Decision Drivers in Supermarket Prepared Foods
In food retail, as in all retail today, what was true three years ago may not be true today or tomorrow.
Chicago-based research firm IRI finds that retail foodservice has added $1.79 billion in sales to grocery stores since 2015, but as the category matures, growth has declined. The most robust year-over-year growth of 7.85% in 2016 has slowed to 2% growth in 2019. The challenge for grocery store operators is to regain previous growth rates and take even greater steps forward as we enter a new decade.
- Merchandise kids’ boxed lunches, protein-based snack packs and packaged treats at a dedicated cash-out kiosk for grab-and-go convenience.
- Partner with a local coffee roaster, juicery or sandwich maker to differentiate your foodservice; also, use recipe cards and in-store incentives to move people from the deli to other store categories for meal-building ideas.
- Use Facebook, Twitter, e-blasts and texts to tell shoppers what’s hot for lunch, as well as for dinner and breakfast. Look into dark kitchens or build partnerships with Instacart, DoorDash, Uber Eats and local delivery services to keep the stay-at-home crowd happy.
According to the FMI — The Food Industry Association's most recent “Power of Foodservice at Retail” report, in 2019, household penetration for grocery foodservice grew to 94.1% — still below the 98.8% for the total deli department. And while consumers averaged 161 grocery trips per year, just 28.3 trips included a deli purchase and 20 included grocery foodservice items.
The promise of the fresh perimeter to fight against online grocery sales has also softened, with the latest year showing 1.3% growth compared with 4% the year before, notes Jonna Parker, principal of IRI’s Fresh Center of Excellence.
Arlington, Va.-based FMI’s report finds that the highest share (31%) of survey respondents want to see flavor and item rotation on a monthly basis, but 28% want even greater levels of innovation and recommend a weekly or even daily rotation.
These challenges can be met by building on the basics: FMI’s report notes that 88% of shoppers want to see more new items and flavors in retail foodservice.
“The assortment needs revision,” Parker affirms. “What is striking is, across all store types, from budget to high-end, the basic prepared food offerings are the same, but they need to change to keep pace with the varied, exciting, multicultural food options consumers can find elsewhere. The deli has to be a point of differentiation — from other stores, from restaurants, and from other competitors like convenience stores and food trucks.”
She continues: “Lack of change and expansion in product assortment are consistent complaints. Shoppers want to see more options — both in flavors and sizes — in appetizers, sauces, charcuterie, soups, sides and sandwiches.”
Shelley Balanko, SVP at The Hartman Group Inc., in Bellevue, Wash., also sees an expanding definition of health food that includes ingredient transparency, sustainability, less wasteful packaging and other better-for-the-earth considerations.
“Consumers are telling us it’s important that better health and convenience are not mutually exclusive,” Balanko says. “Even in snacking, we see consumers trading the usual salty snacks for options with more nutrition density, like roasted legumes.”
She recommends that operators make the most of snacking occasions: “Think differently about portions, variety and packaging.”
Convenience as Table Stakes
Operators also need to take their successes a step further and think like restaurants do.
LTOs and price incentives go hand-in-hand with marketing outreach, and this is an area where restaurants continue to have the upper hand over prepared foods at retail. Parker encourages grocery store operators to tap their frequent-shopper programs to expand customer outreach.
“Most stores have some kind of frequent-shopper program, but few have time to mine the data and learn who is buying vegan frozen options or who would opt in to texts about daily menu specials,” she observes. By contrast, most consumers can check Facebook to find a food truck location, or they get texts about the two-for-one pizza special in town.
2020 Total Meal Solutions Summit
Progressive Grocer will host its next Total Meal Solutions Summit in Chicago Aug. 30-Sept. 1, 2020. Visit the summit website for announcements, as well as highlights from our 2019 summit: www.totalmealsolutions.com.
And speaking of pizza delivery, grocery stores need to get in the driver’s seat when it comes to food delivery. Some of the cross-store advantages supermarkets offer in-store translate well to delivery options. For example, Instacart can deliver a prepared pasta-and-bagged-salad meal for dinner in an hour, plus eggs, milk and toilet paper for tomorrow. Grocers need to get the message of prepared food delivery in shoppers’ minds when they’re at home or work, and social media can do that.
FMI finds that grocers have made inroads with app-based shopper interactions, but more work remains to be done: 42% of shoppers say that they actively use a grocery store app, yet 78% of those shoppers use the apps as they would a printed circular. Further, 53% use apps for ordering groceries for pickup or delivery, but only 38% order deli prepared foods using an app.
“We’re learning that consumers look at prepared foods as a continuum,” Balanko says. “On one end is the fully ready-to-eat meals ordered online and delivered door-to-door, and on the other is pre-chopped vegetables that provide some at-home cooking efficiencies.”
Grocers need to think of everything in between as another opportunity to meet shoppers where they are.