Should food be an afterthought for Target?

Photo: RetailWire
Aug 02, 2021

Through a special arrangement, presented here for discussion is an excerpt of a current article from Frozen & Refrigerated Buyer magazine.

Target earns credit for its omnichannel excellence, private label prowess, in-store merchandising efforts and addictive Circle Rewards program, but the feeling by market observers is that the chain has traditionally done a much better job with non-foods than foods.

“Frozen and refrigerated departments are pretty standard,” Neil Saunders, managing director of retail at GlobalData, says, echoing what we heard from manufacturers in our profile on Target. (Actually, “plain vanilla” was used by more than one.)

The grocery shopping experience is definitely better, says Mr. Saunders, citing new shelving, lighting, signage and better, more prominent displays of produce. “But I would argue that there’s still more to do on grocery and that Target should be a lot more innovative and experiment with things like counters, fresh products and meal solutions.”

However, he continues, “My sense is that Target still hasn’t decided what it wants to do in grocery so there’s a reticence to invest in changing things up. At the moment, it seems to be caught between being a top-up shop and a full-line grocery store.”

Target has been one of the major market share winners during the pandemic. Comps grew 19.3 percent in 2020 and 22.9 percent in the first quarter, driven by its same-day services.

“Target really owns omnichannel excellence,” says Don Stuart, managing director of Cadent Consulting Group.

He adds, “Walmart is a behemoth in food, generating approximately 50 percent of its sales from edibles to Target’s 20 percent, and Amazon rules e-commerce. But Target is better at tying it all together with an integrated omnichannel experience.”

The opportunity for Target to capture a greater proportion of spend in food from shoppers is there, Mr. Saunders adds, but the chain doesn’t appear ready to take it.

Mr. Stuart agrees, “Target may be trying to figure out exactly what it wants to be in food and beverage versus other areas where it plays harder and better,” he says.

Or perhaps the chain recognizes that margins are lower in food and beverage compared to other categories it competes in but knows it still needs to play there because food drives trip frequency.

DISCUSSION QUESTIONS: Should Target be looking at the food category primarily as a traffic driver or as a much broader opportunity? Has Target’s omnichannel success coming out of the pandemic opened up more opportunities around food?

Please practice The RetailWire Golden Rule when submitting your comments.
"In order to create a fully uniform brand that aligns with Target's positioning, every vertical within the retailer should be innovative and exciting to shop."
"Cornell is treating food as a convenience, not a destination, and that may be the right strategy."
"While I will admit that my former life as a Grocery Buyer at Target may bias my perspective, I believe that food is absolutely critical to Target’s success."

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26 Comments on "Should food be an afterthought for Target?"

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Neil Saunders

Food is critical for Target, if only because it is a traffic driver. Without a food offer, Target would be a successful but significantly weaker company. However Target has traditionally been lackluster at working out how to capture a larger share of wallet in food, and, as such, Target is used mostly as a top-up/essential purchase option rather than being a destination for it. That has started to change with a refresh of the look and feel of food sections and the introduction of new brands, like Good & Gather and Favorite Day. However my view is there is much more work to be done. Target should be a hotbed of innovation in food, both through its own investments and by partnering with DTC brands – much like it has done in personal care. But none of this is about driving volume for the sake of volume and trying to compete with Walmart – because that’s a battle Target would lose! It’s about doing something unique and different that chimes with its customer base.

Christine Russo

Perhaps Target intentionally paused in this category to focus resources on omni-channel dominance. And perhaps they will circle back with a Target-esque strategy in food along the lines of their other successes such as brand partnerships, etc. There is certainly a ton of room for creativity in food.

DeAnn Campbell

Target has always been great at the long play. Their long term thinking prompted them to invest in omnichannel optimization long before COVID-19, and this strategy was proven out by their success during COVID-19 and their impressive increase in omnichannel profit margins.

Phil Chang

I think Target has done a good job of making themselves a top-up destination for food. Competing with true grocery would take a significant shake-up based on their current real estate footprint and merchandising strategy.

I know that when I want something interesting to nosh on, or that I need something basic to top up my fridge, I can head to Target and find something experiential.

If Target is to move in this direction, it’s a tall order to not only do a full range of groceries, but not to disappoint on its experiential benchmark. I have faith that the red and khaki can do it, but I think there are more interesting places where Target could be more dominant.

Dr. Stephen Needel

Target is the last place I think of for food – there’s a reason for that. Walmart went all-in on being a grocer as well as a mass merchandiser. To play well in this game, Target needs to up their game – either via assortment or prices. Right now, they are nowhere on either score.

Paula Rosenblum

When Target put so much focus on food its non-food sales suffered as did profits. I think the company has done much better since it put its focus back on its core categories.

Further, given the company’s seemingly endless problems keeping up with its inventory position, there are just too many out-of-stocks.

Joel Goldstein

The concept of omnichannel needs to come second to the concept of local optimization. If the area where Target is situated has ample grocery options and the convenience aspect of having food in the store does not justify the revenue per square foot in the store, the local manager should have the option to re-focus the shelf-space to maximize the products to fit the market.

Jeff Weidauer

Using food as a traffic driver is SOP. If Target wants to get into the food space and really be Target, the company needs to figure out how to add some genuine creativity and not just drop in a couple of cold cases and call it good.

Dick Seesel

Under Gregg Steinhafel, Target devoted vast resources to food (and consumables), to the detriment of its legacy apparel and home businesses. Apparently the company’s thinking at the time was that Target needed to compete in grocery to take on Walmart more effectively.

Brian Cornell has done a lot of things right at Target — especially on the omnichannel front — but one of his original areas of focus was to revitalize apparel and soft home with new brands and better product development. I’m not sure that the “benign neglect” of grocery was such a bad idea in hindsight, given Target’s performance. Cornell is treating food as a convenience, not a destination, and that may be the right strategy.

Paula Rosenblum


Dave Bruno

I keep expecting Target, given their stellar track record in non-food assortments, to establish a grocery assortment that treats food as more than an afterthought/traffic driver. I haven’t seen it yet, but I long ago learned to never doubt their leadership in Minneapolis, and I trust they have a plan, whether outsiders like me can figure out what it is or not.

Jennifer Bartashus

For several years, Target has maintained it does not want to evolve into a full-service grocery store. Instead, the focus on products that its customers want and the evolution of its private-label platform has been driving stronger sales results for the consumables category. It is important for Target to have the necessities plus some unique extras to help draw traffic, but it seems to be doing well with the balancing act. The company’s recent focus on urban stores which are smaller square footage also lends itself to maintaining a limited food assortment, leaving more space for the higher-margin general merchandise that its customers love.

Brandon Rael

Food and packaged goods are a vital part of Target’s strategy of becoming the one-stop shop for the larger share of consumers’ wallets. Target has made significant investments in their grocery, produce, fresh and perishables and, most importantly, their impressive private-label packaged goods assortments.

Target has the brand equity, a digital-first strategy, and the sheer amount of store traffic to justify a meaningful grocery strategy. There are significant revenue and margin opportunities in not only the private label arena but also in fresh and perishables prepared foods for the customer on the go.

The grocery sector is ripe for disruption. However for Target to make a meaningful impact, it will take a creative and innovative assortment planning and localization strategy to make it a sustainable growth category.

Richard Hernandez

I think Target has learned (and is continuing to learn) the food business. They have ramped up their private house brands and improved their assortment and adjacencies. They still lack in perishables, especially in produce, and are not close to being a full or near-full shop. I think they will get there with the recent changes on the food side. I did see more traffic on the food side during the pandemic and I think Target is aware of that and making changes to keep and/or increase that new traffic.

Melissa Minkow

Grocery was always intended to simply drive more frequent traffic to Target, but it’s inconsistent with the brand to have any category experience be sub-par for consumers. In order to create a fully uniform brand that aligns with Target’s positioning, every vertical within the retailer should be innovative and exciting to shop. I hope to see some revitalization here in the future, of course in a way that will actually drive profit for the retailer, since grocery is such a low-margin space.

Gary Sankary
Food is an essential business for Target, it drives traffic and frequency. Target also realized that quality private label products are critical for loyalty. They also know that brands get stale which is why we are seeing Archer Farms and Market Pantry being replaced with Favorite Day and Good & Gather. When Target started in grocery 20+ years ago they found that their customers were either grocery shoppers or general merch shoppers. There wasn’t much cross over. This created margin issues overall for their stores. They also had visions of bringing a more upscale grocery experience to mass retail. What I think they’ve learned is providing upscale grocery requires specialized team members to execute and merchandise stores in the high touch, highly visible areas like meat, deli and produce. This is difficult to do on the margins that Target wants to run in grocery. And, without the scale of Walmart, the volume is there. Although I would argue the deli, meat and produce experiences at Walmart are not good. I think they’re happy to settle… Read more »
John Hennessy

I agree with the other comments that food isn’t a priority for Target. When asked by someone outside the industry why Target wasn’t as good at food I offered that food stores have produce managers with years of produce experience. Target has a manager of the produce category who may have come from sporting goods. I still think that’s fair way to look at it.

Ananda Chakravarty
A traffic driver is just as critical. Even if the food focus for Target remains in the traffic driver category due to low margins, the end result is overall buying and spending time in the store. There are certainly opportunities – especially in higher margin perimeter store options like bakeries, delis, floral shops and more – but these come with staffing costs and separation of the food business from the rest of the experience. The Target model today is a strong expansion to the customer experience where customers can find their key food necessities. According to John Mulligan, Target COO — “Comps in essentials and food and beverage moved from single digits in February to peaks above 50 percent in March before settling down into the teens in April.” This is a powerful food trend for Target and contributes to their outstanding success. The most important item is that Target is selling other products AND food, not other products with food. The customer brings two budgets with them into the store – one for food… Read more »
Peter Charness

Food can be a traffic driver, but it’s very, very hard in a highly competitive market to turn it into a margin driver. I also wouldn’t take it for granted that there’s great cross-conversion between a grocery trip and buying from the non-food categories. Perhaps there’s something to food creating frequency and routine with a shopper to keep coming back to that Target store for all their needs.

Joel Rubinson

If they are not serious about food, shoppers will not be serious about buying food there. Then it becomes an unfavorable point of comparison to Walmart and it won’t drive much traffic and become a negative for the brand image. If they are in, they need to go all-in and treat it seriously. Should they go in or abandon? There is a lot of shopper insights research to be done there and analysis of sales in stores with and without food.

Mel Kleiman

Food should never be an afterthought. I am sure that Target does not look at it as an afterthought. But the question that needs to be answered is, how do you stand out in a space that is already overcrowded and very price-sensitive?

Looking at all of the comments before mine, lots of them indicate the need to do something but there are no real suggestions on what to do.

It is a tough market with a lot of national and regional players and it is oversaturated. I am sure the question they keep asking is, how do we get more customers in the store and get them to spend more money? If any of us had the answer, we would be rich.

Jeff Sward

Target would benefit from a large dose of Trader Joe’s business modeling. Focus, differentiation, excellence, value. Do they benefit most from being a top-up for run-of-the-mill CPG product, or from having an assortment that becomes reason enough for a visit to the store?

Heidi Sax

You can’t be the best at everything. Target’s grocery aisles are more than sufficient. Props to them for focusing on what they’re best at and what their customers want and expect. In times like these, it’s a strategy they can bank on.

Matthew Pavich

While I will admit that my former life as a Grocery Buyer at Target may bias my perspective, I believe that food is absolutely critical to Target’s success. Expanding its Grocery capabilities about ten years ago with its PFresh initiative was a key element to its growth and drove frequency and traffic in stores which led to increases across all categories.

Fast forward to today and the need to drive frequency coupled with Target’s success in omnichannel makes it an even bigger opportunity where Target can drive more business through a renewed focus on Grocery. Without grocery, the “one stop shop” model falls apart pretty quickly and makes Walmart, Meijer, HEB Plus, etc. better options for a lot of shoppers. Few retailers can offer you Target’s level of style and fashion while allowing you to get those few grocery items you ran out of in the same trip.

Jasmine Glasheen

Although Target doesn’t have a robust food offering, their produce is always fresh, up to date, and appealing.

Target will never become a grocery destination. There are enough grocery stores out there doing innovative things and it would be too difficult for Target to differentiate itself.

As such, I think Target’s offering is perfect for its customer base.

Craig Sundstrom

For all this preoccupation with comparing Walmart to Target, they’re fundamentally different: the former being the all-in retailer for rural/low income America, while the latter is the discounter-of-choice for urban and suburban areas … so competitors only in the general sense (how often do you see the two in close proximity to each other?).

And this drives what they emphasize: WM essentially being the general store of old writ large, of which food is of necessity a large component. Target, OTOH, competes against a large number of grocers, at every price point and format, with little opportunity to dominate. I don’t see that changing unless Target becomes a much different kind of retailer, better able to match store count with local/regional grocers.

As for the pandemic experience, I’m for resetting that: yes it provided some (hopefully useful) experience, but I don’t see it providing any long term advantage … certainly not to Target, specifically.

"In order to create a fully uniform brand that aligns with Target's positioning, every vertical within the retailer should be innovative and exciting to shop."
"Cornell is treating food as a convenience, not a destination, and that may be the right strategy."
"While I will admit that my former life as a Grocery Buyer at Target may bias my perspective, I believe that food is absolutely critical to Target’s success."

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