With the pandemic-fueled sales boom just a memory and the financial impacts of the COVID-19 crisis apparently around for the long haul, food retailers have been investing in new business lines in an effort to bring in more revenue and underscore their relevance. 

As turbulent macroeconomic conditions continue to keep shoppers off balance and squeeze retailer profitability, analysts at McKinsey & Company think that an energetic diversification strategy is exactly what the grocery sector needs to ensure its future viability.

In a report released this week, McKinsey noted that grocers have been expanding into categories outside of their historical core, looking for new ways to source products, entering into consumer services and even positioning themselves as business-to-business services. Retail media has become a major alternative revenue stream for grocers, with regional players like Hy-Vee and Giant Eagle launching new platforms. 

As margins continue to get squeezed, grocers may need to explore additional alternative revenue streams. These could include involvement in financial services, logistics, membership programs and even lifestyle initiatives like digital streaming or travel, IGD analyst Stewart Samuel noted in a recent LinkedIn post. Walmart now offers a white-label delivery service, while Kroger has expanded its alternative profit streams to include customer data insights, financial services and retail media.

McKinsey made clear that to grow, grocery company executives have little choice but to look beyond their core business.

“Grocery retailers have an attractive set of options for strategic expansion,” the firm noted in its report. “As margin pressures persist, they should identify growth areas beyond the core to build a broader ecosystem of services and offerings that expand the consumer value proposition, build capabilities, and improve the financial profile of the business.”

In case you missed it

Instacart’s stock has yet to take off

The grocery technology company’s shares opened on the Nasdaq two weeks ago up 40% from the initial share price of $30. But that share price quickly fell back to Earth. On Friday morning, the company’s stock traded below $30.

While it’s still too early to judge Instacart’s performance as a public company — Facebook, for example, rebounded handsomely after its rocky public market debut — the company’s falling share could mean that investors are cautious about technology disrupters in the current economic climate, CNBC noted.

Southeastern Grocers chair joins Diebold Nixdorf’s board

Mark Gross, executive chairman of Southeastern Grocers and co-chairman of Northeast Grocery, the parent company formed in the Tops-Price Chopper merger, is joining the board of the financial and retail technology company, per a Thursday announcement. 

Gross, who is also a board member and chairman of the audit committee of Acosta, is among four new independent directors appointed to Diebold Nixdorf’s eight-member board.

New paper explains food traceability fundamentals

The Council for Agricultural Science and Technology and the Institute of Food Technologists released an issue paper this week that gives an overview of food traceability for people in the food industry, academia and governments. The paper looks at the technological infrastructure underlying food traceability platforms and explains the current technology available, ongoing U.S. food traceability initiatives and the future of commercial-scale deployment.

The paper comes on the heels of the U.S. Food and Drug Administration’s new traceability requirements for food and agricultural products.

Number of the week: 73%

That’s the percentage of consumers surveyed by McKinsey in July who said discounts for grocery items were more important to them now than a year ago. The management consulting firm said this figure underscores ongoing price sensitivity that reaches across income groups even as inflation is coming down.

What’s ahead

September jobs report

The U.S. Bureau of Labor Statistics is set to release its newest employment report next Friday. The data will provide insight into the grocery industry workforce during the month of September as labor challenges persist.

Impulse find

Grocers looking for inventive ways to bring shoppers into their stores around Halloween can take inspiration from Bashas. On Saturday, Oct. 28, the Arizona-based chain will host in-store parties at its more than 40 locations in the state, complete with dressed-up staffers, trick-or-treat stations in each department and a costume contest for kids. The winner of the costume contest at each store receives a $25 grocery gift card and a dozen donuts.