Deli Pathfinders’ Primer

Investments in prepared food programs present ever greater opportunities for grocers.

Springboarding from a central premise that meal solutions provide the most promising avenue of incremental growth in supermarkets, we pick up where we left off last month by taking a closer look at what prevents consumers from buying deli prepared foods, and what would further stimulate trial and repeat purchases.

The steady evolution, increasing sophistication and continuous diversification of supermarket prepared food departments are clearly making strong impressions on customers. But it’s also clear that most grocery stores can do much more to increase purchases and better compete — not only in the realm of traditional fare, but also with new options and inventive merchandising schemes that appeal to a wider variety of shoppers on a more frequent basis.

When pondering one of the most telling takeaways revealed in the first series installment — that approximately 50 percent of shoppers bypass the prepared food section of the in-store deli — ICC/Decision Services next asked its consumer panelists to describe what they tend to most frequently seek when planning meals, be it from the deli/prepared food department, individual store departments, or a combination of both.

The good news: Nearly two-thirds, or 62 percent of the 2,500-member consumer panel, gave a ringing endorsement to meal preparations sourced from both ingredients found throughout the store and the deli/prepared food section. The bad news: A paltry 3 percent of panelists said they purchase meals and components from the deli/prepared food area. And though it’s still good news for grocers that the remaining 35 percent are partial to purchasing ingredients from individual store departments, the data affirms the promising opportunities before grocers to help simplify their customers’ lives, as well as enhance those shoppers’ families’ meal experiences, with trusted store-made fare.

Key demographic points for retailers to ponder regarding ICC/Decisions’ mealtime shoppers’ mindset: Customers between the ages of 18 to 34 are more likely to purchase ingredients for at-home meal preparation, compared with the overall sample (44 percent versus 35 percent). Further, there were no significant findings when cross-tabulated by income level, gender, number of people in the household, and whether the shopper lives in a dual-income household.

As such, the prepared food arena presents more fertile ground for win-win expansion than many grocers would, or could, imagine. It’s going to take more sweat equity and working capital than many have been willing to invest, but the expert consensus is crystal clear: Build it (properly), and they will come.

Perfectly Poised

As shoppers continue to look to their grocery stores for answers at mealtime, retailers are decidedly devoting more space to retail meal solutions. However, this broader vision isn’t necessarily being fully communicated to shoppers, the vast majority of whom tend to equate deli/prepared foods with “lunch” and “sliced meats and cheese.” This limited shopper perception of the department in turn translates into lower trafic for the overall department, as well as components within it, including prepared foods in particular.

But it doesn’t have to be this way. According to a foodservice forecast released in July 2013 by The NPD Group, supermarket prepared foods are perfectly poised to gain continued steam at the expense of restaurants through 2022. The promising prognostication from the Port Washington, N.Y.-based market research firm indicates that instances of retail prepared food purchases for at-home consumption will increase by 10 percent over the next decade, compared with a 4 percent increase forecast for commercial foodservice outlets.

Overall, prepared entrées purchased most frequently for take-home meals from retail outlets are the tried-and-true chicken and pizza, as well as macaroni and cheese and sandwiches, per NPD. Yet for retailers with well-established prepared food cred, further benefits are in store in the next decade from projected increased visits from those in their 30s, as well as baby boomers moving into their senior years.

Hand in glove with an enhanced prepared food platform is an expansion of core offerings, which will not only impart a sense of discovery, but also engender repeat customers, who will likely be willing to experiment further once their confidence in the store’s upgraded offerings grows.

Realizing that trial is never easy, ICC/Decision Services polled its consumer panelists to find out what motivates them to try something new:

In the supermarket business, it goes without saying that the easiest way to induce trial is literally to put the product in the consumer’s mouth. It thus comes as little surprise that samples were found to be the most motivating factor indentified to spur purchase trial, particularly among those 55 and older, versus shoppers in the 18–34 age range (69 percent versus 62 percent).

Sampling, of course, has long been one of the more widely used promotional tactics among CPG manufacturers and club stores, which wisely further the mission with active demos. But when thinking about the built-in benefits of giving shoppers an opportunity to stimulate their appetites — and mitigate the risk of buying something new — with a bite-size sample, supermarket meal solutions seem a lot more inviting.

Beyond the inherent differentiation attribute, sampling stations are a proven means of hitting product-trial pay dirt, particularly on the immediate day of impact when events are conducted. Even better, research suggests that in-store events can have lasting sales effects in the long term, in some cases by as much as 20 weeks after a sampling event was conducted, while yet other studies hint at the potential lasting effects of sampling on total-store sales and customer loyalty.

The Price of Success

When asked what most prohibits ICC/Decision Services’ panelists from purchasing prepared foods in a supermarket, a full two-thirds cited “too expensive” as the foremost cause, paced next by 36 percent who dissed the taste/quality aspects of past purchases. Meanwhile, a quarter of the 2,500 shopper panelists lamented that the food has little to no appeal.

Shoppers who make $40,000 or less a year were more likely to say that prepared food items were “too expensive” when compared with shoppers who earn $80,000 or more a year (66 percent versus 58 percent). Consequently, there’s clearly room for improvement to hammer home the value proposition of prepared foods, which is best accomplished through dedicated customer service techniques backed by education and training.

Cheering the Command Performance

When asked to describe their deli/prepared food purchase behavior, more than half (54 percent) of panelists said they’re purchasing nearly the same amounts of prepared foods from the deli area as they did a year ago. Interestingly, nearly a quarter (23 percent) said they’re purchasing fewer prepared food items from the deli area than they did a year ago.

No significant findings were identified when crosstabulating panelists by income level, age range, gender, number of people in the household, and whether the shopper lives in a dual-income household.

Therefore, raising awareness of the product categories is mission-critical to increasing the penetration of total supermarket prepared food shoppers. Retailers that consistently support, promote and showcase their deli offerings — both existing and new — will not only enhance awareness, but also ultimately drive repeat purchases.

In the final analysis, command-performance purchase is what it’s all about.