Why Consumers Are Opting for Foodservice at Retail Over Restaurant Meals

How grocers can take advantage of this fast-growing segment
Barbara Sax
Price Chopper
Price Chopper offers a New York-style deli experience at its stores.

A combination of higher restaurant prices, cooking fatigue and a quest for convenience is propelling foodservice at supermarkets, making the category one of the fastest-growing and most profitable segments for retailers. 

“Foodservice at retail is increasingly replacing quick-service or fast-casual restaurant meals, and convenience plays into that,” notes Rick Stein, VP of fresh foods at Arlington, Va.-based FMI — The Food Industry Association. “Shoppers tell us they plan to eat more meals at home and, according to a September 2023 Harris Poll done for National Family Meals Month, nearly all (90%) strongly or somewhat agree that family meals at home are more economical than dining out.” 

[RELATED: Cook-at-Home Behaviors Becoming Dominant]

As a result, retailers are investing heavily in foodservice. “We’re seeing a renaissance in the foodservice department, with retailers investing in chefs and specialty staff, increasing space allocation, and enhancing variety in an effort to re-energize foodservice departments and make them more top of mind for consumers,” adds Stein.

Patrick Nycz, president of West Lafayette, Ind.-based NewPoint Marketing, sees more grocery stores capitalizing on the opportunity to provide customers with an “easy button” for the evening meal, as well as a way to differentiate themselves from their competitors. In fact, 82% of U.S. retailers are increasing space for fresh-prepared grab-and-go meals, according to Tammy Gonzales, senior marketing manager, deli and prepared entrées at Wayzata, Minn.-based Cargill.

For example, ShopRite, a banner of Keasbey, N.J.-based Wakefern Food Corp., is rolling out its Fresh to Table store-within-a-store concept, which includes a wide selection of ready-to-cook, ready-to-heat and ready-to-eat meals, to additional locations. At its 135,000-square-foot Gretna, Neb., store, Hy-Vee recently expanded in-store dining offerings to include a large open Food Hall dining area that offers an expanded breakfast menu, as well as a variety of lunch and dinner options, including Mia Italian, HyChi and Hibachi, Nori Sushi, Market Grille Express, Long Island Deli, and Wahlburgers. The new store, the largest in the West Des Moines, Iowa-based chain to date, also includes a pub with a full sit-down bar, 32 taps and an outdoor patio.

Foodservice is also front and center at H-E-B’s rebranded H-E-B Fresh Bites convenience stores. The San Antonio-based retailer has added more prepared food and convenient meal options to its c-store locations, including its second True Texas Tacos restaurant, which features a salsa bar for spicy sauces and taco-appropriate condiments, and a South Flo Pizza in one of its San Antonio locations.

Markets LLC is another chain expanding space for grab-and-go meals, sides, appetizers, and ready-to-heat and -eat sandwiches. The Williamsville, N.Y.-based chain is revamping seating areas and adding spots for plugging in and recharging devices to encourage customers to eat on the premises, as well as upgrading cooking equipment to convection ovens to allow the chain to expand variety and hot-food offerings.

Future investment in the category is expected to continue. “The sky is the limit for what supermarket retailers can offer regarding meal options for their consumers — the key is understanding the consumer and having a strategic approach to testing out products, meal combinations and pricing,” says Nycz.

Price Chopper
Price Chopper locations also feature generously stocked wing bars where consumers can serve themselves.

Greater Lunch Opportunity

FMI’s report reveals an uptick in prepared food purchases centered on lunch, a trend that suggests there’s significant opportunity to offer new lunch solutions as consumers continue to work at home at least part of the time. 

“We are seeing expanded lunch options and menus across categories, especially in urban and higher-income areas,” observes Nycz. “In the Midwest, we see this blossoming at Market District, Mariano’s and several high-end Krogers. Publix, Harris Teeter and H-E-B are all doing a killer job of it in the South.”

“We are exploring more handheld sandwiches and have tested some bowls to accommodate the ‘dashboard dining’ experience,” says Karri Zwirlein, director of bakery, deli and prepared foods at Tops. “We are always exploring new taste profiles, ethnic flavors and upcoming trends.”

Capitalize on Signature Items

According to FMI, supermarkets should also consider building on the success of their signature foodservice items. It’s a smart move, considering that FMI’s research indicates that 40% of shoppers say their supermarkets are known for a particular foodservice item. 

Dan De La Rosa, group VP of fresh merchandising at The Kroger Co., notes that Kroger brand deli and bakery products have long been basket staples that customers depend on as an affordable centerpiece of a meal, or as a side or finish to a weeknight dinner, family breakfast or game day spread. One example is the Cincinnati-based chain’s Home Chef Fried Chicken, premium double-breaded and hand-dipped, with a signature flavor boasting 18 spices. Kroger recently created new packaging to prolong crispiness. 

[RELATED: Kroger Puts Fresh New Spin on Popular Deli, Bakery Products]

“We used to think of rotisserie chicken as a high-convenience item, and it still is; however, now we are seeing consumers who want the next level of convenience,” adds Tops’ Zwirlein. “We are seeing a large amount of growth with our picked chicken — rotisserie chicken meat already removed from the bone — so the customer can skip that step and put it directly onto salads and into soups or other recipes.”

Meanwhile, smoked foods have been a success story at Schenectady, N.Y.-based Price Chopper. “We installed smokers in select stores about a decade ago and began smoking pork, brisket, ribs and chicken,” explains Mona Golub, Price Chopper’s VP of public relations and consumer services. “The output was so well received that we now offer ribs and pulled pork, accompanied by our house-made barbecue sauce, in all our stores.”

Additionally, Price Chopper has expanded its signature fried fish program for Lent, adding ready-to-cook stuffed fillets and casseroles made with crabmeat, as well as fresh store-made shrimp cocktail and seafood salad. According to Golub, the chain has had great success with special limited-time offers and is continually “looking for the next opportunity to meet the moment for our customers.”

Tops chicken
Tops is seeing plenty of growth in its picked chicken — rotisserie chicken meat already removed from the bone — that customers can easily add to salads, soups and other recipes.

Partner with Local Favorites

Supermarkets are increasingly partnering with local foodservice brands to broaden their offerings and cement their positioning as a destination. Nycz notes that Kroger’s partnership with a local fan-favorite chain, Arni’s, is a draw for shoppers. “That’s a competitive advantage, but it depends on knowing your consumer,” he explains. “Putting a Wahlburger’s in Hy-Vee or a Starbucks in a Target represents a calculated strategic move to serve a key demographic.”

Landover, Md.-based Giant Food has partnered with two local favorites in its latest Bethesda, Md., stores. The chain has teamed up with Ledo Pizza in its deli section to offer Ledo’s pastry-thin, square-crust and sweet tomato sauce pizza either as a Take and Bake Ledo Pizza to warm up at home or as a fresh hot-from-the-oven version. Giant has also partnered with Ben’s Chili Bowl to bring the iconic Washington, D.C., restaurant’s world-famous Chili and Half Smokes to prepared food sections and hot bars in Giant stores throughout D.C., Maryland, Virginia and Delaware. 

“Food is a reflection of the communities in which we live,” says Giant Food President Ira Kress. “Unique restaurants like Ledo Pizza and Ben’s Chili Bowl are special, integral fixtures that truly provide a taste of home.” 

Meanwhile, over in St. Louis, hometown grocer Schnuck Markets plans to carry a line of pan-Asian grab-and-go entrées and appetizers from local favorite Sister Sister Kitchen.

Stay on Trend 

Keeping assortment exciting with new flavor profiles and on-trend cuisines can also drive the category. Cargill’s Gonzales observes that retailers building offerings and assortments aligned with macro food trends are winning with younger customers. “Flavor, variety and food exploration are just as important as in-store experience,” she emphasizes. “Our recent ‘Protein Profile Report’ spotlighted growing demand from consumers for multicultural flavors and fusion. When it comes to global cuisine, Latin and Hispanic foods are leading the way among Millennials and Gen Z consumers. In fact, 61% of consumers are interested in Latin cuisine for the variety of flavors its recipes inspire. Consumers are also gravitating toward Latin and Hispanic proteins like barbacoa, al pastor and carnitas.”

Harness Technology

Further, chains are turning to technology to raise their foodservice game. More retailers are installing interactive kiosks to enhance convenience for customers by streamlining the ordering process, through personalized recommendations and easy payment options. This increases satisfaction and order accuracy and reduces wait times. 

There are other advantages as well. “Retailers can automatically adjust deli/foodservice offerings on the menu based on the length of the order line, showing easier, quicker and lower-margin items when there is a long line, and more complex, higher-margin items when there is a shower line,” says Emily McCue Baldeschwiler, product manager, food and beverage at Tampa, Fla.-based Spectrio, a customer engagement solutions provider. 

Technology can also make cooking and food prep more efficient. “Robotics and automation in food preparation can increase consistency, speed and safety while reducing labor costs and enhancing food quality,” says Kevin Kroeger, Spectrio’s retail product manager. 

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