GRAND RAPIDS, Mich. -- D&W Food Centers here is convinced it has put a lid on the packaging problems it -- like many other retailers -- has been wrestling with when it comes to grab-and-go prepared foods.
The challenge is how to package profitably, while still maintaining product integrity and plugging the literal leaks from the package and figurative leaks from program shrink. For D&W, the solution has become a central-packaging system that relies on a heat-sealed film and paperboard system.
The system has enabled the chain to built its program around meal components in self-service form, a profitable choice because D&W can now offer more variety at retail without serious shrink, said Tom DeVries, director of food service at the 25-unit chain. The company had previously sent prepared foods in bulk from its central kitchen to its stores.
Both sales and profits have climbed significantly since the packaging program was put into place a year ago, and that's only the beginning, DeVries said.
D&W's decision to go the heat-seal route is representative of an accelerating trend among retailers, industry observers told SN. The packages look good, they don't leak, and some types of heat-seal packaging costs less than conventional types of packaging, sources said.
"More and more retailers are using heat-sealed containers because they do a good job of holding the product and they look good," said Howard Solganik, president, Solganik & Associates, Dayton, Ohio, a consulting firm that works with supermarkets. "Depending on the design of the film top, the package can make the product look homemade. And it's neat that you can have high-production equipment and in-store equipment that does the same thing."
Having a heat-sealer in-store creates a fresh-perception connection between the prepacked items in the self-service case and those in the service case, he said.
Another consultant, Ira Blumenthal, president of Co-Opportunities, Atlanta, said he also sees heat-sealed packaging gaining in popularity.
"It handles well. Customers tend to pick up a package, turn it around and upside down before making the decision to buy it. The only thing that concerns me about this type of packaging is that it has no provision for resealing. If you don't use the whole family pack, for instance, you have to then dump it into another container which defeats the convenience. The next generation of heat-sealed packaging will probably include a snap-on lid in addition to the heat seal," Blumenthal said.
DeVries at D&W said he had found no negatives whatsoever with the chain's new packaging program. "It's a great program," he said. "It has allowed us to add a tremendous amount of variety without serious shrink and our supply costs dropped by 40%."
Previously, the chain had been using a clam shell, microwavable container as other retailers had been doing before the home-meal replacement trend began to swell. "Generally speaking, delis were using the packaging they had -- not something designed for prepared foods. And the labels just about obscured the food. So you had a clear package, that might leak, covered with a band and labels. Then retailers decided to showcase their prepared foods with something that would set them apart," said one industry source.
D&W's packaging features a film top enscribed with the D&W Kitchen & Deli logo and a checkered design that brings to mind a kitchen towel or table cloth. The colors are green, burgundy and white.
Two sizes, an 8-ounce and a 20-ounce, suffice for D&W, DeVries said.
DeVries emphasized that much more variety of product can be sent to stores now because they can order a small number of packages of the products that sell slowly.
"Now they can buy what they can sell and also participate with more variety," he said, adding that variety brings more customers to the case.
But in addition to answering shrink concerns, variety also can be boosted because some products that were tedious to put together at store level are now packed centrally.
"For example, grilled chicken on a bed of rice pilaf with dijon mustard sauce with a garnish of parsley. That's just about impossible to pull off at store level," he said. Packaging of all products has a more consistent look with the central system, he added.
"[The central system] saves labor because we took packaging out of the retail environment. We estimate we're saving 10 to 16 man-hours a week per store with centralized packaging. The intent is to use that saved time to drive more sales," he said.
Even the investment in packaging equipment at the central facility has already paid for itself, DeVries said. The newest acquisition is a high-speed sealing machine which can seal up to 70 packages a minute and that is expected to pay for itself in a year, he said.
"We're running it [only] at 20 to 30 a minute so we can keep up with it," he said.
In order to make the connection between the self-service prepared foods and those offered in the service case, D&W will add handheld heat-sealers at each store, DeVries said. That's scheduled for next year.
Asked how the heat-sealing system could cut supply costs by so much, DeVries said, "The tray is economical. It's paperboard. I just borrowed a couple of pages from the frozen-food industry's manual. It has worked for them for years."
He added that the film, printed with the D&W logo, is significantly less expensive than a dome top or clamshell package.
" We considered [every type of packaging] and we found that the only system that was effective from a cost perspective was heat seal. But we had to figure out how to do this without reducing profitability at store level and still make a decent profit for the central facility," DeVries said.
One key to keeping costs down is using a film top, with no paperboard frame, he said.
"It takes much less time to seal film to the paperboard than it does to seal paperboard and film to the paperboard tray. So there's a savings in time as well as supplies," he said. But the packaging is durable even though it may not look as sturdy as one with a paperboard frame on top, DeVries said.
"Once you seal the film to the paperboard, it becomes a very rigid package. For test purposes, we've stacked 12 on top of one another and pushed down. We've never had a failure," he said.
And the savings worked to everybody's benefit, DeVries pointed out. "Retail actually has an increased margin on the products and they've gained a conservative estimate of about 15 points in contribution to overhead," DeVries said.
With the packaging system fully in place, just a little over a month ago the chain began increasing self-service displays of the prepackaged items. In most stores, displays have been nearly doubled with space borrowed from the service case.
"We've at least doubled the space for merchandising these items. In some stores, we have 20 running feet, and that's getting really tight for the SKUs we have now," DeVries said.
"As of two weeks ago, we're producing 100 SKUs. You'll find 50 to 60 in our self-service at any one time now. That's up from a typical 15 to 20 previously."
In new stores and remodels, he expects to increase that footage to at least 30 feet.
At a store in the Breton Woods section of Kentwood, Mich., the chain last month increased the self-service display of prepacked prepared foods from 12 running feet to 20 by consolidating a length of service case. Other self-service displays have been expanded from eight feet to 12.
"We're just a month into the expansion of self-service so I don't have increase percentages, but sales have definitely shot up," he said.
"We felt there was a weakness in the self-service portion of our prepared-foods business and we knew we had to go to a central-packaging system to strengthen it. We had been sending prepared foods to stores in bulk; then they were packed in store. That was often at the bottom of associates' priority list so sometimes there wouldn't be more than four or five items in the self-service case," DeVries said.
Ten pounds of beef Stroganoff sent to a store, for example, could end up mostly as shrink. Now, since stores order by the unit, sales of some of the slower movers have doubled and tripled, he said.
The shrink factor was one compelling reason, along with food safety concerns, that helped D&W decide to go to central packaging. And once that decision was made, the chain looked for a heat-seal system because of the stability it would give to packages being transported from D&W's central kitchen to its stores.
After starting a search nearly two years ago for the packaging that could do the job cost-effectively, the chain developed a program with a local supplier that gives it what it wants, DeVries said.
