Restaurant Revolution

When it comes to socializing, people love to discuss the latest restaurant they have tried. Just last week I was scrolling through one of my social media accounts and saw that a friend had posted the picture of a beer she was having with dinner that night. Being a hops and barley enthusiast myself, I stopped to take a quick look at what my friend was drinking, but it was where the consumption was taking place that really caught my attention. She was at a local supermarket — one with a pretty well established presence in the Chicago area.

If it seems as if these conversations include grocery stores on a more regular basis, it’s because that’s probably the case. As the restaurant industry clawed its way to an average growth rate of 2 percent per year between 2006 and 2014, grocery store sales of freshly prepared food items grew five times faster, according to one industry study.

For the longest time, grocery store operators viewed restaurants as their competition. And it’s easy to see why. As consumers spent more money at restaurants, less was allocated to groceries. When the recession hit, grocers saw an opportunity to take share from the restaurant community and they seized the moment. As a result, restaurants’ competitive landscape changed forever.

Nobody knows exactly when or where the first shot was fired in this restaurant revolution, but make no mistake: the grocery stores continue to charge forward with their plans to take even more market share from restaurants.

Past efforts consisted mainly of deli platters, rotisserie chicken and the occasional salad or hot food bar. But as grocery stores took their lumps with these efforts, they learned valuable lessons about food quality, inventory shrink, labor usage and more.

What makes this go around so different for grocery stores: the ability to beat restaurants at their own game by competing on perceived freshness, customization and price. In-store restaurants are bigger and more sophisticated than grocers’ previous attempts to elbow their way into the restaurant segment. So far as grocery stores are concerned, restaurants represent a high margin business. And grocery stores continue to enhance their restaurants by recruiting expats from the foodservice industry, including chefs and other professionals who can enhance the quality of the center of the plate and make their operations more efficient while providing customers with a comfortably familiar experience.

Grocery stores will continue to eat away at restaurants’ share of the consumers’ stomachs by providing value on the customers’ terms. But they won’t be the only ones. The next new players to enter the restaurant space? Retailers. Companies such as Ikea, Nordstrom and Tommy Bahama continue to encroach on the restaurant community and more will follow. In other words, prepare for additional shifts in the restaurant industry landscape.

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