Viewpoints

React Now to Early Signs of Restaurant Recovery

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The restaurant industry has a new item on its menu: recovery.

That was unthinkable until very recently because these outlets have been major victims of the economic downturn. But a string of positive reports and predictions is just now bringing some long-awaited hope to this sector.

“We officially declare that ‘the restaurant consumer recovery’ began in March 2010,” said one restaurant industry analyst in a recent article in Nation's Restaurant News magazine.

“There's no question about this. There's a recovery going on,” said Harry Balzer, chief industry analyst at the NPD Group, in commenting about restaurants in an article this month in The New York Times.

Meanwhile, restaurants are gradually increasing staffing, and a forward-looking performance index from the National Restaurant Association hit its highest level in 27 months in February.

Good news for restaurants often means bad news for food retailers, but supermarkets need not panic in this case. The restaurant rebound is very gradual and is expected to be most pronounced for certain types of segments, such as casual dining. Restaurants can't expect a bigger bounce back until the national economy improves further, particularly on the employment front. Even at that point consumers will be reticent to fully return to past habits.

All of which leaves time for food retailers to further improve their own prepared-food games. Some supermarkets saw a foodservice lift during the recession, driven by consumers who wanted convenience without restaurant prices. Predictably, the biggest gains went to retailers who had made long-term commitments to this segment. But even those with lesser efforts can bolster their competitive stance against restaurants.

Recent stories in SN outline a range of initiatives, including some retailers making prepared foods into a more exciting draw. An article this week outlines how Woodbury, Conn.-based LaBonne's Markets uses in-store special events to spotlight fresh prepared foods and desserts and even reward loyal customers.

Other retailers are conveying the healthfulness of prepared foods. Fresh & Easy Neighborhood Market just unveiled EatWell, a line of 17 healthy, ready-to-eat prepared meals and side dishes, each considered low in calories, fat and sodium.

Still, the most important factor in marketing prepared foods is value as compared to restaurants. An SN article last month about Dash's Market, Buffalo, N.Y., revealed how this operator's high-quality offerings are driving sales despite hefty competition. A dinner that includes a 10-ounce piece of line-caught haddock at $6.95 would sell for $12-$13 in a restaurant, said one of the retailer's owners. Dash's extra-leg, slow roasted chicken is the “biggest bird in the market” and yet sells for only $6.95 at all times, according to the retailer.

The approaches cited here — focusing on excitement, health and value — are only some of the strategies available to retailers. The end game is to strengthen the perception of in-store prepared foods before restaurants accelerate their own climb back.

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Contributors

Julie Gallagher

Julie Gallagher’s delicious foray into coverage of the food industry was purely accidental. With a background in technology, she joined Supermarket News as associate editor of its Technology...

Mark Hamstra

Mark Hamstra is the editor of the Retail/Financial section of Supermarket News covering mergers and acquisitions, quarterly earnings reports, executive changes and other significant events and trends...
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In their Viewpoints columns, SN editors give their perspectives on current industry issues.

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