CHICAGO -- The ticket to better deli sales in the future may well be the meal ticket, according to food marketing professors and gurus Tom Pierson and Jack Allen.
Americans are looking for fully prepared, high quality meals, and supermarket operators need to be ready to compete with the restaurants who provide those meals, often with competitively priced programs that cross into the in-store operation's turf, said the industry analysts, both professors at the food marketing program of Michigan State University, East Lansing, Mich.
The well-known pair presented their latest lesson on deli innovation at a workshop during the Food Marketing Institute convention here.
Lesson One: "Competition is fierce," said Pierson. "There is a tug-of-war out there for consumer's stomachs. Food service operators are right at the heart of that competitive battle." Pierson pointed to the fastest-growing restaurant chain in the country, Boston Market, formerly known as Boston Chicken. He said 70% of the chain's sales are for takeout, a direct stab into the supermarkets' primary food-service niche.
"They're selling meals, they're selling dinners, and it's their goal to be the number one alternative to the kitchen-prepared meal," he said. "They are going after today's contemporary shoppers, because they know what they want. And they are also looking to the shoppers of the future."
The meal concept is still news to many supermarket delis, said Allen. "The supermarket has been thinking of selling items, components. People are really looking for meals."
Allen said only one in four shoppers makes a deli/food service purchase. That figure needs to double if deli and food service operators are going to be successful.
"We need to go from light and moderate users into heavy users," he said.
What's more, shoppers are looking for convenience, and supermarkets can offer it. Yet convenience is not the be-all and end-all of an innovative deli operation, Allen warned.
"It has to be built on the premium quality image. Anything that goes in the deli/food service has to be of a superior quality to any other food found in that store," Allen said. "And that is not always the case.
"People want not only meals, they're looking for ideas," he said. "It's a tremendous opportunity."
Allen and Pierson said that of the dozens of supermarket operators and stores they have visited, only some chains are anticipating the changing needs of consumers.
Allen pointed to D&W Food Centers, Grand Rapids, Mich., as one company focused on selling entire meals. "Their motto is: Entrees as part of an entire meal," he said.
It works. During one promotion with tie-ins throughout each store, D&W projected it would sell 1,200 dinners. Sales were more than three times that, he said. "The power of a meal idea cannot be overstated." Ukrop's Super Markets, Richmond, Va., is another "Best-in-Class" case study of meals merchandising.
One Ukrop's unit features a section called "Meals Made Easy," Allen said. Every day at 4 o'clock, an associate is stationed near the meat department, promoting the purchase of an entire meal.
That's not as commonplace a practice as you might think, however; building a meal plan around meat first isn't a given the way it once was. Allen said meal composition always used to be based around the product in the meat department, but that is not the case any longer. In fact, placing the "Meals Made Easy" promotion near the department is Ukrops' way to get shoppers thinking about including meat in their meals again, he said.
A meat-based meal for two people, including salad, dressing and bread, costs about eight dollars, he said. "This idea is really catching on," he said. "There are even some shoppers that are coming in and saying, 'Thank you for teaching me how to cook.' People need lots of help."
Allen said Ukrop's is also offering a dinner for two, in a microwaveable package. He called the newly developed package "a major step forward."
Pierson pointed to Sutton Place Gourmet, which operates in the Washington, D.C. area, as another chain that merchandises
meals. He described Sutton Place's niche as "gorgeous, gorgeous food that also tastes great."
Operators who focus on meals sometimes need to ask themselves whether they should focus on hot or chilled entrees, Pierson added.
"I think the answer is what works for you," he said. "Over the past several years, we've seen a tremendous amount of growth on the chilled side. From a merchandising standpoint, there's more flexibility, you can do more interesting things with chilled."
However, many retailers also succeed with a hot program, and would not abandon those for a chilled section, he said. There is no hard and fast answer; some programs, like pizza, can be either hot or cold.
Allen said operators also need to determine how much, or how little, service they want to provide their shoppers.
Ukrop's offers both a service and self-service area in the deli department. "Would it surprise you to know that 80-85% of all those sales are in a self-service mode?" Allen asked. "And yet, right over the counter is all the service you could ask for, or a dialogue that could be initiated."
In one Ukrop's unit, some of the self-service packages blend into the service area, he said. "The eye sees a continuum of the same food, reinforcing the fact that this is indeed the same product.
"I think that is what the trend is," he said of the service/self-service continuum.
According to Pierson, sit-down eating is another trend with a future in supermarkets, as long as chains know how to use it.
"Increasingly, we're seeing sit-down eating areas in supermarkets," he said. "I think we need to decide what our goals are." A sit-down area communicates a food orientation, for one thing, he said. "It communicates that retailers are food professionals, that they can make the food." Sit-down areas can also make shopping more enjoyable, particularly for mothers with small children.
But they won't sit down if the department is not offering what they want. Pierson said deli and food service operators need to know and understand their customers' demographics.
"Know who shops the delis," he told the audience. "Before we decide on products, before we decide on merchandising approaches, we got to know who's in our stores." Pierson acknowledged how difficult that can be. "When Jack and I have been in upscale stores, we see an awful lot of people who clearly are not higher-income. When we go to a store in a lower-income neighborhood, I've been astounded by the kinds of folks there, who do not appear to be low-income," he said. "The whole issue of demographics and selecting consumer segments becomes a challenge, but we've got to do it." As delis and food service operations become more innovative and responsive to the clientele, Allen said it is important that they do not forget the basic meats and cheeses, what he called "basic blocking and tackling areas."
"You need something to heighten and build interest into that category," he said.
"Meats are 33% of the business, cheeses 10% or more," he said. Retailers need to pay attention to innovations with these items, including the premium brands, items that are nutritionally enhanced, or items with lower sodium and fat. Also, Allen said that "Old World" items, like crusty breads, are finding a new niche. Pierson said the catering business could be an important direction for delis in the future.
"A number of you have entered the catering business," he said. "Last year's FMI survey of executives showed that about 33% of executives were very interested in home delivery. Where are we going? Will it be computer shopping? Who knows." Most retailers who are catering said it succeeds best as a commercial enterprise. Competing with the local group of church ladies, as he described it, is not easy, and may not be profitable either.
Changes in the way people shop will drive the industry, Pierson said, whether it is by catering, home delivery, computerized ordering or other futuristic methods.
"We've got to keep our eye on those changes," he said.
Allen agreed. "Deli/food service is going to survive a very strategic purpose, as more and more people look at the task of shopping and replenishing the pantry," he said. "It might be something that could be mechanized, televised, programmed, almost as a utility. And the creative part, the enjoyable part, the participative part, could come to the fore, led by the supermarket industry," he said. While delis used to account for 1% of sales, some leading-edge chain delis now account for 10-15% of sales, he said. "Your shoppers are different from the store across town or even across the street," he said. "If you are in the deli/food service business, you realize more than anyone else that this business has truly come of age."