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Supermarket FRESH FOOD Business: Specialty consideration

Of all the changes the retail food industry has undergone in recent years, unquestionably one of the most beneficial has been the dramatic influx of high-end items that not long ago were available only in exclusive gourmet and specialty stores.

As expected, the supermarket industry's shift to more high-end fare has had specialty retailers on the run, according to James Mellgren, the Berkley, Calif.-based associate editor of Gourmet Retailer, the specialty food industry's leading trade journal and a sister publication of Progressive Grocer.

"When a lot of then-small specialty stores like Dean & Deluca first started popping up in the late '70s and early '80s, I don't think supermarkets took them very seriously. But as these stores became more prominent and profitable in other parts of the country and really began eating away at their business, supermarket retailers did start taking them more seriously," he says.

The first signs came, Mellgren says, when traditional grocers began "emulating their efforts by upscaling their offerings, initially with gourmet sections with limited products, and eventually mutating into the fresh food departments." These days, he notes, many of the nation's most successful supermarket operators have built a niche based on an assortment of high-quality provisions that has undeniably reduced consumer need to visit specialty food outlets.

"What's happening now is that specialty buyers are going to grocery industry trade shows, and retail buyers are going to specialty food shows, and they're both starting to find out about the products that have a fit in their respective format stores," Mellgren says. "It's come full circle, where they're both influencing one another."

Intense pressures

He's particularly awed by many of the specialty meats now available in mainstream supermarkets. "Suddenly, you can go into a chain supermarket in Des Moines and find Spanish air-cured ham, which was unheard of just a few short years ago."

Mellgren continues: "I think many of the big supermarket chains are doing a lot of innovative things that are catching the attention of the gourmet and specialty chains, but it's now become a must for them to do so," given the intense pressures they face from multiformat operators on all sides. (To see how gourmet groceries are being marketed, turn to the story on page 62.)

Many grocery retailers, including those located in Mellgren's local Bay Area marketplace, "are doing a better and better job" of bringing everyday gourmet to the masses. "One of the trends for the past few years here has found our local retailers, like Andronico's, Mollie Stone's, and Whole Foods, putting in very upscale, very serious bakeries that are turning out really good bread and pastries."

Notwithstanding the recent dent the popular low-carbohydrate/low-sugar diets have put in bakery sales, Mellgren says there will always be a place for high-quality baked goods. "People will still have a need for good bread and pastries, even though they may be eating less of it." All the more reason to focus on the quality attributes of in-store bakery offerings on a line-by-line basis, he adds.

Referring to a department in which a steady stream of specialty and ethnic items have lately been making impressive inroads, Mellgren observes, "Anyone in the specialty produce business is poised for much higher gains in the future," in view of heightened public awareness of the importance of eating antioxidant-rich fruits, vegetables, whole grains, and fresh herbs.

Although Mellgren has yet to set foot inside the world's largest retailer because "there's no Wal-Mart out here yet," from a price and value perspective, he puts Trader Joe's first.

A devotee of the Monrovia, Calif.-based chain's famous "Two-Buck Chuck" from Charles Shaw Wineries, a product he says is every bit as good as it is inexpensive, Mellgren also gives high marks to "TJ's"strong private label, which consists of a wide array of "unbelievably great prices on organic and GMO-free products."

Supermarket supplier Gourmet Boutique reports rising sales of its gourmet fare in stores across the country. "We're helping supermarkets differentiate themselves from competitors and effectively compete with restaurant takeout foods," says Jere Dudley, Gourmet Boutique's v.p. of sales and marketing.

The Jamaica, N.Y.-based company supplies a full line of preservative-free specialty prepared foods—running the gamut from coconut Thai shrimp to nutty couscous to yams with dried cranberries—to 25 of the largest supermarket chains in the United States.

Made-to-order meals

"People are attracted to more wholesome foods, and they love the convenience of supermarket home meal replacement," says Dudley, noting the company's proprietary recipe development program that caters to the specific needs of each shopper. "Our in-house chefs provide custom-made dishes for supermarkets, which is a huge draw for the store's customers."

All of Gourmet Boutique's lines are shipped in modified atmosphere packaging allowing a shelf life of 14 to 21 days until placed in the deli case, he says, adding that within the last six years company sales rose from $2.5 million to $30 million and the number of items made weekly has increased from 15 to 230.

Variety, abundance, and thoughtful case merchandising are all key to setting up a quality prepared foods program, Dudley says. "We also act as 'consultants' to supermarket line personnel who may not capitalize on the huge profits that are available from 'deli real estate.' If our colorful, eye-popping displays get the right placement in deli cases, it's harder for customers to pass them up."

Soup's on

Noting that consumers are still very much in favor of Italian, Asian, Mexican, and traditional comfort foods, Dudley says Gourmet Boutique specializes in grilled and center-of-the-plate entrees with an emphasis on freshness and authentic preparation. While most of his company's lines are currently sold in the service deli case, "a gradual but swift turnover to prepackaged meals to go is taking place, whereby a consumer can buy an entree, a complementary side, and a dessert."

As for the industry's greatest challenges, Dudley says, "Retailers are constantly under labor pressures—both not having the right key personnel at the stores at all times and not being able to execute at store level, which for many is the dragging point of the whole program."

To counter that drag, Dudley says grocers must always have the right product available. "From there," he continues, "it must be merchandised right, from the displays to how it's being served to garnishes, as well as maintaining the product throughout the day. These kinds of programs can't be set at 7 a.m. with the expectation that it's going to look the same at 7 p.m."

Moreover, he says, items need constant rotation on a regular basis, not just through the course of a week, but also especially during the changing of seasons and holidays. "Supermarket retailers need to treat prepared foods almost like an apparel retailer showcases spring, summer, and fall fashions. Seasons are an important part of the business, and it's no different with food stores," Dudley notes.

Fresh, high-quality soups, which have become increasingly popular restaurant menu items, are also hot with today's growing base of supermarket gourmands. Not surprisingly, Kettle Cuisine is determined to keep the flames fanned with innovative varieties and unique ingredients, according to company officials. Last summer the Chelsea, Mass.-based refrigerated soup supplier's made-from-scratch Grilled Chicken and Corn Chowder took top honors in the Outstanding Pasta, Rice, Bean, or Soup competition at the Fancy Food Show in New York.

Available to both foodservice and grocery retailers , Kettle Cuisine offers 14 varieties—including the aforementioned award winners—to supermarket operators along the Eastern Seaboard and in select stores in Kentucky, North Carolina, South Carolina, and Tennessee. The company's fresh refrigerated soups come in 10-ounce microwaveable bowls and 24-ounce deli containers.

Kettle Cuisine's new certified organic soup line—currently featuring Carrot Ginger, Potato & Leek, and Roasted Vegetable—will be expanded next year to include additional varieties, says company founder and president Jerry Shafir.

"We're very excited to create these delicious organic soups for consumers," he says, noting Kettle Cuisine's commitment to quality natural ingredients. "Creating a line of organic soups was a logical next step on our path to making savory and interesting varieties of soup."

With the market--and profits--steadily rising for higher-quality supermarket prepared foods, now is a great time to highlight the specialty items in your store.
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