Research Perspective and Comments & Analysis
Produce As Wingman: Can Drive Deli Sales, Traffic
By Anne-Marie Roerink, Principal, 210 Analytics And Rick Stein, Vice President Of Fresh Foods, Food Marketing Institute
Compared with the mature produce category, deli trips, sales and differentiation have significant room for improvement; produce can play an important supporting role. Produce is a Top 3 driver of store choice and trips, and has high connectivity to many other areas in the store.
According to Chicago-based Nielsen Perishables Group, deli sales reached $24 billion in mid-2016, with 58 percent of dollars generated by fresh prepared. Furthermore, the deli department is emerging as a driver of growth, with dollar gains of 4.2 percent overall, and 5.5 percent for fresh prepared. But just like produce, where retailers have to make daily assortment decisions and determine their positioning relative to organic, local, ethnic and other items, deli departments cannot be everything to everyone.
Yet, getting the deli right can mean significant payoffs, both for the department, total perimeter and the total store, as found by the Nielsen’s best-in-class research. So what are some ways in which produce can help drive deli trips and growth? The Food Marketing Institute’s (FMI) report, The Power of Fresh-Prepared/Deli, explains.
While market factors are promising, one significant hurdle for retailers to aggressively grow deli/fresh prepared is trip frequency, which has fallen for the total store, including the deli. As is, only about one in 10 store visits includes deli/fresh prepared. As the No. 2 driver of store choice — versus deli at number 15 — produce can help draw shoppers to the store. After that, the key will be growing deli trips and sales.
Current meal preparation trends show increasing reliance on the mixing and matching of scratch ingredients with semi- and fully-prepared items. Convenience-focused produce items, such as salad kits, microwaveable packaging and value-added produce can be cross merchandised or advertised with deli items to complete the meal solution for the shopper.
An important step in growing deli trips is through a strong reputation and image as a viable restaurant alternative. With some noted exceptions, reputation is precisely where many grocery stores struggle. As a result, even though 96 percent of shoppers purchase deli/fresh prepared once per year, few shoppers think of visiting the deli with regularity when deciding what to do instead of cooking dinner (12 percent). Duplicating the ways in which retailers build and maintain their strong reputation in produce may translate into the deli becoming a more top-of-mind alternative come dinnertime.
One of the consumer perceived drawbacks of fresh prepared deli food is that shoppers deem it less healthy and nutritious than home-cooked meals. With fresh produce’s health halo, an increased focus on fresh fruit and vegetables in fresh prepared may help elevate its nutritional profile.
One noted benefit of deli/fresh prepared is that it introduces shoppers to new ingredients and items they haven’t had or prepared before. This was long seen as a key benefit of meal kits that touted the use of local and unusual produce ingredients. Clearly, retailers too can leverage produce variety and innovation to pique shopper interest in new deli offerings.
Consumers mostly compare deli/fresh prepared to the fast-casual restaurant segment, both in terms of price and quality. This includes restaurants such as Panera Bread, Jimmy John’s and Chipotle. The fast-casual segment has seen aggressive growth in sales and store counts with a focus on fresh, quality ingredients and enhanced ambience. Produce’s quality and fresh image can provide an important boost to bring the deli a step above the fast-casual segment in shopper choice.
Within deli/fresh prepared, there are many different solution types, ranging from self-serve stations to made-to-order meal stations. Across the population, the meal solutions that draw the highest interest are fresh-prepared and pre-packaged meals and meal kits. Produce is a key ingredient and may help successful positioning of these offerings.
Mega trends that are driving significant sales growth in other parts of the store are highly desired features for deli/fresh prepared as well, according to shoppers. More than one in five shoppers would like to see locally sourced/grown food and organic items. Programs built surrounding these trends in produce may help carry over interest to the deli and drive growth in these higher margin offerings.
While some cuisines have universal appeal, many of the more ethnic cuisines see much higher interest among Millennials. Cuisines with a fairly broad appeal include American, salads, Italian, Mexican and Chinese. Produce plays an important role in all, and the use of local or organic items may provide an interesting twist to a proven favorite.
Food Marketing Institute is a trade association that advocates on behalf of the food retail industry. FMI’s U.S. members operate nearly 40,000 retail food stores and 25,000 pharmacies. Through programs in public affairs, food safety, research, education and industry relations, FMI offers resources and provides valuable benefits to more than 1,225 food retail and wholesale member companies in the United States and around the world.
Source: The Power of Fresh Prepared/Deli 2016 — Shopper research by the Food Marketing Institute. Commissioned by the FMI Fresh Foods Leadership Council andmade possible by Nielsen, Hussman and Shelby Reports. Researchconducted by 210 Analytics
Produce Is Key Ingredient To Fresh-Food Department Vibe
The problem with discussion of deli departments at retail is that there is less of a continuum of quality and assortment ranges than there is a bifurcation of departments. On one side of the bifurcation are the deli departments that focus on sliced meats and cheeses, typically have a service or self-service option for wet salads and, if they are ambitious, a rotisserie and/or chicken program — perhaps an olive bar, and maybe a sub sandwich program. This is the deli offering in the vast majority of supermarkets today.
On the other side of the bifurcation is a panoply of service options: wok stations, soup bars, pasta stations and pizza programs, massive salad bars, wing bars and much more — all with substantial seating areas.
Walk into a large Wegmans or Whole Foods Market, immerse yourself in their prepared foods sections, and one instantly realizes whatever these people are doing, they are not in the same business as a retailer with meat and cheese behind a glass case with a paper plate sign indicating that ham is on special this week.
I question the statistic that deli is only No. 15 in terms of driving consumer store choice. When the store offers an incre-
The statistic that only 12 percent of consumers think of delis when deciding what to do instead of cooking may
But produce helps the store in important ways beyond direct sales and profits. When Dick Spezzano — now president of Spezzano Consulting Services and then the vice president of produce and floral for the Vons Companies — was describing Vons’ Pavilions concept back in the late 1980s, he explained the “12 types of tomatoes, 15 varieties of apples, 14 types of melons and the purest organic fruits and vegetables” were on display not just because Vons hoped to sell these items, but because the halo effect of this cornucopia would attract consumers to the store — even if they never bought any of these extra items.
Another thing Spezzano used to do was urge producers to find places in salad bars for their products. Back when Sizzler and its salad bars were a force to be reckoned with, I remember Spezzano telling a convention of pistachio growers that, if need be, they should give their pistachio nuts away to Sizzler to get the consumer trial that would come from having placement on the salad bar.
This makes us think that it is not so much that trial in the produce department will lead consumers to buy at the deli but vice versa. Consumers, who never thought of putting pomegranate arils on a salad, could buy a “health salad” in the deli, find they like the taste and start buying packages of arils in produce.
One well-recognized problem is consumers do not eat departmentally — they eat meals. So, many a consumer who is buying fried chicken in the deli department might also buy a green salad, a vegetable side dish and a juice — if we didn’t make them run back to produce to get these things.
Many prepared food offerings at even the best deli counters are out of sync with the organic and local showcase that goes on in produce. Many retailers promote these concepts and promise things such as, “organic, when possible,” but this turns out to be almost never in prepared foods.
The reason: cost. We could make fresh organic lasagna, but the cost would be such that retailers wouldn’t buy it. So for those store executives who think organic and local is a marketing win, turning to fresh produce to carry this flag makes a lot of sense. They can have a sign that details loads of organic or local items in produce, and by maintaining the look and feel of the produce department throughout the fresh-food departments, the retailers can hope consumers buy into the vibe for all fresh foods.
This works best when stores have integrated fresh areas that include produce, foodservice and prepared food options, meat, seafood and bakery. These integrated areas, which Wegmans has really pioneered, serve to create the kind of offer that makes consumers think of a supermarket when they are not sure what is for dinner tonight.