ST. LOUIS -- Consumer data can be the fuel that drives both sales and profits to new heights in supermarket deli and bakery departments.
And finding ways to harvest that data and use it to best advantage are major priorities at the International Dairy-Deli-Bakery Association, Madison, Wis., said IDDBA president Ed Meyer, who is also director of deli-seafood-carryout food at Schnuck Markets here.
The consumer definitely takes the spotlight at the association's Dairy-Deli-Bake '99 in New Orleans, June 6 to 8, he said.
At the upcoming show, new research data will be presented and compared with consumer data collected in IDDBA's benchmark study of five years ago. And Meyer will describe the agenda of IDDBA's newly formed task force, whose aim is to get the industry to use standardized random-weight number systems.
"We're looking at how to get better data and how to use it for category management. It's not enough just to have the information. We also need to use sound data-mining techniques to make sound business decisions," Meyer said.
"We need to find out what our customers need and then fill those needs so we can keep them coming back," he added.
Meyer pointed out that technology has fostered partnerships with suppliers that have helped keep costs down and that technology has also worked to forge new routes to sales.
"We see so many retailers now with Web sites and Internet ordering systems. Let's face it, you can't afford to leave any chip unturned when it comes to serving customers."
In a pre-show interview with SN, Meyer described the jam-packed Dairy-Deli-Bake agenda and also talked about challenges and opportunities ahead for IDDBA members. Following are highlights of the interview.
SN: What are the major issues facing retailers and their suppliers this year? What have you, in your role as IDDBA president, done to help IDDBA members face those issues?
MEYER: The major issues really don't change much, year-to-year. For the most part, though, we're looking at distribution channels, identifying new products, gaining market share, finding good employees, and the ever-present challenge of food safety.
The biggest hurdle is technology. And not just the Y2K-compliance issues, although those are major. We're looking at how to get better data, how to use it for category management, and how to gain more acceptance of standardized random-weight numbers.
As president, I've been very fortunate that the board of directors has approved my proposal for a task force to gain industry commitment to using standardized random-weight numbering systems. By bringing together the retailers, the manufacturers, the equipment people and the information analysts, we'll have accurate data that will allow us to make actionable decisions on product mix and assortment. It's not enough to have the information, we need to be able to use data-mining techniques to make sound business decisions.
SN: What do you see as the future of home-meal replacement? But before you answer, how do you define HMR?
MEYER: The term HMR was very successful in categorizing a segment of the industry that needed attention. In fact, FMI did all of us a huge favor when they introduced their first meal-solutions conference.
By waving a red flag, they were able to get the industry focused enough to see that the quick-serve, informal restaurants were capturing a big piece of the market. I'm not going to say [quick service restaurants] "stole" that segment from us; they didn't. What they did do was to create a demand that no one knew was there until they had a big piece of the drive-home market.
As a retailer, I'm happy to embrace new ideas and marketing strategies no matter where they come from. The fact that Boston Market and similar operations have experienced decline indicates they had their 15 minutes of fame but were unable to sustain it in a way that kept the customers coming back.
Supermarkets will always have an opportunity that doesn't exist in other formats. Our challenge is to figure out what are our customer needs and how we can fill that need. A cookie-cutter approach is not the answer.
As for a definition of HMR, let's look at what it isn't first. Home -- some meals are eaten at home but just as many aren't eaten there. They're eaten at the office, in the car, or anywhere people gather. Meals -- no problem there. Replacement -- replace what? We're not replacing a meal with a meal. The concept of HMR and the term was a great hook but it didn't have any meaning at all to the customer.
My definition of HMR is based on the customer. They're looking for convenience. They're looking for a meal or a snack. They're looking for a solution that will allow them to fulfill a number of issues: meals for the family, meals for the individual, meals for convenience, meals for easy clean-up, and even meals because they're hungry! In short, convenient meal solutions can only be defined by the customer.
MEYER: Ethnic foods are limitless in options and really allow retailers to make signature statements about their products. Some offer a full menu all the time and some offer selected menus on different nights. Consumers want to know they can vary their menu by selecting Italian, Mexican, Greek, comfort foods, Mediterranean, or any other meal category or blend of cultures.
Our customers can't always buy a new car or go to Club Med, but they can treat their families and friends to an exotic meal or just a great tasting adventure. Ethnic foods are very important. As much as I love meat loaf and mashed potatoes, I wouldn't love it night after night. Variety is the spice of retailing.
MEYER: Well, first of all, not everyone would agree that they've lost business, or, at least, not a major piece of it. We can't expect to have the same mix that we had 50, 29, 10 or even five years ago. Society has changed and the consumer has changed with it.
If supermarkets have lost business it's because they've failed to recognize that someone else was satisfying the consumer better than they were. Most people see supermarkets as the place they go to buy groceries, or ingredients if you will. It's only been lately that we're marketing ourselves as an alternative to restaurant meals.
We've had prepared foods for a long time but we haven't focused on them as much as we have lately. We haven't understood that the consumer wants help in making their lives easier. And if pulling up to a drive-through and not getting out of the car is what a particular consumer needs on a particular night, we're not going to get that business. What we can get is the customer who has options, who recognizes that there are more healthful, tasteful or less costly meal alternatives. But we have to let them know. We have to educate them to our business. We have to teach them to shop our stores. Shame on the retailer who doesn't understand that their job is more than setting the case and hoping "they will come."
SN: One of the speakers this year, Dr. Rogers, is going to focus on meats and cheese in the deli. Would you comment on those traditional deli items and their role in profitable sales in the midst of all the talk about meal solutions?
MEYER: Meal solutions has been this decade's "new kid on the block." It's gotten all the attention, received lots of press, had tons of money thrown at it, and has been a star, at least in the media. As great as it's been, it still hasn't displaced meat and cheese as the backbone of deli sales. The numbers don't lie and we thought it was time to remind the industry that the bigger profits came with the old standbys.
SN: Can you also provide a preview of your presentation in New Orleans on a new initiative for using Universal Product Codes to drive market-level data collection?
MEYER: Every retailer has tons of information. The better the scan rate, the better the data. The better the data, the better the decision about how to operate the category. Source-marked products have very, very high accuracy in terms of what comes in the back door vs. what goes out the front door. That's not true with perishable products, especially the deli and bakery random-weight or variable-measure items. There are a couple of problems that hamper data collection. First of all, there aren't enough numbers in the Random Weight Number System 2 category to identify all the products that need identities. Second, the numbering system that we do have is voluntary.
What that means is that 10 different retailers could have 10 different numbers for the same item. When they sell that scan data to the information-collection houses, they have to manually convert each item to a standardized number. This is a monumental problem. It means little or limited data. It means expensive data. It means decisions are being made by the seat-of-the-pants more often than with solid information.
The IDDBA board of directors has voted to fund a major project that will bring all the different players together to see where the real stumbling blocks are, where technology is in terms of getting us more numbers or better UPC symbols, and how to drive usage of standardized numbering systems. This will facilitate better data collection, cheaper data collection.
And it will give us solid information from which to make actionable decisions at retail for deli and bakery departments and related dairy products. By being able to get the same benefits for random weight as we get from source-symbol marked UPCs, we can get information on market size, share in units and dollars; and distribution by market. Everybody wins.
SN: In your opinion, what changes has the great meal quest wrought in the supermarket deli and other perishables departments, in terms of cross merchandising, attention to bundling products, customer service, more use of the media for advertising?
MEYER: The biggest change is still a work in progress. Retailers have been forced to examine their operations and make business decisions based on their customer knowledge and customer base, rather than "me, too" decisions.
The "me, toos" are out there. But if they added programs without analyzing the need and execution, they lost a lot of money. You don't want to enter a major capital expansion program unless you know you can sustain it. Do you want to be bleeding edge or leading edge? For a lot of us, that means that the energy we put into a store opening or reopening needs to be sustained at a certain level.
SN: Has the retailer-supplier relationship changed in general in the industry? What forces are spurring that change and what are the implications for the future?
MEYER: We started out with a terminology change. We called everybody "partners." Well, I have to tell you, it took a long time for the reality to catch up with the marketing. Being a partner implies a high level of trust -- a level that doesn't happen overnight, especially when your history has been that of trying to get the lowest price while your "partner" has tried to get the highest price.
Real change happens slowly. The biggest driver fostering partnership has been technology. Efficient Consumer Response, electronic data interchange and category management have made it imperative that we share information, embrace technology, and look to our partners for assistance in managing systems.
The more information we share, the lower the costs, the bigger the profit. In this case, sharing means profit-sharing.
SN: What new trends are emerging or accelerating in the industry and how, in your opinion, do they affect IDDBA members?
MEYER: It's not so much a new trend as the continuation of an existing one. It's the product proliferation that is forcing us to squeeze more and more new items into less and less space.
Manufacturers are constantly searching for the next "sliced bread" breakthrough. The new forces out the old or at least makes us examine the profit potential and the consumer need. That's why category management is so important; it lets us look at all the variables such as special population or seasonal items. Bottom-line numbers can be misleading if you don't look at everything.
We're seeing so many retailers with Web sites and Internet ordering systems now. Let's face it, you can't afford to leave any chip unturned when it comes to serving the customer. In 10 years, we'll be amazed at how primitive our early systems were. We're predicting the future by inventing it, here, now, day-by-day.
SN: How does your role as director of deli/seafood/carryout at Schnuck Markets, and other industry experience you've had, help you deal with issues facing IDDBA members?
MEYER: If you look at the programs and services the IDDBA has developed, you'll see one common thread. They're all retail-driven activities. Addressing the needs of the retailer is important for one major reason: their success is our business. I've been on many committees, I've been chairman of the Retail Advisory Committee, I've been on the board, and I've been an officer. All of my retail experiences have been critical in making sure that the product from all those activities has represented the retail viewpoint. The hardest thing is making certain that the retailers involved with the decision-making process represent the industry's ideas and not just their own. Based on the feedback, we've done a good job. IDDBA is a partnership between retailers, manufacturers, brokers and distributors.
MEYER: If I had to pick just one thing, I'd have to pick the new "Consumer in the Deli" and "Consumer in the Bakery" studies. It's very important to understand what the attitudes and buying triggers are for today's consumer. But when you can package that with data collected five years ago as a base line, and you can compare how their appetites, lifestyles and buying behavior have changed, then you've got something.
It's a cliche, but it's true: by understanding the past, you can predict the future. I haven't seen the study results yet, but if, for example, food safety wasn't in the Top 10 of consumer issues five years ago and it's jumped to the Top 5, that tells you a lot. Or if a product that was a No. 1 seller back then isn't even on the charts, that paints a different picture.
The public tastes are fickle. And if you invest major dollars into building departments or concepts that are just fads, then you're a very foolish retailer. Again, do we want to be a bleeding-edge retailer or a leading-edge retailer. Studies like this help us understand the consumer and evaluate our options. It takes more than facts; it takes understanding and analysis.
MEYER: Just one. And it's about food safety. The popular [consumer] press (TV, newspapers, magazines, news shows) are very quick to present the horrors of bad food safety. The public picks up on that and, without solid information, it can become their "viewpoint" and influence their shopping patterns.
As retailers, I think we have an inherent obligation to educate the consumer. We need to teach them how to prevent product abuse after it leaves the store, how to cook food to proper safety levels, how to store it and how to clean it.
Consumer education about food safety should be a major priority. One recent study showed that 95% of consumers made one or more food-safety errors that could have had serious foodborne illness implications. To me, that's absolutely unacceptable. By teaching the customers about proper handling and cooking, we protect them and we protect ourselves. It's everyone's responsibility and the industry has neglected to train the last link in the supply chain -- the consumer.