CHICAGO -- Reflecting the strength of its food-service operation, Ukrop's is not in the supermarket business -- it's in the meal business, according to James E. Ukrop, vice president and chief executive officer of the Richmond, Va.-based chain.
"We're in the business of selling meal solutions that meet the needs of our consumers' lifestyles," Ukrop said during a presentation at the Speaks session at last week's annual convention of the Food Marketing Institute here.
Being in the home-meal replacement business means that competition comes from other companies in that business, Ukrop noted, "because your traditional competitors have so much invested in the way they've always done things that it's hard for them to switch gears, change the way they compete and search out new markets.
"I agree with the experts who say that in mature industries, your competitors are not the companies that compete with you but the ones you don't know about."
He said experience helped him reach that conclusion five years ago "after we discovered we weren't making any money on our rotisserie chicken operation, and the head of our food-service department said we had to raise our price.
"I told her we couldn't do that because we were charging the same amount as the other local grocery stores, and she said they aren't our competition -- that our competitors are Kentucky Fried Chicken, Boston Market and Arby's.
"We believe that our chicken is as good as theirs, and even with a price increase, our product would still cost less, so we increased the price by $2 per chicken, and I waited for sales to crash and for irate customers to bust down my door.
"However, I don't think I received a single angry letter, and when we tracked our chicken sales later that year, you couldn't see the week when the price increase was made. Chicken sales just kept going up until we led all our markets in sales, ahead of KFC and all the other takeout chains.
"The reason is that we sell a great-tasting product that offers a good consumer value."
In deciding how to source its stores, Ukrop's decided to use an outside commissary "because we knew quality control -- ensuring food safety and consistency of taste -- would be difficult at store level," Ukrop said.
"But that was in the late 1980s, when there weren't any vendors in the United States that could supply the products we needed. Today I think retailers have a choice because more vendors are capable of supplying prepared foods. But you have to pick your suppliers carefully."
According to Ukrop, the supermarket business, where the goal is to keep all the shelves filled all day long, is different from the restaurant business, where rapid turnover is more desirable. "You can't store product for later sales, and the secret is having your prepared foods ready and displayed as close as possible to the time they'll be purchased," he said. "Your suppliers have to share your culture and commitment to food service. If you pick the right vendors, it becomes a competitive advantage."
Ukrop said he believes his company still has a long way to go to master meal solutions. "We have succeeded to some extent in establishing our supermarket as a brand, but we are now trying to become more proactive in the area of selling -- trying to adopt more of a department store mentality and to sell our products more aggressively by encouraging customers to buy more products through cross merchandising and suggestive selling.
"But the business is constantly evolving, and there is no single prototype store or concept that will work for everyone."
Ukrop offered four suggestions to companies just starting out in home-meal replacement: An extremely strong commitment from top management. "It sounds like a cliche, but it's very critical because when any company ventures into food service, it is taking a risk that will affect the success of its entire operation.
"If you run a clean, creative and friendly prepared foods department, it will make the rest of your store appear that way. But if you make only a token effort and it shows up in the form of bad-tasting food or a department with signs of contamination, it will undermine your entire operation.'
A strong person to run the program, "someone who knows food, who has a passion for food and will do everything possible to make your program succeed."
A good source of supply, "either a central kitchen or suppliers who share your commitment and culture and are willing to form a lasting partnership."
Good execution. "It all comes down to who can execute better than the other guy. If you take care of the little things, the big things will take care of themselves."
Prior to introducing Ukrop, Michael Sansolo, group vice president for the FMI, cited statistics from the FMI's annual Trends study that showed 82.8% of companies surveyed do some food-service preparation at store level; 60.5% rely to some degree on outside suppliers; and 13.4% use a central commissary.
Among other Trends statistics cited by Sansolo were these:
Prepared foods (those that are fully cooked or ready-to-eat) are being offered by 74.9% of supermarkets, compared with 63.1% a year ago. If all companies follow through with their plans, Sansolo said that number will rise to 82.2% this year.
Supermarkets were named by 22% of consumers as their main source for food eaten, but not prepared, at home -- a 10-point jump from results in the 1996 survey, putting supermarkets about even with regular restaurants, cited by 21% of respondents.
While fast-food restaurants continue to lead the pack as the main source of food prepared outside and eaten at home for 41% of respondents, the total is down from 48% in 1996.
Supermarkets are showing more sophistication in planning food-service menus, with 58.7% indicating they rotate menus by season; 55% by week; 32.2% by themes; and 31.5% by time of day.
Professional chefs have been hired by 43.3% of supermarkets with food-service operations, and 81.1% said they staff their departments with restaurant or food-service workers.