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The future, present and past of Grocery Distribution

The talk of a retail revolution might, more accurately, be described as a Supply Chain revolution.

Decades of logistics thought is having to be reconsidered, as consumers demand that we get goods closer to them – creating more complexity and fragmentation in Supply Chains than there has been since the 1950s.

This article is about the future of Grocery distribution.

But in order to understand the future it helps to understand how Grocery distribution worked in the past; what social, technological and economic changes brought us to the present "big box" and "big drop" model; and why those same changes are now rendering this model obsolete.

So, we are going back to the fifties, when:

  • There were no roll cages
  • Retailers weighed out your sugar and margarine for you
  • The Shrink Wrapped tray was a distant packaging engineers dream
  • 95% of married women were housewives
  • 5% of homes had fridges
  • Pre packaged goods and self service were tiny, tiny embryos…

…that would go on to take over the industry

In other words we are going back to "When I were a lad…"

Yes – this is me, aged two(ish) – in the chair and practising my famous two finger salute!.

A typical shopping trip for my mother and her four children.

In those days shopping was more or less a daily chore, given the absence of fridges and freezers.

And this is my Sequoia co-founder’s Grandad

Standing proudly outside his "High Class Grocers"

In an ideal world we would peak inside – to really understand what went on.

Unfortunately we can’t peak inside The Five Ways Stores.

But a unique record by way of a film was made of how the store belonging to Lyon and Son operated.

In the late 1950s, when the boss retired, the staff of T. G. Lyon & Son made a film – documenting the operation of the store.

It provides us now with a fascinating insight.

Let's have a look!

The first thing you notice is bulk stock.

Lyons & Sons bought in bulk.

Sacks, crates and boxes of all sorts of goods (including Pig Food!!) were delivered by manufacturers such as Unilever and Tate & Lyle, and stored at the premises.

However, clearly these were not consumer packs – so the next thing we see is on premise portioning.

A veritable production line.

This small shop employed over 30 people, many of them weighing, slicing and packaging.

Of course they weighed out the obvious things that could be bought in specific quantities.

At this time the "sugar loaf" still existed which was cut down to customer needs.

And as we see here lard arrived in huge blocks which were portioned out to the precise amount the customer needed.

But maybe a surprise is that the "private label" industry is older than we thought

In the film we can clearly see that they are locally pre-packing goods for customers to buy.

In the revolution that followed – this portioning, weighing and packing moved upstream – to large scale, automated factories.

Until the 1940s companies like Tate & Lyle filled sugar into jute sacks, or sent Sugar Loaves to retailers.

In store the sugar was weighed as needed.

However, distrust abounded.

Your local corner shop owner sometimes adulterated the sugar – or slyly left his thumb on the scales to deliver you short measure

In the 1940s Tate & Lyle installed Hesser Packaging machines

The advent of packaging machines led to prepacked goods.

This was more efficient – because it was done on automated production lines.

But it also built Brands.

The, slightly distrusted figure of the shopkeeper was no longer involved in the packing.

This meant consumers were more confident it was all sugar; more confident it was 4lb of sugar – and they really liked that it was "Untouched by Hand"!!

Again – back to T. G. Lyon & Son – the 1950s was when the last great retail revolution took place in the UK.

By the late 50s, when the film was made, packaged goods were very much in evidence.

And with packaged goods came brands and marketing.

Unilever led the way for the domestic UK team – against stiff competition from the USA where these changes were more advanced.

Heinz products and other imported ideas became familiar sights in shops around the country

This was a transition point.

Packaged goods were sitting alongside portioning activities – including in-store pre-portioning.

However, again – economics drove developments.

Not only was packaging cheaper when done in factories.

But with stores selling only packaged goods the rise of self service began.

The expensive parts of retailing were being progressively outsourced, upstream to the supplier – and downstream to the customer.

The revolution had begun.

The hugely better economics of both the newly automating factories and the self service approach led to a rapid growth of in town small supermarkets.

Quickly followed by out of town large Supermarkets

Just as quickly followed by Hypermarkets, led by Asda in the UK – again following the USA model

And then to the big box Superstores we know and love…

…or at least used to!

What we are witnessing now is a new Peasant’s Revolt

Maybe less of a Peasant’s Revolt than a Women’s Revolt.

One the of biggest demographics and social changes of the second half of the 20th century was the role of women.

In 1950s Britain only 5% of married women participated in the workforce.

Cooking, cleaning and, of course, shopping were seen as their "job".

So the daily trawl to the corner shop was expected, and went with the role of "housewife".

But when both partners work outside of the home – shopping has to be done in "free" time.

Half a day in the Supermarket every weekend is a big chunk of family or leisure time.

And – while the market may regard consumer labour as "free" – it is pretty obvious now that consumers actually value their own time!

Let’s unpick the economics of consumers valuing their own time at, say, the minimum wage!

These are the original dotcom, man to goods, warehouses.

Acres of floor space.

Thousands of products in various states of organisation.

The current state-of-the-art of dotcom fulfilment centre is a "goods to man system".

A man, or in this case a woman, occupies a pick station.

In front of her a display screen; a supply tote and a receipt tote.

The totes are delivered to the station from storage areas using a system of conveyors and cranes.

The display screen informs the picker of how many items are required from the supply tote in this specific order.

The picker transfers the required number, and confirms the transfer with a button on the control panel.

The system then whizzes the supply tote back into stock, and the receipt tote on to the next pick station to have more goods added or to a despatch packing area.

This is repurposed parcel handling technology, and it does dramatically improve productivity by reducing the walking about time that pickers otherwise incur.

So it is good for operators…

… It is very good for the conveyor industry…

… and it is absolutely marvelous for the plastic box industry!

But is there another way?

Bring on Mick Mountz – a veteran of the very early dotcom grocery industry with the scars to prove it!

Reflecting on his WebVan experience Mick asked the same question. Is there another way?

Unlike most of us, Mick also answered this question by inventing KivaBots

These form a distributed robotic workforce that collaborate to support dotcom fulfilment operations.

The KivaBots position themselves under racking towers.

Then they jack the tower up off of the ground by spinning themselves through 90 degrees

After lifting the rack they can then carry it around the warehouse

They coordinate with each other and navigate by following QR type codes stuck on the floor of the warehouse.

Unlike conveyor and tote based systems - the KivaBots can be installed in a standard warehouse box…

…though we are told by some contractors with experience that they need an ultra flat floor

Ultimately this is still a Goods to "Man" system – the KivaBots deliver their rack to a picker, who picks and scans the item(s), allowing the bots to move away and take the rack to another picker or back to a storage location.

Though it is a Goods-to-Man system, it has some emergent properties that make it very attractive:

First – it is a parallel processing system, so is less prone to bottlenecks than conveyor based systems

Second – it can reface the warehouse e.g. for seasonal range changes

Third - it scales in a modular fashion to very, very large units

But why is it Goods-to-MAN

Mick Mountz’s vision (described in his thoroughly entertaining TED talk) was to streamline the process of getting stored goods to a human packer.

Because we have a "one size fits all" mentality we seem to assume that humans are essential in the process.

Is this true – or could robots be on the rise?

Generally when you say "robot" people picture something like this.

This is a six axis FANUC robot – that is highly flexible.

Used extensively in the automotive and assembly industries, and sometimes for palletisation.

They can be coupled with vision systems to become pretty useful. But at the moment they would struggle to pack groceries.

The diversity of the handled items and the complexity of the placement task is beyond them.

However, robotics can be more than robots.

And "one size fits all" could probably be the wrong approach.

This video is of a picking operation in the Pharmaceutical industry.

This facility by SSI SCHAFER uses banks of magazines lining the sides of conveyor belts.

The magazines are pre-loaded with packets of each SKU – in a facility that can cope with tens of thousands of different types of product.

Under computer control the packets can be kicked out of the bottom of each magazine…

…at the right time to join a passing assembly of other SKUs on the receiving conveyor.

At the end of the conveyor each – multi-SKU order drops into a receptacle, tote or shipper.

The magazines in this instance are loaded by hand.

It is not difficult to conceive of a grocery industry where the magazines are automatically loaded in the factory – and so fed to the Fulfilment Centre in a much more useful format than the current Shrink Wrapped tray, which is designed for the old Big Box Superstore model.

Bottles are a different problem from packets, and require a different solution.

Again the shrink-wrapped-tray paradigm is letting us down.

Bastion have a crate based concept.

A normal pick-and-place robot can pick single bottles, of any shape, size and neck type, from crates mounted on a carousel.

Similarly – receipt crates on conveyors can be loaded with the picked bottles – either for direct delivery to customers or for subsequent aggregation into customer totes.

High volume SKUs could be delivered in pre-loaded racks, that are mounted vertically in the fulfilment centre.

An AGV mounted, mobile robot could pick from the racks in to crates, and deliver them to the order aggregation points.

VW (amongst others) already have autonomous delivery van concepts…

…and why can’t we integrate grocery delivery with recycling collection?

The opportunities to slash the cost of Online grocery fulfiment suggest this business is only just beginning

The future, present and past of Grocery Distribution

What does it all mean?

Turnover per sq ft peaked in Tesco Stores at the turn of the millenium.

With the benefit of hindsight - the model had already been pushed too far a decade and a half ago

But this was not due to a move Online – the model is under multiple pressures

Sainsbury and Tesco opened their first, C-Stores in the late 1990s – and in the new millenium growth took off.

Driven by changing lifestyles – consumers responded positively to the combination of range and convenience which the two giants brought to the marketplace.

However, as we have seen, turning a profit on these outlets is a challenge – and undoubtedly they are cannibalising volumes at Superstores – further stressing the business model.

In a survey by an insurance company, the number of Independent specialist retailers on the UK High Street increased by 27% between 2012 and 2013.

These specialists are combining traditional skills with being Tech Savvy – reaching out beyond the High Street geography

OnLine works for commoditised shopping. But consumers are turning to specialists for goods they really care about.

C-Stores are growing at 10% CAGR – but Online is still growing at 15% CAGR.

The pressure from Online is relentless.

But the model is still evolving.

However – if this was just another challenge from an alternative form of Retailing – the incumbents could be more confident of success.

In practice however – this is a rethink of how Grocery distribution is accomplished.

Retailing was a solution to the problem of distributing Groceries to homes.

Retailers, from a logistics point of view, are a bulk break point.

From their own point of view however they are traders – buying well and selling well are their core skills.

But the core skills of the Online model are Supply Chain – and specifically technology and engineering.

Ocado employ over 1,000 Engineers – and Amazon employ far more.

Both companies own hundred’s of patents – and are filing hundreds more every year.

If this is what it takes to win in the new model then all major retailers are in big trouble.


The materials in this publication have been widely researched and drawn from publically available sources. We have strenuously avoided the infringement of any copyrights and will immediately remove any materials that do infringe upon notification by the rights holders. Any of the trademarks, service marks, collective marks, design rights or similar rights that are mentioned, used or cited in the publication are the property of their respective owners. Sequoia cannot take responsibility for the accuracy of the information in this publication which should be independently verified should you choose to rely on it in any way.


Overload Truck by Peter Krimbacher (2005) Licence: (

Amazon Warehouse by Álvaro Ibáñez (2013) Licence: (

Amazon Warehouse by Álvaro Ibáñez (2013) Licence: (

FANUC 6-axis by Phasmatisnox (2009) Licence: (

Convenience Store by Ray Stanton (2006) Licence: (

Competition in the groceries business (2007),_Morocco_Street,_London_SE1.jpg Licence: (