Supermarket FRESH FOOD Business: Taking on takeout

With "quick" and "convenient" the latest bywords, shoppers are increasingly choosing time over money, especially at mealtime. Whether it's picking up a pizza on the way home from work, ordering takeout from a local eatery, or swing-ing by the supermarket deli, consumers are eating more meals away from home than ever before.

And if the latest government research proves correct, we ain't seen nothing yet. According to a U.S. Dept. of Agriculture report, Food Expenditures by U.S. Households: Looking Ahead to 2020, consumer spending on away-from-home meals will increase 8.1 percent over the next two decades, good news indeed for the nation's existing successful prepared foods leaders.

The news, however, is less heartening for others—including many grocery organizations—that up to now have been unwilling, unable, or unprepared to address many of the same considerations and concerns faced by traditional restaurant competitors long before the stakes got higher.

Nevertheless, the fact that the takeout category has emerged to become the fastest-growing segment in the food industry has hardly gone unnoticed by several industry leaders, among them Sheboygan, Wis.-based Fresh Brands, Inc., parent company of Piggly Wiggly and Dick's Supermarkets, which recently broke ground for a new bakery and delicatessen production facility in Platteville, Wis.

The 41,000-square-foot facility, expected to be completed by summer 2004, will more than double an existing smaller bakery/deli production facility acquired as part of Fresh Brands' purchase of the Dick's Supermarkets chain in 2001, according to Michael Houser, e.v.p. and chief marketing officer.

Producing one of the Midwest's largest varieties of from-scratch foods and bake-off items, Dick's existing central facility—built in 1988 and expanded by 7,000 square feet in 1995—generates deli and bakery products for Fresh Brands' 73 franchised and 29 corporately owned Dick's and Piggly Wiggly stores. Among the deli items produced are hot soups, entrees, salads, dips, sandwiches, and sandwich fillings; bakery products include breads, rolls, cookies, pies, cakes and wedding cakes, candies, and specialty items.

"We believe there's great potential in expanding our capacity to produce bakery and deli products for our stores, as well as other retailers and institutional customers," says Houser, who notes that the facility had particularly high appeal when the company originally evaluated the Dick's acquisition.

"Where we're really headed with this project," he adds, "is to develop signature recipe items that will really set our stores apart from the others," with the ultimate goal of using the facility to get into restaurant products, where, according to Houser, "it all starts."

Great opportunity

While several retailers have scrapped their central commissaries in recent years in favor of offloading them to third-party providers, Houser says Fresh Brands views the pending new facility as a great opportunity. Obtaining an adequate "freshness factor" and the accompanying economies of scale, he says, is typical of the roadblocks that have prohibited the company from authorizing some of the more innovative deli and bakery items currently on the market.

"When the facility is complete, we intend to do a lot more with many of the things we're already procuring from someone else," he notes, including, but not limited to, European-style breads, gourmet muffins, gluten-free products, and low-carb, natural, and organic items.

The long-standing European trends are just as compelling as the national trends toward convenience and away-from-home dining, Houser says. "For the past five years or so, we've been watching the wonderful job bakeries have been doing in Europe, and while we're not there yet, we've got some ideas we want to emulate, like how they do breads, handle logistics and such."

Moreover, the new facility will serve as a test kitchen "that will allow us to develop recipes that are quicker, better, and unique for our shoppers," Houser notes. Consumer test panels, he adds, will be used frequently to ensure that the products developed "are really what they want, and not just what we may think they want."

Going forward, Houser says he couldn't be more upbeat, "because I really believe, both in bakery and deli, that the surface has yet to be scratched," a statement that aptly speaks to one of the most noticeable trends at this year's IDDBA show in Las Vegas, which featured a flurry of restaurant-quality products from the likes of Perdue, Schwan's Deli, and ChefSolutions.

Samantha Mesrobian, director of prepared foods marketing for Schaumburg, Ill.-based ChefSolutions, says that while the rotisserie chicken section is by far the highest-volume section of the supermarket deli department in terms of sell-through, "retailers are looking for different ways to bundle their products so they can continue to offer variety" beyond just the bird.

The Nextra big thing

In an effort to gain more share in the department, bundling is key, she says. "We've seen a lot of focus going into fall and winter selling seasons on retailers looking for side dish opportunities and how to bundle those programs—whether as a whole meal or providing different side dish options like potatoes and vegetables."

If bundling is the greatest opportunity, execution, as always, is the greatest challenge, Mesrobian notes. "It's easy to bundle things together and offer a meal, but what it all comes down to is a chain's ability to capture all of the components—shrink, sales, audience, and trust—on a ring at the end of the day."

Mesrobian says many retailers have recently (and rightly) begun organizing product selections based on customer demographics of store clusters "by asking themselves what kinds of products they need to have in Market A vs. Market B."

Another noteworthy trend Mesrobian cites is nutritionally advanced oils like Source Food Technology's Nextra, which recently made its debut in the supermarket trade. In light of the growing concerns surrounding trans fats, Nextra appears to be a viable option for the food industry.

Made with a premium blend of natural oils, Nextra was developed using a patented purification process developed at General Mills and a unique formulation developed and patented by researchers at Brandeis University, who were seeking a healthier alternative to partially hydrogenated vegetable oil, explains Hank Cardello, c.e.o. of Durham, N.C.-based Source Food Technology.

"As the food industry prepares to begin labeling trans fats on packaged foods, consumers will grow more aware of the dangers of trans fats and demand an alternative," says Cardello, who describes the product as "a breakthrough for food service providers who want a nutritionally advanced cooking oil that provides longer fry life and superior food taste and appearance."

Containing zero trans fats from hydrogenation, the patented purification process eliminates cholesterol and other naturally occurring impurities, the veteran food and beverage executive says.

In August, Jack M. Greenberg, former chairman and c.e.o. of McDonald's Corp., joined Source Food Technology's board in a move industry observers say adds significant clout as Nextra looks set to enter a period of significant growth.

Tim Kasler, director of marketing for Eaton, Ohio-based Henny Penny Corp., says customization is the operative word for a successful deli/kitchen concept. "There are more ways than ever to prepare, present, and serve hot foods in a retail foodservice operation," he says, offering as an example a combined self-serve/full-serve strategy to present whole meal components.

Urging retailers to "make your space sell," Kasler says the configuration of front-line displays and service cases "must support the business that your menu will generate. Self-service is a must for any prepared foods concept. Effective packaging, signage, and display mean customers who know what they want can get it without having to wait in line. Make sure you have self-serve cases for hot and chilled items."

And though labor considerations may not always permit it, allowing customers to see your staff finishing, assembling, and packaging items not only demonstrates freshness, Kasler says, but also further reinforces other positive customer cues such as honesty and individual attention.
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