6 Jul 2020

How Restaurants Are Transforming Into ‘Grocerants’ with NCR

Location: United States & Canada

"Grocerants” or “restaurmarts” are exactly what they sound like: a cross between restaurant and market where customers can buy food and the ingredients, too. And while we’ve seen restaurants take to this hybrid model amid the global pandemic, the concept isn’t new.

In fact, grocery stores and supermarkets offering hot and cold takeout or dine-in options have been around for some time. The model was first driven by consumer behavior; people were cooking less at home and instead opting for take-out or delivery. As recently as December 2019, CNN explored the trend and how grocers and supermarkets had begun to expand their offers to meet it.

But as restaurants maneuvered through the challenges of the global coronavirus pandemic, many operators began looking at the hybrid concept for their own restaurants. And while some restaurants supplemented their offerings with take-away displays of their food, some are now evolving to a format where restaurants and food providers are partnering to offer products directly for sale through retail outlets, or adding additional grocery products like fresh ingredients and even hand sanitizer and toilet paper to their pick-up and delivery services.

Restaurant operators have been focused on keeping their businesses afloat, retaining their employees and finding new ways of driving revenue—but we’ve also seen the shift in consumer behavior supporting the hybrid concept as well: Now consumers are cooking more from home for both economic and safety reasons, while also increasing their use of take out, curbside and delivery services, driven by the desire for variety and convenience.

Restaurants globally have been responding in a variety of ways:

  • Offering their products for curbside pickup or delivery (including those who did not already offer this service)
  • Offering their products through partner retail outlets
  • Offering additional (usually basic) grocery items as an extension of their offer, either for pick up or delivery
  • Offering recipes and/or cooking or cocktail mixing classes online

These types of activities help support local communities where the restaurants operate and often are tied in with support for other local products and services as well as support for critical workers. They help mitigate the economic impact of the lockdowns and are providing good opportunities for operators to keep their brand top of mind for when things return to a more ‘normal’ business environment.

For example, the operator of one California-based restaurant brand, Coupa Café, had been interested in the idea for some time.  When the COVID-19 shutdowns and service limitations began impacting operations, the restaurant owner decided to adopt the grocerant concept. It was so successful that the café will continue it as part of their restaurant offerings.

 

How Coupa Café adopted the grocerant concept – and succeeded

Once the pandemic hit, Coupa Café, like many restaurants, had to focus on adaptation and survival. Focused on delivering specialty coffee beverages brewed with their own coffee roasted in-house and along with tasty food to go, Coupa opened their first location in 2004.

In March 2020, when the state of California issued shelter-in-place orders, Coupa Café braced for a tough business year. After thinking through ways to drive revenue, the owners, including Jean Paul Coupal, made the call to expand on the grocerant concept they’d been considering; it would allow the café to keep serving customers, keep their doors open and keep staff employed.

What made Coupa Café successful in this evolution was understanding how the world and the industry had changed, and knowing that the business that existed in February could no longer operate the way it once did. It needed to adapt.

So they started by enabling curbside pick-up through online ordering. Leveraging the online ordering and mobile app capabilities of the Aloha platform, they were already set up for success in managing online orders from their customers. But they needed to go a step further to diversify their revenue stream to stay afloat.

What started off as a light-heartedly idealized concept turned into a legitimate reality and path for the future—just three weeks later. The idea was to sell the produce they receive from their supplier directly to the consumer in a more structured way, just like a grocery store, providing greater convenience for their customers. That’s when Coupa Grocery was launched.

Coupa announced it first to their loyalty customer base via email—and it immediately took off. Coupal and his team quickly realized they'd struck gold on a little-known, built-in frustration with both large, online grocery ordering services and physical stores. Simply put, customers wanted a better grocery shopping experience, one that’s quick, convenient and contactless. And Coupa Grocery delivered on all objectives.

Due to the incredible demand in such a short period of time, Coupal saw the need to broaden their inventory from the initial 100 items on the website. Within a month, they doubled their inventory, all of which can be delivered to customers within an eight-mile radius of Palo Alto, Calif. Coupal cleverly repurposed his catering team and used their catering vans as delivery vehicles, allowing more people to come back to work.

To date, over 800 orders containing more than 11,000 different items have been bagged, sorted and delivered to customers with a 97% fill rate. They trained their staff on the completely new system, readying them for the future of the company. “Everybody does everything,” Coupal said. “Because that’s the only way you survive this—by everybody pitching in, helping and adapting at the same time.”

At least for the foreseeable future, the avenue to success and sustainable revenue is Coupa Grocery. Coupal believes that, because they are so boutique and much smaller than large grocery chains, they’re better able to consistently provide higher quality products, manage quality control and provide a more tailored experience for their customers while California continues to slowly open its economy.

Until consumers feel comfortable enough to go out to restaurants again, Coupal doesn’t see a shift in consumer spending habits coming anytime soon. That said, the foremost challenge is figuring out how to build up revenue fast enough to replace the lost revenue, so they can get back to the size they once were. 

 

Grocerants around the world

The hybrid model isn’t just reserved for local favorites. Similar trends are happening across the globe, with fast food chains and restaurant chains adopting similar models.

In April, Panera announced a new program called Panera Grocery, providing delivery of basic items through their own delivery network as well as in collaboration with other delivery organizations such as Grubhub. Subway has been piloting a grocery service at 100 of its restaurants in Southern California; customers can order items such as baked bread, deli meats, sliced cheese, vegetables and soup online for contactless delivery or curbside pickup.

In the Philippines, popular fast food operator Jollibee is offering frozen menu items through its own outlets as takeaway or drive through, but also through agreements with some supermarkets, selling frozen items in-store. In Japan, Yoshinoya is offering its "Family Kitchen" series online, frozen and sealed, which can be made at home.

McDonald’s in Australia started to offer drive through basics such as bread, milk and muffins to help those struggling to find such items through regular shopping. In the U.K., Prèt-a-Manger announced it would reopen some stores near hospitals and that they would extend their offering to include some basic items, such as milk and bread.

Germany is largely open now, but during lockdown, some restaurants completely transformed into grocery stores or small supermarkets, since this retail category was able to stay open. In one example, the restaurant Speisekammer West cleared out its tables and chairs and, in collaboration with its suppliers, offered cheese, eggs, milk, butter, vegetables and more through their premises. It started as a way to dispose of excess stock and evolved from there.

In the U.K., food chain Leon turned its 65 restaurants into shops, selling meals via both click-and-collect and delivery. In this move, meals usually served in boxes in-store were placed in plastic pouches, which were refrigerated and could be heated, stored or frozen at home. Founder John Vincent told the BBC that he hoped the move would not only save Leon itself, but provide an important lifeline to food producers and suppliers also staring at a difficult financial future. He believes that, by using this model, Leon can keep 60% of their stores open and keep food production going. Many other restaurants in London are following suit.

As the industry globally emerges from various levels of lockdown, if these new ways of doing business prove successful in delivering profitability and customer loyalty, many restaurant operators will likely integrate these new revenue streams and services into their day-to-day businesses as they look to adapt to today’s dining experience.