From the Editor
New Battle Lines
The supermarket deli finds itself at a crossroad. During the rise of the HMR movement, the question was whether the deli’s traditional role as being the only place in the store that sold cooked, ready-to-eat foods would be supplanted by some new HMR center or a new-found department. The proposals were vague, unwieldy and never fully realized within a conventional supermarket’s departmental structure. Indeed as the hosannas to HMR faded, it pretty much was established that the deli was the HMR department and that any initiatives launched in this area would succeed only if they were practical for the deli to execute.
Advanced technology is presenting a new kind of competition for the deli from other departments: most notably meat, but also frozen foods, poultry, seafood and produce.
The deli department at top stores with extensive prepared foods selections offers an outstanding array of fresh foods. From ethnic specialties to gourmet foods, the quality and quantity of the deli offering is a consumer’s delight.
But the Achilles heal of the department is that only a few items are actually sold hot and ready to eat at that moment. Even a very, very, nice store might offer only pizza, a wok station, fried chicken, rotisserie chicken, a soup or two and perhaps a special of the day with an entrée and side dishes.
The vast offerings are refrigerated foods ready to be reheated. Aye, but there is the rub. For whereas if consumers want hot food, the deli is the place in the supermarket, but if consumers want food to reheat quickly at home, well, the times they are a changing.
For over a decade now, poultry has been available preseasoned and ready to cook. More recently, branded product, ready to microwave has been wildly sold.
Now other areas are getting into the fray. Frozen food has dramatically improved in quality, and a consumer can buy items including frozen meat or chicken, frozen rice and vegetables and a frozen sauce and combine the ingredients to make a pretty decent meal in 15 minutes.
More threatening is that technology is now allowing meat producers to sell precooked roasts, chops, meatloaf, and barbeque that consumers can microwave in less than 15 minutes. Cooked for up to 12 hours at low temperatures and using high-tech packaging to help it microwave uniformly, these products are posing real competition to the deli as a meal center.
Part of it is quality; these products are being well received by consumers. But perhaps the biggest challenge is that these are nationally branded items being marketed under names like Hormel and Tyson’s IBP division’s Thomas E. Wilson brand, with other big names still to come.
Big names with consumer products translate into big marketing bucks — coupons, money-back guarantees and dollars spent on television. Thomas E. Wilson bought commercial time during the Winter Olympics to champion its pot roast by explaining, “It’s not just a roast; it’s dinner. No, it’s more than dinner. It’s family time.”
All this is a way of capturing the consumer who yearns for the family dinner Mom, or more likely, Grandma, used to make in which she took four or five hours to prepare.
But these new items are pricey, generally more than twice what the raw meat would cost. To the extent these new items are competing with other in-store offerings, this implies the competition is prepared food from the deli.
The battle will be tough because these branded marketers have promotional and marketing dollars most fresh foods from the deli simply don’t have. However, the fresh food counter at the deli has a big trump card — freshness. Despite the quality of frozen and canned fruits and vegetables, the consumer still perceives quality as freshness. With proper positioning and marketing, that is a formidable edge for the deli department.
And one well worth the investment by the overall store. After all, whatever good branded pot roast might do for cattlemen or even for the branded producers, in the end, for the supermarket, these are parity products, sold under a brand, and it is unlikely that ten years from now the meat department will make anything more on selling these items than the store earns selling canned tuna. In fact, the new technology in cooked meat, combined with the rapid growth in branded uncooked meat, means the whole meat department is inexorably on the road to lower profit margins.
A good fresh food offering, though, reflects well on the store that offers it. It provides a halo effect that makes the whole store look high quality and fresh. In addition the generally non-branded nature of these programs makes consumer comparison difficult and so allows for better profits.
But there is a battle to be won, the deli departments better gear up to fight it and the supermarket CEO better see clearly where the chain’s interests actually lie. DB