What we have here is a failure to communicate, say major food manufacturers looking for the right paths into the supermarket food-service business.
Like food-service distributors and supermarket operators both big and small, manufacturers also want to find their place in the fresh-meals distribution pipeline.
In interviews with SN, however, some leading companies said their efforts are hampered by the fragmented nature of the emerging industry, one in which every supermarket chain handles food service differently, drop sizes remain small and distribution costs run through the roof.
They said that, despite having big operations with sophisticated product-development and marketing strengths, it is still tough to focus all that muscle in the right place.
"There are a number of manufacturers without an efficient way to get product to the supermarket," said Jeff Devon, national marketing director at SSE Foods Inc., San Diego, a prepared-foods supplier. "We can't get food-service products through the supermarket system fast enough.
"Fresh food is clearly a regional business. A European-style cross-docking system is needed," Devon said. "There is a big opportunity for a direct-store-delivery system."
Bil-Mar, Zeeland, Mich., is one food supplier that tested a direct-store-delivery system and found it came up short.
"We did not achieve our success," admitted Charlie Goodstein, director of prepared foods for Bil-Mar. The biggest problem, according to Goodstein, was a lack of common understanding rooted in a failure in communications; it was just a matter of being able to establish what the goals were.
"If there's a need, you still have to agree to what purpose you are doing a project," he said. "Retailers, manufacturers and distributors need to be in lock step when developing what type of program they should be presenting. A short shelf life, fresh program is a tight circle in comparison to sourcing components, or ingredients, which may have a longer shelf life.
"Between supermarket and food service, there are language and cultural differences," Goodstein continued. "Expectations need to be agreed to, up front. What is good for the retailer is not necessarily good for food service."
"Lack of communication, both in the manufacturer and retail environments, hampers a program," agreed Robin Jensen, vice president of marketing at Tyson Foods, Springdale, Ark. "There has to be communication between the decision makers, including the perishables buyer and the store manager, with one clear vision on what the department is to be."
And that includes internal communications and a shared vision inside the supplier as well. Manufacturers told SN they have to settle their own issues regarding how the distribution channels can and should work.
"The conflict on who sells what and through which channel has to stop," said Devon of SSE Foods. Indeed, some manufacturers are realizing the benefits of crossing the lines.
Tyson's food-service group, for example, focuses on deli sales and marketing. The team provides assistance to retailers with trends, customized point-of-sale materials and promotions as programs allow. Product categories including refrigerated, frozen and rotisserie products are included.
"We promote marinated and breaded items and we have seen the business in supermarket food service grow by double digits," Jensen said.
This organizational cross pollination evolved at Tyson as the manufacturer discovered that it was selling many types of products that retailers didn't have expertise in.
The retailers were familiar with the prepackaged lines, but in the deli, something typically had to be done to the product, such as cooking or reheating. Keeping this added-value component in view, Tyson began to categorize the supermarket prepared-foods area more properly as a restaurant, Jensen explained.
"Supermarket food service is handled as a restaurant; it just happens to be housed in a supermarket much like a company cafeteria happens to be housed in an office building." The bonus this brings to market strategy is clarity in communications, she said.
Manufacturers also say specific market conditions are playing a key role in which distribution system they try, or how systems can be combined. And as long as retailers call the shots, by specifying how food-service items are to be transported and delivered, there can be no ideal model manufacturers develop and put into use on a broad scale.
Food manufacturer Celentano, Verona, N.J., has to deal with individual supermarket distribution channels even in the relatively small market region of New York, New Jersey and Pennsylvania, where it does business. The supplier works with four retail customers on fresh-meals programs, and each wants Celentano to use a slightly different system.
"The supermarket business is predominantly focused on selling packaged goods, and is not food-service oriented," said Domenick Celentano Jr., president. "It will take time to evolve."
For one thing, he explained, "Supermarkets still believe that they can produce in-house food-service items. They want a certain degree of theater, which comes at a high price both in cost and in gross margin."
Innovative products and menus will accelerate the process, he said. "Consumers have requested traditional home-cooked style foods. They have requested more interesting and varied menus. Retailers are having a hard time seeing the right direction, and are a little baffled about the type of food they should offer."
Fresh is still what most supermarket operators request, which presses the distribution system into overdrive, Celentano added. For his company, that means using distribution to push the shelf life time down the pipeline.
Celentano uses clean-room technology common to surgical and computer-chip manufacturing environments to produce food products that are virtually bacteria free. This reduces spoilage and places more shelf life into retailers' hands.
For their part, retailers need to survey the real competition and respond accordingly, manufacturers said. "Retailers have to understand that their competition is the restaurant," said Devon of SSE Foods.
"Food service has to be made to be convenient, with a separate checkout and separate parking to compete with restaurants," Tyson's Jensen noted. "And selling by the pound, as opposed to selling by the each or by the meal, is a real roadblock. Consumers buy a meal."
"In the consumer's mind, supermarket and food service is a blur. Consumers care about convenience, value and quality," said Goodstein.
"The things that will make them happy are what needs to be addressed. The consumer has too many choices."