The familiar clatter of plates and friendly chatter may still define some dining experiences, but the soundtrack of success is increasingly punctuated by the click of online grocery carts, beeping barcode scanners and roaring delivery bikes. Rising costs and ever-evolving consumer habits are challenging the traditional bricks and mortar model, pushing operators to diversify beyond their four walls.
The past few years have witnessed a surge of grab-and-go brands venturing into grocery. Once fierce competitors, supermarkets are now seen as strategic partners, offering the opportunity to explore new categories and reach wider customer bases.
Itsu, a pioneer in this space, boasts national listings across multiple categories, with its grocery arm generating c.£50m in revenue in 2023 (UK & International). Wasabi too expanded its Sainsbury’s launch of Wasabi Home Bento into Tesco. Leon, building on its 2019 launch of sauces and dipping oils, has grown their offering to include fresh dips, microwave rice, and frozen meals across major grocers. Pret started with a trial of frozen croissants at Tesco in 2021 and has since experimented with granolas, sauces, soups, coffee and frozen smoothie mixes, and partnered with other major grocers like Sainsbury's and Morrisons.
These Grab & Go pioneers are joined by growing ranks of casual dining chains, following in the well-trodden footsteps of Pizza Express and Nando’s who first ventured into retail decades ago. Zizzi launched frozen pizzas in 2020 and saw a 176% retail sales increase in 2023, driven by new products and listings. Franco Manca recently expanded its 2022 Tesco range of chilled pizzas. Having acquired a supermarket sushi manufacturer in 2018, YO! Sushi has developed "To Go" ranges, chilled ready meals and "At Home" sauces.
The growing demand for frozen, "free from", vegetarian and Asian cuisine in the grocery sector is creating new opportunities for foodservice brands to expand their reach and revenue. Meanwhile, supermarkets benefit from the halo effect of partnering with renowned foodservice brands, attracting a wider and more loyal customer base by fostering their reputation for quality and innovation.
However, not all ventures into the grocery aisle are successful, as illustrated by discontinued ranges from the likes of Wahaca, Carluccio's, and Cinnamon Kitchen. Potential pitfalls include niche appeal, excessive pricing, strong competition, a mismatch in customer base, low margins, broken partnerships, and even cannibalisation of more profitable lines.
For smaller or more premium brands, the path to grocery expansion is different. Brands like Daylesford, Ottolenghi, Lina Stores, Eataly, Jones the Grocer and Ergon Deli already have grocery at their core. They typically produce or import their products and sell direct as well as through select partners such as Ocado and artisanal food stores, to maintain their premium image. However, the scale of their UK grocery business is generally smaller than those partnering with major supermarkets, and often more complex due to a wider product range. Ottolenghi's recent launch into Waitrose demonstrates an appetite for growth in this channel whilst maintaining its premium positioning.
JKS Group exemplifies another approach, producing a concise range of Indian sauces and marinades under the label of their Michelin-starred “Gymkhana Fine Foods.” Their beautifully packaged jars are available through Ocado, Whole Foods Market, Selfridges, HG Walter and other speciality retailers. They are planning to scale up through larger UK supermarkets and internationally after securing £2.5 million in seed funding last year. An upscale restaurant group already boasting international retail success is Cipriani, known for their 1931 Harry's Bar in Venice, the birthplace of the Bellini. Now 24 restaurants in 13 countries, they launched Cipriani Food in the 1980s, recognising the growing demand for premium food products. The range now includes distinctive blue packages of artisanal pastas, sauces, oils, vinegars and treats like panettone, biscotti, and jams. Most recently, a conveniently bottled Bellini was introduced into Ocado in the UK. By focusing on longer-life, ambient products, Cipriani are well suited to a more international approach.
For most brands looking to enter grocery, it is a volume game. Sufficient demand and the right partners are crucial. The key ingredients for success are:
Product: Meticulously choose categories that align with your brand expertise, market positioning, and areas where competitors are lacking. Consider factors like profit margins, product lifecycles, waste generation, and international export potential
People / partners: While some brands have the resources to produce in-house, most partner with supermarkets, manufacturers, or distributers / brokers. Setting out with shared values, well defined responsibilities and realistic expectations is crucial
Place: High volume and low cash margins necessitate big retail listings. Consider retailer market share, brand fit and customer overlap, aiming to expand to multiple partners after an exclusive launch
Price: Avoid anchoring grocery prices to your brand’s other channels; it doesn't matter how many multiples cheaper it is than a meal in your restaurant, it needs to compete with the supermarket aisle
Promotion: Leverage the marketing muscle of national retailers through exclusive launches with joint promotional efforts. Actively promote your grocery range to your existing customer base
Grocery opportunities will not fit with every business, and there are plenty of other diversification strategies to consider from international expansion and franchising to licensed products, mergers and acquisitions, as well as exploring different models like virtual brands, kiosks, drive-thrus or even vending or forecourt coffee machines. We believe the winners will be those who prioritise opportunities that best align with their strengths, making sure to protect their core business whilst expanding their presence to become an indispensable part of their customers' lives.
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