Dive Brief:

• Hy-Vee announced the launch of home delivery from six of its Market Grille locations in metro Des Moines, according to a release. 
• The locations include Ankeny Prairie Trail, Altoona, Waukee, West Des Moines Mills Civic, Urbandale and downtown Des Moines stores. The service is available from 11 a.m. to 2 p.m. for lunch in all locations except downtown and from 5 p.m. to 9 p.m. for dinner in all six locations.
• To order, consumers must download the Hy-Vee Market Grille app, enter their address and if delivery is available it will show the option to order. The Market Grille menu items available for delivery include products straight from the grocer's shelves, including Hy-Vee's Choice Reserve beef, produce and bread from the bakery. 

Dive Insight:

As the rest of the industry focuses on grocery delivery, Hy-Vee is making a splash by launching delivery at one of the largest grocery-owned restaurant chains in the supermarket industry.

In-store dining is a fast-growing segment in the grocery industry. In fact, the segment has shown an annual sales growth of more than 10% and one of the top three fastest-growing segments within foodservice, according to Technomic. Hy-Vee is tapping into this demand through its restaurants, and delivery could help it reach new customers and deepen loyalty with existing ones.

Restaurant delivery sales have risen steeply in recent years. Services like GrubHub and UberEats grew 51% between the months of August and March of this year, according to data and analytics firm Second Measure cited by Recode. Home delivery is even outpacing overall restaurant growth. According to a Cowen Company survey from last year, restaurant delivery is expected to hit $76 billion in sales by 2022.

Hy-Vee isn't the only grocer to debut a delivery ordering app. Wegmans, known far and wide for its prepared food selections, recently launched its standalone prepared foods app in addition to its existing partnership with Instacart.  

Hy-Vee’s decision to build its own delivery infrastructure instead of partnering with a third party delivery company comes with opportunities as well as challenges. On the plus side, the company can collect customer data directly and keep more sales dollars. However, the service costs more to get off the ground and will require a significant investment to scale. The grocer has shown it's willing to make future-focused investments, with new store concepts, health initiatives and more taking root across the chain. Hy-Vee has also built its Aisles Online e-commerce platform from the ground up.

Focusing Market Grille delivery close to headquarters allows Hy-Vee to closely monitor the service, and is in keeping with other recent tests. Last year, the company switched seven of its Market Grille locations in the city back to self-service eateries — the restaurant’s original model before it switched to sit-down restaurants in 2012. The switch back was in response to consumer demand for a faster eating experience, and Hy-Vee continues to serve those demands through its delivery service.

The main challenge for Hy-Vee's new delivery service will be reaching customers outside its established Market Grille base. In addition, as it continues to add new services, Hy-Vee should remember that it is first and foremost a grocery store, and while expanding their portfolio is a positive, building upon that core grocery business is what will ultimately help it compete with other grocers.