The Lempert Report LIVE

Extreme Food Prices, Pandemic Food Tech, Chipotle & Roblox

September 20, 2022 Phil Lempert Episode 46
The Lempert Report LIVE
Extreme Food Prices, Pandemic Food Tech, Chipotle & Roblox
Show Notes Transcript

Welcome to The Lempert Report LIVE.

  • More on extreme food prices and the fallout
  • Kroger leads with “cheap”
  • Time for that cup of tea
  • The battle of words between grocery and foodservice
  • The food tech that will remain after the pandemic
  • On today's Bullseye we update food in the Metaverse
Phil:

Welcome to The Lempert Report LIVE. On today’s broadcast more on extreme food prices and the fallout, Kroger leads with“cheap”, time for that cup of tea, the battle of words between grocery and foodservice, the food tech that will remain after the pandemic and on Bullseye we update food in the Metaverse. Let’s get started. So, Sally, let's talk about how this extreme weather can push food prices, even higher. Consumers are complaining now, just about everything in fact, last night on 60 minutes, they pushed President Biden on the price of food. They brought that up and talked about inflation, but according to this report from CNN business food prices are gonna continue to go up.

Sally:

Yes, Phil, we have extreme weather conditions going on right now that are affecting these major parts of our agricultural system here in the country. We've got drought going on, we've got flooding going on. Our fruits and vegetables and nuts in our supply is affected because of California and Texas being the states that mostly provide those. And they are just under some really bad weather right now, some extreme heat, and it doesn't look like it's going to get much better soon.

Phil:

Not at all. And in fact, what we're seeing according to the bureau of labor statistics is that, what's happened in the west as you point out, California, what's happening is they're keeping land empty, they're pulling up orchards, they're reducing livestock herds, and the yields are going down. In fact, the rice acres have dropped by 55% this year. Most of the rice that comes from California, and it's only second to Arkansas, I didn't realize that Arkansas actually was growing rice, and had the rice fields, but that's about 900 million just in California a year. And the problem, this is medium grain rice. So that's found in sushi and risotto and basically what this report is saying is we're gonna see more and more climate-based problems that we've got which really just underscores the fact that we need more indoor farming and controlled environments. In fact, Paul Griffin, who's a professor management at UC Davis. One of the best ag schools that we've got in the nation, finds that for every degree over 77 degrees, that translates to an annualized loss of sales of 0. 63%. Now I know that doesn't sound like a lot, but it is. And a profit margin decrease of.16%. What that also means is as a result of that, because of a heat spell, the stock prices, you know, the Dow Jones dropped by an average of 22 bases points. Now those are really important and we've gotta understand that whether it's California, Texas, Arizona, I don't care where it is, because of climate change prices are gonna go up. There was another report probably about nine months ago on 60 minutes that talked about the fact that in France, the champagne district of France, they can't grow champagne grapes anymore. It's too hot. So they've had to move that crop up to England, you know, very far away. And, the problem is that you can't call champagne grapes that come from England, c hampagne. So that becomes t he sparkling wine thing. So we've really gotta take a huge look at what's going on. So, Kroger has decided to announce a new private label. Tell us about that.

Sally:

Well, Phil, you know, that Kroger has already had 17 private label lines. The simple truth home chef private selection, these are very popular, but now they're sort of changing things up and they're focusing on this new private label brand called Smart Way. This is a budget friendly label. They're gonna use orange and white brightly colored signage so that you can see it in the store. And, this is supposed to signal to consumers that this is a great deal, this product.

Phil:

So what, what concerns me about this, and I love Kroger's simple truth. For example, I love, you know, 99% of all Kroger private labels. So let me start there when I look at Smart Way and I really have not tasted it. I have not seen it. I have not looked at the ingredients of it, but what has me concerned, this really reminds me of what happened in the seventies and eighties, where we went to those generic black and white labeled products and those products quality was down. We've gotta understand that for Kroger to say,"okay, we're gonna have Smart Way, which is less expensive". Something's gotta give, and it's not Kroger's margin because that's razor thin, but I'm concerned about the quality. So I've gotta get into a couple Krogers. They just announced thiatthey're gonna have 150 different products right now. They've got well priced, canned goods, jarred pickles, dish soap, breads napkins. Those are the only ones that they're talking about, but I've gotta check it out. So just hold on that until we can actually look at the product to be able to determine whether or not it's gonna be a hit or whether or not it's gonna be a miss because yes, people want less expensive foods, but I don't know if people are willing to give up any quality as a result of that. Also, you know, SmartWay is saying that 41% of shoppers are buying more store brands than they did before the pandemic and 77% see they will continue to purchase store brands in the future. Those are huge numbers. And to be honest with you, it's a great opportunity for not only Kroger, but every retailer to really build up their store brands. That's the great news, but you've gotta have the quality there to maintain that. So a new study's come out of the UK. It's all about tea. We know that tea is good for us. We know that more tea is sold across the globe than coffee is. And what I like about this study, they followed a half a million adults for up to 14 years. So, you know, when we look at studies like this, there are really some great learnings. There's a lot of people that are looking at this survey and saying, there's not enough evidence to advise changing tea habits, but half a million adults, 14 years, there's gotta be something to that. And Sally, what did they find?

Sally:

Well, they found that this was really linked to deaths related to heart disease. And there's not really a trend that they can follow when it comes to cancer. But that's very important because heart disease is such a killer for Americans. I know. I wonder also if a lot of people drink tea in the UK and what that number is compared to Americans. You know, Americans seem to drink more coffee than they do tea. And the question in there is, is your typical American tea drinker, do they have a healthier diet profile already? So there are some variables in this study, but showing us a 9 to 13% lower risk of death if you are drinking tea.

Phil:

And it's black tea, it's not herbal tea. So, you know, let's remember if these stats are important to you as a retailer to promote it, or as a consumer to drink tea, it's not about herbal tea. It's about the plain old black tea that we see on the shelves. Also when we look at food service, The Wall Street Journal reports, that while grocery prices were up 13.1% from the month before, restaurant prices only went up 7.6%. So basically what, especially fast food restaurants are now saying," Hey, come to us, it's cheaper than making your food at home". And in fact, 58% of the TV ads, not only TV ads, but all kinds of ads that happened in August were all about special offers, discounts, mobile app, or loyalty benefits. That's between may and August of this year. Restaurant business magazine shows that 80% of US consumers are eating out less. That certainly is hurting the food service business. 75% said, they're going to bars less often. So when we look at this battle between grocers saying"eat at home, you can save money", fast food restaurants saying,"forget that, come to us, you're gonna save more money". What's up?

Sally:

Yes. And I think the restaurant industry was hit in such a tremendously challenging way because of the pandemic. And even though they adjusted into curbside and delivery, a lot of them, you know, we saw a lot of restaurants close. And so I'm sure that they are offering deals and not raising their prices as much because they are trying to get those customers back and recover from this situation. But the other thing is, that I think, yes, there's a real disconnect here to maybe we're not messaging enough to people how they can affordably eat at home. You know, there's an example in this article that we read of someone saying I went to a KFC meal costs$7 and her grocery bill compared to that, would've been$19 is what she found. So, there's a problem there in us showing how to shop so that they can make things for less at home. And then there's this problem of cheap, fast food that also is making us not eat well.

Phil:

Exactly. And, also when we compare, you know, the price of KFC to the$19 grocery bill at home, let's not forget that the$19 does not include your time to make that meal itself. Exactly. If you include that, you know, it's a much, it's a much worse situation. And to your point as far far as the quality of food, certainly there's gonna be a difference between going to a fast food restaurant and making it at home yourself. One of the good things about the pandemic is it really ramped up everything that we know in grocery, in food service, as it relates to technology. And the Food Institute just published a report about how some of this technology is gonna remain after the pandemic, and it's gonna help. What are some of those technologies that we should be paying attention to that's gonna be around for the rest of our lives?

Sally:

Well, I think we're looking at curbside a lot, you know, that provided such a convenience to people and we already had it in some places before, but businesses were really forced to up their game with that. But we are seeing people since the pandemic has shifted, we are seeing people not having their groceries delivered as much, there are more than half think that it's unlikely, they will continue to have their groceries delivered, attend virtual activities. That's 62% say that, and 62% say that they,won't shop during the senior hours. So, um...

Phil:

Especially if they're not seniors, exactly.

Sally:

Especially if they're not seniors. Yes.

Phil:

You know, but by the way, I hate to interrupt you, but early on in the pandemic, when all these retailers were having senior hours at like, you know, seven o'clock in the morning, you know, so you could get in there with less people. I saw a ton of people who were not seniors, sneaking in, you know, just to get in there. I mean, come on senior hours that was silly to begin with. Now, there are certain retailers that give senior discounts on certain days. That's totally different that I agree with, you know. Wednesdays or Tuesdays where it's a slower day, give your senior discounts. Absolutely. But this whole senior hour thing, sorry to interrupt. Keep going.

Sally:

Yeah. So I, you know, we, I think with the delivery all of these things we do need to focus on keeping those technologies going. Contactless payment was a really important technology that came out of this that I think a lot of customers prefer, but it was interesting. I thought of you Phil, when you did your Good Morning America piece recently and showed people how to save money in the grocery store and you saved some shoppers$80 by showing them how to buy differently. I went to order my groceries as I got used to ordering my groceries the other day from Publix. And I noticed that the price was really, really high. And so I went to the grocery store and it was an$80 difference in me having them delivered than me going to the store and getting them. So there's, if we wanna keep those services going, then you know there's gotta be a little bit more balance, I think, in the pricing for that. And I also think people are just sort of eager to be in more interactive situations and with real people.

Phil:

Absolutely. We relate better to people than we do to inanimate objects. So, you know, those robots going up and down the aisles, forget about them. They're great. They're great for a selfie to put up on Instagram, but yes, long term, it just doesn't work. Thanks Sally. Appreciate it. So this past week, the CMA and SEMA hosted a webinar with Cantar in this webinar, Cantar discussed the future of category leadership in an Omni commerce world and the shifting balance of power in a post COVID landscape members of the CMA can access the full replay of the webinar in the resource library non-members should visit catman.global to contact the association about membership. Let's take a look.

Speaker 3:

And we heard, you know, uh, from retailers as well, just directly about some of their concerns, um, antiquated consumer insights, consumer behaviors have shifted dramatically rendering historical models at best of questionable value. Um, that comes, you know, it ties into that idea that shopper insights is an important area for investment, um, supply chain, inflation, labor. All of these are things that we heard from retailers, uh, both quantitatively as I showed on the previous slide, but also they felt that it was important enough to let us go directly. Um, but these are all areas that even though they're ready to start talking strategically, we know that these are still big hurdles that we need to work through. As we think about 2022 and

Phil:

On today’s Bullseye Eater asks if“I can Eat It” in the metaverse. Jaya Saxena at Eater is a 35-year-old who says she is challenged by food in the metaverse. She doesn’t leave us with the impression that she either wants or understands the connection of food brands excitement about the possibilities and their future in the metaverse. Chipotle introduced a Garlic Guajillo Steak product on Roblox last week, and the Mexican chain claims it’s the first restaurant to launch a menu item in the metaverse.“By launching Garlic Guajillo Steak in the metaverse, we are able to share our culinary traditions and real food proposition with Gen Z,” said Chipotle CMO Chris Brandt, as Gen Z metaverse users, he says, are way more likely to spend money there. The good news is that Saxena tells us that we can buy the garlic guajillo steak at Chipotle locations in the U.S. and Canada for a limited time. It’s also available in the grill simulator in Roblox, Chipotle’s press release tells us that“users grill Garlic Guajillo Steak following Chipotle’s exact culinary process and then virtually taste Garlic Guajillo Steak’s robust flavors. She poo-poos the Chipotle benefits of entree codes for rewards members and chances to unlock exclusive virtual items that she doesn’t care about because in her words“I’m not a dweeb”. I get it– I understand where she is coming from– but I have to disagree a bit. I’ll agree that having my avatar head over, grill a virtual steak on a virtual grill and then virtually eating it is not my idea of a good and tasty meal. The metaverse is not about filling your belly. It’s about creating experiences that enhance and sometimes, romance the brand. Chipotle says that“After successfully preparing Garlic Guajillo Steak, users will be able to virtually taste the menu innovation with Chipotle’s iconic black fork. A flavor aura will appear, highlighting Garlic Guajillo Steak’s dynamic flavor profile.” In this case, both sides are expecting a bit too much. If the metaverse is successful– and especially in the category of food, we will have to get past the hype and tech and really figure out how our consumers and shoppers want to use this engaging and empowering tool– its not going to be play acting our avatars to sit at a dinner table, be served a meal, grab our knife and fork and go at it. Those that build their metaverses with that model will fail. Today, I don’t know where the food metaverse is headed– but my word of caution is simple. If you are trying to emulate a real food experience, you will fail. If you see the metaverse through the eyes of the consumer– you will own it. In this case, both sides are expecting a bit too much. If the metaverse is successful and especially in the category of food, we're gonna have to get past the hype and the tech, and really figure out how our consumers and shoppers want to use this engaging and empowering tool. It's not gonna be playacting our avatars to sit at a dinner table, be served a meal, grab our knife and fork our virtual knife and fork and go at it. Those that build their metaverses with that model, frankly, they're gone. They're gonna fail today. I don't know where the food metaverse is headed, but my word of caution is simple. If you're trying to emulate a real food experience, you will fail. If you see the murder metaverse through the eyes of the consumers, you will own it.

:

Thanks so much for joining us today. Don't forget. Go to SupermarketGuru.com, check out our archives on the Lempert Report LIVE, and we'll see you back here next Monday, same time, same place. And also if you're watching this as a recorded version, please add your comments. We check them every single day and we'll get back to you. We promise.