February, 1996

Fruits of Thought

Entering The Meal Business

For a long time now retailers have been aware that the shift of consumption to foodservice is a major challenge. After all, people can eat just so much and, if they do that eating in restaurants, they are going to buy less food at retail.

As the numbers for foodservice have been rising steadily, with the best estimates now being that around 45 percent of food dollars are being spent somewhere other that at retail, supermarkets have responded with all kinds of efforts to recapture this business. With a sort of if-you-can’t-beat-them-join-them resignation, operators have even opened restaurants and fast-food courts.

Though the deli/foodservice departments may get the glamour, the produce department is an important part of this effort. Fresh-cuts, in particular, were thought of as a weapon for supermarkets to counter foodservice’s advantage in family dining convenience.

Today, efforts are starting to focus in more precisely. It turns out, however, that supermarkets really cannot compete with foodservice most of the time. Those in-store restaurants may offer shoppers convenience, but, except in small towns with scant options, few people are making supermarket restaurants their destination of choice for dining out. In fact, it seems that a large portion of the increase in foodservice consumption is “involuntary” and unlikely to change; for example, with more women having entered the labor force, they are doing what many men have always done, eat out for lunch.

Foodservice usage statistics encompass a great deal. People in prison, people in hospitals, people on vacation out of their home towns, people on romantic dates, business lunches, etc. The stern truth is that, as a practical matter, these types of consumers cannot be won back by supermarkets under any likely circumstances. It would be quixotic of the supermarket industry to run massive efforts to encourage people to brown bag lunch or kids to bring picnic hampers on mid-winter dates.

There is, however, one area that is finally starting to get the attention that it deserves: Home Meal Replacement or HMR. As with all these catch words, the exact definition is subject to some debate, but I’ll use it to identify meals eaten at home, but prepared elsewhere.

Now this is a market that supermarkets can fight for and win, if they care enough to do so.

The great exemplar of this market is Boston Markets, which does a large portion of its business as take-out orders customers bring home for dinner. This is very frustrating to supermarket operators. After all supermarkets were selling cooked chicken in the deli decades before Boston Markets was even conceived!

So why are Boston Markets and similar chains booming? Several reasons, and they apply to produce if it is to be a part of this battle:

  1. Consistent quality and availability from open to close.

Who hasn’t visited a supermarket deli and seen one, last, chicken sitting out for hours? For supermarkets to compete, they have to give consumers the confidence that if they stop by during business hours, fresh, quality product always will be waiting.

Produce is a big part of this.

Just the other day I did a store check on a Sunday evening about an hour before close at a big chain supermarket in one of its newer, large model stores. The facility was beautiful, but the entire produce department had obviously been left to sell down. If I had gone with the intention of picking up some nice fresh-cut fruit for a late dinner. I would have been very disappointed. There was, exactly, one half cantaloupe, with a strawberry in it, sitting on a giant table of ice. Just for comparison I went across the street and visited the Boston Market, where every bowl of each side dish was full in its display case.

  1. Physical and procedural changes to make buying and pick-up easier.

At Boston Market, fax an order and it will be ready when you get there. At many units, customers simply use the drive-through to pick up pre-ordered foods. Well, if supermarkets want to compete for HMR business, they better offer similar convenience. Just walking into a supermarket, going to the deli, stopping at produce, then the beverage section, maybe the bakery, then walking to the front to check out is too time consuming to capture this market.

Why can’t consumers call and order a package of their favorite fresh-cut salad mix, some fresh-cut fruit, a hot deli entrée, some beverages and fresh rolls and have it waiting for them when the customers arrive?

A hundred explanations might ensue. But if the HMR market is one supermarkets want to capture, they have to face some hard facts:

Supermarkets have to get margins up. Boston Market is not cheaper than supermarkets. Many consumers are prepared to pay for the bundle of ancillary services — consistent quality, availability, easy pick-up, etc.

They must be willing to throw out more food. Strict standards have to be set up for all fresh foods. If that chicken or fresh-cut melon is out too long or starting to look sad, it must be dumped.

Sell-down has to stop. The HMR business, more than any other, depends on consumer confidence that the outlet will have the product available. If a consumer is counting on a slice of fresh-cut melon and it is not there, the consumer will learn that she can’t use the supermarket as her source for HMR. That portends defeat for supermarkets in the Home Replacement battle.  pb