Bigger Slices

Mintel forecasts that the overall lunchmeat category will post steady annual growth through 2015

Convenience, value and new better-for-you options deliver growth for packaged lunchmeat.

By James Dudlicek

While the supermarket full-service deli historically dominates lunchmeat sales, packaged lunchmeat continues to be a strong segment by providing convenience products for shoppers in a hurry, while new flavors and healthier options are broadening variety in the department.

“I think customers tend to shop the processed meat case because it's convenient and usually heavily discounted or promoted, and all items are sold by the each, so they can see what they are getting for their spend,” says Mike Richter, director of meat, deli and seafood for St. Cloud, Minn.-based retailer Coborn's Inc. “Customers are looking for a convenient package that can be reused and easily opened. The largest growth in this category is resealable tubs.”

Say ‘Cheese’

Lunchmeat shoppers evidently also like cheese quite a bit.

More than two-thirds of respondents to Chicago-based market researcher Mintel's most recent consumer survey on the category indicate that when buying lunchmeat, folks buy cheese at the same time. Oscar Mayer Lunchables has already had some success with the younger market by combining cheese and meat products, along with a light dessert. Additionally, Northfield, Ill.-based Kraft Foods has united cheese and lunchmeat (along with bread and condiments) to target adults with its Deli Creations sandwich kits.

Mintel makes the case for opportunities in this area with a wider variety of cheese-and-lunchmeat combo products, which would not only potentially increase usage among cheese users, but could also broaden usage occasions to snacks or breakfast, from a current majority of lunch usage.

Suppliers of packaged lunchmeats agree. “Quality and convenience are key for the pre-packaged lunchmeat section,” says Tim Smith, director of the Hillshire Farm brand for Downers Grove, Ill.-based Sara Lee. “Consumers purchase packaged lunchmeat because they know they can get great quality at a value to the full-service deli. Additionally, for consumers who don't have time to wait in line at the deli, the self-serve area offers time conveniences.”

Packaged lunchmeat accounts for more than a third of all packaged meat sales, which approached $11.3 billion for the year ending Sept. 3 at food stores with at least $2 million in sales, excluding supercenters, according to Schaumburg, Ill.-based Nielsen. Total packaged lunchmeat sales passed $4.06 billion for that period, an increase of 4.65 percent over prior year. Healthiest growth within the subsegment was in deli pouches, for which sales rose nearly 8 percent to $1.63 billion. Sales of nonsliced lunchmeat rose 5.7 percent, to nearly $339.2 million; sliced lunchmeat sales rose 2 percent, to nearly $2.1 billion.

Chicago-based market researcher Mintel reports that more than half of all lunchmeat sales come through the supermarket deli department, which generally offers products at a higher price point and that are perceived as being fresher and better-tasting than refrigerated packaged lunchmeat.

That's an image being fought tooth and nail on several fronts by manufacturers that are striving mightily to improve consumer perception of prepackaged lunchmeat with products aimed at matching the quality of that which can be found at service deli counters or specialty sandwich shops. Some retailers have developed deli-style packaged meats to compete better with national brands and the deli counter, such as Hannaford's Thin Deli Sliced Oven Roasted Turkey Breast, Mintel notes.

And while a rocky economy has sent penny-pinching shoppers to the packaged lunchmeat case in greater numbers, price isn't the only reason for their choice. Mintel reports that about half of its survey respondents have purchased meat products with healthy attributes such as “all natural” or “low calorie.”

“Consumers tell us they want simplicity, wholesomeness and healthfulness at a great value today,” says Jason Baskin, product manager at Austin, Minn.-based Hormel Foods. “Our Hormel Natural Choice products have a great taste and meet consumers' preferences because they are 100 percent natural with no preservatives.”

Meatbook?

While salty snack brands have been fairly aggressive with social media, Chicago-based Mintel reports, this hasn't necessarily been the case with lunchmeat.

One exception is Northfield, Ill.-based Kraft Foods, which launched what the company describes as its most ambitious marketing campaign, in support of the entire line of Oscar Mayer branded products, including lunchmeat. The campaign also coincided with the company's “Good Mood Mission,” which aimed to donate 2 million pounds of food to Chicago-based Feeding America, the nation's leading hunger-relief organization.

This marketing support is typical of what the brand has received from Kraft in the past, Mintel reports, as Oscar Mayer Deli Fresh and Oscar Mayer Deli Creations were the only brands to appear on a 2009 ranking of the top 2,000 brands based on advertising expenditures, according to Brandweek.

Lunchmeat Demographics

Lunchmeat usage is strong among all of the racial groups, as roughly 80 percent of respondents to Chicago-based Mintel's most recent category survey indicated they eat lunchmeat.

Asian levels are a bit lower, at 69 percent. Mintel reports that Asians, along with Hispanics, have the most interest in eating lunchmeat at breakfast time, which could indicate an opportunity to grow the market by targeting these two influential minority groups. Ideally, once breakfast lunchmeats become entrenched with these groups, it could expand into the mainstream population, as has been seen with other Mexican and Asian dishes, Mintel suggests.

Further, the influence of parents on their children's eating habits is demonstrated by the high usage of lunchmeat among kids and teens, Mintel notes. Ham and turkey are the most popular varieties of lunchmeat among both youth groups.

As younger consumers spend more leisure time online, particularly on social networks such as Facebook, lunchmeat manufacturers need to increase their presence with the goal of generating brand loyalty without too much exposure, Mintel advises, as the category is less likely to be top of mind with kids and teens.

Roasts With the Most

Baskin says Hormel is working to increase awareness of its Natural Choice products, which are gluten-free, and also have “no added nitrates or nitrites, and no artificial colors or flavors. We continue to add new varieties, like cracked black pepper deli turkey.”

But despite recessionary times, lunchmeat manufacturers have also been creating a greater number of premium products, driven in part by consumers' willingness to pay more for a better product.

Launched in early 2011, Oscar Mayer Carving Board Meats are designed to mimic a “carved-off-the-roast taste” in a prepackaged product. The brand, part of Northfield, Ill-based Kraft Foods Inc., describes the product as being “slow oven-roasted, then sliced, packed and sealed for juicy flavor.” The turkey, ham, chicken and roast beef varieties come in 7- to 7.5-ounce reclosable rigid plastic packages. Each 2-ounce serving provides 60 to 70 calories and 1 gram of fat.

Meanwhile, Hillshire Farm has launched Grilled Essentials, which offers two single-serve chicken breasts per package, in Garlic & Herb, Italian Style, Lemon Pepper and Grilled. Each serving delivers 120 calories, 19 grams of protein and no more than 2 grams of fat. (This item is also featured in the What's Next section on page 152.)

”Our insights indicate that there is a growing trend around consumers wanting a restaurant-quality sandwich option they can make right at home that also delivers on quality, taste, convenience and versatility,” Smith says. “Our new Grilled Essentials hits on all of these areas. They're a great consumer option, as they are fire-grilled, ready in 60 seconds in the microwave and [have] the quality you expect from a chicken breast you make from scratch."

Smith continues: “Additionally, consumers are looking for more wholesome offerings that can fit into a balanced diet, so we see poultry and lower-sodium offerings playing a key role with lunchmeat offerings. We currently offer lower-sodium offerings in our Hillshire Farm Deli Select Ultra Thin lunchmeats, and we have seen this product perform very well.”

Demand for better-for-you products is expected to continue. “I think going forward, we will see smaller-size packages with whole-muscle cuts, lower sodium, [and that are] gluten- and MSG-free,” Richter of Coborn's says. “Healthier benefits will play more into the decision process for consumers. Nutritional scoring will become more prevalent in retail stores, and this type of marketing will educate consumers on healthier lifestyle choices at the point of sale.”

Protein Boost

Retailers are making packaged lunchmeats a priority in their weekly promotions. “We keep these products in our ad rotation, and many times additional savings are highlighted in store with green tags, indicating price drops,” Richter notes.

Of course, suppliers are doing their part to keep their products top of mind among their retail partners. For his part, Baskin says Hormel strives to show grocers how its unique products can boost sales.

“Our marketing efforts continue to build awareness about the 100 percent natural attributes of Hormel Natural Choice products,” Baskin says. “We have distribution at most major grocery chains across the country, and, as a national brand of premium lunchmeat, we focus on the differentiation of our product and how its 100 percent natural attributes can bring customers who are currently not buying lunchmeat into the category.”

Smith says Hillshire Farm spends considerable time and resources trying to better understand shopper behavior. “Through our program, we identify opportunity areas by customer; sometimes these benefit us, sometimes not,” he explains. “We recognize the best way to win is to make sure the categories we play in are winning.”

Certainly, all indications are that packaged lunchmeat will be a winning category for supermarkets in the foreseeable future. Mintel reports the overall lunchmeat category experienced 7 percent growth between 2005 and 2010, and forecasts the category will continue to post steady annual growth through 2015.

The extent of that growth may in part depend on how well retailers and suppliers can work together to expand product usage beyond the usual lunchtime daypart. Mintel reports that more men tend to use lunchmeat at non-lunch occasions, showing a greater willingness to eat lunchmeat as part of breakfast, dinner or a snack.

The snack opportunity may be beneficial for both men and women, Mintel suggests, noting that 45 percent of male respondents and 40 percent of women say they eat lunch-meat as a snack, though breakfast is a time when more men than women seem to use lunchmeat (21 percent versus 16 percent).

The types of lunchmeat snacks would likely vary based on gender. “Women may enjoy a lower-calorie, better-for-you lunchmeat, coupled either with a low-fat cheese or crackers, while men may prefer a thicker, individual-serving-size lunchmeat,” Mintel reports.

For their part, suppliers are focusing on product attributes to attract new users and grow sales.

“We continue to develop new varieties of our products that meet the latest consumer trends,” Hormel's Baskin says. “Continuing to educate consumers about the 100 percent natural attributes of our products is also an ongoing focus.”

Hillshire Farm's Smith notes: “Lunchmeat offers great options to consumers. We recognize that we need to give consumers new options among a sea of known lunch and dinner items, either in health, in wholesome areas or in totally new areas. Consumers are always looking for new, relevant offerings.”