No Free Lunch

The erratic economy, overstored landscape and changing consumer dynamics are as keeping food retailers on their toes as they jostle to increase basket sizes and gain a competitive edge, according to the hot-off-the-press findings of Progressive Grocer’s 79th Annual Report of the Grocery Industry, which appears in our April issue and which will be landing on your desks any day.

Despite an impressive 3.8 percent overall supermarket sales during the past year driven primarily by new stores and hefty price inflation, retail food executives are toiling mightily to chisel growth during an evolving economic cycle that has triggered a schism between the operators that are feeling more optimistic about the road ahead, and the larger percentage that have since retrenched into a more guarded stance.

The downgrade in optimism among most retailers is clearly driven by independents, which are virtually split on whether they’re more optimistic or less optimistic compared to a year ago. Historically, chains and wholesalers have always been more optimistic, but the gap between those two groups and independents is higher than ever.

Among the most revealing takeaways contained within the pages of PG’s annual “State of the U.S. Supermarket Industry” -- which exemplifies our brand’s 90-year heritage of providing retail grocers with one of the most accurate and reliable barometers of market intelligence -- deli and prepared foods are expected to fare exceptionally well this year.

Indeed, with consumers now more inclined and accustomed to purchasing prepared meals at supermarkets, grocery retailers are responding admirably well by making more space for these offerings. International fare and regionally produced ingredients are among the hottest trends in deli department foods. Ditto for signature and organic salads and side dishes, which also are rising in popularity.

Further, the prevailing themes that any progressive grocer is striving for these days to reinforce their overall value statement -- high quality, trusted signature products, authenticity in taste and assortment, personal service, food education – are in full bloom when evaluating the foremost areas supermarket retailers are investing in to generating the strongest returns.

Underscoring the well deserved popularity of the deli and prepared meal programs, execs rated this area highest among merchandising options. Retailers like Hy-Vee and Publix are among the operators that continue to test new meal ideas, particularly those centered around health and wellness. Independents and small chains indexed slightly higher in their rating of deli, as well they should, given their overall superiority in the realm of authenticity, quality and excellent service.

When asked to rate what store department is most influential in terms of driving traffic with targeted promotions, meat and seafood handily claimed the top spot among a whopping 54.4 percent of Annual Report respondents – a rate that is individually greater than the other four top categories combined, which include: produce (16.3 percent); grocery (7.5 percent); deli/prepared foods (8.8 percent); and beer/wine (3.4 percent).

To be sure, as the centerpiece of most food retailers’ efforts to generate traffic and enhance their stores’ brand and image, the meat department’s dominance as a key customer magnet is undeniable. But during a cycle of dynamics that are commanding higher retails at the expense of volume, meat department promotions are a proven tactic to court everyday shoppers that are steadfast in their quest to stretch their budgets with stock-ups of hot deals and smaller pack-sizes.

As you’ll soon discover, a plethora of many more valuable insights are packed within the contents of our 79th Annual Report of the Grocery Industry, so stay tuned.