Securing the Right Grocerant Solution

By Kathy Hayden

The business of food has moved far beyond providing meals. From food trucks to chef-branded food halls and on-demand delivery, food takes up more of consumers’ time, money and imagination.

At the same time, people are cooking less and less. Somewhere in this new food frontier, traditional grocery stores need to stake their claim, and many experts see grocerants or prepared food sections as the gateway to supermarkets’ future.

A report titled “The Sophistication of Supermarket Fresh Prepared Foods,” from Food Marketing Institute (FMI), shows that the category grew by an annual rate of 10.4 percent between 2006 and 2014, making it one of the highest-performing segments in the entire food industry. The same research showed that only 8 percent of responding supermarkets reported total store sales growth of more than 5 percent in 2014; 69 percent reported that same level of growth (or much higher) in their prepared food departments. Not coincidentally, 88 percent of banners now employ a corporate executive chef.

Beyond food upgrades, more attention is being paid to physical spaces and experiences: 23 percent of responding supermarkets reported having remodeled deli departments in the past three years, adding new features such as café seating, Wi-Fi and adult beverage sampling. Increasingly, these profit centers are being managed independently of deli sections: 43 percent of responding supermarkets indicated that they manage separate financial reports for prepared foods.

“Competition for food dollars is fierce,” notes Lauren DeMaria, chef and director of culinary and business development at CSSI, a Chicago-based marketing and culinary consultancy. “Even if people have their dream kitchens, they have no time to cook, but they want to eat the best food, both at home and when eating out. This makes prepared meals and almost-prepared meals appealing.”

Levels of Preparedness

Not all grocerants are created equally, nor should they be. In a recent research report, “Prepared Foods: The State of Fresh,” Nielsen researchers analyzed how a three-tiered approach to planning a prepared food program could bring success to retailers of any size.

Gillian Mosher, integrated marketing communications manager at Schaumburg, Ill.-based Nielsen, notes that retailers must continue to close the gap between restaurants and in-store offerings. The gap isn’t one that can be filled by food alone. She sees the quality or amount of options as part of the equation, as well as the experiences around the purchases, or making it easy for consumers to get the same on-trend flavors and fresh tastes in-store as they would in a restaurant.

“The [deli] experience all begins with understanding your consumer and choosing the right deli strategy by weighing the needs and circumstances of a store’s primary consumers, with specific capabilities,” Mosher says. “It’s OK not having all the bells and whistles, but knowing how to still stay relevant with your consumer is imperative.”

Outsourcing Some Options

Stores without the capability or demand for a robust deli prepared food program should take a level-one approach to managing what they have. Mosher sees these stores as better positioned to focus on basic staples, like deli service cheese or deli bulk meat. At this level, it also makes sense for stores to partner with other businesses to enhance their fresh prepared food offerings.

“In traditional grocery stores, there’s still a share of stomach that isn’t being served in the deli or frozen food aisles — we’re right in the middle of those two,” explains Rob Povolny, founder and president of Tampa, Fla.-based East Fresco Inc., a company that offers no-cooking, no-cleanup, heat-and-eat meal solutions for retailers and customers in need of quick options. “Our meals check in at 440 calories or under. The difference is the freshness and the great taste. They are portion-controlled, flavorful, restaurant-quality meals. These are fresh foods with a 12-day shelf-life. Customers can buy several for a busy week.”

Povolny points out that his meals aren’t meant to replace cooking; rather, they’re a better convenience option, available at traditional supermarkets, for those times when people can’t cook, don’t have time to cook and want to avoid takeout. East Fresco meals are merchandised in dedicated branded coolers in convenient locations like end caps and near registers.

Now featured in 20 stores, including several Winn-Dixie locations, Eat Fresco focuses on suburbs, where people still depend on supermarkets, as opposed to cities, where meal delivery businesses like San Francisco-based Munchery are really taking of and shopping patterns are less dependent on traditional supermarkets.

“These are fresh meals made with regional food,” Povolny notes. “As we grow, we will take a regional approach to building hubs where people already shop.”

The Specialization Level

On Nielsen’s next level are stores with the demand and capability for a robust deli. Here, the focus needs to be on balancing deli performance with total store needs so that busy traffic times are adequately staffed and associates are skilled in leveraging prepared food sales with center store sales potential. With a department so often specialized, it’s crucial to invest in the right staff and training to ensure that a store experience has something that’s worth a repeat visit, Mosher explains. For instance, highly trained staff can tie prepared food to center store purchases by offering “next-day menu” ideas.

Other experts also stress the importance of accentuating the positives and playing to existing strengths. Last October, Tyson Foods’ Think Tank: The Deli of the Future gathered food industry experts with retail, restaurant and marketing expertise to examine what the future holds for grocerants.

Participant Jeremy Johnson, director of education at the Madison, Wis.-based International Dairy-Deli-Bakery Association, notes that most prepared food sections are known for rotisserie chicken and shouldn’t be afraid to really own that. He urges supermarkets to try more on-trend flavors and spice rubs on chicken, and to take it of the bone for a great sandwich program, a move Subway recently made.

Another idea: make “spit-grilled” chicken the center of a noodle bar that also provides fresh greens, herbs and sauces from columns of choices and upgrades to emulate the fastest-growing categories in the fast-casual restaurant segment.

This simple yet customizable approach follows what consumers want. More and more, meals are getting really specific, CSSI’s DeMaria points out. “People don’t go out for Mexican food, they go out for tacos. Or they go to a place that just serves ramen. Retail can have a range of these specific foods.”

A “Top Trends in Fresh” ongoing webinar series presented by Chris DuBois, senior principal at Chicago-based Information Resources Inc., and Rick Stein, VP of fresh foods at Arlington, Va.-based FMI, also noted that there’s no one-size-fits-all success story for grocerants.

“There’s plenty of room to specialize and to find a value-added role that will build loyalty shoppers,” DuBois says. “We will continue to see sophisticated, efficient and smaller storefronts that emulate specialty foodservice — even food trucks within stores.”

Top-level Treatments

On Nielsen’s third level of grocerants are stores with even more capabilities and well-established prepared food programs. Here, it’s important to build the depth and breadth of incremental categories to compete most directly with foodservice.

“Better food is a given. People want easy meals, but not simple favors,” Stein said during the “Top Trends in Fresh” webinar. “If you’re offering meatloaf, it can’t be the Tuesday-night meatloaf people recognize from when they were growing up. You need artisan ingredients, a mix of proteins, and restaurant-quality flavors and sauces.”

Mosher sees convenience and variety as important points of differentiation at this level, and even here, outsourcing some of the “bells and whistles” is another way to build a grocerant program and meet new consumer demand. For instance, as dozens of meal kit delivery businesses are starting up and circumventing grocery shopping altogether, some retailers like Carlisle, Pa.-based Giant Food Stores are offering their own kits. Other stores are working with startups that are making meal kits more grocerant-compatible.

Handpick, a San Francisco-based meal kit delivery company founded by Payman Nejati, harnesses Big Data to put 80 million internet-generated recipes together with about 20 existing grocery SKUs to create a meal kit solution. Purchasing a Handpick kit means buying a pack of traditional supermarket items and the recipes to make three original meals.

Handpick offers a solution that doesn’t require repackaging or third-party couriers, provides three meal ideas for 15 to 20 full-sized retail SKUs, and leverages pre-existing fulfillment systems. The kits start at less than $5 per meal, which is about half the price of popular meal subscription services.

“If customers can get better grab-and-go meal kits with their groceries, they won’t need third-party kit delivery,” Nejati notes.

Meeting People Where They Are

Another grocery-store-based business addressing the meal delivery trend is Indianapolis-based DinnerCall, a new app that allows users to search and pre-order prepared meals from local stores. Customers can order via the DinnerCall native app, arrange a pickup time and pay using smartphones. Users call when they reach the store, and orders are delivered curbside. DinnerCall President Ashton Chafee and CEO Gerry Hays see the pre-sell and external engagement as crucial elements of their startup.

“Supermarkets have had prepared meal replacement options since the ’90s, but there’s also been a lack of merchandising and marketing, leading to money loss and food waste,” Hays explains. “The beauty [of DinnerCall] for retailers is they get the money upfront and capture purchase intention, which eliminates guesswork and food waste. We see a capacity for grocery stores to make more money by combining the existing perimeter with existing in-store equipment to create fresh prepared and packed meals.”

For customers, DinnerCall recognizes that traditional meal shopping and preparation can be a lot of work and don’t always fit the workday world. Ordering call-ahead meals is one way grocery stores can provide the convenience, consistency and affordability that people need from their grocery stores, now and well into the future.