Why Grocers Should Bet on Fresh Convenience and Prepared Foods
Life during the pandemic was complicated with masks, sanitizers, social distancing and lots of rules. If consumers came to value anything, it was what was easy, convenient and dependable. Not that those things haven’t always been appreciated, but they’re even more important now, though, as some workers juggle hybrid lives that are often less predictable than the pre-pandemic, five-day-a-week commute or the homebound pandemic days, and most worry about where the economy is headed.
Add to that the weekly food budget pressure from inflation, and it’s more than ever a perfect environment in which prepared foods won’t just thrive, but also be a key differentiator for grocers.
This is a trend that we’ve seen before. During both recessions in 2001 and 2007-9, the U.S. Department of Agriculture reported how food-at-home consumption grew at the expense of the food-away-from-home category. It’s logical: Stressful financial times make people shift from more expensive restaurant dining toward affordable at-home options. We saw a similar seismic shift to food-at-home consumption during the COVID-19 pandemic, but that wasn’t driven by cost, but rather by an effort to avoid getting sick from mingling at a restaurant.
Market indicators are telling the same story today. According to recent numbers from data firm IRI, prepared deli foods are seeing double-digit growth again this year. We expect prepared foods and meal solutions for grocers to continue to represent a strong growth area. Those that invest heavily in them can expect to see bottom-line benefit, with a broad halo effect anticipated for the rest of the store.
Fast and Healthy
The key to grocer success in prepared foods is to remember what’s important to consumers: Keep it healthy and easy. FMI – The Food Industry Association’s “U.S. Grocery Shopper Trends 2022” report shows that three-quarters of consumers take less than an hour to prepare meals and that about half of the decisions about what to eat are based on wellness and finding calm.
How can food retailers provide a fresh convenience experience for customers that generates loyalty? Here are four key merchandising plays that make the most of grocers’ unique capabilities:
1. Step Up Sophistication
Cracking the shoppable “assembly” of the meal combines the simplicity of quick-service restaurants with the abundance of grocery shopping — a killer combination. To do that, grocers have to get into the heads of shoppers, understanding price-point priorities and tastes. By building a complete assortment in a layout that suggests different ways that customers might assemble meals takes pressure off consumers, with options to cook or heat and ways to embellish a menu to make it a little special. Ultimately, grocers suddenly become shortcut meal planners.
2. Innovate Like a Restaurant
We often turn to restaurants not only for convenience, but also for inspiration. We consume variety through the wide range of restaurants available to us, and the best restaurants keep us inspired by rotating and curating their menus to ensure that we’re always delighted and interested. Today, most grocers change their offerings seasonally at best. Yet fresh convenience campaigns offer a natural venue to create an innovation pipeline through recipe variation and new sourcing.
3. Supercharge Omnichannel
Many retailers avoid making some of their prepared foods available online for fear of disappointing customers if they run out of product, or because of the short shelf life of fresh food. That means that many grocers are potentially ceding share. Instead, they need to invest in more visibility online, with leading retailers providing real-time transparency into what’s available in store. The most capable players take this a step further by allowing customers to customize their orders as if they were at a restaurant.
4. Become a Destination
Many consumers don’t associate all grocery stores as places to go for high-quality prepared foods because of unappealing displays. To compete with restaurants, grocers have to look more like them, using the backdrop of bountiful produce, exposed kitchens, authentic rotisseries and busy staffs to make offerings more compelling.
Changing Landscape
Since before the start of the pandemic, digital food and beverage delivery services have seen enviable growth, increasing 187% from 2019 to 2021 and posing more of a threat to the grocery industry as a result. These new entrants are working relentlessly to siphon off grocery customers and have had some success, despite the fact that grocers maintain an advantage in terms of access to broad ingredients, experience in food production at scale, and lower prices. That said, inflation is apt to make consumers more attuned than ever to price differences, even small ones, which would favor grocers.
What won’t change is the fading reliability of the weekly shop. Grocers need new ways to compete and grow, and fresh prepared foods can be a core differentiator to help them.
ABOUT THE AUTHORS
Marc Rousset is a partner in Oliver Wyman’s retail and consumer goods practice, based in Boston. He has supported many clients undergoing organizational improvements, digital and artificial-intelligence transformations, targeted margin improvement programs, and end-to-end turnarounds. Retail is continually undergoing seismic shifts, and Rousset helps organizations adapt to these changes and remain competitive within their respective markets.
Corey Rochkin is a principal with Oliver Wyman’s retail and consumer goods practice, based in Chicago. There, Rochkin works with diverse clients, helping them define and implement their corporate strategies and improve their commercial effectiveness, operations and financial governance.
Tanja Ebner is a principal with Oliver Wyman, based in Los Angeles. She has more than 10 years of experience in the retail and consumer goods industry in Europe and the Americas, with particular expertise in the areas of business transformation, operational effectiveness and customer satisfaction.
