Pandemic Pushes Prepared Food Category to Forefront
We are at the point in the pandemic where some silver linings are emerging. The food industry has survived supply issues, staff shortages and ever-changing safety protocols, among other operational problems. With restaurants facing even bigger challenges and longer recoveries, the past two years have reminded consumers just how essential grocery stores are to our daily lives.
Now the industry is ready to innovate and find even more creative ways to help people get food on the table. Nowhere is this clearer than in the prepared food category. The 2021 “Power of Foodservice at Retail” report from FMI — The Food Industry Association notes, “In 2020, the share of fresh items as a percentage of total store sales declined” because early pandemic patterns meant that shoppers made fewer but larger trips and relied on shelf-stable items from the frozen and center store aisles.
Yet good news emerged by the first half of 2021, when the fresh perimeter regained lost share and reached 31.5% of sales. “The deli department, including meat, cheese and prepared foods, reached $41.1 billion in annual sales, reflecting an increase of 4% versus the same period a year ago,” observes Arlington, Va.-based FMI.
Even with this encouraging rebound, the fresh perimeter can’t rest on its laurels. We’re already seeing how quickly pandemic fatigue can hit the kitchen, pushing people back into takeout and delivery patterns. FMI finds that the power and opportunity for convenience-driven retail meal solutions lie in “[continuing] to serve as differentiation strategies for their businesses.”
“With the right formula that caters to the customer with supportive technology, retailers can increase their significance as a destination for health, well-being and food solutions,” Rick Stein, VP of fresh foods at FMI, notes in the report.
The Time is Now
For Michael Lippold, founder, and CEO of Ventura, Calif.-based FreshRealm, the right formula is about providing solutions to shoppers, some of whom may need a heat-and-eat option, some of whom may want a meal kit that helps them learn how to cook, and others who may need daily convenience options that fall in the middle of that spectrum.
With the November 2021 launch of its Kitchen Table brand, FreshRealm is aiming to help retailers offer a turnkey menu of chef-created fresh meal solutions. Lippold sees this time in the history of food retail as the perfect opportunity to reinvigorate and reinvent the industry.
“We see fresh meal solutions at the end of an 80-year history of how people have shopped for and cooked food,” he notes, explaining that eight decades ago, shoppers bought from fresh outdoor markets, bakeries, and the neighborhood fishmonger and butcher. From the 1950s to the 1980s, stores got bigger, and food became more processed and shelf-stable for convenience. By the 1990s, however, consumers had realized that processed food loses some of its nutritional value and quality.
“Now we have evolved back to where consumers want food that is closer to the original source, and with its nutrition intact,” says Lippold. “They also demand convenience, freshness, better health, and the flavors and styles of chef-created meals they experience in restaurants.”
FreshRealm’s in-house expertise supports culinary design, sourcing, implementation, logistics, marketing, promotion, and delivery that brings meals to retailers within 24 hours of assembly.
“We have end-to-end solutions,” observes Lippold. “On one end are fully prepared heat-and-serve meals that are chef-created and available with an array of specific diets and tastes in mind. We have solutions for retailers who want to scale up their own brands. Or, if you want to develop a full product line, we can do that, too. We allow grocery stores to stay within their core competencies and we can support them with what we know.”
Jewel Hunt, group VP of deli, foodservice, bakery and branded concepts at Boise, Idaho-based Albertsons Cos., has seen how a full array of prepared options was especially important over the past two years. “The pandemic has taught us that many of our consumers are focused on healthy eating and well-being, and we offer a wide variety of meal solutions that meet that demand,” she says, noting that likewise, “[c]ulinary styles and preference vary by customer; therefore, we offer several choices from our Ready to Eat, Ready to Heat and Ready to Cook options, which makes our Ready Meals an easy choice to fulfill and meet their needs.”
FMI’s Stein is also enthusiastic about how fresh grocery store options fit into the future of how Americans eat.
“Meal solutions from the fresh perimeter can compete on convenience, and we excel in health and wellness, which has never been more paramount,” he notes. “Grocery meal solutions have more options for people who have underlying conditions and need to eat certain foods, or those who see food as medicine. Our research finds that the most popular diet now is your own diet, which means that people have highly personalized ways of curating what they eat, whether it’s ‘keto light,’ intermittent fasting, cheat days. They need the kind of ingredient transparency they can’t get from the drive-thru, and they can get it from their local grocer.”
Cross-Category Hybrid Meals
Teresa Sabatino, director of customer marketing at Home Chef, the meal kit and food delivery company owned by Cincinnati-based Kroger, notes: “We anticipate at-home meals will continue to dominate in 2022. With people returning to stores to shop, we’re focused on continuing to innovate our in-store meal solutions and offer convenient products that don’t sacrifice quality or flavor. We’re focused on not only making mealtime simple and delicious, but we also want to help make mealtime your way. In stores, you can select from a variety of Heat & Eat single-serve entrées, separate proteins, sides and more to mix and match and create your perfect meal.”
Stein sees this mixing and matching as part of an evolution in the way that shoppers experience and use prepared meals. “Fresh prepared foods are part of meal solutions that now involve more parts of the store, from a prepared pasta main dish to bagged salad, bakery bread and frozen vegetables,” he says. “People want ideas about putting these components together. We used to think that shoppers needed cross-merchandising in the deli section, but that’s not necessarily the case anymore. They want suggestions through signs, menu boards, staff, lists and directions. Apps can provide this ideation outside the store, and really drive home the fact that hybrid meals are where groceries shine.”
Stein points to great strides in the way that grocery stores have advanced technologies, apps and online interactions so that out-of-store ordering and experiences are up to speed and ready to compete with those of restaurants.
For her part, Hunt believes that technology is vital to category growth. “Now more than ever, consumers are engaging digitally, and we understand that we must be nimble and adaptive to our multigenerational consumer base,” she asserts. “We continue to offer prepared meals that are high quality and fresh, but now consumers can order these meals conveniently online to be either delivered to their home or picked up at our store through our Drive Up & Go program.”
Insta-Ready
Hybrid meals and the need for convenience have also been sweet spots for Instacart, which on Jan. 13 launched its Ready Meals Hub, a focused in-app section featuring prepared meal ordering and delivery from more than 4,100 grocery stores. According to Daniel Danker, VP, head of product at San Francisco-based Instacart, grocers need to step up their prepared meal production and sales as business booms.
Danker notes that consumers’ shopping habits and frequency revealed new patterns during the pandemic. “Beyond the weekly shop, we are seeing much more quick, smaller convenience shops for fresh fruit, fresh vegetables and dairy,” he explains. “These are items that grocery stores do best, and our service allows them to do it with speed. We wanted to apply this convenience business model to another category grocers do well, and that’s fresh healthy meals.”
Instacart’s Break Up with Takeout campaign recognizes that takeout burnout has peaked in year two of the pandemic. The company’s delivery data shows that retailers could play a role in providing better, fresher options with convenience and speed. Danker notes that the typical prepared meal order is for two meals, plus 19 other items. In addition, shoppers ordering from the hub are shopping twice as frequently as regular Instacart users.
“Our hub creates a dedicated ordering category where shoppers can find options like ‘sushi under $10’ or ‘salads for $6,’ he says. “This approach plays to grocery store strengths. If you’re known for your great soup or your burritos, your shoppers will find them easily.”
Welcome to the Future
The study of shopping patterns is already revealing more ways to personalize both the ordering process and the options that grocery stores make available. For instance, it’s easy to see where special meals for two would be a hit, or how recommendations for add-on items would enhance the ready meal experience.
Sabatino says that as Home Chef looks ahead, the development team will “plan to expand our options of family-serving sizes, offer more items focused on convenience, and launch new products in other prepared food categories such as dips.”
Likewise, Danker sees other ways that ready meals can grow. “It’s important to capture those ‘in the hunger’ moments we capture with our ‘add, add, add’ ordering function that makes the Instacart experience so easy,” he notes. “I can see where people will want to load up their fridges with some lunch options, a few packaged snacks and salads. Instacart can help meet new behaviors while enabling the local grocery stores to be the beloved neighborhood brands for getting food.”
- The 4 Ws of Packaging Priorities
What: Focus on the food. It must look and taste good, have ingredient integrity, and keep, cook or retherm well. “Functionality is paramount to packaging,” advises Rick Stein, VP of fresh foods at Arlington, Va.-based FMI – The Food Industry Association. “Consumers tell us that packaging is wasteful only if it doesn’t serve a function. Food safety and integrity are the biggest considerations.”
When: “Shoppers want to know when pre-packaged grocery and deli-prepared foods were made — more so than where,” Stein stresses. “Provide clear use-by or best-by dates on the package.”
According to the 2021 “Power of Foodservice at Retail” report from FMI, 38% of pre-packaged grocery deli-prepared foods are typically purchased for immediate or same-day consumption, and 46% are intended equally for same-day or later-in-the-week consumption.
Who (and How): Consider who your end user is and what they need to know. “Our packaging complements lifestyle needs,” says Jewel Hunt, group VP of deli, foodservice, bakery and branded concepts at Boise, Idaho-based Albertsons Cos. “For example, we offer Ready to Eat and Ready to Cook options in packaging that works in both microwave and ovens.” Hunt notes that package developers need to be sure that customers, no matter their kitchen skills, know their next steps, such as whether the meal is ready for the oven, the microwave or the table. Does the consumer need to pierce the top? Is there any mixing involved? “It’s important to offer easy-to-read labels and ingredients that complement the packaging,” she advises.
Why: Ask your customers for their opinions on packaging as well as the food. “We are consistently listening to feedback from our customers and implementing packaging that resonates with them,” says Teresa Sabatino, director of customer marketing at Home Chef, which is owned by Cincinnati-based Kroger. “Based on customer feedback, we’re refreshing our retail packaging with new top-down photography [and] a balance of white space and color, among other new packaging elements.”
Packaging is an extension of in-store branding and experience. It’s also an opportunity to talk to your consumers as they spend time with it in their homes. Make sure it’s worthy of their attention.
