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Deli Health

Retailers are employing new tactics that have kept sales of higher-priced, healthy deli meats from slipping. That's the good news. The bad news is the recession is hampering growth. With consumers' awareness and concern about health and wellness at an all-time high, it could be a field day for just about any quality product labeled but not in this economy. As consumers tighten their purse strings,

Retailers are employing new tactics that have kept sales of higher-priced, healthy deli meats from slipping. That's the good news.

The bad news is the recession is hampering growth. With consumers' awareness and concern about health and wellness at an all-time high, it could be a field day for just about any quality product labeled “healthy” — but not in this economy.

As consumers tighten their purse strings, retailers have added new healthy lines they can retail for less, are showcasing private-label lines, have taken new steps to educate customers about the products, and have adjusted their advertising to put more emphasis on their value.

“We added a new [healthy deli meat] line that we can offer at just the right price point, and it took off right away,” said Richard Travaglione, vice president of perishables at Morton Williams Fresh Marketplace.

“It's a very high-quality product and customers like the price.”

Travaglione credits that line with keeping healthy deli meat sales steady, and actually growing a little bit at Morton Williams.

“The supplier, Hansel & Gretel [Glendale, N.Y., a manufacturer of processed meats] has worked very closely with us on this. We call the line Morton Williams Healthy Deli Heartwise.”

For the 12-unit, Bronx, N.Y.-based independent retailer — with most of its stores smack in the middle of Manhattan where competition is particularly fierce — the new line is a super plus.

“It actually serves a larger niche than most people would anticipate,” said Wayne Williamson, Hansel & Gretel's vice president, sales and marketing.

In a ramped-up marketing campaign, Hansel & Gretel is emphasizing the line's recently added Heartwise logo — cleared by the American Heart Association and the U.S. Department of Agriculture — and so is Morton Williams.

Travaglione said it's working even better than he had expected.

“I had tried some all-natural, national brands earlier but they didn't work. We had to retail them too high and they had no shelf life,” Travaglione told SN.

“This line puts us in the right place in this market. Our best sellers, though, in the deli meat category continue to be our store-roasted turkey and roast beef. That's not new. People know those products; they know they're done in-store and are fresh and natural.”

Those retail for about the same as the Morton Williams Healthy Deli line and both cost significantly less than some of the major healthy deli meat brands.

Industry observers told SN that even in this darkening economy, high-quality healthy deli meats, even at premium prices, can hold their own if retailers are diligent about explaining why such products command a higher price.

“There is a much greater awareness and desire on the part of consumers to live a healthier lifestyle, and it is remaining true despite a difficult economy,” said Neil Stern, senior partner, McMillan Doolittle, Chicago.

“Retailers can address these consumers by adding more products in the deli that are natural, but they also need to explain what this means and the benefits of the offer in order to justify what can be a higher retail.”

That is exactly what Kowalski's Markets has been doing, and with good results.

“We're still seeing growth in our Natural Path line of deli meats as we continue to educate our customers [about the line's attributes],” said Terri Bennis, vice president of perishables at the 10-unit, St. Paul, Minn.-based independent.

Bennis added that sales of the higher-priced line have slowed somewhat as the economy has worsened, but that it was still outperforming expectations.

Even though the price is comparable to a national brand of healthy deli meat that's also doing OK at Kowalski's, the private-label line is gaining.

“We see people switching over,” Bennis said.

It could be that it's the added attributes — and the fact that Kowalski's is aggressively touting those attributes — that are bringing customers over to Kowalski's Natural Path line.

“Ours is a truly all-natural line — no fillers, no preservatives, but also no antibiotics or hormones ever. We can make that claim,” Bennis said.

Family-owned Kowalski's has always made an effort to keep customers informed about its products, Bennis pointed out.

It accomplishes that task sometimes in creative ways. For example, the company's panini program uses only Natural Path all-natural deli meats, and makes that point clear with point-of-sale signs and blurbs in its ad circulars.

So if a customer orders a panini at a Kowalski's store, he's automatically getting a taste of the chain's private-label, all-natural line.

The line was given top billing and starred in multiple demos throughout the store during a chainwide Healthy Eating event in February.

With picnic season approaching, Natural Path deli meats also will play a major role in the next big chainwide event, which will focus on summer entertaining, Bennis said.

Also, on an everyday basis, Kowalski's deli associates know that they're expected to offer any customer ordering sliced meat a taste of Natural Path turkey or roast beef.

Out on the West Coast, Lamb's Thriftway sees sales of healthy deli meats — defined by the retailer as low- or no-fat or low- or no-sodium and also whole muscle meat without preservatives — growing on the pegboard in the dairy case, not in the service deli.

“The economy is taking its toll,” said Tanney Staffenson, advisor at five-unit Lamb's, based in Portland, Ore.

“Natural meat, led by Boar's Head, in the service deli has lost a little of its market share while [prepackaged] Oscar Meyer Deli Fresh's 98% fat-free is doing very well right now. So many of those prepacked lines have come out with low-fat product. Even Tillamook came out in the last year with a whole line of reduced-fat cheeses and they're doing well for us.”

Preservative-free deli meats — primarily prepackaged products — have shown strong growth recently. For the 52 weeks ending March 21, 2009, dollar sales of preservative-free lunch meat are up 29.1% on 41.6% volume growth, according to the Nielsen Co. Similarly, sales of antibiotic- and artificial hormone-free lunchmeats were up 13.9% on 8.1% volume growth during the same period.

Staffenson said Lamb's strategy is to take on as big a variety as it can of healthy meats in the service deli and to promote them heavily. The lines are still growing, slowly, “but some of our customers are forced to trade down a little.”

They're still looking for healthy items, but are paying a lot more attention to price, Staffenson said.

Part of the customer migration to prepackaged healthy meats is driven by price points, he explained. But at the same time, Boar's Head brand, both regular and natural deli meats priced at around $10 per pound, are doing OK in the service department.

“They have a following, and Boar's Head does a great job of marketing,” Staffenson said.

“You're going to see these [Boar's Head and other premium healthy items] continue to grow. We want to make sure we're marketing them effectively to those consumers [who are interested in them].”

The obvious growth Staffenson and others have noted in the self-service, prepackaged deli meats hanging in the dairy case could be the result of other factors than price, industry sources said.

“There's the longer shelf life, and customers know exactly what they're getting. They can see the quantity and the price,” said Terry Roberts, founder and president of Merchandising By Design/The Design Associates, Carrollton, Texas.

“When every penny counts, they don't want the extra slices on their request [at the service deli] for a half pound,” she added.

“It's the same issue we face with prepared foods by the pound. The consumer wants to know what his purchase is going to cost and not be surprised when he's handed a package they can't afford or don't want. Prepackaged takes that issue away.”

Every retailer SN talked to said healthy deli meats were doing pretty well until recently.

“They were OK through the holidays and even at the beginning of the year, when people cinch their belts and try to eat healthier,” Lamb's Staffenson said.

But after those first few weeks of the new year, price became a very big factor, he said.

Other sources agreed.

“Whatever you put on special price, they'll buy,” said Bennis at Kowalski's.

In fact, one observer said he has seen lines, long lines, forming to buy discount-price turkey breast, no matter whether it's touted as healthy or low-fat or low-salt, or even if it's a familiar brand. That it's on sale is what counts.

“Then, they're buying two pounds of it at a time.”

So some retailers, Kowalski's and Morton Williams included, have changed their advertising strategies to offer healthy deli meats frequently at a good discount. That gives the customer what they want at a price they feel they can afford and also hopefully will bring some new customers to the category. It's a good way to get them to test the flavor and quality of a product they might not be familiar with.

That's the idea, Bennis told SN. In a recent ad flier, Kowalski's offered Natural Path, oven-roasted turkey breast at $6.99 a pound, at a $3 dollar savings. The tag line said, “No added hormones or antibiotics ever!”

Meanwhile, every week in its circular, Morton Williams Fresh Marketplace advertises two items from its Morton Williams Healthy Deli Heartwise line at $5.99 a pound. That price is lowered $2 from the everyday price of $7.99.

Through these hard times, retailers and suppliers alike continued to sound optimistic about the future of the healthy deli meat category. Big growth ahead is predicted.

Sales of Hansel & Gretel's Healthy Deli Heartwise line has grown 24% in the past year, Williamson said, and he expects significant growth to continue.

Retailers base their high hopes on the fact that a whole range of quality healthy deli meats and cheeses has hit the market in the last year or two — long enough for consumers to taste the products and verify their quality. So the thought is that if customers are trading down for a while now, that won't last.

“Our hope is that when the economy lightens up, customers will remember those healthy products they liked,” and will trade up again, Staffenson said.