Since the beginning of the year, foodservice researchers have reported shifting consumer attitudes that could have an effect on prepared food sales at retail. And some analysts say that restaurants may be poised to take back lost market share now that consumers are spending a little more of their discretionary income.
“Supermarket [prepared food programs] did much better than restaurants during the recession, but now restaurants are trying to take it back with catering and easier pick-up,” said Ron Paul, president and chief executive officer of Chicago-based Technomic.
Whether it's fast food, fast-casual or casual-dining establishments, many segments of the restaurant industry already have been launching aggressive promotions such as “kids eat free,” and issuing coupons at a steady clip, and they're not letting up.
Paul and other food industry experts said retailers have improved their prepared foods immensely over the last few years, but what is sadly lacking is communication — communication about the freshness of their products, for instance.
“Many, maybe most, supermarkets bake bread every day in their stores, but do their customers know that? Retailers need to tell them.”
Several retailers told SN that their prepared food programs did quite well over this past year, and they have plans to keep these departments performing.
“We have had a good year. Our sales last year were up overall, but as we go into this new year, we will watch pricing of goods closely to stay competitive,” said Diane Earl, business director of deli/foodservice at United Supermarkets, Lubbock, Texas. Earl added that breakfast has become an “extremely strong” part of the company's prepared food business, particularly at the company's upscale Market Street locations.
Kowalski's is a great example, in many ways, of what retailers can do to keep their prepared food programs growing.
“Our prepared food sales are up double digits from last year,” said Terri Bennis, the St. Paul, Minn.-based grocer's vice president of fresh food operations.
Bennis said she keeps the prepared foods menu fresh in more ways than one — constantly adding new items, and employing popular restaurant techniques, such as preparing food in front of customers.
“Our panini program itself has grown by double digits in the last year,” Bennis said. “Customers don't mind waiting for a nice, hot sandwich,” especially one they see being made. The panini menu boasts 24 varieties.
Kowalski's makes a conscious effort to stay on top of trends and tries to make the most of them, Bennis said.
“Kale, for example, of all things, is getting popular and we're exploiting it in our delis. We're making several kale salads and we have a hard time keeping up. We started last year with just a couple, and we've added more.”
Brussels sprouts are another vegetable that's getting attention — and a lot of rings — at Kowalski's.
“We have a brussels sprouts and pecan dish that's brand new and doing well. It's not just corn and carrots anymore,” Bennis said.
The growing popularity of once-ignored vegetables was recently underscored by Melissa Abbott, director of culinary insights at the Hartman Group, Bellevue, Wash.
Abbott told SN she has seen a large variety of vegetables — brussels sprouts one of them — enjoying newfound popularity.
In addition to catering to consumer tastes in vegetables, Kowalski's is keenly aware of keeping variety “fresh,” as Bennis calls it, meaning rotating menu items and regularly adding new ones.
“At least every quarter, we add new items to the menu.”
The upscale independent has recently launched Indian entrees at some stores, and is working on an Asian program.
Kowalski's even keeps its homemade soup menu interesting by adding such attention-getters as “lasagna soup,” with diced tomatoes, Italian sausage, onions, ricotta and Parmesan cheeses, noodles and an accent of basil and garlic. Customers can find out about these latest new flavors, and their origins, in the company's newsletter.
Featured theme dinner nights such as Friday night fish fries and Monday night chicken continue to bring customers in, Bennis said, and Kowalski's intends to add theme nights on Tuesdays and Thursdays.
Such theme nights have worked well to keep sales going at McCaffrey's Markets, Langhorne, Pa., said Mark Eckhouse, the three-unit independent's vice president.
“We're doing as well as we did last year, especially with our Italian night and American night. Those have stayed successful for us,” Eckhouse said. “The whole family comes in and they have dinner and then do their food shopping. It's great convenience for them, and fun.”
Although McCaffrey's prepared food sales are currently flat, Eckhouse said a number of factors enter into that.
“Our overall [storewide] sales are fine. So for one thing, I think people are just doing more cooking at home.”
While almost 25% of respondents in a just-released Mintel study said they'll spend less or the same in restaurants this year, compared with 2010, some observers have seen local restaurant business picking up. And many restaurant chains have launched successful, aggressive promotions in their efforts to lure diners back.
Eckhouse at McCaffrey's said he sees casual restaurants in his area doing a huge weekend business. He thinks it's possible that locals are indeed cooking more during the week, but then treating themselves to a moderately priced meal out on the weekend.
“One recent Saturday night, there were lines outside waiting to get in at all the casual-dining restaurants in our little community.”
Mintel's most recent study shows that most of the respondents who said they'll spend more money eating out this year, said they'll do so in casual restaurants. Those loosened purse strings could be seen as an added opportunity for retailers.
“Foodservice growth has been in takeout meals,” said Harry Balzer, vice president of the NPD Group in Chicago.
“The No. 1 reason for going to a restaurant is not wanting to cook. Who will do my cooking?”
It certainly could be a supermarket prepared food department, since 63% of respondents in Mintel's study said that it is too expensive to eat out regularly.
But Technomic's Ron Paul stresses that restaurants are looking for new ways to try to take back the share they lost during the recession.
“Things are changing from the last couple of years,” Paul said. “For example, all the major chains and some independents have recognized what they can do with catering.”
Not only that, but restaurants have a big advantage over retailers when it comes to takeout food, he added.
“Think about this. Some restaurants already are willing to bring takeout orders right out to the car. People don't have to unfasten the baby seat, or even open their car door.”
Paul added that increasingly sophisticated mobile devices are making it even easier for restaurants to capitalize on takeout.
“You can probably prepay, as well as order over the phone. Soon, you'll be able to just swipe your smartphone.”
Strangely though, United Supermarkets, one of the few retailers that operates drive-up windows at select locations, has not seen a lot of growth in usage.
“It's not growing but it's strong,” Earl said.
Researchers agreed that customers, both at foodservice establishments and at retail prepared food cases, are looking for value and freshness. Communicating those attributes loud and clear is essential.
In Simsbury, Conn., the new owners of Fitzgerald's Foods — Bryan and Sandy Devoe — did just that, and to good advantage.
For weeks after they had acquired the local-landmark Fitzgerald's, the Devoes ran a full-page information ad in the local weekly newspaper.
“It just told people what we have here, what changes we've made. That we've put in a new full-service bakery, have chefs preparing fresh food everyday,” said Devoe.
That has paid off. He attributes an 11% boost in sales year-to-date to getting the “fresh” message out to the community.
When it comes to value, Technomic's research showed that seven out of 10 customers who had been using coupons to cut down the expense of casual dining will continue to do so even as their financial situations continue to improve.
Other studies indicate that nearly two-thirds of consumers say the recession has changed the way they're spending and will spend in the future.
Consumers are trading up from fast food to casual dining, according to Mintel's research. And, retailers have a new challenge with the quickly growing fast-casual restaurants in between, such as Chipotle and Panera Bread, said Neil Stern, senior partner, at McMillan Doolittle, a Chicago research and consulting firm.
“The major change towards fast-casual dining represents both an opportunity and threat to supermarkets,” Stern pointed out. “Supermarkets need to continue to find ways to offer affordable, accessible and flavorful foods to the consumer or they are at risk to losing to these new players.”
Stern noted that while retail prepared food held up well during the recession, people perceive that the economy is lightening up and they feel they can spend a little more money.
Other industry sources, including retail consultant Brian Salus, president, Salus & Associates, Midlothian, Va., warned that retailers should ready themselves to compete with restaurants.
“The restaurant industry is not standing still in trying to hold their share of the consumer's food dollar. The battleground is based in value, bundled meals and takeout,” Salus said, citing successful, value-focused marketing programs such as Applebee's “2 for $20” menu, which offers diners one appetizer and two entrees for $20.
“Retailers need to take note of that, and compete so they can hold their business and be well positioned as the economy improves. If they don't, the road back will be that much harder in the future.”
At Mintel, Eric Giandelone, director of foodservice research, said retailers could be doing a much better job of marketing their prepared foods.
“You don't hear or see any advertising focused on prepared foods. At any rate, if I were a retailer right now, I'd be watching my prepared food sales very, very closely to see what my customers want,” Giandelone said. “If the economy continues to improve later in 2011, they [retail customers] will have more money to spend.”
