Deli-Driven Growth Potential

With inflation outranking the pandemic as the No. 1 consumer concern, and people experiencing sticker shock when they return to regular restaurant usage, many are hoping that home-cooked meals can ease some of the strain on their budgets. The problem is that very few people have more time to cook. In fact, whether they’re back to their pre-pandemic commutes or working what seems like 24/7 schedules at their home offices, they have less time to cook than ever. 

This equation of less discretionary spending and more time at work has created a small slice of heaven for the deli category, as evidenced by the numbers reported in IRI’s total U.S. integrated fresh data of year-over-year deli sales for the period ending April 2022: 

Year-Over-Year Deli Sales

Source: IRI, Integrated Fresh Total U.S., MULO Blog, period ending April 2022

During a webinar recapping the mostly double-digit gains in April’s fresh category sales results, Anne-Marie Roerink, president of San Antonio-based 210 Analytics LLC, and Jonna Parker, principal of IRI Fresh Center of Excellence, in Chicago, described how the deli and fresh food categories can build on this growth and compete with restaurant usage. 

In fact, deli category leaders can let one question — “Is it less expensive than going out to eat?” — guide their approach to fulfilling consumers’ food needs, according to Roerink. From deluxe deli slices and DIY charcuterie boards to café-quality soups and pasta meals, shoppers are saying “yes.”

With such strong momentum, Parker noted during the webinar, what the category needs is more — “more variety in portion sizes [and] pre-sliced weights, more brand options, more healthy preparations, more information on the packaging, and more culinary styles and flavors.”

Spicing Up the Same Environment 

“With COVID, folks upped their game and were all looking for ways to spice up the same environment — and that included dining, snacking and entertaining at home,” says Katie Macarelli, manager of public relations at Lakewood, Colo.-based Natural Grocers by Vitamin Cottage, which operates more than 160 stores in 20 states. “Whether it was a charcuterie board filled with 100% organic USDA produce, gluten-free crackers and 100% pasture-based dairy cheese, or free-trade chocolate and popcorn for a family movie night, we sought to provide what our customers wanted.” 

In other words, premium options are one way to take a strong deli category to the next level for shoppers. Adopting a global approach to culinary styles and flavors is another way, according to Suzanne Fanning, SVP of Madison-based Dairy Farmers of Wisconsin, chief marketing officer for Wisconsin Cheese, and an International Dairy Deli Bakery Association (IDDBA) board member. 

“I always say a great cheese board should take you on an adventure of taste, texture, aroma and visual delights, as well as tell a story,” asserts Fanning. “It’s a small indulgence people really allowed themselves to take during the pandemic.”

Now, she cites Innova data finding that 60% of global consumers say they now expect companies/brands/restaurants/stores to expand on services that enhance social interactions, and adds, “It’s important to fuel people’s desire to gather around the cheese board.” 

What’s even better is that building cheese boards is an opportunity for retailers to cross-promote multiple items by recommending accompaniments like hummus, chutneys, nuts and bread. Building your own customized cheese boards also means building basket size and cross-category sales in the process.

This momentum hasn’t dropped off, according to Macarelli, who notes that with more in-person events happening and restrictions lifting, “people are using their entertaining tricks and snacking treats in a more widespread fashion.” 

Deli, But Make it Culinary

Similarly, Rick Stein, VP of fresh foods at Arlington, Va.-based FMI — The Food Industry Association, sees strong deli and prepared food sales as an opportunity for grocers to up their culinary game. 

“Growth will come from bringing more culinary professionals into grocery — corporate chefs and culinary school graduates with real skills. This will be the way to elevate the fresh prepared category and navigate the right trends, including health trends,” says Stein, emphasizing that health and well-being “have never been more paramount.” Dieting and eating habits have evolved into highly personalized ways of eating, whether it’s intermittent fasting, keto-lite, Paleo, food as medicine, sports recovery or some other regimen. 

“Customers want nutrition information and give higher grades to the stores where they can get healthful preparations,” adds Stein. “Try rotating through specials, like a weekly prepared seafood special, a Mediterranean day and other options that consumers can feel good about eating.”

Convenience Keeps Sales Moving

The convenience of prepared foods and a hybrid approach to “build-your-own” meals are still major growth drivers, according to Stein. He sees fresh prepared meals as a quickly evolving opportunity where delivery services, co-branded restaurant options (like Saladworks units inside various supermarket banners) and more meal kits (store-branded or co-branded) will have more room to make their marks. Accessibility and ease of shopping are growth priorities for everyone in retail, and perhaps even more so in the deli section, which is competing with drive-thrus, takeout and well-established delivery habits. 

“We are focusing more on our grab-and-go options,” notes Macarelli. “People are going back to the workplace, traveling more, going to weekend family soccer games, etc. Food on the go is a thing again. We’ve been adding grab-and-go-specific sections to our stores in response to this.” 

Convenience must extend to how people shop as well. “Order in advance, virtual pay, delivery, grab-and-go warm sandwiches — grocers must make their fresh food options as convenient as possible,” advises Stein.

For her part, Fanning sees current shopping patterns as an opportunity to make convenience a greater part of the deli user’s experience. “Eating occasions have been very much framed by convenience and accessibility in the last two years, and technology has really been the main facilitator for both of those factors,” she notes. “Throughout the pandemic, we saw this explosion of e-commerce, click-and-collect, delivery, touchless ordering or kiosks, etc.”

Fanning predicts that consumers will continue to rely on these kinds of solutions. Acceptance of technology and online food shopping has even started to affect perishables like cheese, according to Fanning, who points out, citing IRI data, that in 2020, online natural cheese sales doubled, and in 2021 they grew another 10%, hitting almost $2 billion in sales.

These numbers are more evidence that deli products are inflation-proof, and Roerink sees no reason to believe that pattern will change. “Refrain from overreacting to stock market fluctuations and inflation concerns,” she cautioned in her May 12 webinar’s recap of recent sales data. “Don’t jump to lower prices or start stocking less expensive brands. People may cut back elsewhere, but they consider most things in the grocery store to be essentials, including the premium versions of cheese, meats and prepared foods. Remember, most things shoppers find in the deli are still less expensive than eating at restaurants regularly.”