From the Editor
In South Florida, where Deli Business is headquartered, there was panic in the streets… well, maybe not quite panic and, actually the streets were clear, the frenzy was all online. The Tampa Bay Times published a piece, the Orlando Fox affiliate ran a report, the Orlando Sentinel picked it up, and the article was run in South Florida’s Sun-Sentinel. The Tampa piece was headlined “Publix No Longer Offers You That Free Slice of Meat at The Deli Counter.”
For the deli foodservice department in American supermarkets, 2017 stands to be the year when the proverbial irresistible force slams right against the proverbial immovable object.
We suspect that the Carnegie Deli is really closing because it is worth more dead than alive. The building can be knocked down, redeveloped, rented out for a lot more than can be derived from working day and night selling expensive sandwiches. Not too many native New Yorkers went to the Carnegie Deli, but its flag was a reminder of a deli culture that has been declining for a long time.
The fastest growing food retailer in America is Aldi. Very soon, though, the fastest growing retailer in America will be Lidl. Both are deep-discount concepts, heavy to private label and lesser service. How will traditional supermarkets respond?
The storyline was written: As Wal-Mart rolled out across America, conventional supermarkets would not be able to compete on price, so they had to compete by being better than Wal-Mart where they could: the successful stores would have more service, more organics, more local and, most of all, more fresh foods. Yet this may well be yesterday’s battle. Now there are new obstacles, and it is not so clear that deli, perishable foods or any product will be at the center.
The fact that more produce will be and must be sold in the ready-to-heat and ready-to-eat offerings of supermarkets is clear; likewise the fact that the expanded deli/foodservice operations of supermarkets are the likely place for much of this growth is also certain. But much of the potential depends on breaking down walls between departments and offering consumers the meals — rather than ingredients — they want.
The feature on private label in the deli department, addressed in this issue by longtime Deli Business contributor Lisa White, begins on page 22 and is an important issue indeed. Without doubt top supermarket executives are pushing private label and there is no question today’s private label programs are not your father’s private label programs. The days when private label was synonomous with low quality or even cheap - are long gone.
This issue features an insightful piece by Sharon Olson, a respected industry consultant whose work, including many pieces for DELI BUSINESS, is invariably thought provoking. Sharon went to Italy to visit Expo Milano 2015 and walks us through this fascinating event, with an eye on lessons for supermarket deli executives, which might be drawn from this extraordinary exhibition. The piece is very useful as a guide to retailers looking for what is “on trend.” Yet the report on this world-class event also reveals the almost schizophrenic attitude of thought-leaders and policy-makers towards the future.
The hottest trend in food retailing today is the small store concept. Many chains are experimenting with new small concepts, such as Ahold with its Bfresh store in Alston, MA, following on its Everything Fresh store in Philadelphia, and Wal-Mart, experimenting with its Walmart Express and Walmart To Go concepts. It all makes perfect sense but also poses a great question as to the future of the supermarket deli.
For decades the growth of the service deli has served as a signpost marking the growth of a sophisticated food retailing sector. Supermarkets saw the move to service departments as both a move into a higher margin enterprise and as a differentiating factor from the growing warehouse club and supercenter sector. Firms, such as Wegmans, were on the cutting edge of retailing and were the type of company every foreign retailer wanted to see when they visited America, precisely because they had made a large and varied service deli the centerpiece of their offer to consumers. Yet now the industry is on the verge of changing, and this service culture may yet be transformed.
There is a movement to recreate Jewish delis, to make it sustainable, ethical, low fat and more. Perhaps they will succeed in recreating an old cuisine for the modern world. Succeed or fail, the contemporary supermarket deli/foodservice outlet has its roots in the Kosher delicatessen that once was on every urban corner, long before Starbucks was dreamt of.
As the industry gears up for the International Dairy-Deli-Bakery Show in Atlanta, it is worth thinking about the role these events play and how to use them successfully - both as an exhibitor and an attendee.
As always, Sharon Olson and her Culinary Visions Panel have provided deep insight into the minds of shoppers in the supermarket deli. Now the question is how should the industry take advantage of these insights. That is a question without clear answers — possibly because the answers are specific to the retail banner, the store or the brand.
The question of how retailers ought to approach consumer demand for natural products is an intriguing one. There is no question that organic, GMO-free, antibiotic-free, free-range and panoply of other terms have, in fact, won the culture war. These are the kinds of aspirational values that journalists, chefs and food critics, etc., are celebrating and consumers strive for — at least theoretically. But when one gets down to actual purchasing behavior, the situation is not as clear.
The Specialty Food Association funds an annual consumer survey to “…explore consumption of and attitudes and behaviors toward specialty foods.” This year it discovered only 59% of U.S. consumers reported purchasing specialty foods, a huge drop compared to 74% in 2013. Is this signaling some sort of collapse of the American palate? Does it represent a flight to basics caused by economic distress? Perhaps the “local” movement is causing a massive rejection of foreign specialties? The answer would be no, no and no. In fact, this decline signifies nothing more than the Sisyphean task of the specialty food trade, which continuously promotes specialty items, but then loses credit when the items become best sellers.
Max McCalman is a world-renowned expert on cheese and a good friend of both DELI BUSINESS and its sister publication, CHEESE CONNOISSEUR. In this issue (page 14), he writes a thoughtful piece regarding the current state of the food safety rules regarding the cheese industry. He substantively questions whether the FDA understands cheese and whether anticipated food safety protocols might help or hurt the situation.
We may like to delude ourselves that somehow, someway, it was inevitable that the tiny Cheese & Deli Association that Carol joined in 1982 would blossom into the IDDBA of today. But, in fact, it was the ability of Carol to inspire her industry, her staff and everyone she met that was the crucial transformational variable of the association and the industry.
Fresh Direct in New York has expanded to Philadelphia, and Amazon Fresh has opened in Los Angeles with a promise of expanding in California and elsewhere. The threat this poses to supermarkets has not been well publicized. Supermarkets are high fixed-cost businesses, and small reductions in sales can translate into big reductions in profits. Fortunately, though one can buy goods online, it is very difficult to create communal experiences online, and in this the deli not only holds the edge, but indeed can be and should be the flag carrier for the whole supermarket.
Hostility to GMOs as a class is more political than scientific. Genetic modification is a technology, not a food, and, as with any technology, can be used in many different ways.
Whether the assortment is vast or narrow, most deli operations today don’t do a very good job of telling a culinary story. We all too often sell wonderful foods but as disjointed individual items to be appreciated or rejected as a consumer may choose.
There is a crisis in the Prevor family household. William and Matthew Prevor, ages 12 and 10 respectively, are in revolt. They claim they may soon starve. The cause of the crisis? Hot dogs! The school foodservice department doesn’t know it, but if they copied a great retail deli program, a lot of problems would be solved.
As schools are open once again and parents continue to wrestle with healthy meal plans for their children’s lunches and dinners, supermarket delis stand poised to provide solutions and go beyond the traditional routines of selling chicken fingers and discounted bologna.
As the industry gathers in Orlando for its annual meeting at the International Dairy Deli Bakery Association (IDDBA) Seminar and Expo, we are reminded that in this very high-tech world, where each of us walks around with a Dick Tracy-like device that lets us FaceTime or Skype anywhere at any time, human beings place enormous value on the high-touch interface of the personal meeting. Yet, in the end, the more we automate, the more we employ technology, the more important people are to our operations.
Among the myriad of reasons Tesco’s Fresh & Easy has failed in the U.S., one not commonly recognized is the key role of the deli department in the fiasco, or put more precisely, the lack of a service deli department. Unless Tesco can pull a rabbit out of its hat and gain a sale nobody expects, total losses for the Fresh & Easy venture will approach $2 billion U.S.
Sharon Olson and her Culinary Visions Panel are irreplaceable resources for the industry and in this month’s cover story, Captivating Today’s Consumers, they offer us unusually valuable information. Three key points stand out.
The closing of the famous Stage Deli in New York City is sad to those who value Jewish ethnic food. It also points to an important business lesson.
Publix has been in the news lately for launching — and then expanding to 50 stores — an experimental online system, designed with smartphone users in mind, that allows consumers to pre-order subs, wraps, sliced meats and cheeses. These are then ready and waiting for customer pickup. This columnist’s family is a big buyer of sliced deli items, and just waiting for our own order — a pound of roast beef, a pound of turkey, etc. — takes far too long. So this ordering system is a good thing.
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.
As the deli industry gathers in New Orleans for the International Dairy Deli Bakery Association Seminar & Expo, a relevant question is whether the notion of a unified deli industry really makes any sense.
The deli department is the ideal forum for a supermarket to deepen its relationship with people. But too many retailers are too focused on selling more sliced meat to see the opportunity.
The old-time Jewish deli is becoming a culinary tour de force; the question is whether supermarket delis are going to know how to ride this wave. There’s a real danger they’ll let it pass by.
If a mainstream restaurant chain creates a new healthy food offering, the way to guarantee it flops is to create a menu section labeled “Healthy Menu Options.” Why? The most logical explanation is patrons get the message as, “These products don’t taste good enough or satisfy sufficiently to be on our regular menu.” If there’s a delicious, satisfying option that also happens to have healthy attributes, why isn’t it on the menu for everyone to buy?
Consider a website called FindLAFoodTrucks.com. That such a website exists at all should give supermarket deli operators pause, because all over the country people are not only dining at food trucks but also checking Twitter feeds and websites to find out what sounds interesting today and where their favorite food truck is going to be. This really points out that there are loads of opportunities, and the typical supermarket deli is just letting them pass by.
The deli has undergone transitions many times. Few sell the pimento loaf and other processed products that were once mainstays, and the move to whole muscle meats helped the deli remain relevant. Yet the transition ahead for delis may be more difficult than the transitions that have gone before, and three big challenges confront the deli of the future.
In an age when technology means that people will have intense relationships in which a person’s true character is highly likely to be discovered, it becomes clear that technology raises the importance of people in your organization and requires organizations to notch up their requirements for hiring to include only people of good character.
Deli departments that once sold only sliced meats, cheeses and smoked fish are now more than 50 percent prepared foods. This transformation of supermarket delis into a foodservice vendor within the store has repositioned the purpose of the department, making it the bridge between retail and restaurants. Bridges, of course, take traffic two ways.
Today’s vast assortment of prepared foods provides a powerful reason to go to the supermarket deli rather than a restaurant when buying a family meal. Where else can you find everyone’s favorites in one place? Yet, this very strength is also an enormous weakness. The marketing challenge for the supermarket deli today is that it is so diverse it isn’t in the business of building demand for any particular food.
The nature of the deli industry makes government relations a problematic activity. In the deli arena a lot of suppliers have divisions that are giants within the deli space. Those same divisions, however, are but tiny fractions of the whole corporation. It is very difficult for the deli industry to get together the kind of PAC money that often means political weight in Washington. Still, it is important the deli industry speak up, and an issue such as the importance of trade is a great place to start.
For the most part, supermarket delis have done a pitiful job of acting to seize consumer interest created by the buzz over local. In fact, many loathe doing so since handling lots of local product complicates procurement, merchandising and marketing and can pose food safety challenges. Yet we don’t get to choose what intrigues our customers, and a failure to understand what is behind the locavore enthusiasm is a form of marketing negligence.
A consumer sent us a thoughtful letter about her impressions with her local supermarket. The letter dealt with common complaints and frustrations and is broadly relevant. Our consumer, who is married with a young daughter and works part-time, identified many areas worth focusing on.
The supermarket deli department has an inferiority complex. If we don't act to change that way of thinking, the deli department won't be able to fully capitalize on the next upswing in the economy.
Supermarket deli operations are consistently under-marketed; stores are not using their best weapon in building shopping frequency and consumer loyalty. Deli departments are often inexpensive, perhaps too inexpensive, but whatever the value, it is often hidden. Why do so few supermarkets offer a consistently highlighted value offering?
This recession hit like a bomb. The transition that seems to be occurring in consumer thought and behavior, among those consumers who have not lost their jobs, is a transition away from ostentation and toward quality and value. This poses some challenges for both retailers and producers, especially in the food sector, because it's easier to sell the sizzle - the ostentation - than the steak - the quality and value.
Not only do the "new consumers" want bargains and good value, but they also want the good prices on the high-quality products that they value.
Recently I visited chain stores around the country and, although some were exceptional and almost all reasonably nice, they were for the most part under-merchandised, under-marketed and, frankly, a bit boring.
The role of the deli/retail foodservice operation during a time of recession is unclear. Many retailers have jumped on the "value" bandwagon, but the results are mixed and how much value consumers want - and in what fashion they want it - is an open question.
As the industry gathers in Atlanta for the annual International Dairy-Deli-Bakery Association Convention and Exposition, it finds itself, as America and the world find themselves, in a startlingly different position from last year. If we view the IDDBA as an opportunity for a collective huddle, we may come out of Atlanta with an industry game plan that leads to success in the current environment.
It ought to be of no small concern to the industry that the world may break into another trade war, since the prospects of high tariffs or unavailable products would impoverish the shopping experience and make retailers less able to satisfy customers.
This issue's cover story presents some terrific consumer research done by Olson Communications of Chicago. It focuses on branding and consumer perceptions related to product attributes. The research is revealing, intriguing and easily misinterpreted.
It is increasingly obvious the future of the supermarket in the United States rests, in no small part, on the future of prepared foods. Tesco, with the launch of its Fresh & Easy division in the United States, laid down the gauntlet: In its view, the future of American retailing was European. And, specifically, British.
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.
A unique confluence of circumstances is creating a "teaching moment" in which consumers will be open to listening to the deli industry, and if our message is profound, it can lead to a paradigm shift in the way consumers think about food and where they choose to purchase their food.
Home cooking is something of a lost art, and just because people don't want to spend money traveling to restaurants and eating there, this hardly means they are going to become Julia Child. This leads consumers smack into the deli/retail foodservice section of their local supermarket. Yet, if all we do is offer a less-expensive alternative, we will have left a lot of opportunity sitting on the table.
Although the industry thinks of "local" in the context of the environmental movement -with a focus on "food miles," reducing carbon output and supporting local green space by sustaining local agriculture-our research indicates that consumers are often thinking in more practical terms.
Consumers feeling pressure on discretionary income are eating out less and looking for more economical places to eat. It is certainly a problem for foodservice operators and certainly an opportunity for the deli and retail foodservice operations.
Specialty cheese is enjoying a boom at mass-market retailers. Yet the boom is calling into question the product offer and merchandising abilities of supermarkets of all types. We say we are going to offer broad arrays of specialty product, but large assortments pose unique challenges for procurement teams and enormous challenges to merchandisers. Are retailers up to the challenge? Can suppliers help more?
As Tesco unveils its new Fresh & Easy concept, ironically, Tesco may be in more trouble if it has an instant success than if it struggles.
The ordering mechanism in the vast majority of delis has not kept up with the broadening of the range and the increased emphasis on cooked items. Although able to fulfill culinary dreams unthinkable a generation ago, the modern deli in a mass-market outlet is horribly slow and typically does not meet consumer needs for convenience.
The future of the supermarket deli industry is likely to be decided in the next few months as Tesco, the giant U.K.-based retailer, rolls out its Fresh & Easy Neighborhood Market stores in southern California, Las Vegas and Phoenix.
To some extent, Tesco's positioning is similar to Whole Foods Market - an organic, natural, environmentally friendly, healthy sensibility - but it also has a gastronomic positioning similar to Trader Joe's with its heavy emphasis on private label and gourmet items. And it proposes to do all this at a price that will be recognized as mainstream. It won't be easy. And freshness is a big part of the reason why.
Smithfield Deli Group, a division of Smithfield Foods, has entered into a licensing agreement and launched a one-year test of Subway-branded deli meat and cheese. It is an intriguing concept that raises real issues.
To improve the meal experience of consumers, and get more business, there are a lot of things that can be done short of building a world class food emporium.
After 30 years as the undisputed king of dinner mixes, Hamburger Helper suddenly faces a challenge. The food industry, obsessed for years with making products ever readier to eat, has had a revelation: Americans want to do a bit, but just a bit, of actual cooking.
Competitive dynamics, combined with consumer trends of less cooking and a need for more convenience, really led to the notion that the next generation supermarket was going to carry groceries almost as a convenience for those needing a fill-in between trips to a supercenter or warehouse club. The next generation supermarket would also be for those wanting certain specialty brands and products not available at supercenters and warehouse clubs. Now, however, the British are coming - once again.
Although we tend to think about branding in terms of manufactured goods, every retail store name is also a brand. And consumer awareness and perception can pre-dispose consumers on where to shop when.
Whenever businesses look to capitalize on specific market segments, they run the risk of emphasizing differences rather than the similarities.
Very few supermarkets are focused properly on attracting the right kind of consumer. Most still think that the "best" customer is the "biggest" customer. And that is rarely the case anymore.
Back in September, when Albertsons issued the press release headlined above, it scarcely required any translation. What it was saying was simple: "Other people can use our real estate so much more profitably than we can that they will pay us enough for the stores where it makes sense to stop operating supermarkets."
The foodservice offerings at supermarket delis are too irregular. Costco doesn't have a Mexican food bar, a wok station, etc., but it reliably produces exceptionally good rotisserie chicken. And if something is a necessity, reliability is crucial.
A large group of people accustomed to restaurant quality food is not going to restaurants as much. They are already in the supermarket, so it doesn't take any extra gas to add some nice meals from the deli.
How do we each conduct ourselves so that those around us are inspired to do all they can?
Supermarkets that do a good job matching up to each need state may still find themselves losers if other shopping venues do a better job of positioning themselves.
If consumers tell a survey interviewer that they are constantly seeking out low-fat and ultra-healthy products, but you keep finding that your "lean" and "fat-free" offerings are a bust and that fried chicken is outselling all healthy alternatives, look at the survey not as wrong, but as an interesting study in why consumers want to tell surveyors certain things.
Retailers across America see Wal-Mart rolling out supercenters and they ask themselves the obvious question: How do I compete with Wal-Mart? It may be the obvious question, but it is the wrong one. Wrong because a business that defines itself in opposition to competitors is a business lacking purpose and is certain to fail.
On the one hand, supermarkets must offer extraordinary delis with fantastic products so as to compete with all the other food purchasing venues out there. Yet, somehow, supermarkets also have to cut costs to keep prices competitive with concepts such as Wal-Mart Supercenters that have different cost structures. This is today's Gordian knot.
It is both true and obvious that there is hardly a deli department in the country that wouldn't like to see sales increase. Yet, in a form of unilateral disarmament, most deli departments eschew the classic tool of grocery marketing: Brand Promotion.
Deli executives who had the opportunity to visit Chicago last month for both the Food Marketing Institute (FMI) and the National Restaurant Association (NRA) conventions must have felt a bit displaced. However, visiting both venues is a big opportunity, and the exercise of seeing both aspects of the deli opens one's mind to the possibilities that few know how to address.
Last issue, the cover story of Deli Business was a terrific review of the findings of a proprietary consumer study on the effects of branding in the deli department. For a brand to have real power, it needs not only to have consumer awareness but also consumer loyalty. And the lack of this loyalty is the story of the research results.
One of the most common mistakes made in business and public policy is to look at the obvious consequences of a decision, action or event and ignore those consequences that are less easily discernable. If Wal-Mart is so much less expensive what will happen to all the money that consumers will save from buying so much more cheaply?
It may well have been penny-wise and pound-foolish for the U.S. beef industry to oppose a ban on using downer animals for meat. Be that as it may, that is all politics and public policy. A more interesting question is why hasn't even one single major supermarket chain imposed such a requirement on its own meat supplies?
Through selection of product, the deli alone has the opportunity to both distinguish a store from its competitors and to consistently project an image - in other words to position the store. Of course, just because the opportunity is there doesn't mean that many chains won't mess it up. Boar's Head is probably the most interesting example of the temptation of easy procurement.
Buyers Guide, 2004
There are many, on both the buy and sell side, who neglect to study merchandising. The mistake many manufacturers and more than a few retailers are making is that, because we live in the age of self-service supermarkets, they believe the product must be able to "sell itself." Yet the product itself offers little to explain how it is best presented and positioned to consumers.
Increasingly, deli executives need to take notice. Up to this point, the obvious freshness of the deli separated it from the meat and cheese sold in meat and dairy almost as well as fresh produce is separated from frozen or canned. Recently, however, better production and packaging technology have combined with aggressive marketing to create a new threat to the deli department.
Although manufacturers assume some liability by gilding the lily in the area of shelf life, the concentration of retail chains and the consequent increase in the power wielded by large buyers has increasingly led manufacturers to think that this liability is a risk worth taking. Indeed for some, the alternative to declaring that products meet retail shelf-life requirements could be bankruptcy.
Fleming Companies Inc. has filed for Chapter 11. It claims that its troubles are due to the bankruptcy of what was, until recently, Fleming's largest customer, K-Mart, which had accounted for about 20% of Fleming's business. It would be more accurate to say that Fleming got involved with K-Mart as a last ditch effort to evade its problems, which are rooted in the changing nature of the industry.
The shareholder lawsuits are bound to be filed, and we can leave the particulars and legalities to the SEC. For the deli industry, Ahold's announcement that it has significantly overstated its earnings - due to the way its U.S. Foodservice division accounted for various types of slotting fees and promotional allowances - provides food for thought about the real impact of these fees on business.
With Wal-Mart increasingly moving into more suburban and urban areas and the sales of independents being squeezed fast, large supermarket chains - especially the big three: Albertson's, Kroger and Safeway - are scrambling to come up with a strategy that will allow them to survive and grow.
Passivity in the deli department threatens the industry. Just putting product out and hoping it sells is a recipe for failure for new and innovative products. The products we are counting on to build the business in the future will never even get a chance. The move to self-service, from the traditional service deli, leaves a gaping hole in the marketing and merchandising efforts of most departments.
Caesar Barber is Plaintiff Number 1 in a lawsuit filed recently that claims the fast food industry provides inadequate and deceptive nutritional information and that, through its marketing efforts, creates fast food "addicts" who are helpless victims. The National Restaurant Association has called the lawsuit absurd. It is, of course, correct. But the restaurant industry should really treat this lawsuit with great seriousness.
Boars Head made a strategic decision not to sell to Wal-Mart. In doing so, Boars Head was acting to protect the margins of its supermarket customers and, like Tommy Hilfiger or Polo, trying to protect the brand against discounters that might cheapen the image.
Surely there is a market for all different levels of food quality. But the real prerequisites to retail being competitive with restaurants in the market for take-out food may have a lot to do with systems, building design and operational priorities. Food itself may not be the primary issue.
With improvement in technology and the huge amount of marketing money major brands have, the deli is finding a formidable foe in the frozen food section. The way to win the battle is to market the freshness of the deli cooked food offering.
I've been visiting the delis at all my local supermarkets lately. Not on store tours: I've been buying. My wife recently had a baby and, since neither she nor I really cook much at home, I've been bringing food in every night. As my wife heals and the baby lets us sleep through the night, I see the deli will have trouble holding on to our new-found business.
We may be seeing a structural change in the U.S. economy, one in which substantial portions of our available resources - our capital, our labor, our training, our technology - will not increase output. This indicates that the blow to foodservice, for example, is not likely to be a short dip with a steep rebound.
There is no particular reason to believe that the next terrorist strike will involve airplanes. Indeed, since the rules of guerrilla warfare, of which terrorism is a particularly onerous kind, dictate the use of constant surprise, it is logical to think the next strike in the terrorism war will be in some other facet of our economy. Just possibly our food supply.
Politics in America is a peculiar thing. At virtually every national election you can find a candidate proudly announcing that he has voted to do something to increase the price of milk. Now with almost 300 million milk drinkers, including poor children, and only a tiny minority of milk producers, one would think this bad politics... yet it seems to work every time.
Today we see a much more sophisticated use of foodservice personnel in the supermarket deli. Progressive chains are bringing in people with foodservice experience and culinary training not to put on a show in each store, instead, foodservice experience and culinary training are beginning to be seen as important components of a deli executive's background.
It is said you can't go home again and yet, somehow, we do. Today, as the industry gathers in Minneapolis to attend the IDDBA convention, it is fitting to note that it is also a homecoming. Five years ago, in the very same city, at the very same convention, a new industry was born - the very magazine you hold in your hands today, DELI BUSINESS.
Part of the problem for supermarket delis - and thus for the supermarket chains that count on delis to attract and retain customers - is the degree to which the interests of the deli can deviate from those of the store at large.
It is more than cliche to say that when the going gets tough the tough get going, so one can count on the fact that many deli executives on both the retail and supplier side will be confronted with demands for economies.
It seems so obvious that it doesn't require repetition: every retailer involved in the deli industry should attend the IDDBA convention. As important as our deli shows are, they are not enough, and those retail deli departments that confine themselves to the traditional venues are not fully capitalizing on the opportunities presented by today's food industry.
Supermarket executives have gotten used to the fact that "share of stomach" has been lost to restaurants and take-out and have fought back with HMR programs, but always with something of the sense that they were fighting a losing battle. Well, now comes news that the hottest trend in dining is that people are going to eat... at home - but they still don't want to cook and they don't even want to take out. No, the trend of the day is the personal chef.
If there is a recession in the offing, how ought the deli industry respond? A big yawn might be a less harmful approach than most. We are selling food after all. People have to eat, recession or not. But what about all those high profit expensive items - prepared foods, high-end meats, smoked fish? Isn't it likely that in a recession, such items would be crossed off shopping lists? Intuitively it seems to make sense, but our practical experience has been otherwise.
In many supermarket delis around the country, about the only thing that speaks to that classic heritage is a plaintive looking Hebrew National salami or bologna sitting lost in the deli case. It is a shame because what it represents is the kind of passive merchandising typical of deli operations in supermarkets across the country.
The attention to GMOs as a food adulteration issue detracts from real issues such as GMOs crossbreeding with wild plants and the possibility of pests growing resistant to various chemicals. More generally, food adulteration, which is rarely a public health concern, detracts from attention to real food safety issues such as bacterial contamination with living organisms like E. coli.
To decry change is a fool's game. The fact is that delis would have remained in ethnic enclaves had they not been homogenized to serve the broad taste preference of the American consumer. Yet, in the burst of expansion that put a deli in almost every supermarket, the need to innovate the product line was recognized. Is it possible that we may be on the cusp of a need; to reinvent the deli once more?
There is a great new book out: The Fourth Great Awakening and the Future of Egalitarianism, written by Nobel Prize winner professor Robert W. Fogel. There are items of great significance for the food business within this book. It is especially important for those in the deli business looking at Home Meal Replacement, both to see why it didn't work and to see what might yet work.
Just when you thought the deli industry was safe from the ambitions of Boston Market, the news comes out. Yes, McDonald's has completed its previously announced acquisition of Boston Market in a distress sale right out of the bankruptcy court. And in response, the deli industry ought to... do nothing.
The secret in looking at the future is not to project the present - that's just budgeting - or to apply present day attitudes to a future that will be composed of people influenced by different things. The key is to find leverage points that just might transform attitudes.
Many companies on both sides of the buy exhibit a weakness in that they focus hard on a primary market for a product and neglect secondary uses. This is often a mistake. The business world today requires more creative and flexible approaches to marketing.
Peapod, the granddaddy of the online grocers, is tottering on the edge of bankruptcy. At the rate the company burns money, Peapod could close down by the time you read this. In one sense, it is sad. Peapod spent 10 years garnering customer support and, barring a last-minute infusion of funds, it will have all been for naught. Yet, with all these troubles, it would be a horrible mistake for conventional brick-and-mortar retailers to write off the threat of Internet competition.
Departmental marketing suffers from the same lack of strong overall positioning and intelligent and contemporary marketing strategies that the chain as a whole suffers from. Almost by definition, the chain has to set the positioning, the overall strategy for a marketing program and many chains fail to do so. Still, this leaves the deli free to execute tactical marketing programs and most do a rather basic job.
The decision to lift the ban on Italian pork products is welcome, but its timing is worthy of attention. The truth is that there hasn't been an outbreak of African swine fever in Italy for decades, and the ban was maintained due to a confluence of interests.
Supermarket delis are about as well insulated as anyone from Internet competition. Ham and cheese on a roll - now - is not a likely e-purchase. There is some competition from shopping services, often with delivery, but density issues seem to be making this an uncertain road to riches, as well.
Priceline.com, promoted in ads by William Shatner of Star Trek fame that allows individuals to name their own price on airline tickets, hotel rooms and much else, now is moving into the grocery store. The company has launched WebHouse Club, which offers brand name products for consumers to buy online but pick up at their local grocery store. At the moment, the service isn't affecting deli very much, but it could.
Supermarkets, and particularly, differentiating departments such as deli, make a big mistake by focusing only on operational efficiencies as opposed to merchandising effectiveness. There may be some minor advantage to being able to have all 10 divisions buy from the same supplier, but it is unlikely that these advantages are sufficient to outweigh the loss of merchandising variety and marketing specialization that dealing with smaller suppliers can produce.
In France, Patrice Vidieu, secretary-general of Peasant Confederation, a self-proclaimed "farmers movement", states it clearly: "Culinary sovereignty is imperative. What we reject is the idea that the power of the marketplace becomes the dominant force in all societies, and multinationals like McDonald's or Monsanto come to impose upon the food we eat and the seeds we plant." This all sounds very stirring, a kind of call to arms against impersonal and foreign forces. But the thinking is really quite muddled.
The conventional wisdom says that with tremendous numbers of women now in the work force, time is at a premium. For the food industry, this means a boom in timesaving services, from restaurants to prepared meals. In a sense, one might say that this simple thought is behind the home meal replacement movement. Home meal replacement, however, hasn't exactly been a money tree these last few years.
Produce buyers have been reminded all too frequently that Mother Nature plays havoc with even the best laid plans and so are loathe to have just one supplier of any commodity. Astute deli buyers also have learned to hedge their bets and make sure they have, at least, both primary and secondary suppliers for most major items. This way if a disaster hits and a product is in short supply, a buyer has someone to turn to who won't ask, "Where were you when I needed you?"
It is still not clear that all members of the industry fully understand the consequences of food safety problems. As supermarket chains grow, the possibility that one incident could alienate customers from an entire chain becomes more threatening to the industry. As manufacturers consolidate, the notion that a food safety incident with one brand could bring disrepute on every deli in the country is not far-fetched.
In all businesses there is an enormous temptation to think that one can succeed by doing an additional business. The failure of most store HMR efforts could be predicted from the press releases. All these releases are filled with what additional things the store is going to do. I've yet to see one that mentions what the store is going to stop doing.
The greatest failures of the contemporary food scene are the midrange dining houses and "upscale" fast food joints - most notably Boston Market. Not surprisingly, both of these types of concepts attempt to bridge this bifurcating marketplace. Ominously, it is this model that supermarket delis have mostly chosen to adopt. This explains, as much as anything, the failure of so many HMR programs. They are geared for a mid-range market that is rapidly disappearing.
The old model of shopping and cooking has fallen by the wayside because of an active choice by consumers. In our more affluent society, families are choosing to spend that money to avoid the drudgery of shopping, cooking and cleaning. So what does this mean for supermarkets? As incomes rise, people seem willing to spend more on food and the challenge for supermarkets in general and deli departments in particular is how to position themselves to capitalize on the tsunami of interest in food.
On 80th Street and 3rd Avenue in New York City stands the latest brainchild of Eli Zabar, known for his success at Zabar's, the venerable Upper West Side food institution. His new operation, simply called Eli's, takes his recent Vinegar Factory concept to the next level. What enchants about Eli's is the constant reminder that it is run by a foodie.
The impact of specialty foods on deli is an often neglected area in analyzing merchandising, procurement, and operational opportunities for supermarket delis. Delis have a special role in dealing with the specialty food industry. In many cases, delis are the transitional portal through which specialty food products transition from specialty food stores to mass market supermarkets.
To a substantial point, the advantages of consolidation are cost savings that can be created by insuring uniformity in product selection. Yet, a store's comparative advantage increasingly depends on those departments - deli, bakery, produce, specialty foods, etc. - that draw their strength from differentiation.
Commissaries are the hot ticket right now. Rare is the month that goes by without my getting a call from a retailer looking for the inside scoop on setting up commissaries. The enthusiasm over commissaries is, however, not so much a positive pilgrimage to a shining city on a hill. It is, instead, a mass exodus of refugees from the horrors of in-store preparation.
I just walked through a beautiful new Food Emporium on 86th and 2nd Avenue in Manhattan. The store is new, and at peak hours it is packed. Things that wouldn't play well in New York City are left out. This store looks like a winner. Great location, top concept, fine execution. You can be sure New York area retailers, and out-of-towners, will be visiting. But, will it play in Peoria?
Time will show that we now live in the dog days of deli - a time of uncertainty about how to proceed and how to build an industry. The cause of the interruption: The collapse of Boston Market. Today, Boston Market teeters on the edge of bankruptcy, a national chain of restaurants in search of a viable concept. With this realization has come self-doubt about supermarket HMR efforts. The doubt is justified.
One of the great benefits of travel is the opportunity to see one's own business played out against different circumstances. During a recent trip to Italy, I saw a large number of supermarket delis and found many of the same forces at work in Italy that are driving the business in the U.S.: Home Meal Replacement, grab-and-go sections and expanded prepared food offerings. Just as interesting, though, were the differences.
August , 1998
It is worth thinking about upscale, because upscale is being downscaled at delis all across America. Time and again some supermarket has decided to feature some particular brand as its featured meat and cheese in the deli. Inevitably, this brand is identified as "upscale". Deli directors who have struck these kinds of deals regale me with their enthusiasm for how the deli is going upscale by capturing this quality brand. I have no argument with the quality of the brand's product, but, conceptually, these efforts are off the mark.
The battle between McDonalds and Burger King brings several salient points to the fore: First, growth in the fast food hamburger category has slowed to the point where McDonalds and Burger King are now focused on stealing each other's customers. This is not dissimilar to general supermarketing. Second, as competition heats up, the product line between these two vendors becomes more similar, not less.
Though meal solutions and Home Meal Replacement seem to represent some kind of new confluence of departments, we may be looking at it in the wrong way. We may be mistaking the ingredients for the product. In fact, we may be making a classic retail mistake. Restaurants don't think they are in the wild pheasant business just because they serve some under glass. Equally, one can sell a beautiful nicoise salad in the deli, and that doesn't mean the deli is suddenly in the lettuce business or the tuna business.
If you haven't been to Natural Products Expo recently, or ever, you may not understand what an enormous business the natural food industry has become. It's certainly not Hippies in love beads and sandals. It is a big business and a big challenge.
For many years, supermarkets have realized that abundant produce departments are important not only for the profits they generate but for the image boost they can give a whole store. The same logic, of course, goes for bakery, deli and the whole fresh foods arena. It really is tough for a supermarket to distinguish itself by how cleverly it merchandises national brands of soup or mayonnaise, but a retailer can gain a real competitive edge by virtue of its selection and presentation in areas such as deli.
Countless rivers of ink have been spilled vaunting the hottest foodservice concepts, and it is impossible to speak to progressive deli directors without getting caught up in the enthusiasm over the latest sushi bar, rotisserie, pizza program, branded food court or other program to capture consumers' stomachs. It would do us all well to remember how easy it is to get overextended and, in so doing, to neglect the core products and services that have sustained supermarket delis.
Boson Market is, in many ways, an astonishing phenomenon. The rapid growth, attractive stores and the sense that it has created a new "higher-class" fast food have combined to catch the attention of supermarket operators nationwide. Throw in the fact that the core of the menu is built around an item - rotisserie chicken - which has long been a staple of supermarket deli departments, and, to retailers, it feels absolutely abusive. Still the bottom line is that Boston Market is really an experiment.
Is the deli/retail foodservice department there to make money or to bring people into the store? This is not a trivial question. It may well be the essential question if supermarkets are to win the war for consumer food dollars. It is, however, difficult - in some ways excruciatingly so - to rethink our basic business. Yet such a rigorous approach is the only way likely to pay off in really extraordinary results.
The issue of DELI BUSINESS you hold in your hands is the first national magazine to serve the deli/retail foodservice industry and marks the coming of age of an industry. What was once a fragmented trade of, on the supply side, regional suppliers serving specific ethnic markets and, on the buying side, chains with widely varying commitments to deli has been transformed.