CHICAGO -- Even supermarkets entering the meals business with well-focused food-service programs, experienced chefs and well-developed business plans face an uphill struggle, according to three senior supermarket executives whose companies are deeply involved in meals programs.
The executives, Lewis Golub, chairman and chief executive officer of Price Chopper Supermarkets, Schenectady, N.Y.; David Ball, executive director of Hen House Markets, a subsidiary of Balls Food Stores, Kansas City, Kan.; and Larry Cantos, president and CEO of Pay Less Super Markets, Anderson, Ind., spoke at a roundtable organized by the Food Marketing Institute and Senn-Delaney, Chicago, and held just before the start of FMI's annual convention here.
The transition from the business of selling components -- the traditional grocer's role -- to that of food service has forced operators to make a major stretch, said Golub.
"The people we need didn't exist in supermarkets or restaurants," he said. Companies are being forced to develop a hybrid employee to develop the emerging and equally hybrid supermarket/food-service programs.
The business defies supermarket conventions. Shrink in supermarket food-service is enormous, Golub said, up to 20%. Yet Price Chopper's newer stores, which range from
65,000 to 85,000 square feet, will get additional space for food service and food courts.
While Price Chopper had many years of experience selling pizza and chicken, Golub said he found hiring chefs to be a pricey undertaking. "I doubt many stores with chefs make money."
Personnel, unfamiliar ingredients and technical matters are the three components of food service that can perplex supermarkets, Ball said.
And the human component has presented Ball Foods with its knottiest problems. To address it, the company has begun recruiting food-service employees from restaurants, community colleges and cooking schools.
Supermarkets do have a potential hiring advantage, considering the grueling hours and meager benefits many restaurant positions offer, Ball said. Supermarkets offer better and more predictable hours, more paid days off, profit-sharing programs, benefits and the opportunity for employees to spend more time with their families.
But Golub noted that although it might be easier to recruit more experienced food-service employees through bonuses and incentives, supermarkets already pay out an additional 30% of wages, on average, for benefits.
It's also difficult for chefs experienced in restaurant business practices -- where success or failure is frequently calculated by food costs -- to understand the demands of a gross-margin business, said Ball.
Cantos recommended that operators consider hiring employees with little food-service experience but lots of enthusiasm about food to defray the higher costs of employing professionals.
His company, Pay Less, which prepares meals for its stores in two commissaries, concentrates on service in the stores, and culinary expertise in the commissaries.
Golub said Price Chopper already does something similar in its meat departments, where meatcutters stick to cutting meat and other employees are trained in customer service. The same could be done in food service.
Cantos also said that hiring consultants is no panacea for companies trying to make the transition to food service. While he was pleased with the results of his company's experience with a supermarket food-service consultant who helped it develop goals, objectives, project teams, recipes and other components, Pay Less still had implementation problems.
Ball agreed that operators must be willing to hire people with culinary expertise, but also must be prepared to do their own in-store training. He compared that approach to the European model where food-service workers begin their apprenticeships at an early age.
Price Chopper is leaning towards more outsourced products in its meals programs, but only if the quality and price are good, or the product has local brand awareness.
Ball said he believes outsourcing will become more important in the coming years, with more meals being assembled in stores from outsourced components. Ball said he is very happy, for example, with an arrangement in the company's newest store, where a local barbecue operator smokes meat in the parking lot to be sold inside.
Cantos agreed that many more products continue to arrive in the market from suppliers more commonly doing business with restaurants, but the distribution system hasn't kept pace.
"We in the supermarkets are having a hard time finding a way to get those products, and they haven't figured out a way to get them to us, either," Cantos said. He recounted a story of an owner of two supermarkets well known for programs, who, in order to identify the local food-service suppliers, was forced to wait behind his favorite restaurant to get the names and telephone numbers of delivering suppliers.
But the most bedeviling problem is still the consumers' perception of supermarket meals, said Golub. While Pizza Hut does a booming business with pizza that frequently is cold by the time the consumer gets it home, supermarket pizza programs still labor under a stigma.
"Our Bella Roma pizza is as good or better than Pizza Hut pizza, and we have to find a way to communicate that to the consumer who's in the store two or three times a week," he said.
Golub recommended that operators don't follow the traditional method of introducing products at discounted prices when it comes to food service. Supermarkets need to communicate the quality of their products, not undermine their own hard work with deep discounting.
And he concluded that the future of the business will be shaped by technological and logistical change, and companies that survive will be those that can "change on a dime." Ball said he believed that independent supermarket operators are in the best position to spot the trends and adjust quickly to them. "The issue is, what does the customer want? Buying habits are changing regularly.
"We have all these elements in place and really high quality foods, but we don't get credit for it -- the restaurants do." Partially to establish that reputation for high quality, establishing a meals programs will mean "a long journey with no finishing point and no starting point," Ball predicted.