The pandemic is changing how the Twin Cities shops for groceries, but business is booming

Feb. 28—It was approaching lunchtime on a recent Wednesday and with no shoppers within earshot, Lukas Medin was talking to himself.

"Aisle three. Go to aisle three. Waffle mix," the Kowalski's Market worker murmured while roaming an otherwise silent corner of the Woodbury store, checking a shopping list on his iPhone. "Prego, Oreos, hamburger ..."

Empty aisles usually suggest a store is going out of business. But at Kowalski's, like many grocery stores during the coronavirus pandemic, business is thriving thanks to restaurant restrictions and a surge in home grocery delivery and curbside pickups.

The shift to touchless grocery shopping has accelerated in the past 11 months. And that pivot could leave Twin Cities grocers better positioned to compete with high-tech innovator Amazon and Whole Foods.

"The competition is important to be aware of," Kowalski's chief operating officer Mike Oase said, but his stores have adapted, business is booming and he's looking at two locations to build new stores.

"We feel good about the future," he said.

When the novel coronavirus crept into Minnesota in March, supermarkets shuddered.

"Overnight, food-shopping went from a fun experience to a scary experience," said Phil Lempert, retail food expert and editor of SupermarketGuru.com.

At the same time, efforts to control the virus' spread decimated the labor market, and supply-chain disruptions caused food prices to rise. U.S. grocery prices jumped by 3.5 percent last year, after increasing just 1.3 percent in the two previous years.

With restaurants ordered to suspend or curtail indoor dining, however, Minnesotans last year had little choice but to stay home to cook — and supermarket sales surged.

Over the past three months, U.S. grocery store sales were up 10 percent compared with one year prior, while bars and restaurant sales were down 18 percent, according to government surveys.

But grocery shopping looks different today. Shoppers have cut back on impulse visits and now load up their carts for the week ahead.

"They used to come in four times a week. Now, it's once a week," said Kowalski's store manager Dan Klassen.

And many customers no longer enter the store at all. They opt instead for grocers who offer curbside pickup or ship boxed food to homes.

Online food-buying in the U.S. tripled in 2020 to 10 percent of all grocery purchases, according to the grocery consulting firm Mercatus. By 2025, the firm predicts, 21 percent of groceries will be bought online.

Many supermarkets are slow to change, though, partly because they cater to longtime customers who aren't going to change their habits, retail food expert Lempert said.

"Older people like in-store shopping," he said.

Some supermarkets have dipped their toes into the online world, and badly. "For many online shoppers, it's not a great experience," said Lempert.

The best websites list recipes, specials and nutritional information. That appeals to younger shoppers, who are quicker to accept new technology and online ordering.

COMPETING WITH AMAZON

In the Twin Cities, said Lempert, Amazon is going to be a big winner. "It's a huge threat," he said.

The $1.6 trillion Goliath burst into the market in 2017 when it bought Whole Foods and its five metro locations. There are signs that two more could be on the way.

A mysterious retailer in January proposed redeveloping a vacant store in Burnsville, using the name "Mendel" on an architect's drawing — the name Amazon has used on store plans elsewhere.

Meanwhile, an unidentified retailer is preparing to build a grocery store in Eagan with a "checkout-free experience" — a feature Amazon has advertised.

Lempert predicted Amazon will buy independent stores, too. "Amazon will always be a step ahead," he said.

They're competing with Iowa-based Hy-Vee, which entered the Twin Cities market six years ago and soon will have 15 metro locations, including a newly built store in Spring Lake Park and one in an old Rainbow Foods in Maplewood.

"Hy-Vee is one of the best retailers we have in the country," said Lempert.

Lempert named Aldi, the low-cost German grocer, as another winner. The chain has more than 70 locations statewide and is adding more in the metro area.

The wild card is Minnesota's own Cub Foods. Its owner, United Natural Foods, sold Cub real estate in 15 locations last year but not the stores themselves. Now, they're trying to sell the stores, as well.

According to industry publication Supermarket News, Cub owns 52 stores and has part-ownership in or franchises 27 others. It's unclear how a sale could change those stores, but they could be closed or sold off.

"I don't think anyone wants them," said Lempert.

United did not respond to calls and emails seeking comment.

NEW WAY FORWARD

Oase said Kowalski's is ready for whatever is to come.

He said curbside pickups tripled when the pandemic first struck and have settled in at more than double the volume of 2019.

Home delivery is surging through the store website, with Kowalski's on the Go, and through Shipt, a business partner.

The future of retail food isn't long lines of masked shoppers but the quiet plop-plopping of cans and boxes into carts by Medin and other shoppers-for-hire.

As he weighed bananas in the back of the store, Medin said customers are growing accustomed to shopping via iPhone.

"We are figuring this out as we go along," he said.

They are learning, for example, that they must specify their meat orders by weight. They can't say "just enough hamburger for me and Mike" or "a decent amount for family lasagna."

When he can't find what a customer wants, he calls to suggest a substitute.

"They appreciate that," he said. "One of them even sent me a thank-you note."