Walgreens Grows the Food Retail Category

Now it's Walgreens.

Steve Johnson reported it on LinkedIn and on his blog, but I could've predicted it.

If I were in the prognostication racket.

But my business is helping restaurants and food brands navigate the rapidly-changing retail grocery business. And it's changing even more rapidly than in the past.

The rise of the "grocerant" has been detailed here and elsewhere. What's new is the embrace of food products by non-grocery retailers. Just as grocery stores are pretending to be restaurants, non-food outlets like CVS, Dollar Stores, and now Walgreens are moving into the food category. They've hired Jim Jensen as divisional merchandise manager in charge of fresh foods. He comes from Tesco's Fresh & Easy Markets, and will be in charge of ramping up Walgreen's "W" lines of prepared and fresh foods. Fresh & Easy was touted when it started out as "a convenience store on steroids," and while Tesco has stumbled here for a variety of reasons, the appeal of convenient food for busy consumers remains a sound one (especially since most c-store customers are males, not your traditional grocery buyer).

Walgreens already sells milk, eggs and other perishables, but they're looking for ways to up that load, citing stats that say 80% of Americans don’t know what they’re going to have for dinner at 4 in the afternoon. It's logical, then, they would be looking at “grab-and-go meals," salads, and sandwiches, along with selling its own private-label foods, especially what the company calls “meal components.”

The reasons are pretty simple for Walgreens' move: in the Great Recession, the only retailers who've thrived are those selling food. Hard goods titans like Target now look like drunken sailors, stumbling from one miscue to the other. The brand experts continue to sing the Minneapolis trendsetter's praises, but the numbers don't lie: food is the reason Walmart has thrived.

Surprisingly, grocery stores seem to think they can sell non-food items, which have a much higher profit margin than food (traditionally in the 1-3% range). We'll see about that.

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