There are one-offs and regional players, but no one has risen to be a national player like Whole Foods was in the early 2000s. Finally, partially due to value propositions and partially due to health reasons, prepared foods are seeing a big surge. These stores tend to do these types of products, like a salad bowl or chicken tenders with sauce, very well. Many customers love these for a quick meal during busy stretches as opposed to takeout or sitting down at a restaurant.

These changes are going to be happening more and more as customers look for alternatives beyond the traditional conventional and club grocery stores that are increasingly dominating the landscape. With the new wave of consumers indicating they are more likely to shop at multiple stores each week, these smaller format specialty stores could carve out a niche. Still, I would surmise it will be difficult to scale these to dominant players given the smaller format and high prices. I anticipate a constant cycle of stores entering and exiting the space. For brands, these stores can be a strong sales outlet, just be careful not to over-extend the slotting and entrance fees.

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