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The Spoon

Daily news and analysis about the food tech revolution

H-E-B

H-E-B to Use Swisslog for Automated Micro-Fulfillment

Even though everything is bigger in Texas, the San Antonio-based H-E-B grocery chain is going small. Today, the chain announced it has partnered with Swisslog to install automated micro-fulfillment centers at an undisclosed number of stores (tip of the hat to Grocery Dive).

According to the press announcement, H-E-B will make use of Swisslog’s AutoStore solution, which will use a combination of bins and robotics to shuttle grocery items around. Swisslog says that it has more than 170 AutoStore installations worldwide. H-E-B has 400 locations across Texas.

Swisslog’s micro-fulfillment centers will help H-E-B speed up the processing of online grocery orders for delivery and curbside pickup. Keeping up with the crush of new e-commerce customers was something retailers across the country struggled with throughout a good part of this year as pandemic fears pushed people into online grocery shopping.

While the first few months of the pandemic saw record amounts of online grocery shopping, recent survey data from Brick Meets Click shows that grocery e-commerce dropped in August to $5.7 billion, down from its peak of $7.2 billion in June. Having said that, August’s online grocery numbers were higher than the the $5.3 billion in April.

Swisslog is among a number of companies angling to bring more automation to grocery e-commerce fulfillment. Alert Innovation is being used by Walmart, Fabric is working with Fresh Direct, Takeoff Technologies has lined up Albertsons, ShopRite, and Loblaw’s, and Kroger is building out its own centers using Ocado.

While we’re still waiting to see exactly how many people stick with online grocery shopping (FWIW, even Whole Foods’ CEO thinks a lot of people won’t go back into grocery stores), H-E-B’s announcement shows that retailers continue to make big investments in micro-fulfillment. Will these micro-moves yield Texas-sized returns?

The Food Tech Show: Walmart+ and Ghost Kitchen Robots

It may be the waning days of summer, but there’s still time to get outside for a walk and listen to podcasts and the Spoon team is here to help with our latest episode of The Food Tech Show.

This week, the team discusses the launch of the strategy behind Walmart+, Walmart’s long-rumored membership program centered around grocery and food which will now launch on September 15th.

Other stories discussed on the podcast include:

You can subscribe to the Food Tech Show on Apple Podcasts and Spotify or wherever you listen. If you’re a regular listener, we’d really appreciate a review!

You can also listen by clicking play below or downloading direct to your device.

Grocery Chain H-E-B Opens a Food Hall Offering Takeout and Delivery Meals

Grocery retailer H-E-B further dissolved the boundaries between groceries and restaurants this week when it opened a food hall at one of its Austin, TX stores. Dubbed Main Streat, the venue has five restaurants and a full-service bar.

Given the current state of the foodservice industry, now would seem an odd time to open a public space dedicated to restaurant fare. In most states, restaurant dining rooms must operate a reduced capacity. Many businesses are either mandated or choosing to stick to outdoor patio seating, though that will change once colder weather arrives.

H-E-B has clearly considered all of this, as Main Streat caters to the off-premises customer as much as it does the one who wants a patio table. The company said meals from the venue’s five restaurants are available for pickup and delivery (the latter through local third-party delivery service Favor) along with limited seating inside the food hall and on the patio.The to-go format even applies to alcoholic beverages from the aforementioned full-service bar.

Less than a year ago, starting a foodservice business with a built-in off-premises strategy would have been an anomaly. Catering to takeout and delivery formats was certainly becoming an important strategy for these businesses, but that transition was meant to unfold over a longer period of time, say, five years. The pandemic changed all of that, and H-E-B’s to-go-centric food court is one example of something that will become table stakes very soon for restaurants: opening a business with multiple formats from the start.

Main Streat also underscores how our definition of the word “restaurant” is quickly changing, and how the grocery store is a part of that transition. In the last several months, we’ve seen QSRs selling groceries at the drive-thru, third-party delivery services like DoorDash peddling grocery and convenience store items, and the rise of services like Good Egg selling restaurant meals and supplies via e-commerce. All of which is to say, both restaurants and grocery stores seem to be redefining the word “experience” these days, and often doing so together. The common denominator? Off, premises, obviously. 

In a Time of Broken Norms, Restaurants Experiment to Stay Intact

So earlier this week I was chatting with a food industry colleague who pointed out the sheer amount of opportunity food businesses have right now to experiment with existing norms. At the moment, breaking those norms feels less risky because in many cases we can’t do things the old way.

No one knows this better right now than restaurants. Dining rooms are closed and once they reopen they won’t look the same. Shifting to a delivery-takeout model is a necessity, but it may not make up for all the lost sales. And lately, restaurants are going far outside their normal territory for ways to survive the double whammy of a global pandemic and an industry on the brink of meltdown.  

Selling groceries is one way.

Case in point: Subway this week announced Subway Grocery, a site where you can buy pantry staples straight out of the Subway supply chain. Think foot-long bread loaves, frozen soup, bagged lettuce, and bulk amounts of bacon. The move is a way to get consumers goods that might not actually be in the grocery stores right now (thanks, panic shopping). More importantly, it lets the chain supplement its to-go format while dining rooms stay closed due to coronavirus.

Panera quickly followed that news with a similar concept, Panera Grocery. Customers can order grocery items like breads, produce, and dairy items straight from Panera’s supply chain and via the Panera app or through Grubhub. Like any Panera meal, the goods get delivered to customers’ houses.

And in NYC, just salad launched Just Grocery, which says it will deliver household staples — from produce to paper towels — in 90 minutes or less to Manhattan residents. The company also launched a meal kit service of items from its own menu, which customers can also order from the Just Grocery site.

If I were a betting woman, I’d say more of these initiatives are to come. Right now, big chains like the ones above as well as smaller restaurant businesses (see below) have no choice but to adapt their businesses to new formats so they can add incremental revenue to severely declining sales Plus, I imagine prepping grocery and meal kit orders is another way to keep employees occupied in the process, not to mention save on food waste costs.

But what about when dining rooms open again? Will restaurants need an additional grocery business?

I’ll go on a limb here and say yes, and that at least some of these initiatives will be in place for a while. The reason is that once dining rooms re-open, they’re not going to resemble their former selves. I’m just going off my own speculation here, but I foresee the days of cramped tables close together and family-style seating as a thing of the past. Restaurants dining rooms will have way less capacity, and more than a few people will be wary of going out to eat.

That makes the additional revenue from grocery businesses an attractive long-term play for many of these chains.

Small Restaurants Turn to Big Grocery

Other restaurants are turning to grocery stores themselves, not to sell pantry staples but to get their own meals in the hands of customers at a time when eating out isn’t an option. Texas chain H-E-B launched a pilot program to carry ready-made meals from restaurants in 29 of its stores. For the program, the chain has partnered with local restaurants, some of which have been able to bring back furloughed employees thanks to the extra work (and presumably money). 

And in some cases, grocery stores are actually doing the hiring themselves. When Greensboro, NC-based chain The Fresh Market realized it didn’t have enough staff to keep up with the demand for groceries as well as the chain’s deli counter, it reached out to Darden Restaurants to hire out-of-work employees from the company’s restaurants (Olive Garden, Longhorn Steakhouse).

The sharing of employees seems more of a stop-gap measure than long-term employment solution for many individuals, particularly those building a career in the restaurant industry. Selling restaurant food in stores, however, might stick around. Like I said above, there’s a pretty good chance restaurants won’t be operating at their old capacity once dining rooms reopen, which means other sources of revenue — even incremental revenue — will be a necessary staple for some time to come.

DoorDash Slashes Restaurant Commission Fees By 50%

Of late, I’ve approached most news from third-party delivery aggregators with more than a little skepticism along with the question: Is this really helping restaurants?

DoorDash announced it is reducing commission fees for “local” restaurants by 50 percent, from April 13 through the end of May. “This is not a deferral of fees, nor will merchants be asked to pay anything back,” the company said.

Third-party delivery companies are getting an increasing amount of flack for those commission fees, which can go as high as 30 percent per transaction. Cutting back those fees would obviously help restaurants during this time.

What I’d like to know is, when will the other shoe drop? More and more, the major third-party delivery companies are seen as predatory entities that are astoundingly out of touch with the daily realities of running a restaurant. Is this news from DoorDash an about-face for the company or is the other shoe dangling in the air right now? Maybe it’s hidden fees or getting locked into a contract. Maybe it’s none of those things, though that feels too optimistic an idea in a discussion about third-party delivery.

I’ll be having a third latté and digging into the fine print, so more on this to come.

Keep on truckin’,

Jenn

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