Grocery Industry's Shift to CTV for Smarter Advertising

In an age of digital saturation, consumer attention has become the ultimate currency. Traditional advertising channels once dominated the landscape, creating predictable pathways between brands and their audiences. But beneath the surface of this seemingly stable ecosystem, a profound transformation has been brewing. Retailers have evolved from mere distribution channels into sophisticated media platforms, leveraging their first-party data to create powerful new advertising opportunities. This evolution has now reached a critical tipping point as Retail Media Networks (RMNs) presents an exciting opportunity to extend its reach beyond websites and apps into the living room, with Connected TV (CTV) emerging as their next frontier for growth.

Connected TV (CTV) has rapidly transformed the advertising landscape, blending the precision of digital targeting with the reach and engagement of television. In 2024, CTV ad spend in the United States reached $28.79 billion, with projections to soar to $46.89 billion by 2027, driving the entire growth in the TV category as traditional TV ad spend declines from $60.38 billion in 2023 to $54.75 billion by 2027, according to Statista and eMarketer. This emerging ad channel presents a lucrative opportunity for grocery retailers, who are leveraging their first-party data through retail media networks—an $8.5 billion market, according to Grocery Doppio's report on the state of digital grocery—to drive personalized campaigns and enhance customer engagement. The Grocery Retail Media Ecosystem, as outlined in the report, highlights strategic partnerships between grocery retailers and retail media leaders fueling this growth. See the full ecosystem chart here.

What is Connected TV advertising?

Connected TV (CTV) represents the evolution of television viewing through internet-connected devices that enable streaming content directly to television screens. CTV offers a sophisticated advertising channel that combines traditional television's visual impact with digital marketing's precision targeting capabilities. CTV encompasses Smart TVs with built-in internet connectivity, streaming devices such as Apple TV, and Amazon Fire TV Stick, and gaming consoles that transform conventional televisions into connected platforms. These devices allow viewers to access content through streaming applications rather than traditional cable or satellite services.

The fundamental transformation CTV brings to advertising lies in its actionable capabilities, creating pathways for immediate consumer response that traditional television has long lacked. Where conventional commercials merely deliver messages, CTV's technological framework enables immediate interaction through sophisticated features like shoppable overlays that facilitate direct purchasing, embedded QR codes, shopping links, and interactive elements directing viewers to dedicated landing pages. This evolution effectively compresses the marketing funnel, allowing consumers to move seamlessly from initial exposure to completed transaction within the viewing experience itself—solving advertising's perennial challenge of converting awareness into measurable action

Hyperpersonalization and Targeting

Connected Television (CTV) has transformed from a simple entertainment device into a sophisticated marketing machine, turning every household into a meticulously mapped advertising landscape. Companies like Disney have developed sophisticated data collection strategies to enhance viewer experiences and advertising effectiveness. The company has built comprehensive profiles leveraging data from 110 million households and 260 million devices. By utilizing this data, Disney can create more nuanced and targeted content recommendations that aim to provide more relevant viewer experiences.

Where once advertisers relied on broad demographic targeting, today's technological infrastructure enables unprecedented granularity, thanks to advanced capabilities of generative artificial intelligence. A single advertisement can now be algorithmically adjusted—to resonate more intimately with individual viewer characteristics. 

The boundaries between digital observation and physical consumption have dissolved, creating a seamless feedback loop that transforms every interaction into a measurable insight. Imagine the journey of a single impression: A viewer watches a cooking show featuring a Mediterranean recipe, encounters an advertisement for premium olive oil, and unknowingly enters a complex tracking mechanism that will trace their subsequent grocery store decisions. Smart TVs equipped with automatic content recognition (ACR) technology have transformed the way brands connect with consumers. By pairing ACR insights with first-party data from streaming platforms, companies can identify patterns that link viewers’ content consumption, such as watching a cooking show, to subsequent purchasing behavior, like buying ingredients featured in the program.

Connected TV (CTV) also provides brands with an unparalleled ability to deliver hyper-local advertising. Retailers can craft campaigns that target specific ZIP codes, tailoring messages to resonate with the unique preferences and lifestyles of communities across the United States. Whether it’s the agricultural focus of the Midwest, the cultural vibrancy of the South, or the innovation-driven ethos of the Pacific Northwest, CTV allows advertisers to build meaningful, localized connections with their audience.

Challenges in Connected TV Advertising

The sprawling Connected TV ecosystem presents advertisers with a paradox of opportunity and challenges as inventory fragments across dozens of streaming services, device manufacturers and ad exchanges. This fragmentation creates significant supply chain challenges—campaigns struggle to scale efficiently while viewers face ad bombardment. Measurement complications further undermine effectiveness.

Programmatic advertising technology offers a sophisticated solution to the fragmentation challenges by applying algorithmic intelligence to the buying process. These automated systems function as digital air traffic controllers—orchestrating precise ad placements across fragmented inventory, maintaining optimal frequency levels through intelligent capping mechanisms, and providing consolidated performance metrics previously unavailable in traditional buying models. 

Is CTV Advertising a Smart Investment for Grocers?

As American households continue navigating inflation rates and anticipating potential price hikes from looming tariffs, grocery retailers are operating in increasingly precarious economic conditions. Retailers now face unprecedented pressure to demonstrate return on every advertising dollar spent. Against this backdrop, Connected TV (CTV) advertising, once viewed primarily as an experimental channel, has gained significant traction among grocery retailers searching for more effective ways to engage budget-conscious consumers. The question many industry executives are now asking: Does this rapidly growing medium actually deliver enough measurable value to justify shifting precious marketing resources away from traditional channels during such uncertain economic times?

Kroger has expanded its retail media network to incorporate video and Connected TV (CTV) advertising, enabling the company to target specific consumer segments, such as those who have reduced purchases of certain brands. This approach allows Kroger to directly measure the impact of its advertisements through in-store sales data, creating a closed-loop system that enhances accountability for marketing expenditures. ​

In another example, a national grocery chain partnered with Strategus to employ advanced audience targeting strategies aimed at boosting in-store traffic and digital engagement. By utilizing CTV ads in conjunction with Cross-Device Retargeting, the retailer activated loyalty data to attract customers from competing stores. Weekly audience optimizations ensured precise targeting, leading to approximately 435,000 in-store visits and over 265,000 online conversions within a nine-month period

Nielsen data reveals the striking growth of Connected TV, with adults 18+ increasing their CTV usage by over 20% in 2023 and more than 80% of Gen Z now streaming content through these platforms. This shift presents grocers with a compelling opportunity to reach younger, digitally-native consumers through highly targeted advertising. While investing in CTV has become essential for delivering actionable, high-quality targeted advertisements that can directly impact purchasing decisions, grocers shouldn't abandon traditional television entirely. With 32.4 million Baby Boomers—a demographic with substantial purchasing power and brand loyalty—still primarily consuming linear TV content in 2024, a strategic balance is required. Forward-thinking grocery retailers are increasingly adopting hybrid approaches that leverage CTV's precision targeting capabilities for innovation and customer acquisition while maintaining selective linear TV investments to ensure continued engagement with valuable Boomer audiences.

Retail Media Networks as a Catalyst for CTV Optimization

The integration of retail media networks (RMNs) and connected television (CTV) is transforming the advertising landscape for grocery retailers. By utilizing robust first-party shopper data, RMNs enhance CTV's targeting capabilities, allowing grocers to deliver more tailored advertisements. For instance, instead of generic snack promotions, retailers can target specific demographics, such as young professionals interested in healthy options or families seeking bulk-sized products.

This synergy between RMNs and CTV is particularly impactful in an era of increasing privacy regulations. RMNs not only enhance CTV’s capacity for personalized advertising but also address one of its biggest challenges—accurate measurement. By linking ad impressions directly to in-store or online purchases, this integration enables grocery retailers to design data-driven campaigns that combine engaging brand storytelling with measurable results.

Conclusion

In today’s volatile economic climate, grocery retailers are navigating the challenge of optimizing their marketing spend while adapting to shifting consumer behaviors. As Connected TV (CTV) gains traction, its unique ability to merge precise targeting with measurable outcomes offers grocers a compelling avenue to reach both tech-savvy, digitally native shoppers and loyal, older demographics. While traditional television remains valuable for engaging legacy audiences, CTV’s informed approach based on data enables retailers to connect with consumers on a deeper, more actionable level.