Online Grocery INSIGHTS & OPPORTUNITIES - THE TETRA PAK INDEX ISSUE 11 / 2018
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THE TETRA PAK INDEX
ISSUE 11 / 2018
INSIGHTS & OPPORTUNITIES
Online Grocery
foreword_02
Thoughts from Dennis
Welcome to the 11th annual Tetra Pak This year’s Tetra Pak Index provides insights Packaging has a key role to play in all of this.
Index, which focuses on the rise of online into this new omnichannel world of grocery It’s part and parcel of home delivery, impacting
grocery and the unique opportunities it shopping. It’s based on consumer research significantly on both customer satisfaction
presents for the food and drink industry. conducted in five countries, plus interviews with and logistics (light weight and space efficiency
e-retailers in North America, Europe and China, are key factors). And while its primary purpose
The power of the internet is transforming and a global market segmentation study. will always be one of protection and
the grocery trade, just as it has revolutionised preservation, it now offers rich potential for
so many other retail sectors. There were some It highlights four key trends. Convenience, personalisation and a consumer experience
initial challenges. But with most of these now which is driving online demand in all that can both surprise and delight. Thanks
addressed, online grocery shopping is on an geographies, as consumers look for ways to smart technology, every package sold
unstoppable march, taking an ever-greater to make their time-crunched lives easier. can now carry a unique digital identifier,
share of the food retail market. Technology, which is transforming both creating the opportunity for direct one-to-one
supply chains and the consumer experience. conversations with consumers (as well as
Physical stores are also being reinvented Sustainability, as environmental issues become helping drive efficiencies across the entire
through digitalisation, providing consumers more important for consumers, brands supply chain).
with extra information on products, personal and retailers, and governments alike.
offers and recommendations, automated And personalisation, as marketers look for Looking ahead, this omnichannel revolution
cash-free checkout and more – as well as new ways to attract consumers online, build in grocery is not merely going to continue,
supporting hubs for rapid local delivery. relationships and drive loyalty. it’s going to accelerate. We look forward to
Indeed, offline and online are now merging working with our customers to harness the
into an “omnichannel” age, where consumers opportunities it presents.
expect to be able to buy whenever, wherever
and however they choose, with the ubiquitous
smartphone acting as their compass.
DENNIS JÖNSSON
PRESIDENT & CEO, TETRA PAK GROUP
contents_03
contents
Overview Analysis Trends
05 Growth & disruption 11 Market forecast: resisters, laggards, 16 Convenience
06 Redefining the consumer experience pioneers, leap-frogging pioneers 19 Technology & performance
08 Physical retail: reinventing to stay relevant 12 Retailer & consumer needs: 23 Sustainability
North America, Europe & China 25 Personal & unique
13 Understanding online grocery consumers
27 Summary
28 Research & references
CASE STUDIES 14_Maeil Dairies_Tetra Pak & bigbasket / 17_Di Carlo / 21_Adopt A Cow_Tetra Pak, Ads On Board & Shazam / 22_Puleva / 24_Buzzbox_Koita / 26_JustFoodForDogs
overview_04
Overview
E-commerce is by far the fastest-growing channel
for groceries today. It also has a much wider impact,
influencing physical stores – and more. It’s part
of a transformation that’s redefining the way
consumers buy, experience and react to products,
driving innovation and disruption throughout
the value chain.
overview_05
Growth & disruption Not only do retailers and brands now see We’re now seeing the emergence of online/ To that end, Walmart has acquired
Online is by far the fastest growing channel online as a crucial sales channel, they also see offline alliances everywhere, as “bricks and e-commerce companies such as Jet.com
for groceries today. Looking at Kantar’s latest it as having an impact far beyond e-commerce: clicks” emerges as the business model of and made significant investments in IT to
figures for the global fast-moving consumer its disruptive influence is affecting investment choice in the shift towards an “omnichannel” raise its capabilities. Coming from the other
goods (FMCG) market as a whole, online and future plans for all channels. Online approach to retail. “Our strategy is to serve direction, Amazon spent $13.7 billion to buy
sales grew 30% in the 12 months to March grocery is being seen less as a battleground customers through e-commerce and our stores Whole Foods, not only to establish a physical
2017, double the figure for the previous year, between insurgent pure players and in a seamless way,” says Walmart CEO Doug consumer-facing presence, but also to turn
compared with just 1.3% growth in all FMCG incumbent bricks and mortar vendors, and McMillon.3 “Customers are time-crunched, its stores into a network of hubs close to urban
channels.1 And while the picture is very different more as a catalyst for a wider transformation. so we want their shopping experience with consumers. It’s now rolling out free two-hour
from market to market, online grocery is “It’s about how online and offline together us to be fast and easy – truly seamless – in all delivery from the grocery chain to Prime
expected to continue to grow much faster than can create both a better customer experience the ways they want to shop: in stores, on their subscribers in various US cities, increasing
any other channel, albeit from a fairly modest and better efficiency for the entire supply mobile device, or through pickup and delivery.” pressure on traditional retailers to look for
base – 4.6% globally. (See also Planet Retail chain,” says Stéphane Roger, Global Director ways to promptly and profitably deliver their
figures, below. For more on individual markets of Shopper and Retail, Kantar.2 own fresh food and pantry items.
and their growth prospects, see page 11.)
In China, e-commerce market leaders Alibaba
and JD.com are also investing heavily to
Business models • Third party/personal shoppers.
Services such as Instacart
build an offline presence (see page 08.) “We
Hypermarkets
Drugstores, Supermarkets Cash & carries, Convenience
Discount Online Currently there are a variety of
& superstores
pharmacies &
perfumeries
& neighbourhood
stores
warehouse
clubs
& forecourt
stores
stores grocery
online grocery models: that pick up from retailers service every piece of the consumer journey,”
and deliver to consumers are says Kurt Li, Head of Business Intelligence at
2012 2017 2022 2012 2017 2022 2012 2017 2022 2012 2017 2022 2012 2017 2022 2012 2017 2022 2012 2017 2022 • Home delivery. Retailers are increasingly popular, not only Alibaba.4 “Now, with our bricks-and-mortar
increasingly prioritising home with consumers but also with retail presence, our touchpoints are no longer
$1,714bn
$1,659bn
$1,848bn
$335bn
$412bn
$481bn
$799bn
$770bn
$925bn
$305bn
$367bn
$455bn
$294bn
$314bn
$396bn
$342bn
$387bn
$514bn
delivery due to consumer retail partners: Sam’s Club, limited to online: we have managed to digitise
$21bn
$41bn
$94bn
demand. But it’s costly, Target and Costco all use
offline behaviour too.”
making it difficult for retailers Instacart for fulfilment and
to make a profit, especially delivery in the US.
as consumers are resistant to • Direct to consumer. Many (if not Meanwhile, brands are becoming e-retailers
delivery charges. most) major CPG companies too, and many (if not most) major consumer
Fastest growing channels
• Click and collect. Allows are expected to add direct-to- packaged goods (CPG) companies are
consumer services over the next
PLANET RETAIL GLOBAL RNG
consumers to browse and expected to experiment with the direct-to-
buy online then collect from few years. Some, such as The consumer model over the next few years.
a physical outlet, such as a Coca-Cola Company, Unilever,
“This is, without a doubt, the greatest retail
2.2% 3.2% 3.8% 4.4% 4.8% 5.8% 17.4% store, petrol station, post Procter & Gamble, are doing
revolution we’ve seen over the last 50 years,”
CAGR 2017-2022 CAGR 2017-2022 CAGR 2017-2022 CAGR 2017-2022 CAGR 2017-2022 CAGR 2017-2022 CAGR 2017-2022 office or other commuter- so already. For example, for
friendly locations. It’s the first time in The Coca-Cola says John Carroll, Vice President and General
appealing to traditional chains Company’s more than 100-year Manager E-commerce, The Coca-Cola
Hyper/supermarkets are still the largest channels globally, with a wide footprint and is bottling history, bottlers are Company.5 “The bricks-and-mortar world and
but growth is slow. Convenience and discount are the fastest particularly popular in the now delivering select brands the online world are merging. And it’s all being
growing physical formats, while online is growing far faster still US, where superstores are directly to consumers’ homes
driven by how and where people are shopping.”
larger – Walmart now offers a via a pilot called eFulfillment.
drivethrough service in more
than 1000 stores, for example.
overview_06
Redefining the consumer experience
E-commerce redefines the way
consumers receive, experience and
react to products, creating a new circular
model with constant innovation and Share Discovery & search
disruption at almost every stage. With Third moment of truth Zero moment of truth
more ways to buy and more places to
get information than ever before, brand
to consumer engagement throughout
the path-to-purchase, and afterwards, Buy
becomes essential. In fact, the more
touchpoints a brand makes with its
consumers, the better the impact on
perception and satisfaction.
Receive
First moment of truth
Order fulfilment & last mile
Discovery & search to 97% and 93% respectively in Hence Facebook now talks about
As consumers spend more time China. Such independent reviews “the three-second audition” and Best versus brand probably will be too. overwhelmingly a search engine and
online, so it becomes a key and comments are now rated “thumb-stopping content”. “If it’s Google believes that Google is now seeing a stronger for generics build their basket
source of product discovery, the most influential marketing too complex for mobile, it’s too the way consumers strong rise in searches than for brands (81% around that. This is
often via blogs and social media, influence after a recommendation complex,” says Matthew Lowe, shop for online for the term “best” in versus 2%). particularly true for
and research (which typically from a family member or friend.1 Head of Online Content & UX at groceries is changing, relation to products, “Consumers are searches for niche
means search, via Google or, Given the amount of information UK supermarket Iceland.2 with the starting point even for traditionally increasingly starting specialist products,
increasingly, Amazon). As we consumers are exposed to online, increasingly being low consideration their grocery shopping such as those with
reported in last year’s Tetra Pak brands need to work harder than specific products items such as journey without a perceived health
Index, 80% of the most active ever to capture attention and get rather than a toothbrushes (up destination – the benefits as food
and influential consumer group their message across. Arresting destination where they 100% in two years), starting point is the increasingly evolves
online read reviews/ratings on and, crucially, simple messaging fill their basket. It deodorants (up 180%) product,” says Harry into “foodcare”.
food and beverages monthly is vital, particularly as mobile is argues that search is or olive oils (up 110%).3 Walker, Head of Hence a simple tip:
and 70% do so weekly – rising increasingly the device of choice. a strong proxy for Brands still dominate Industry – Retail at experiment with using
consumer demand: for search terms over Google.4 Or, to put common search
example, if searches generic products it another way, they terms in the title of
for a product are today (70% versus find the key product the product itself to
growing, sales 30%) – but growth is they’re looking for via drive sales.
overview_07
Consumer posts of images/comments
on food and beverages
How often?
GLOBAL
Several times a day 18% 15% 16% 16%
Once a day 21% 10% 22% 18%
At least once a week 16% 21% 41% 26%
Buy Order fulfilment Receive Share
At least once a month 10% 13% 14% 12%
TETRA PAK INDEX 2017
Online shopping drastically & last mile Receiving and unpacking As we reported in last year’s Less often 14% 16% 5% 12%
reduces the visual real estate for There is considerable ongoing e-commerce goods is now Tetra Pak Index, connected Never 21% 25% 2% 16%
products, especially on mobile. innovation (and investment) in literally part and parcel of the consumers are increasingly Daily 39% 25% 38% 34%
So it’s important to ensure that order fulfilment and the last first moment of truth. In a survey sharing opinions and experiences Weekly 55% 46% 79% 60%
Monthly 65% 59% 93% 72%
they are instantly recognisable mile, particularly in technology of US CPG companies last of food and beverage brands
and consistent wherever they development. For more on year,2 95% agreed that “bad” online. This is particularly true of
appear. Copy is also crucial, this, see the Technology & packaging (defined as a package the most active and influential
especially in categories such performance trend, page 19. that’s hard to open, unattractive, online consumers: 68% globally
as baby food where nutrition or results in damage including (and 90% in China) write reviews
In your opinion, what is the In your opinion, what is the
and ingredient information is breaks or leaks) can have a at least monthly, with 57% doing
impact of BAD packaging impact of GOOD packaging
paramount. New ways of negative impact on an online so weekly. And 72% globally
5+5+ +C +C 3+3+C
ordering, such as subscriptions, customer experience. Moreover, post images/comments on on an online customer on an online customer
voice and auto-replenishment 71% said it can ruin an otherwise food and beverages monthly experience? experience?
via Amazon Dash and smart positive online purchase – rising to 93% in China, led by
appliances (see page 16), are experience. However, 97% commenting on or reviewing
making an impact too, changing agreed that a “good” packaging a product (68%) and showing
the consumer’s relationship with experience can have a positive something new (60%). Moreover,
products and brands. “It’s all impact, with 70% saying it 49% of CPG users say their
about convenience – making can even create a memorable e-commerce customers are not
TRENDS IN E-COMMERCE PACKAGING, DIMENSIONAL RESEARCH
your life easier and getting experience. Crucially, 86% only sharing their experiences
away from the 90 minutes a week say improved e-commerce with online purchases online,
you have to spend in the store,” packaging is the responsibility they are including photos and
says The Coca-Cola Company’s of the brand, not the e-retailer. commentary about packaging on
John Carroll.1 Secondary packaging is also social media, making packaging,
a key issue today (see page both good and bad, more visible
No impact 5% No impact 3%
23), while personalisation and than ever before.3
custom unboxing experiences
are tipped as trends for the Minor positive impact 24% Minor positive impact 27%
future (see page 26).
Bad packaging can ruin a Good packaging can create
customer experience 71% a memorable customer
experience 70%
overview_08
Physical retail: reinventing Digital stores in China’s e-commerce growth, Alibaba has
to stay relevant A key player in the reinvention of physical expanded its remit, and in 2017 alone, it
Physical stores are experiencing slow growth retail is Amazon, which gained much attention invested $21 billion in deals as it moved into
rates due to the impact of increased consumer for its moves into the offline space, both logistics and bricks and mortar retailing.
spending online. Consequently, retailers are through its acquisition of Whole Foods and
scaling back new store expansion, closing or also its Amazon Go checkout-free concept Its Ling Shou Tong programme is helping
investing in smaller formats. But even though store. The first of these opened in Seattle in to upgrade China’s 6m small family-run
there be fewer outlets in the future, they will January 2018 selling ready-to-eat foods, meal convenience stores, injecting modern logistics
still account for the bulk of spending: shoppers kits and grocery essentials, including its own to revitalise their supply chains and analytics
clearly still want to see and feel goods, receive brands such as Wickedly Prime. The store to help them better understand the buying
inspiration and advice – and also pick up employs the same types of technologies used behaviour of their customers. But its New
goods ordered online. However, such offline in self-driving cars: computer vision, sensor Retail flagship is its Hema supermarkets, which
spending may well be influenced by online, fusion and deep learning (see box, right). offer smartphone-enhanced shopping via an
before or during purchase. app that offers personalised recommendations
Similar moves are happening elsewhere, and offers based on captured data. Consumers
To ensure they continue to stay relevant in notably in China, which is setting the pace can scan any product to find additional
the digital age, bricks and mortar stores are globally for omnichannel retail innovation. information, and cashless payment through
working hard to reinvent their offering. Alibaba first announced its “New Retail” the Alibaba platform is also embedded.
They are starting to use their stores as social concept – integrating online, offline, logistics
hubs, creating memorable experiences that and data across a single value chain – back in
can’t be replicated online. They are also 2016. Alibaba became China’s e-commerce
now beginning to digitalise the in-store leader by building asset-light marketplaces,
experience and better integrate it with online. notably Tmall, its B2C online retail site, the app
Personalised digital marketing is starting to for which has been downloaded by some 500m
happen in-store, too (see page 25). Chinese consumers. Driven by the slowdown
“China is moving much faster
than the West in this retail The Amazon Go store in Seattle is
evolution because the Western checkout-free. It uses Just Walk Out
retail model is built on legacy Technology that detects when products
systems. China’s model is are taken from or returned to the shelves
disruptive. China does not and keeps track of them in a virtual cart.
have the legacy of malls and When the consumer is finished shopping,
big-box stores like the West. they just leave the store and their Amazon
China has no traditional retail account is charged later. The store offers
model to defend.” ready-to-eat items, Amazon Meal Kits
(see page 17) and grocery essentials, such
Frank Lavin, CEO, ExportNow1
as Amazon’s Wickedly Prime private-label
brand. The range includes soups, which
are packed in Tetra Recart® cartons with
the tagline “Time to kick the can”.
overview_09
Each Hema store has its own warehouse and The format is already proving to be hugely
logistics centre that fulfils and delivers local popular, especially among Chinese migrant
online orders – as customers stroll below, bags workers who want to return to their rural
of shopping destined for delivery speed by town of origin, with JD.com saying it receives “Over the last decade, we have
over their heads – within 30 minutes. The stores 50,000 applicants from potential franchisees used up benefits provided
are designed to be inviting retail destinations, every day. Such stores are currently opening at by China’s rapid e-commerce
with super-fresh produce, notably seafood, the rate of a thousand per week, expected to growth. No matter how we
which can be prepared and served on the spot. rise to a thousand per day by the end of 2019. look for growth opportunities,
we are limited to that 15% of
Alibaba aims to have around 50 Hema stores JD.com, Alibaba and others are also busily
China’s retail business. Now we
by the end of 2018. opening self-service cashier-less convenience
want to bring our online tools
stores, some more like walk-in vending to the entire retail sector, and
Meanwhile, in January 2018, online retail machines than traditional stores. this is a huge leap for us.”
giant JD.com opened its first supermarket Chang Bin, Vice President of
7fresh as part of its own “Boundless Retail” Smartphone payment Strategy & Investment, JD.com1
omnichannel vision, which is backed Mobile payments have become
so common in China that it is fast
by Tencent, the giant Internet services
becoming a cashless society.
conglomerate that owns WeChat. JD.com The mobile payment market is
is also rivalling Alibaba’s convenience store dominated by two apps, WeChat
programme, aiming to have a million franchise Pay and AliPay, which have hundreds
outlets, run by independent investors, in the of millions of users. Paying by
next five years or so, half in rural areas. phone became popular partly
because the infrastructure was in
place for online, and partly because
credit cards never caught on here.
Smartphone-scannable QR codes
are widely used and mean that
anyone can become a merchant,
since there is no need for hardware
such as card or chip readers.
analysis_10
Analysis
To understand the global trends of today and
tomorrow, and also the key differences from
market to market, we commissioned consumer research
in five countries, along with a global market
segmentation study and interviews with e-retailers
in North America, Europe and China.analysis_11
Resisters Leap-frogging pioneers
Developing markets with slow growth in online grocery, due to abundance Developing markets with fast growth in online grocery, driven by
of physical stores and associated buying experience infrastructure development and demand for convenience
India Brazil Russia Shanghai Bangkok Jakarta
Traditional trade to remain Modern trade to benefit from Preference for “touch and feel” A hotspot even in digital Online expected to grow with Online to compete against
dominant due to its deep demand for low prices and aspect of physical stores to pace-setter China, thanks to (and complement) modern growing mini-supermarkets as
penetration and emotional convenience. Online limited to push continued growth in high internet penetration and trade, as it continues to gain demand for convenience rises
attachment with consumers specific segments modern trade advanced logistics trust among consumers and internet access improves
Market forecast
Tetra Pak-commissioned research by Euromonitor International Online grocery Modern trade Traditional trade 2016
forecasts the growth of online grocery in key markets by 2030
2030
Laggards Pioneers
Developed markets with slow growth in online grocery as rising emphasis on Developed markets with fast growth in online grocery, thanks to rising
quality and innovation expected to keep modern trade competitive consumer confidence in online delivery and quality
United States Germany Japan South Korea France United Kingdom
Wide choice in modern trade to Modern trade to stay Popularity and widespread Innovative services, notably Convenience, quality, low price Modern trade retailers are
keep share high. But millennials competitive as rising income availability of convenience stores on mobile, plus increasing and free delivery are all likely to joining online players in a bid to
seeking convenience will levels lead consumers to will pose challenges to online credibility to drive online growth be key in attracting consumers close price gap and create an
increasingly go online emphasise quality over price grocery growth as competition intensifies to online grocery omnichannel presenceanalysis_12
Retailer & consumer needs For consumers everywhere, the main purpose For e-retailers globally the most important When it comes to design, although European
A Tetra Pak-commissioned study carried of packaging is to protect and preserve. performance factors remain speed of delivery consumers appreciate “eccentric” design
out in February 2018 interviewed leading Durability of primary packaging is a major and quality of products shipped to consumers, for food and beverage packaging and are
e-retailers offering online groceries basic requirement for e-retailers everywhere, along with space-efficient packaging to predicted to see “tasty” (multisensory, even
in North America, Europe and China. but the need for secondary packaging varies optimise logistics. Space-efficient packaging edible) packaging as a performance factor
Its goal was to understand their sales by region: in North America it is often avoided appeals to consumers, too, particularly by 2025, they prefer a unified design across
channels, value chain and packaging as an unnecessary extra cost for e-retailers who in urban areas where living space is often all distribution channels rather than online-
needs, as well as to get their perspective may need to repack and aggregate products, tight: it is viewed as a performance factor3 only packaging and products. Chinese
on the needs of consumers in their whereas in China, branded secondary and is in demand for consumers in North consumers also appreciate design but they,
geographies, both now and in 2025. packaging is seen as a marketing opportunity. America and in China, while in Europe it is and their American counterparts, show a
seen as a nice-to-have. strong preference for online-only products
Environmental concerns are growing too, and for unique, premium and/or personalised
impacting on the use of secondary packaging Currently, safe delivery is seen by e-retailers packaging for e-retail. This trend is expected
(see page 23). Demand for sustainable as more important than providing a specific to continue, with e-retailers predicting that
packaging generally is on the rise globally: benefit for consumers, such as an “unboxing” the offer of online-only products will be a key
in Europe, recyclability is a basic factor1 and it experience. This is true across all geographies decision criterion in consumers’ choice of
is likely to become so for American consumers but is expected to change once high-tech vendor by 2025.
by 2025. However, it looks set to remain a supply chains and logistics make super-fast
value-added factor2 in China due to slow deliveries the norm. Smart packaging, with features that enable
take-up by manufacturers. digital purchase and enhanced consumer
experience, is particularly highly regarded
by Chinese shoppers (where scanning QR
codes is already commonplace). It’s also
welcomed by e-retailers in the region as it
Looking ahead: 5 hot factors for 2025 allows them to experiment with new business
01
Augmented reality via smart packaging models and payment methods. As technology
02
Unboxing experience of online grocery packages advances it seems likely that smart packaging
03 Super-fast delivery will become ever more significant globally
04
Personalised packaging and online-only products in both upstream and downstream logistics
05
Tactile technology that allows consumers to “feel” through unique data codes, as well being used
the product at the zero moment of truth increasingly to position online grocery items
as premium products.analysis_13
Understanding online Drivers & barriers Clearly, grocery shopping has an inherently Shopping behaviour
grocery consumers Our research shows that convenience is by far physical nature with often strong emotional Online grocery is not yet as mature as other
Online grocery is a highly distinctive the main driver of online grocery everywhere. and cultural overtones too. The inability to categories in e-commerce, and consumers
channel, demonstrating consumer But there are other drivers that vary from inspect goods is one of the biggest barriers can be quite traditional in their shopping
behaviour that’s often strikingly different market to market. In China, for example, for online grocery, with quality the leading behaviour. While the trend in physical retail is
both to physical retail and to other wider choice is key, particularly the availability concern for consumers everywhere. A desire a shift away from supermarkets towards more
e-commerce categories. To understand of international brands. Promotions are to see and touch the product is particularly frequent top-up shopping in local convenience
this better, Tetra Pak commissioned a important in Saudi Arabia, and Americans are apparent in the UK, while consumers in the US stores, online grocery shopping is much like
consumer research study conducted in also focused on saving money, with coupons want to pick out products themselves. Delivery the traditional weekly trolley shop.
five countries: the US, UK, China, South and vouchers playing a big part in their choice is cited as the next biggest barrier, with cost
Korea and the Kingdom of Saudi Arabia. of retailer. Discounts and the ability to buy and issues around delivery slots and reliability Consumers often buy to stock up, trading
in bulk without the hassle of having to cited as key concerns by consumers. up to bigger package sizes and looking for
carry too much weight particularly appeal competitive pricing. They also like multipacks,
to consumers in South Korea, the world’s In almost all countries “bricks and clicks” with consumers in our research highlighting
most highly developed online market by far, are largely preferred to pure online players that individually wrapped portions help
accounting for nearly a fifth of all FMCG trade.1 for grocery shopping. Such retailers have an minimise food waste, are highly suited to
opportunity to create more convenient and modern consumption habits (on-the-go and
efficient omnichannel fulfilment options, out of home) and also help with diet control (in
demonstrating the relevance of the trend for particular when it comes to snacking). The key
merging offline and online discussed earlier. life stage that converts consumers to online
grocery is starting a family, when the scale
Key barrier to online grocery is inability to see the product (and bulk) of shopping becomes bigger, and
convenience is arguably even more important.
Food is widely bought for stocking up,
I want to pick the products myself 14% I like to see the products 22% I can’t check the quality 20% even when not heavy or cumbersome
I like to see the products 10% I want to pick the products myself 13% It’s not as easy as physical shopping 17%
Products might not be fresh 10% Prefer physical stores/experience 9% I like to see the products 10%
Prefer physical stores/experience 7% Products might not be fresh 8% I don’t trust the delivery times 12%
TOLUNA
I want/need the products now 6% Delivery is expensive 8% I want/need the products now 8%
I like to touch the products 1% I like to touch the products 4% I like to touch the products 4%
Plain bottle water 52% 63% 52% 77% 61%
Juices & nectars 51% 72% 62% 60% 66%
Coffee-based drinks 49% 52% 63% 77% 64%
Tea-based drinks 46% 49% 58% 69% 63%
Flavoured water 41% 44% 32% 26% 45%
TOLUNA
I like to see the products 13% Products might not be fresh 29% Base: 437 Base: 504 Base: 502 Base: 507 Base: 425
I don’t trust the delivery times 13% I like to see the products 26%
I can’t check “best before” date 10% I don’t trust fresh or frozen products 9%
Prefer physical stores/experience 9% I don’t trust the delivery times 9%
I can’t easily check the quality 7% I can’t easily check the quality 5%
I like to touch the products 4%analysis_14
Tetra Pak & bigbasket, India
Consumers tend to be loyal both to their Looking ahead Generally speaking, the online grocery
UHT milk has been selling well on
familiar brands and their choice of retailer as As speed of delivery and/or collection landscape is expected to continue to online platforms in India, especially in
they move to online grocery shopping: in the continue to be improved and the online change at a pace even greater than before metropolitan areas, driven particularly
UK, for example, a loyal Tesco store shopper grocery channel matures, consumer behaviour as the various players continue to invest in by convenience and food safety factors. As part of
is nearly twice as likely to choose Tesco.com will increasingly follow the offline trend for technology and infrastructure as they strive its strategy to convert consumers in India to UHT
for groceries.1 By and large, they are repeat smaller basket sizes, increasing the pressure to appeal to consumers, combat competition milk from other formats, Tetra Pak partnered with
shoppers, with little browsing involved. Most on margins for all players. and maintain profitability. It’s also important bigbasket, the country’s #1 online grocery platform
with around 0.5m consumers ordering every month
online grocery shopping starts from (and stays to note that while many in the West look to
across more than 25 cities.
with) the website of their e-retailer of choice, Amazon already reports that around two-thirds Amazon as the main disruptor, the view looks The joint campaign targeted 100,000 non-buyers
where smart players do all they can to make of deliveries for its Prime Now service, which quite different in the East, where e-commerce of UHT milk in New Delhi, Mumbai and Bangalore,
them feel at home, understanding their needs, can deliver in less than 60 minutes in some penetration is much higher. with banner advertising on the bigbasket
analysing their past shopping behaviour, areas, is groceries: not just one-off small items, portal and mobile app offering free samples of
and offering them a contextualised, personal but baskets. This subscription-based service For example, China’s online giant JD.com Amul Tazaa and Nandini branded milk in Tetra Pak®
shopping experience to make the process as removes key barriers to purchase associated which, like Amazon, has invested heavily in packages. Tetra Pak sponsored the cost of the
initiative, while bigbasket managed the logistics,
simple and straightforward as possible. with delivery – speed, finding and planning building its own integrated, high-tech logistics
delivery and data analytics.
slots, cost, etc – and opens the door to the network, has its own global ambitions. It aims Bigbasket tracked six to eight weeks of purchase
Finally, while online grocery is less affected top-up/convenience and impulse shopping to bring its e-commerce platform and delivery data to check the uptake in UHT purchases and
by mobile than other e-commerce categories, which increasingly accounts for so much of services to the US in the second half of 2018 increase in average business. The result? More
mobile is growing rapidly here too. For grocery sales. For example, two-thirds of and Europe as early as 2019, aiming to be than 15,000 new UHT milk buyers after the
example, in the UK, a relatively mature Britons now shop for groceries more than once ubiquitous across the continent within “a few promotion period.
market, 40% of online grocery purchases in a day, treating stores like “walk-in fridges”, years”.4 It plans to spend €1 billion over the
2017 were made on mobiles,2 so it’s vital to and one in 10 people decide what to buy for next two years in France to set up its own
ensure that content is optimised accordingly an evening meal just before they eat it.3 logistics network, and is likely to follow suit
and user-friendly apps are available. in the UK and Germany.
Maeil Dairies, Korea Council™ (FSC™)-labelled become increasingly key. The is ideally suited to online
Maeil Dairies paperboard, another first for brand’s online growth has been and around 66% of all
launched the first a Tetra Pak® package on the so rapid that e-commerce has Tetra Pak ambient white milk
organic flavoured Korean market, all of which help now overtaken hypermarkets in sales in South Korea are now
milk on to the Korean market to position the product at a channel share, rising from 38% in sold via this channel.
under the Sangha Farm brand premium price compared with 2015 to 57% of the total by 2017. Maeil Dairies has built on
back in 2013. An innovative the chilled flavoured milks that Key online sales drivers include its success by expanding its
product, it’s sold in the innovative previously dominated the market. convenience, lower price Sangha Farm range from the
Tetra Prisma® Aseptic 125 Square Sangha Farm was originally and tailored offerings targeted original two to four flavours –
package: easy to hold for the promoted in-store, but with the at families with young children white milk, cocoa, banana and
target consumers – children aged rapid growth of e-commerce here – classic online grocery shoppers strawberry – in Tetra Prisma®
from one to eight – and perfect – it now accounts for almost 20% Generally speaking, ambient Aseptic 125 Square packages.
for single-use consumption. It of the FMCG total,5 and around milk – especially in lightweight,
also uses Forest Stewardship 14%6 of beverage – online has logistically efficient cartons –trends_15
Trends
We see four key trends shaping online
grocery. Convenience, which is driving demand in
all geographies. Sustainability, as environmental
issues become ever more important. Technology &
performance, with both supply chains and the consumer
experience being transformed. And Personal & unique,
as marketers look for new ways to attract consumers
online and build lasting relationships.trends_16
01 01. Easy replenishment
Ease of replenishment is one of the main
Meanwhile, more than 100 hardware
providers are working on building the Dash
02. Super-fast delivery/collection
As discussed, super-fast delivery is a game-
Convenience reasons cited by consumers for shopping Replenishment Service into internet-of-things- changer as it removes a major barrier to
Convenience is the main driver of online online. Favourites – a personalised shopping enabled smart appliances, from fridges and online grocery and opens the door to impulse
grocery in all markets. Consumers are list of products based on past purchases – has dishwashers to electric toothbrushes. “Dash and convenience shopping, rather than just
looking for a shopping journey that’s long been a way for consumers to streamline replenishment solves a big problem for stock-ups. Looking ahead, our e-retailer
ever faster and easier and they expect online grocery shopping. And automatic manufacturers that make smart machines but survey suggests that super-fast delivery (within
a seamless, friction-free experience, replenishment, such as via subscription and don’t want to get into the e-commerce and as little as 10 minutes) is expected to be a
not only across devices, but also across Amazon Dash buttons (a wi-fi-connected fulfilment business,” says James McQuivey of value-added service in Europe by 2025, with
online and offline. The easier brands and device that reorders a particular favourite Forrester Research. He adds that most people fast delivery a performance factor in North
retailers can make this experience, the product with the press of a button), is growing. who use Dash Buttons rarely diverge from the America and China.
more successful they will be. “Assistance one product those buttons apply to, effectively
is the new battleground for growth,” says Amazon says that more than 55% of its “locking in” consumers. An alternative is super-fast click and collect.
Harry Walker, Head of Industry – Retail delivery subscriptions last longer than For example, Sainsbury’s in the UK has trialled
at Google.1 “Consumers expect to be 12 months and build loyalty for the long Looking ahead, both auto-replenishment a service that enables customers to order their
assisted. Brands that win will provide term. It also says that its Dash buttons, both models and smart appliances that can sense shopping via their Chop Chop app and pick it
assistance in the moments that matter: physical and now virtual too, are one of its and reorder products that are running low will up from a store just 30 minutes later.
during inspiration and discovery, planning fastest- growing services and that many continue to be key trends going forward to
and shopping.” Here are seven ways brands are now seeing more than half of their 2025, according to our e-retailer survey.
brands and retailers are doing just that. Amazon orders placed via such devices.
Convenience is driving online grocery shopping Interest in auto-replenishment is strongest in China and South Korea
Base: 437 Base: 504 Base: 502 Base: 507 Base: 425 Not aware 17% 34% 25% 16% 44%
Aware and not interested 37% 40% 24% 35% 21%
I have my shopping delivered at home Aware and would like to try it 22% 20% 43% 37% 28%
I can shop whenever I want Aware and already tried it 24% 6% 9% 12% 7%
TOLUNA
It’s more convenient
Base: 437 Base: 504 Base: 502 Base: 507 Base: 425
No physical effort is required
I can buy in bulk without carrying heavy loads
I can buy everything without visiting several shops
It’s easier to compare products
There’s a larger choice of products Amazon says Dash buttons are among its fastest-growing services
I can save my shopping list and spend less time shopping
I can find promotions not available offline
I can edit my basket after I check out
There are more discounted products
TOLUNAtrends_17
03. Convenient packaging 04. Buy it now direct-to-consumer models: a major and 44 are twice as likely to use them as older
The trend for smaller families and urbanisation As part of their omnichannel strategy, brand development for CPG companies going consumers – and to have ordered goods and
is causing homes to become smaller, with less owners are looking to create consistency and forward, according to our e-retailer survey. services online in the previous three months.
storage, making frequent, smaller shopping enable conversion to sales wherever possible.
trips more common than the traditional stock- Social commerce – buying direct from a social 05. Meal kit services In addition to convenience, some say these
up. It also makes consumers more appreciative media feed – is increasingly common, notably A relatively new, fast-growing segment that services appeal to younger consumers
of space-efficient packaging – in particularly in China through WeChat, but also in the offers consumers a convenient way to cook because they have not been taught how
strong demand in China and North America, West, with the addition of buy buttons in social at home without the planning and shopping: to prepare meals by their parents. These
and treated as a nice-to-have feature by posts on the rise here too. they just choose from online picture menus, consumers also have a tendency to lean
Europeans, according to our e-retailer survey. and pre-measured fresh (and typically high toward natural foods, hence organic, local,
Software company Adimo is working with quality) ingredients along with recipes are farm-to-table and speciality diets are all likely
Carton packaging has an advantage here, as major brands such as Nestlé and Beyer to delivered to their home. to be fruitful niches going forward.
it is already designed to be space-efficient make all forms of marketing, from brand
to maximise logistical performance. Looking websites to social media, shoppable via Bridging the gap between home-cooked
ahead, space-efficient packaging is expected partner online retailers. Consumers just click meals and takeout, while also minimising food
to be a basic requirement by 2025, according an “Add to basket” button, select their waste (see page 24) and removing the barrier
to our e-retailer survey. Convenience is also retailer of choice and choose the products of picking out produce, meal kit services are
key in secondary packaging. “Frustration-free” they want, which are then added directly to already worth about $5 billion in the US alone,
(easy-to-open) packaging is reported as key by their online basket for later purchase. This is according to Packaged Facts.1 Meal kit users
e-retailers in our survey. part of the trend towards experimenting with are likely to be younger – adults between 25
Di Carlo Extra Virgin manufactured from FSC™-
Olive Oil, Italy certified and controlled sources
Convenience, paperboard, are also cited in its Hello Fresh is the world’s leading meal
sustainability, quality marketing, along with the ability kit subscription service, operating in nine
and innovation are all key selling of the multiple layers to protect countries, notably in Europe and the US,
points for Di Carlo Extra Virgin the contents from oxygen and where it is the market #2 after Blue Apron.
Olive Oil – Italy’s first ever extra light – the main causes of olive oil It delivers pre-measured “high-quality
virgin olive oil to be packed in oxidation. A premium product ingredients sourced straight from the farm”
Tetra Pak® packages. Available made with 100% Italian, cold- – some of which are packed in Tetra Recart®
online via Amazon, ease of pressed olives, it was launched (pictured left) – complete with recipes in a
delivery is key to the product in Tetra Prisma® Aseptic convenient box that fits “perfectly in the
offering, hence the importance 100 Square packages with a fridge”. In 2017, HelloFresh delivered more
of the logistical and distribution convenient, easy-to-open and than 137m meals (up 51% on 2016) to its
efficiency of cartons over the reseal cap in January 2018. approximately 1.45m customers.
alternatives – traditionally heavy,
breakable glass in the case of
olive oil. The environmental
benefits of the packages,trends_18
06. Voice recently launched its low-cost Tmall Genie, Moreover, 62% say they are likely to use it to 07. Takeout partnerships
A lot has been written about the impact of reporting 1m sales of its X1 smart speakers buy something in the next month, while 44% According to NPD, 50% of dinners ordered
voice. Some see a threat to the very concept in just the last four months of 2017, double say they order products such as groceries from restaurants in the US today are eaten
of brand. They argue that consumers will analyst estimates. at least once a week – a potentially potent at home – and that figure is expected to
ask voice apps to add products (milk, juice, combination. Many are open to welcoming grow. Meanwhile, digital ordering has posted
washing powder) rather than brands to their Our consumer survey shows that attitudes to brands as part of the experience. They are rapid growth in the last five years, and now
shopping list, trusting to the e-retailer’s AI to voice vary from market to market, and there are particularly open to receiving information represents 53% of all delivery orders, up
choose for them, creating a key private label clear concerns, particularly about the potential that is helpful and relevant to their lifestyle, from 33% in 2013. To exploit this trend,
opportunity – particularly for Amazon, which for mistakes in ordering. However, those that such as updates on deals and promotions, The Coca-Cola Company is piloting partnering
is by far the early leader in voice technology have tried voice seem to like it a great deal, and personalised tips to make life easier. with restaurant delivery services such as
with its Alexa voice service and Echo speakers. indicating its potential. According to Google, Uber Eats and DoorDash – and with meal-kit
72% of people who own a voice-activated delivery service Chef’d – to add beverages to
Partnerships are already forming between speaker say their devices are often used as food orders. It estimates that as little as 10% of
e-retailers and voice technology providers. part of their daily routine, while 41% say it all delivery service orders include its products,
Ocado recently launched its own voice- feels like talking to a friend or another person.1 so the opportunity is “huge.”2
driven shopping app for Amazon’s Alexa,
while Google has partnered with Walmart to
offer voice-enabled shopping via its Google
Assistant. Meanwhile in China, Alibaba
Interest in voice ordering is particularly strong in China
Not aware 30% 42% 23% 26% 41%
Aware and not interested 31% 36% 26% 38% 24%
Aware and would like to try it 24% 20% 41% 30% 29%
Aware and already tried it 14% 2% 9% 6% 5%
TOLUNA
Base: 437 Base: 504 Base: 502 Base: 507 Base: 425
What voice users would like to receive from brands
Information about deals, sales and promotions
52%
Personalised tips and information to make my life easier
GOOGLE/PEERLESS INSIGHTS
48%
Information about upcoming events or activities
42%
Options to find business information (eg store location, hours)
39%
Access to customer service or support
38%trends_19
02 “The key to success in e-commerce is winning
in logistics and supply chain,” says Marc Lore,
Not surprisingly, automated pick rates in the
latest CFCs are many times higher than the
Data carriers
Value chains are being transformed by a raft
Technology & performance President and CEO of Walmart eCommerce.1 manual equivalent. CFCs also have much of technologies that interconnect via the
Technology is transforming both supply Generally speaking, there have been two better demand management, lower waste, internet of things2 to allow consistent data to
chains and the consumer’s relationship models to address this: physical retailers and better picking accuracy and consistency: be used throughout, boosting efficiency and
with shopping and products alike. leverage their store network with products substitutions (a major issue in our consumer transparency, and ultimately allowing every
picked, largely manually, at the store nearest survey) are also much lower, as the consumer product (and indeed their component parts)
to the consumer and sent out for delivery can see what’s in stock almost in real time – if to be automatically tracked and interacted
from there or set aside for collection; while it’s not available, it can’t be ordered. with from end to end.
e-commerce pure players use high-tech, highly
automated central warehouses, also known as However, Amazon’s $13.7 billion acquisition The #1 technology trend identified in our
customer fulfilment centres (CFCs). of Whole Foods has added a new twist to the e-retailer survey is a key enabler of this
logistics models, as has Alibaba’s New Retail transformational data chain: data carrier
For example, at Ocado’s 18-acre CFC in drive in China. Such moves are not only about systems such as RFID (Radio Frequency
Hampshire (one of three in the UK), hundreds moving into physical stores, they’re also about IDentification) and QR (Quick Response)
of robots process and pick around 65,000 building a network of delivery nodes closer codes. As its name suggests, RFID uses radio
customer orders per week, assisted by just two to consumers for rapid grocery delivery. This waves to automatically identify and track tags
or three maintenance engineers on standby. suggests that the traditional store network attached to objects and has a huge array of
Ocado not only uses its own infrastructure to (for example, 90% of Americans live within ten both upstream and downstream applications,
offer fulfilment as a service to domestic rivals, miles of a Walmart) may be the best approach from inventory management to anti-counterfeit
it’s also now turned solution provider, selling for e-commerce, not to mention omnichannel, measures to smart store enablement.
its Ocado Smart Platform (from mobile app after all. But the challenge remains to make
to automated warehouse technology to van the execution sufficiently efficient to remain
routing software) to give retailers worldwide competitive and profitable, especially
a “more cost efficient and lower-risk way as basket sizes fall and consumers prove
of launching or improving online grocery stubbornly resistant to delivery charges.
businesses with limited capital investment”.
It has already signed a number of deals,
notably with Kroger in the US.
downstream
RFID functionality Applications/benefits: supply chain management Applications/benefits: retail Applications/benefits: consumer
upstream
• Automated identification • Increase inventory accuracy • Store management improvement • Augmented reality and product engagement
• Medium-distance geo-tracking • Avoid out-of stocks • Anti-theft security • Internet of things devices in home, such as smart fridge
• Real-time product tracking • Increase product availability • Data collection on sales • Waste management
• Quality monitoring • Speed up receipt product process and warehousing performance • Retrieval/collection of product after online purchase
FROST & SULLIVAN
• Readable information no matter • Reduce shrinkage (expiry, loss, theft) • Anti-counterfeit measures
the position of the package • Enable automation for shipment, warehousing • Smart store enablement
and deliverytrends_20
In our survey, individual e-retailers reported Robotics The whole process, from parcel sorting to
that RFID implementation had: RFID at Tetra Pak Looking ahead, the increased use of robots loading on to trucks, is fully automated. The
• reduced the risk of out-of-stocks by 20%; Tetra Pak is currently to pick and pack products for shipment first of its kind in the world, the centre has
• reduced inventory costs by 10%; piloting using RFID to emerged as the #1 trend for 2025 in our a capacity of about 9000 parcels per hour –
transfer packaging material
• reduced labour costs by 10% to 20%; e-retailer survey. As already mentioned, robots around four times the volume of its old human-
information between
• increased sales by 20% by significantly its factories and filling are already widely used by Ocado, and also run centres. Its Delta robots can pick 2000
improving inventory. machines at customer sites, by Amazon, which has deployed more than to 3000 items per hour – 10 times more than
which promises a number of 100,000 Kiva robots in 25 of its around 150 human workers, representing a $15,000 saving
Looking ahead, as the shift towards benefits: CFCs worldwide, helping to cut the “click to in labour costs per day. Orders are packed
omnichannel introduces further complexity, ship” cycle from roughly 60-75 minutes to 15 in the right-size box automatically, reducing
• Reduction of operator
RFID benefits will increase, while continued minutes.1 Amazon is now running competitions corrugated cost by 20%.
dependence through
falling costs of tags will allow them to be to encourage researchers and engineers to
automatic reading of tags
applied at an ever more granular level. • Mitigation of incident risk build a robot that can identify, sort, and pack Automation and robotics adds to e-retailers
Currently the cost is still generally too high by automatically matching goods from items they see on warehouse frustration with secondary packaging on
to place on individual items (unless they are packaging material and shelves, automating the majority of the work inbound goods from suppliers, which
very high value); the usual application today filled product content required to fulfil an Amazon order. needs to be removed prior to repacking
is pallets and sometimes boxes. QR codes • Increased traceability for dispatch to consumers – a significant
• Optimised logistics and
are a more affordable solution for tagging But the most advanced use of robotics and cost. As Sverker Lindbo, Head of Concept
warehousing
on an item level, also allowing for innovative • Waste reduction.
automation today is arguably in China. In Development at Ocado, put it in last year’s
interactions with consumers through smart August 2017, JD.com, China’s second-biggest Tetra Pak Index: “In time, all products supplied
packaging (see page 22). e-commerce player after Alibaba, announced to us will need to be unpackable and pickable
it had inaugurated its first unmanned sorting by robots (they hate shrink wrap!).”
centre in Kunshan, near Shanghai, as a key
part of its strategy to build an intelligent and Last mile
highly efficient logistics system. Last-mile delivery – the shipment between
the final storage hub and the customers’
home – is the most expensive and inefficient
part of order fulfilment. Hence the appeal
to traditional retailers of click and collect
services, which are often now widely available
Concepts 01. Ready meals the package during the fulfilment solve packing of ready meals in a
both at stores (where collecting consumers
Over the last year, Tetra Pak has been working Concept: Given the growing process, rather than in the home. nice-looking and efficient way,”
trend for prepared food, a logical said one. “Ready meals is the can often be tempted to make additional
on a research project with a design consultancy
next step is for pre-packed meals Feedback: E-retailers recognised disruptor of e-commerce,” said purchases) and other convenient sites.
to explore new ways of creating and capturing
value in an increasingly omnichannel
that are delivered from e-retailers that ready meals in various another. Younger consumers Alternatively, as mentioned, retailers can utilise
hot and ready to eat, complete forms would be a key part of without families – a group that delivery service partners such as Instacart.
marketplace, and to identify potential areas
with drinks, disposal cutlery and their future business, and that already orders a lot of takeaways –
for R&D. A number of concepts were
serviettes. These could include appropriate packaging would particularly saw the benefits.
developed and tested with both e-retailers long-life products that are be key. “One of our biggest
and consumers. Here, and on the following designed to be heated through concerns for e-commerce is to
pages, are four of them.You can also read
