Value-added poultry is here to stay in meat and deli cases across the country, retailers report.
The growth spurt experienced by the once-fledgling category has been good for everyone involved, retailers and wholesalers say, and there is room for still more expansion -- if not in the meat case, then at least in the variety of products vying for case space.
Far from being daunted by competition from Kentucky Fried Chicken, Boston Market or Kenny Rogers Roasters, retail meat executives expressed gratitude that those chains have upped the ante in the market for poultry products -- and, indirectly, provided a way for retailers to increase sales for a historically dormant section of the meat case.
"We do quite a bit of value-added product, and maybe 15% to 20% of it is poultry," said Russell Kates, co-owner of Steele's Markets, Fort Collins, Colo. "I'd say five years down the road, value-added is going to be the majority of sales. It's currently about 75% of lettuce sales, and I think that poultry is going to go the same way."
Now the major concern is to make sure they maintain the market share they have gained from these developments.
"I think the grocery business' job is to get the customers back from restaurants. I think Boston Market stole their idea from us and we need to steal it back," Kates said.
"They opened a store about eight months ago near one of our stores. Before it opened my store there was selling about 25 [rotisserie] birds a day, and since it's been open they sell about 60."
Kates said he thought customers preferred Steele's birds "because we're cheaper and better tasting." "Boston Market, Kenny Rogers -- those chains have helped our business, not hurt it," he added. It has had an impact on other value-added items as well as rotisserie, Kates said, because customers get used to the idea of prepared poultry and are more likely to experiment with similar items in the meat case.
Food-service operators have done great things for the future of value-added poultry in supermarkets, agreed Jeff Farnsworth, director of meat operations at Copps Corp., Stevens Point, Wis. "As the KFCs and Boston Markets begin to refocus their efforts on bundled-type product, obviously that draws greater attention to supermarkets via the deli," he said.
"The net effect to the industry is good: We turned to value-added to help maintain our market share; because with all that's available from other sources, if we were still just trying to sell whole birds or plain parts, eventually our market share would be nonexistent."
That food-service impact has been dramatic in the 300-mile area serviced by the Boise, Idaho, division of wholesaler Associated Foods, according to Bob Simmons, meat manager.
"Out here in last five to six years, stores went from not even having a service deli to where about 60% have them now. They're serving hot, cooked chicken, and that is an enormous volume item in those delis. Some of those guys say that their cooked chicken sales represent 60% of their deli sales."
From there, there's a trickle-down effect to the meat counter, he told SN. "It's processed itself down the line to the meat case, where raw product is ready to cook in the same manner.
While the convenience keeps customers happy, higher rings are keeping retailers and wholesalers smiling, too. "From the standpoint of our business, it's a very good thing," Simmons continued.
"The profit margins that the retailer is able to make on these types of products is much, much higher than selling the whole chicken, which costs maybe 55 cents, would get an everyday price point of 69 cents and on ad sell for 49 cents [per pound]: The chicken industry used to give it away just to move it. "That's why the smart [suppliers] like Don Tyson figured out a way to process it or package it to get more money out of it: he gets more money out of it, I get more money out of it and so does the retailer."
All of the meat executives polled by SN seemed to agree, and are anxious to see the category flourish some more.
"Certainly the category is going to grow, with the importance of convenience to today's consumers. Added value of all the possible options is where we have to go," said Eddie McCoy, senior director of meat operations at Acme Markets of Virginia, North Tazewell, Va.
"We're doing less of a job on it than we should be, but have to take economics into account," he told SN. "In our area we can't have the success with these kinds of products the way they can in, say, Atlanta." Acme's customers tend to be older, with average incomes, he explained.
However, McCoy also contends that, ultimately, retailers must make the effort to change customers' attitudes toward new products -- and not settle for reflecting their shoppers' current predilections.
"That's the wrong way around. We as the retailers have to create the demand. Everything starts slow; new products take a while to take off, and everyone just has to keep that in mind."
The poultry products that are the most successful in McCoy's stores are the ones seen as particularly healthy, such as boneless, skinless chicken breasts.
"Breast meat is 35% to 40% of our sales in fresh poultry. I don't know whether it's because of health concerns and people's doctors telling them that's what they have to eat. We have a little bit of an older clientele here, so it's possible."
He said he is still optimistic about the gradual acceptance of a wider selection of value-added products by his customers.
"We're still kind of just getting started with products like stir-fry, so I can't make any predictions about its success here at this time.
"We have some of Tyson's value-added products and we're trying to grow that business," he said.
Retailers named boneless, skinless chicken breasts as the consumers' favorite all over, though whether their customers favor them marinated, stuffed, Kiev-style or barbecued seems to vary according to region.
Some meat executives, however, say it's only a matter of time until there is acceptance of every type of value-added product, not segmented by region but universally.
"I don't think that the more exotic products are regional," said Tom Moore, director of meat, poultry and seafood operations at Balls Food Stores in Kansas City, Kan. "I was in Canada and Buffalo and I saw all this Cajun-style poultry, and I find that that's also very much in demand in this area in Kansas City. So I don't think it's a regional thing, I think people are so mobile today it doesn't really make much difference.
"I would say the outlook for this category is pretty good; demand is certainly destined to continue increasing, " Moore added.
At Balls, one of the most popular categories is marinated whole chickens and chicken parts. "Some people are even going to be coming out now with smoked chicken that has flavors added, like smoked jalapeno-flavored.
"We do it all in the store, with very stringent sanitation, and have designated people to do marinating. We also do a tremendous job on stir-fry chicken," Moore said.
Balls developed the value-added program in full service and then began stocking it in the self-service section as well. "The movement has been excellent."
Turkey items are also selling well, Moore said, but the most popular products are still turkey tenderloins and steaks rather than marinated, flavored or breaded cutlets. While the poultry industry has indicated that turkey products will provide the next big innovations in the meat case, wasn't so sure.
"It's hard to say what the next biggest value-added trend is going to be," he told SN. "I never thought five years ago that we'd be selling marinated chicken breasts, so who knows?"
Turkey suppliers have a lot of work ahead of them to get their value-added business up to the standard that the chicken industry has achieved, said Simmons of Associated.
"Turkey is coming on line a little bit -- they've got a long way to go yet in market," he told SN. "But you are seeing some that is further processed, packaged and spiced, and different types of fresh turkey products are coming out on the market. Obviously the biggest one in the last five to six years is ground turkey, but that's their only real large success right now.
"We do sell some turkey breast fillets or breast slices, but not very much, and the turkey companies have not elevated anywhere near where the Don Tysons have in packaged product."
At Copps stores, meanwhile, turkey unexpectedly has become the department's rising star, according to Farnsworth.
"One of the most pleasant surprises has been the growth of the fresh turkey parts program," he said. The program, which started about a year and a half ago, has been so popular it has warranted an increase in space. Fresh turkey parts currently occupy four linear feet, or 16 feet total.
In some Copps stores the value-added items are available only in the full-service case, but in others they can be found in the self-service case as well. Farnworth said that pointed to a challenge for the category: space.
"Space is always difficult -- there are more ideas out there now than what you have space for, but we get around that by doing smaller batches and smaller displays. When you get into specialty product, you don't need a whole row. If you have a section of different marinated products, you don't need a lot of them, you can have just a few of each."
Marinated products also have been a big hit at Copps, and the chain recently put vacuum tumblers in all of its biggest stores.
Other successful products have been stuffed items, such as Cornish hens, roasters and chicken breasts, as well as chicken Kiev and chicken cordon bleu. Chicken fajitas are the newest effort in the case, and are also selling well, he added.
"There's also been tremendous increase in [individually quick frozen] product," Farnsworth noted. "Demand for boneless, skinless breasts and drummettes continues to grow."
Farnsworth has found that although the markup on value-added products overall does not seem to be a deterrent to customers, not every item does equally well in every region.
One thing that Copps has found to be particularly effective in persuading customers to purchase value-added products is the placement of cooking instructions on package labels. "It's not always possible, but it seems to make a big difference to the consumers."
In any case, consumers are now savvy enough not to price-shop when it comes to prepared foods, Simmons noted.
"We used to virtually give chicken away, but now these items are $2.29 in cost, sell for $2.99 on ad, and about $3.49 not on ad, for boneless, skinless product. The consumer is smarter nowadays -- she knows that if she's buying just chicken breast meat at $2.99, even compared to bone-in at $1.98, it's a better value."
Patience and diligence are absolutely essential to the nurturing of value-added programs, according to Farnsworth.
"You have to make the commitment to space and to the markdown you're willing to accept until they realize that it's not just a one-time deal, it's a program and it's going to be there all the time."
Steele's now boasts a separate value-added section in the meat department, which Kates was inspired to institute after the Food Marketing Institute conference in Phoenix last year.
"When we first put it in, it started slow, but since then it has shown significant progress," he said.
The product mix includes marinated bone-in turkey as well as chicken breasts, stuffed breasts and fajitas. The marinated items are also cooked and sold hot in the deli.
"Marinated chicken breast is the newest item at Steele's. It's all done here -- we bought a tumbler and we package it up ourselves."
Doing this in-store is definitely cheaper than having the items supplied, Kates said. "Take something like Chicken by George -- you can make something real similar to that for a lot less."
Like Farnsworth, Kates doesn't see any reluctance among his customers to pay the premium associated with value-added.
"People seem to equate higher price with meaning they don't have to do any work, so they don't care about the price," he said.
"There are always going to be the people who want to make it from scratch, but basically everybody's in a hurry."
Improvements in packaging have contributed to the wider acceptance of new products among consumers, Kates said. "I think packaging has helped. It's come a long way from a couple of years ago. Customers can see the product better, and it holds product better."
In the regions Simmons services, there has been conclusive movement toward value-added over the last few years.
"Now they've got four or five sections that virtually didn't exist years ago, and the whole body fryers are cut down to just one or two rows."
In the 300-mile area he covers, marinated products have not been very successful. "But we sell quite a bit chicken tenders, which is what most people will use for stir-fry and fajitas.
"Our stores, like many others, have gotten to the point where they'll take the chicken tenders and add vegetables for stir-fry on the tray, and wrap the whole thing so customers just take it right out of the package and throw it in the wok or frying pan."
In other stores it's the space constrictions that determine product mix. "In the last few years now there are 4- to 5-foot sections for boneless, skinless, and including thigh meat and tenders, that probably constitutes about 50% of the case now. "