October/November, 2008

From the Editor

Brown Bag Opportunities

With Wall Street basically out of business and good news being defined as days when oil prices go up because it implies the market does not believe we’re heading into a new depression, it is not at all surprising that Brandweek, a trade magazine for the branding industry, is running an article declaring Brown Bagging It Becomes Fashionable.

The piece builds on research by the NPD Group out of Port Washington, NY, indicating brown-bagging has reached a 7-year high: Adults ages 18-and-older consumed some 8.5 billion brown-bag lunches last year (38 bagged lunches per capita compared to 35 in 2006).

Nearly 12 percent of lunchtime opportunities were brought from home as of the year ended February 2008. In contrast, the February 2007 figure was 11.3 percent. Of those polled, cost-saving was the primary motivation.

With sandwiches being the most popular brown-bag lunch, this trend looks like an easy win for the deli. But the article indicates branded competitors are started to buzz around the business like bees around honey.

Part of the issue is that sliced meats and cheeses are available elsewhere in the store and often sold there by branded giants: The return to brown bagging has prompted food companies to reexamine their portfolio of brands. Products that were formerly “lost segments” of a company’s business now have a chance to shine, said Paul Leinwand, vice president at Booz & Co., Chicago.

Take Kraft. The maker of Singles cheese slices introduced new packaging for its Deli Fresh Natural Cheese slices, new Oscar Meyer thick-carved and family-sized meat varieties and a mayonnaise with olive oil this summer.

To promote the products, Oscar Meyer is wrapping up its “Deli Fresh” mobile tour this month. Two trucks hit more than 150 cities handing out more than 100,000 coupon books worth $6 in value for select products.

“Clearly, more people are looking to prepare meals that are easier on their budgets,” said Greg Hughes, marketing director at Kraft’s sandwich cheese division. “We’re seeing an increased interest in brown-bag lunches and sandwiches as affordable lunch options.”

These companies are forming marketing alliances to boost their products, and service deli producers will find it tough to match them: Soup maker Campbell has teamed with Kraft for a joint FSI promotion dropping this November that pairs the two companies’ staple products.

The partnership marks the first time Campbell and Kraft have joined forces in the last five years. Since the introduction of Soup At Hand, Campbell’s heat-and-go line, and microwavable bowls, the company has seen sales exceed $250 million. “Much of the consumption of microwavable bowls and cups is out-of-home — whether brown-bagged or hidden in a desk drawer,” said Campbell representative John Faulkner.

Competition for lunchtime brown-baggers doesn’t come only via traditional sandwiches and soups. Many workplaces offer employees refrigerators, freezers and microwave ovens, so frozen foods pose formidable competition for the deli: ConAgra announced...its new Banquet Select Recipes frozen lunches.

Introduced last month, Banquet Select Recipes come in seven “restaurant quality” varieties, including Herb Grilled Chicken Breast and Slow Cooked Beef. The entrées all sell for $1.50 and are meant to provide affordable and healthy options. “When you compare it to other dining alternatives, whether it’s in or outside of the home, it’s difficult to find a better value,” said Tom McGough, vice president, ConAgra’s Banquet and Kid Cuisine brands.

Pretty tough competition. What can your deli offer a consumer who wants to spend $1.50 on lunch?

Branded marketers of all kinds of foods are looking to grab a piece of this growing niche: The brown bagging phenomenon has prompted even pasta maker Ronzoni to reach for the lunch crowd. Whereas pasta is traditionally viewed as a dinnertime staple, the Ronzoni Bistro line is a microwavable pasta that consumers can take with them wherever they go. (Note: Refrigeration is not required.)

“We feel that we’re right in line with the trend by bringing convenience to the pasta lover,” said Kevin Blacker, brand manager at New World Pasta, Harrisburg, Pa., Ronzoni’s parent company. “We’ve [introduced] the idea of pasta as being consumed in an out-of-home setting.”

For the last decade, the deli has expanded into ever more service-intensive offerings so as to compete with restaurants. But most delis have looked at white tablecloth restaurants or, at least, dinner-house chains. The only restaurant sector having real growth, however, is quick service; McDonald’s recently announced strong sales growth in a generally depressing environment. Consumers are trading down during tough economic times.

There will always be high-end retail chains, and suddenly running a $1.50 special will only annoy their core customers, but the vast majority of retailers must recognize their customers are buying off the fast-food dollar menu.

There has to be a way for deli retailers to have competitive offers — if not the big branded manufacturers marketing throughout the other departments are, literally, going to eat what should have been the deli department’s lunch. DB