Fresh food at the intersection of trust and transparency

Additionally, for grocers, it also means earning the trust of their consumers. Many of the opportunities uncovered in Deloitte’s work on The future of grocery retail¹—from mass to micro personalization to embracing responsibility as a requisite or using fresh food as medicine—require high levels of consumer trust to be realized.

Part II of this article explores the topic of trust. We see grocers are doing relatively well on trust compared to other types of retailers, but they may have an area of weakness: transparency. More investment to meet transparency-related regulatory requirements, such as the US Food Traceability List implementing Section 204 of the Food Safety Modernization Act (FSMA), may already be in the cards for many companies.² Fortunately, the same transparency improvements may also be used to build trust and support many of the authentic and defensible "label claims" that both consumers and grocers think could drive more fresh sales.

Part I: Fresh food through a two-way mirror

What consumers say motivates them in surveys, and what they actually do can differ. And the grocer's view of the consumer, built up from years of experience and set into rules of thumb, can also become outdated. The truth on the ground lies somewhere in between. Comparing consumer and retailer answers to similar questions across the fresh landscape can help establish a baseline and point to areas for further exploration.

Purchase drivers for fresh food

Although inflation for food-at-home has eased somewhat, price (93%) continues to lead the purchase drivers we've tracked for several years. Other drivers, such as personal health and wellness (86%), convenience (84%), and food waste (77%), have remained resilient through recent changes and turbulence. However, relative to the prepandemic survey results of 2019, the importance of three other factors in our latest data has declined among surveyed consumers. Locally grown or sourced dropped 20 percentage points, environmental sustainability is down 15 percentage points, and non-GMO is now 14 percentage points below 2019 levels. Organic wasn't introduced to our survey until 2021, but as a purchase driver, it only registers as important to 47% of consumers in the 2023 survey.

Comparing executive and consumer survey data provides reason to think the decline in importance for these drivers isn't wholly shared by grocery retailers (figure 1). Executives had to answer on behalf of their "typical consumer," so it isn't a perfect comparison. But the results reflect large percentage-point differences in the estimation of importance for organic (+47 percentage points), locally grown/sourced (+33 percentage points), non-GMO (+31 percentage points), and environmental sustainability (+27 percentage points). Digging into degrees of importance further amplifies this disparity in perspective. Apart from non-GMO, 70% or more of the executive and consumer difference lies within the extreme "very important" answer on the question's scale.

That said, these purchase drivers may still play a role in helping grocers differentiate themselves from the competition. Take both locally sourced and environmental sustainability as examples. Though they may not be the final deciding factors in a given purchase, 80% of consumers surveyed said they prefer food retailers that source food from local farms. Fifty-seven percent prefer to shop at a store that is meaningfully reducing food waste.

Paying the price, even at a premium

As price is the perennial top purchase driver, it's worth some additional exploration. When explicitly asked about the prices for fresh food, fewer consumers, relative to last year, highlighted they are seeing higher prices for the most recent two months (down 6 percentage points). This decrease mirrors recent improvements in year-over-year food-at-home inflation around the time of the survey.³ With easing inflation, more consumers are willing to pay a premium for the best fresh food (68%), which is 7 percentage points more than last year and marks a return to near-2021 levels. On average, these consumers are willing to pay 28% more for fresh food than other alternatives, such as frozen, canned, or processed food.

If the fresh food being purchased is also considered sustainable, the average premium bumps up to 30%—though the willing customer set gets smaller (47%, or 11 percentage points lower than the overall fresh premium group). Grocery retailers are more skeptical, with survey answers suggesting that only 19% of their consumers would pay more for sustainable fresh food at an implied average premium of just 12% (figure 2).

The price of perception

Some consumers may be willing to pay a premium for what they value most, but only as much as necessary. Rising prices may have created some skepticism. Eighty percent of consumers surveyed believe that food prices have gone up more than needed, contributing to increased company profits more than offsetting increased supply costs. This figure is up 7 percentage points over 2022.

Consumers aren't alone in their perceptions of unnecessarily high prices. When asked about their food suppliers, a combined 85% of grocery retail executives surveyed said either "several" (39%) or "most of them" (46%) were raising prices more than needed with the purpose of increasing profits. A mere 10% of these executives said their food suppliers were raising prices to keep up with rising costs. Whether or not the facts support this finding, perception is reality for these consumers and grocers.

Who is on the hook for sustainability?

All have a role to play in sustainability. Still, consumers and retailers differ in which part of the value chain they consider most responsible for maintaining and improving the environmental sustainability of food (figure 3). Consumers point to food producers, such as farmers, ranchers, and fishermen, whereas more grocery retailers believe responsibility resides with the government. Perhaps most notably, consumers and retailers are also skewed on the centrality of their own roles.

Fresh food as medicine

More consumers want personalized nutrition. Eight in 10 surveyed say they actively seek foods that offer nutrition profiles personalized to their needs, up 3 percentage points year over year and an impressive 18 percentage points higher than in 2021.⁴ Similarly, nearly two-thirds believe fresh food can act like medicine (64%). Yet, on average, grocery retail executives think only four in 10 consumers would hold that belief.

Belief is one thing. It takes a system to put food as medicine into action. Nearly half (46%) of consumers would use an app from their grocer to help make healthier food choices. And it looks like grocers will be there to meet them—eight in 10 grocery retailers are investing in digital functionality to help consumers make healthier choices; more than half of this group said the investment was significant.

However, these systems require data-sharing to work well. It could be a glass half-full or half-empty situation, but four in 10 (38%) consumers are willing to share some of their medical and health data with their grocer to get personalized fresh food recommendations. Here, grocers are almost precisely aligned in expectation, estimating that 37% of consumers would share their health data.

Part II: Trust and transparency

As illustrated by trends like sustainability and fresh food as medicine, when they are on the same page as their consumers, there are likely opportunities for grocers to grow sales, aside from competing on prices. However, these opportunities involve trust. Consumers need to trust that grocers' sustainability claims are authentic. Similarly, they likely need to trust their grocer enough to be willing to share their personal health data. Trust was shown to be valuable to companies broadly as well. For instance, trusted companies outperform their peers by up to 400%, and customers who trust a brand are 88% more likely to buy again.⁵

But how much trust do consumers actually have in their preferred grocery retailers?

An assessment of trust in grocery

Trust is derived from a combination of competence and intent. An organization should be capable and reliable enough to deliver on its promises competently. It should also show enough humanity and transparency to demonstrate it has the right intentions. To learn where grocers stand on trust, we deployed Deloitte's HX TrustID^TM assessment.⁶ Consumers were asked a battery of questions about their primary grocer's capability, reliability, humanity, and transparency, and a net score was created by subtracting the number of consumers who have low trust from those who have high trust in the brand, taking an average of the four trust areas for the overall score.

In 2022, grocery had the highest overall net HX TrustID^TM score among retailer types, spanning mass merchant, department, convenience, and apparel stores.⁷ This year, with a net score of 40 from our fresh food survey, grocery retailers likely improved their lead, with the greatest gains relative to 2022 evident in humanity and reliability (figure 4).

While trust in grocers is relatively high, there is always room for improvement. Transparency is an area where grocers have the most room to build trust. There are notably some areas of relative strength in transparency—at least two in three consumers surveyed think their grocer's marketing and other communications are generally accurate and honest, fees and costs are clear and upfront, and they clearly communicate about their products. However, three transparency subthemes score particularly low (figure 5).

Grocers that want to improve trust might gain traction by helping consumers get comfortable with how their data is used, providing them with easier-to-digest information about environmental, social, and governance impact, and being more upfront about how retail media and other revenue sources come into play.

Fresh food benefits from trust through transparency

The fresh food department may be best positioned to translate investments in additional data collection and transparency, and the overall trust that builds, into benefits. Consider three examples:

Traceability. More than any other food category, fresh products reduce the conceptual distance between a customer and the meal on their plate. This closeness piques consumer interest in the journey their food takes before arriving at the grocery store. In fact, 39% of consumers surveyed want detailed data on how the fresh food they buy moves from farm to store. With this curiosity comes concern about the repercussions of sourcing, processing, and the supply chain. Grocers can gain a competitive advantage and grow customer trust by capturing and sharing relevant information with consumers.

Sustainability. Forty-five percent of consumers surveyed look to label data on sustainability when choosing which product to buy. According to both customers (30%) and grocery executives (36%), the fresh department is by far where environmental, social, and governance claims matter the most. Consumers do not prefer their food traveling large distances and are interested in buying local, yet the reality is fresh food can travel a thousand miles before it reaches a consumer's home.⁸ Grocers that start buying more local food can use transparency to reflect lower food miles and communicate the associated benefits.

Health and safety. Fifty-five percent of consumers surveyed use label data on health and nutrition to determine which fresh food to purchase, and 89% of customers say food safety is of the utmost importance. Typically, consumers deploy some "common sense" tactics for food safety (figure 6). They check dates, inspect their groceries, and prepare food in ways that minimize health risks. Besides that, they rely heavily on their grocer to supply safe food. When it comes to knowing their food is safe, trust in one's grocery store is more important to consumers than trust in food brands or any governmental regulatory body. Grocers can build customer trust by continuing to supply safe and healthy food and differentiate themselves by providing information and transparency that verifies this health and safety.

A system for transparency

The upcoming FSMA requires food supply chain participants to better track where their food originates and the processing it undergoes.⁹ While this monitoring will likely necessitate higher costs, this investment also gives grocers access to more data that can be relayed to the customer. If communicated properly, this information can satisfy customer curiosity about product sustainability, provide details on the health benefits of an item, and ameliorate potential concerns regarding food safety.

How can grocers effectively communicate this information to their customers? Even in a digital world, consumers say the place they are most likely to look is the label (25%). Two-thirds of consumers said they value packaging with labels because the labels help them better understand their fresh food purchases.

As an avenue for product information, internet search is not far behind food labeling. Combined with social media and apps, digital methods are used slightly more than labels and store signs. Only 21% of consumers say they do not look for information about their food (figure 7).

The sum of its parts

Retailers’ perceptions of their consumers don't always match up with how those consumers see themselves. Finding areas of alignment may build confidence, whereas disconnects could be sources for opportunity discovery. These new opportunities, such as food as medicine or sustainability, tend to require high levels of trust to be realized. While trust in grocery retailers is relatively high, transparency is currently an area to be improved upon. We see a potential path for grocers to differentiate themselves by creating systems to deliver transparency and building the customer trust necessary to enable the future of grocery retail business models. Here are five ideas for grocers:

• Challenge assumptions about consumers. Consumer purchase drivers can change and come out of alignment with rules of thumb. Grocers should frequently test to help ensure they are up to date with consumer desires and evolving willingness to pay a premium in some areas.
• Assess trust in individual brands and banners. This will provide a comprehensive perspective of where they uniquely stand in the eyes of consumers. A given brand's trust strengths and weaknesses may differ from the industry average.
• Consider investments to collect essential data from supply chains. Changing regulations may necessitate investments in this area but spending deliberately and strategically for a more comprehensive set of needs can be a difference maker. Of note, in Deloitte's 2023 consumer products outlook, companies set up for profitable growth were investing disproportionately more in supply chain data.¹⁰
• Communicate clearly. Transparency doesn't come from drowning consumers in data. Use plain language, point to the important takeaways, and meet consumers where they want to look for data.
• Continue to build a digital layer of service. Hypercustomization is a major component of the future of grocery retail.¹¹ Doing so at scale involves digital tools and systems of engagement for consumers to share their data with their most trusted grocers. Grocers who want to help their customers use food as medicine or find more sustainable options will likely find a digital layer of service indispensable.