Target’s Grocery Reset: More Better-for-You Brands

On Wednesday, general merchandise retailer Target reported results for the first quarter of 2016. During its conference call, the retailer noted that Q1 food comps were dragged down by a decline in center store grocery. The drop was due in large part to what Target describes as a “meaningful disruption” related to a major center store grocery reset, which occurred in April. Target’s grocery reset is an effort to reinvent the department to remain relevant for its core base of young shoppers, including new moms and young families. Oh yes, and drive future sales.

As stated by Chairman and CEO Brian Cornell:

“It was an investment we had to make in both labor and in disruption to make sure we continue to move forward in the reinvention of food. So, short term, it had a meaningful impact on our food sales, but we certainly expect to see the recovery over the balance of this year as we provide a more relevant assortment to our target grocery shopper.”

This month’s edition of Gluten Free Retail Tour features Target. It highlights Target’s grocery reset, which includes changes to assortment, presentation and category adjacencies.

Target’s Grocery Reset: Notable Changes

Showcasing wellness. One example is nutrition bars. Target intends to be a destination for nutrition bars. The retailer has integrated bars of every kind into the center store set. Our store visit reveals an aisle of bars as far as the eye can see.

Broader assortment. Target reports that it has added about 1,000 new grocery items. This includes 55 new better-for-you brands across 25 categories with an emphasis on natural and organics.

Bigger focus on Simply Balanced. Target stated that it recently expanded its private label Simply Balanced brand into an additional 30 categories.

More fresh and local products. In addition to updating the grocery assortment across the board, a key initiative is to segment stores to align with local demographics. This will mean more fresh, local and more natural and clean label offerings on a store-by-store basis in the future. We anticipate local will become a bigger focus for Target going forward. Our recent store visit turned up some local beers, but not much else in terms of local assortment.

Increase in gluten free. As part of its overall health & wellness strategy, Target is ratcheting up the gluten-free options available in its stores. The retailer is expanding its assortment of well-recognized gluten-free brands (e.g., Amy’s, Enjoy Life Foods, Pamela’s, Udi’s).

Target’s also adding more gluten-free items produced by big consumer packaged goods companies. Some examples: Nestle’s Lean Cuisine Gluten-Free frozen entrees and Nabisco’s Good Thins rice crackers.

Adding good-for-you kids products. There’s also a noticeable bump in the number of kid-oriented good-for-you SKUs now available at Target. New to Target shelves for example: Campbell’s Organic Kids soup (Frozen characters on the packaging is a big win!) and Back to Nature’s organic mac & cheese.

“Allergy moms” will also be happy to find more allergen-free products targeting kids cropping up on Target shelves as well. One fun find is Annie’s Homegrown gluten-free bunny cookies. So food allergy kids can be “just kids” too.

For more on Target’s gluten-free initiatives, see post: Target’s Gluten Free Offer Delights.

Target’s Grocery Reset: Key Takeaways

• It’s good to see Target make changes in grocery and implement a department reset. Target never really did gain any traction in grocery due to a lack of differentiation in the original set (which dates back to the P2008 prototype).

• By adding and expanding on-trend foods – healthy, natural & organics, gluten-free – Target is, as Cornell states, positioning grocery for the long term.

• The increased focus on health & wellness in Target’s grocery reset will likely resonate with the retailer’s core guests: Millennials and young families.

• And Target’s grocery reset provides a much-needed differentiated offer, which could potentially lead to a sales lift in grocery.