MINNEAPOLIS — Target Corp. wants to get out of the grocery business and into the food business. During the retail giant’s corporate analyst meeting on March 3, executives discussed an overhauled approach to the company’s nearly $20 billion segment.
“At the highest level, we have made a strategic shift and have begun talking about and thinking about food versus grocery, because groceries are transactional, and food is emotional,” said Kathee Tesija, executive vice-president and chief merchandising and supply chain officer. “We’ve spent the past six months talking to our guests to understand what matters most to them and how can we bring joy to their lives. We are redesigning food, the food strategy, with the demanding enthusiast at the center.”
What’s important to Target’s “demanding enthusiast”? Wellness, for starters.
“Our guest has told us they expect to have food in our stores, but they’d like us to offer more choices that support their wellness goals: more natural products, more organic, more gluten-free,” said Brian Cornell, chairman and chief executive officer. “Items that have simple, cleaner ingredient labels.”
Target is on track to collect $1 billion in sales this year from its Made to Matter collection of better-for-you products, which launched last April.
“Made to Matter is an incredible partnership with like-minded companies to agree to develop new, better-for-you products designed with the Target guest in mind,” Ms. Tesija said. “It started with 16 vendors last year, and this year will expand to 31. And more are vying to earn the right to be a part of this collaboration…
“Now, if this were a standalone-owned brand, it would already be one of our 10 largest.”
Aligning with the wellness strategy is a focus on fresh. The company said it is cutting the transit time from farm to store by 30% and will display products in a way that signals freshness. Target also plans to broaden its assortment of local brands for staples like coffee and bread and highlight such products with new presentation and signage in the stores.
“We are still in the very early stages of this work, and we will be using Chicago as our test market,” she said. “And we will have it remerchandised by this summer.”
Customers also indicated they want to see more unique and differentiated items offered at Target. Executives said they want to inspire customers out of a dinner rut by improving the assortment and presentation of products in specific categories.
“We will do that through our strong portfolio of owned brands like Simply Balanced and Archer Farms, as well as meaningful exclusives like our recent partnership with Starbucks for their Estate blends and, from Chef David Chang, Milk Bar baking mixes,” Ms. Tesija said.
As food currently accounts for more than 20% of Target’s business, at the heart of this strategic shift lies a lucrative prize.
“One extra trip every three months is worth $2.5 billion in incremental sales annually,” Ms. Tesija said.
Target will test the initiatives in the coming year with plans to amplify efforts in 2016.
“Food is something that our guests shop for while they are at Target, not why they come to Target,” Ms. Tesija said. “And that has to change.”
