Exclusive: Theirs to Lose

OAK BROOK, Ill. -- In an increasingly competitive industry, finding bright spots is crucial to gaining an edge. As part of Fare's annual State of the Industries, we share what's up, what's down and what's next for foodservice at retail. Following are insights on the state of grocery/drug/mass foodservice. (Click here for Part 1 on the foodservice-at-retail shopper, and here for Part 2 on c-store foodservice.)

As evidenced in Packaged Fact’s 2012 Prepared Foods and Ready-to-Eat Foods at Retail study, supermarkets are capturing the most prepared-foods purchases among all foodservice-at-retail channels. Sixty-two percent of survey respondents said they purchased prepared foods from a supermarket in past three months, compared to 34% who frequented Walmart for prepared foods, 30% who went to a c-store, 25% who went to a supercenter other than Walmart, 25% who went to a wholesale club and 13% who bought a meal at a drug store.

But it’s theirs to lose as c-stores continue to up their own game, and mass merchandisers and drug chains roll out new formats ideal for convenient meal purchases.

This threat may be reflected in supermarket meal traffic in 2011, which was flat while c-stores saw a 3% increase, according to The NPD Group.

“Supermarket foodservice did extremely well during the recession [with the hook] ‘I can feed my family of four for $11 and I don’t have to make a separate trip to a restaurant,’ ” says Joe Pawlak vice president of Chicago-based Technomic Inc.

But like the c-store channel, it’s a select few brands that are seen as the pinnacle of supermarket foodservice, and some of the other players could be doing a lot better to be “universally seen as an option for a convenient meal,” says Pawlak.

Supermarket foodservice is expected to bring in nearly $20 billion in sales this year, a 3.6% share of the total foodservice industry (food and nonalcohol beverages only), according to May 2012 Technomic data. The firm anticipates supermarkets will see 3.5% nominal growth each year for the next two years (1.0% real growth).

A solid 86% of the 30 million households tracked by Perishables Group FreshFacts Shopper Insights purchase deli prepared foods at least once a year. The prepared-foods category represented 52.5% of total deli sales for the 52 weeks ending Dec. 31, 2011. Total deli prepared-food dollar sales saw a 6.7% increase in that 52-week period.

Meanwhile, a look at the very different subgroups of the grocery industry reveals where the strengths are. While upscale/fresh-format supermarkets and specialty/lifestyle stores, as defined by Technomic, often have very innovative and sophisticated foodservice programs, traditional supermarkets simply dwarf their numbers. Fourteen percent of respondents in Technomic’s study said they purchase prepared foods from a traditional supermarket several times a week, compared with 9% for specialty/lifestyle stores and 11% for upscale/fresh-format supermarkets. The gap is widest at the two- to three-times-per-month level: 33% purchase prepared meals at a traditional supermarket two to three times per month, compared to 25% for specialty/lifestyle stores and 21% for upscale/fresh-format stores. Perceptions of higher prices may also be impeding more traffic at these concepts.

Other key findings from the Fare State of the Industries include:

• Seventy-five of traditional supermarket meal purchases are made at dinner, according to Technomic.
• The No. 1 meal item ordered at food and drug stores is beverages (included in 67% of all meals/snacks), followed by sides/appetizers (50%) and main dish/entrees (39%), according to The NPD Group.
• The snack category saw big gains in 2011, taking a nearly 19% leap in dollar share of grocery deli prepared foods to 4%, according to Perishables Group FreshFacts. Sushi and dips/spreads/toppings also made notable gains, though sales are still led by the stalwart chicken category at 27% share of total dollars.
• An International Dairy Deli Bakery Association consumer study found shoppers want big, bold, trendy and out-of-the-ordinary flavors across the board. In salads, they asked for dried fruits, roasted vegetables, arugula and other unique greens. For entrees, they want nontraditional ethnic meats, especially chorizo and carne asada, followed by Korean short ribs, Polish kielbasa, carnitas, Serrano ham, German wurst, barbacoa, and linguica, a Portuguese smoked sausage.

Stay tuned for the next installment of the State of the Industries in the Sept. 5 issue of Fare Digest, focusing on the College & University segment.