Competitive Watch

A look at grocery/drug/mass, non-commercial and restaurants.

By
Abbie Westra, Editor-in-Chief, Convenience Store Products

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The Grocery Greats

For many retailers, foodservice promiseshigher profi ts and a powerful differentiator,whatever the channel. But it is by nomeans foolproof, as two analysts withTechnomic explained at the recent 2013IRI Summit.

“This is a business that is doing verywell … but in many ways could be doinga lot better,” said Bob Goldin, executivevice president and director of the research& consulting division of Technomicduring an educational session on freshprepared foods. “It requires retailers tosharpen their focus.”

Not surprisingly, the most ambitiousprograms are run by upscale grocers.Wade Hanson, principal and director ofthe retailer meal solution practice groupof Technomic, highlighted the exampleof Giant Eagle’s Market District concept.With about a half-dozen sites in Pennsylvaniaand Ohio, the approximately100,000-square-foot, gourmet-foodfocusedstore includes crepe, waffl e andgelato bars, panini and salad stations andcooking demonstrations.

Wegmans Food Markets, a Mid-Atlantic chain that is widely respectedby retailers in multiple channels, has agreat understanding of its local markets,where the voids are and what customerswant, Hanson observed: “Freshness—they defi ne it.” This is tricky consideringhow diluted the term “fresh” has become,but Wegmans has been able to own theconcept thanks to its impressive productand prepared-foods offer at the front ofthe store, and small touches in messagingsuch as “fresh-cut and pre-washed.”Consider that while 3% to 4% of totalsupermarket sales typically come fromfresh prepared foods, at Wegmans thisfi gure is more than 20%.

Whole Foods centers its programon quality, variety and unique items,although other supermarket chains aregaining ground on this market leader.“They’ve gotten much more precise andtargeted about their promotional items,”said Goldin, citing pizza- and sandwichof-the-day specials. But variety has itscost: Whole Foods’ shrink level is veryhigh, and Goldin expects the chain willfi ne-tune the variety going forward.

The Chicago-based chain Mariano’sgives the impression of a very expansiveoffer at the perimeter of its sites, butactually has a fairly limited assortment.Hanson highlighted the chain’s smartpractice of offering price tiers on its mealoptions—one entrée and two sides for $6,$8 or $10, depending on the number ofservings required—and keeping the offersimple with 16 to 18 meal options. “Thatis a good way to go—it looks fresh and isrelatively simple,” said Goldin.


Trend Tracker: Snacks

Nielsen Perishables Group reported that snacks grew its share ofgrocery deli prepared foods sales 21% last year, after strong growthin 2011 as well. What’s making snacks sizzle?

  • Nielsen analysts attribute most of the snack category growth tocrackers, citing a 27% increase in sales. Grocers are merchandisinghigh-quality, specialty crackers near specialty meats and cheeses, dipsand spreads. Smaller snack categories such as pretzels and popcornalso saw double-digit growth.
  • A 2012 National Association for the Specialty Food Trade reportfound that gourmet chips, pretzels and snacks saw salesof $1.8 billion in 2011, making it the third-largest specialty-foodcategory. Meanwhile, IRI data shows nearly twice as many consumersare willing to pay more for gourmet snacks compared to 2009.• Packaged snacks aside, according to Technomic’s Appetizer ConsumerTrend Report, trendy appetizers include egg rolls, nachos,quesadillas, spring rolls and hummus.
  • Also expected to grow in prevalence on full-service restaurantmenus are house-cured meats/charcuterie; vegetarian appetizers;ethnic/street-food-inspired appetizers, amuse-bouche/bitesizehors d’oeuvres; and fl atbread appetizers, according to The NationalRestaurant Association’s annual “What’s Hot” survey of chefs.

Non-Com Sees Growth

While colleges and universities have recentlytaken on a reputation as a pioneer of foodservicetrends, its non-commercial brethrenin health care and business & industry cananticipate a solid year ahead.

In 2013, Technomic expects strongnominal growth in the health-care(4.5%) and business & industry (4.0%)channels. As a whole, non-commercialfoodservice operations are forecast togrow 3.7%, representing opportunitiesfor operators and suppliers alike.

“Whether they are traveling, attendingschool or work or just concerned abouttheir children’s school lunches, [consumershave] come to expect better optionsand operators need to deliver it,” DarrenTristano, executive vice president ofTechnomic, said in a statement releasedwith the new report.

The National Restaurant Associationis likewise anticipating strong gains forhealth-care foodservice. It forecasts 5.5%growth for managed services in hospitalsand nursing homes, and 4.5% growth forself-operated hospitals. It is anticipating3% growth change for managed-servicesin colleges in universities this year, and2.9% growth for self-operated institutions.

What operators are worth watchingfor cutting-edge menu and operationalideas? Look to the award winners.

This year’s FARE Leaders in RetailFoodservice honorees include CampHoward, director of campus dining, andhis operations at Vanderbilt University inNashville, Tenn. What set Vanderbilt apartis its balance of convenience that today’sconsumer demands, with a strong senseof community. Foodservice is not just atransaction at Vanderbilt, it’s an experience.All that is matched with a high attention toquality ingredients and unique concepts.

Two large dining centers anchor theprogram. In the Commons Center, whichfeatures a chef ’s table, wok station andbrick-oven pizza, students must dine inand all food is served on china. RandDining Center, meanwhile, caters to theharried, on-the-fl y student. Special eventsoccur in both centers, and Howard relieson the word-of-mouth buzz of socialmedia to draw crowds.

Meanwhile, FoodService Directormagazine recently announced its GoldiesAwards, with the college & universityaward going to North Carolina State University,Raleigh, and its “My Roots are atNC State” program.

In an effort to engage students inthe department’s sustainability efforts,dining services partnered with the stateprogram Got to Be North Carolina totrack down local businesses that havean NC State connection. Dining servicesthen made a list of all the local companiesit was already purchasing from andlooked for areas where it could switch toa local company. Students became moreengaged in the department’s efforts whenthey saw that people in those businesseshad connections to NC State.


Gains for the Juggernaut

Limited-service restaurants (QSRs and fastcasual), which weathered the recession byfocusing on value menus and welcomingcustomers downgrading from full-servicechains, continue to be strong competitionfor c-stores and other foodservice-at-retailchannels. And the segment is expected tosee nice gains this year. The NRA projects itwill post total sales of $225.4 billion in 2013,a 4.6% increase over its 2012 sales volumeof $215.4 billion.

And yet operators aren’t expecting toglide through 2013. Health-care and foodcosts continue to challenge profi tability,while government regulations and theoverall economy loom darkly.

QSRs are also experiencing the increasedcompetition of foodservice at retail. In anoperator study conducted by the NRA, 40%of operators said competing with c-storeswas more challenging in 2012, comparedwith 20% who said it was less challenging.Meanwhile, 44% of operators said competingwith other QSRs was more challenging,and 41% stated that grocery stores werebecoming increasingly competitive.

Because lunch and dinner are still fi rmlyin the domain of QSRs, Bonnie Riggs ofThe NPD Group advises c-stores to dig inon the breakfast and late-night day-parts,which currently make up 76% of theirtraffi c.

“It’s really hard to compete with those[for which lunch and dinner is part] oftheir core business,” Riggs says. “I wouldput those efforts against growing my coreday-parts.”

So what are the restaurants to observefor their abilities to please the consumer?Technomic recently reported the top restaurantchains based on consumer ratingsin service and hospitality, unit appearanceand ambiance, food and beverage, convenience/takeout and value attributes. Papa Murphy’s took the top spot for quick-service chains for its order accuracy, takeout and food taste/flavor, followed by Chick-if l-A, In-N-Out Burger, Krispy Kreme and Culver’s. Honors for favorite fast-casual chain went to McAlister’s Deli, which bested its peers in the food and beverage and value categories, as well as friendly service. It was followed by Firehouse Subs, Panera Bread, Jimmy John’s Gourmet Sandwich Shop and Jason’s Deli.

When broken out by sub segment, consumers ranked Krispy Kreme as their top beverage/snack chain, followed by Jamba Juice and Cold Stone Creamery. Krispy Kreme received strong scores for crave ability, food taste/flavor, food visual appeal and order accuracy. The best burger chain, according to respondents, was In-N-Out Burger, while Chick-fil-A was ranked top chicken chain. Moe’s Southwest Grill beat out Adobe and Chipotle in the Mexican category.

What attributes were most important to consumers? Service and hospitality is No. 1, followed by convenience and takeout, food and beverage, and appearance/ambiance. Compare that with consumers’ c-store attributes on p. 16.

For more on Technomic’s ConsumerRestaurant Brand Metrics study, including a 16-page mini report with rankings, visit www.technomic.com.

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