August/September, 2012

From the Editor

Deconstructing Delis

Over in the produce department, a product-development and marketing battle always rages. The topic: how to compete effectively against canned and frozen options. 

In many ways, deli has it worse. Most stores sell pre-packaged deli meats and cheeses — fresh product — in other parts of the store, such as in the meat and dairy departments. Indeed, the deli department typically competes against itself selling both pre-packaged and sliced-to-order services on the same products.

As prepared foods have become more important to most deli operations, the competition with frozen has also become more direct. Indeed, as part of its journey to America as Fresh & Easy, Tesco has found one of the major barriers to successfully selling British-style ready meals in the United States is the copious freezer capacity in many American homes that allows consumers to buy economically and stock up on a frozen food sale. Abundant freezer space also accustoms the consumer to being able to avoid frequent shopping trips and to avoid waste from having too much fresh product around.

Deli, though, has an even bigger competitor: restaurants. Sometimes the competition is the decision to “eat out,” and sometimes it is the decision to “do takeout.” Sometimes that competition is from specialized chains such as Subway, which are in direct competition with supermarket deli sandwich programs. Sometimes the competition is from restaurants that offer cuisines of all sorts — Thai, Italian, Chinese, Mexican etc. — that do takeout as a side business.

Some retailers compete head on with restaurants by becoming restaurants of a sort — thus the seating areas in Wegmans, Whole Foods and the like.

And in the take-out area, supermarket deli operations have for years now been highly focused on issues such as “how to deliver restaurant-quality food” and “how to offer the convenience of a restaurant” where customers can get beverages and everything they want in one place.

Yet one of the challenges for deli/prepared foods operations across the country is that they lack the ability to differentiate their appeal beyond differentiating product. In other words, the store and the deli may be upscale or basic — it may appeal to particular ethnicities or may be white bread — but as broad as its assortment may be, creating a particular consumer experience requires more than product.

One sees this in retail all the time. In most department stores, they don’t simply integrate all shirts, all pants, etc. They have a Ralph Lauren boutique — complete with different cabinetry and décor than the Tommy Hilfiger boutique right next door.

When it comes to food, one sees this wherever people are in a constrained space. For example, cruise ships have been transformed. Years ago everyone dined in one dining room every day. Now the trend is “free-style cruising,” in which people select from many options.

Some restaurant options cost extra and some are fully included, but what is interesting is that even the premium choices, though surely not partaken by everyone, are selected by many and not necessarily by people who are noticeably different than other customers. The key is they’re selected occasionally. Maybe it’s a birthday or other celebration, or perhaps it’s a romantic event, or maybe someone got a bonus and wants to blow it, or maybe the family is a saver and can spring for a small indulgence.

In any case, you go on Disney’s newest and largest cruise ship, the Disney Fantasy, and you see the exact same people having lunch at Cabanas, a mass market buffet, and then again paying a premium to dine at Remy, a high-end French restaurant themed around the star rat in the Disney film Ratatouille.

It isn’t just product; it wouldn’t suffice to take the exquisite dishes served at Remy and add them to the buffet. It wouldn’t even suffice to take the exquisite dishes served at Remy and add them to a standard table service restaurant on the ship. The experience is integral to the value, and the branding creates value in and of itself.

Some of the industry controversy over exclusive arrangements that Boar’s Head has with retailers may miss the point. The deli may not need to uniformly upgrade or downgrade or carry a bigger assortment. The deli may need to, in culinary terms, deconstruct. Some of this is done by cuisine in some operations — with a wok station one place and a barbecue bar elsewhere.

Maybe, though, we need to think of food as fashion and realize that cuisine is more like functionality than style. Could a store set up an upscale chef’s boutique and a trendy all organic boutique, in the same way that department stores have the Ralph Lauren boutiques and the Quiksilver boutiques?

People live diverse lives and yearn for different experiences at different moments. If we don’t find ways to appeal to the moments in their lives, we can be certain these customers will find vendors who will do so. DB