"Strategically, fresh is the thing that differentiates a grocer from the online competitor like Amazon or even from other brick-and-mortar competitors," says Matt Schwartz, CEO of San Francisco-based Afresh, a four-year-old tech company offering an ordering optimization system built specifically for the fresh department. And as 2022 opens, the fresh department is decidedly in focus for grocers eager to maintain—or claw back—market share in increasingly competitive local markets. In a recent survey of food industry leaders from Deloitte and FMI–The Food Industry Association, more than 80% of respondents said they're expanding their fresh departments by adding floor space and/or more product assortment as well as adding more fresh-department staff as they look to capitalize on the power of the perimeter in the new year.
Afresh, which Schwartz co-founded in 2017, relies on AI that takes into account on-the-ground variables as varied as weather and local events, in addition to historical data, to help grocers better predict inventory demand in fresh—allowing them to merchandise fresher items and reduce food waste. The company announced in November that it had partnered with Save Mart in California to pilot its solution in select Save Mart, Lucky California and Foodmaxx stores to do just that. In a recent conversation with Winsight Grocery Business, Schwartz talked about the growing realization he sees among grocers that it's time to take a more high-tech approach to fresh.
Christine LaFave Grace: How can retailers be smarter about fresh in 2022, and what should they be paying attention to that might, without deliberate focus, get overlooked?
Matt Schwartz: Just as grocers are investing more physical space into fresh, they’re also going to put more digital investment into fresh. Strategically, fresh is the thing that differentiates a grocer from the online competitor like Amazon or even from other brick-and-mortar competitors. They need to figure out how to inject technology into that space to be able to really win and support that fresh strategy. That’s exactly where Afresh as a business slots in. Our contention is you need to have technology that’s specifically built for the idiosyncrasies of fresh food to be successful in that space. Efficiency in fresh means less waste; it means fresher food.
It seems like there are multiple dynamics at play, even within companies: On the one hand, you've got folks eager to adopt new technologies in an effort to put more AI and data behind ordering inventory management, and on the other hand, there's that hesitation of, "We've always done it XYZ way," or "This is what we know and it's worked well enough so far." What do you see?
Schwartz: A couple of anecdotes come to mind for me. We started this company back in 2017, and I remember when Amazon bought Whole Foods, and I got a phone call from one of the initial customers that we signed that basically said, “I’m ready to move forward.” It was really sort of this visceral reaction of, “There is pressure now to change and to innovate.”
And then I think the second event I remember was at the FMI Midwinter Conference in 2019 and the CEO of Ocado came in and talked in front of all of the executives about how online grocery is working in the U.K. profitably with robotics, and I just remember this feeling in the room of the executives awash with this sensation of needing to change. I think there’s a phenomenon over the last few years as competitors like Amazon and other folks have stepped in with technology where the industry has always had trepidation about innovation in that it’s a slim-margin industry; they have to be very careful to not invest in technology that is very risky, but at the same time, with these new competitors that are especially tech-enabled and technology-driven, they’ve come to realize that they have to innovate to compete in the 21st century.
The market dynamics are applying a lot of pressure into the grocery industry to innovate, which I think is a good thing. And then it becomes incumbent on technology partners like ourselves to really take that call to action and that opportunity to drive innovation and do these great things like reduce food waste and also assume that great responsibility to be trusted and be of service to the industry.