FUTURE OF FRESH

TOM ZIND

Perishables or perish: It's become the rallying cry for supermarkets trying to get their bearings as they head into the 21st century -- and the food retailing skirmishes that lie ahead. SN's interviews with retailers and consultants show where the battle lines are being drawn.

Today, fresh foods have become firmly established as a vital part of the supermarket product mix, but they're poised to play an even more central role as products become more convenient, varied, flavorful and nutritious.

For retailers anxious to cash in on the trend toward freshness, obstacles remain to be overcome -- but the rewards are great, said Bruce Axtman, president of The Perishables Group, Chicago, a fresh-foods marketing and research firm.

"[Perishables] will be a bigger part of why consumers shop one store over another, and they'll help shape even more how consumers shop the entire store, even the center of the store, especially as the meal-solutions focus of stores increases," he said.

In fulfilling consumer desires, retailers are learning that freshness is a key selling point in a crowded, competitive marketplace. Strong performers, open to innovation and new ideas, will be rewarded with loyal shoppers.

"In the center of the store, it's assumed that you'll have all the national brands, competitively priced," said Mike Baker, vice president of perishables for Nash Finch, the Minneapolis-based wholesale grocer. "So, in order to excel in the conventional supermarket format in the future, you have to excel in the perimeter of the store -- deli, produce, bakery and meat in particular."

Indeed, consumers are becoming more attuned to shopping "by the meal" in a retail setting, forcing retailers to re-examine their sourcing options, since a higher freshness quotient creates new operational burdens. Most notably, fresh foods require a growing emphasis on food safety in regards to store-level handling and merchandising, retailers said.

"Food safety has become a focus issue for consumers, and it's one that affects fresh departments a lot more," said Al Oliver, director of perishables for Ukrop's Super Markets, Richmond, Va. "There will be more demand on suppliers of fresh meat and seafood products, in particular, to provide [source] information so that retailers and consumers can be assured of where their products came from and their safety."

For example, the independent retailer's Ukrop's Own meat label, supplied by PM Holdings, is part of a case-ready program that bears the new "Ranch To Retail" logo. The phrase refers to a tracking system PM has created under which the handling of its products and their ultimate source can be documented for quality and safety -- from the animal's conception through to the feedlot and slaughterhouse, and on into the meat case. Nash Finch is also emphasizing food safety in its Ground Central Station ground-beef program. "Ground beef is an important category and this signature program establishes standards of excellence in dating, chill chain, grinding and source verification, whether case-ready or store ground," Baker said.

Food safety is one of the main reasons that supermarkets are looking for more ways to minimize fresh-food handling at the store level, without compromising a full selection of fresh foods that shoppers want. That trend is particularly evident in the fresh produce department, where in-store preparation of cut produce has been steadily curtailed as vendors improve their offerings. One of the biggest, untapped frontiers in the produce aisle is fresh-cut fruit, which retailers are increasingly looking to get from outside processors.

"In the low-margin, grocery-store environment, there's a big challenge in finding affordable and skilled labor to do a lot of this product preparation and deal with food-safety issues at the same time," said Joe D'Ottavio, a former prepared foods director of Gooding's, Apopka, Fla, and now general manager of Country Fresh Orlando, a division of Country Fresh, a Houston-based supplier of fresh-cut produce to supermarkets.

"The industry is going to move to more high-quality outsourcing, relying on third parties to do everything from meat cutting, to seafood sourcing and merchandising, to cut produce. The central kitchen/commissary concept also will become more important for retailers who want to retain control," he told SN.

Food safety is not the only challenge as fresh moves to the front. The growing array of fresh and prepared foods taking different forms promises to put retailers' category management skills to the test. Deciding what preparation tasks to outsource and which to retain in-store will require careful labor and product cost-benefit analysis.

And, unchanged of course, will be the need to balance the quest for more fresh-foods variety and a look of abundance with the need to control shrink, retailers said.

"Conventional supermarkets are going to be challenged and in some ways limited to what they can do with fresh because it's so driven by labor and, to a degree, by the talent needed to work with these products," noted Pete Davis, senior director of meat, seafood and sushi for Bristol Farms, a 12-store chain headquartered in El Segundo, Calif.

These competing factors -- freshness and convenience vs. food safety, shrink and the like -- could actually get in the way of efforts to further develop fresh foods, especially as the industry consolidates, industry observers warned. Howard Solganik, president of Solganik Associates, Dayton, Ohio, said large chains, in particular, may find themselves torn by conflicting desires as they seek to expand their fresh-foods offerings.

"Large supermarket chains tend not to like high-labor, short shelf-life products of questionable profitability," Solganik said. "In my view, most of the large supermarket companies would just as soon not have seafood, for instance."

However, the timing of consumer demand has helped to improve manufacturing and processing technologies. Today, a raft of food companies are eager to exploit the consumer desire for foods that are both fresh and convenient. As a result, there are more case-ready, prepackaged, semi-prepared and ready-to-eat products available to help retailers address the obstacles to selling more perishables. This trend is especially apparent in the meat department, retailers and consultants told SN.

"The major change taking place in the meat department is the move from strictly raw products to those that are either somewhat prepared, such as marinated, seasoned or sliced, to partially cooked; to, now, fully cooked and prepared," said John Tedesco, senior vice president of merchandising for Pittsburgh-based Giant Eagle Foods. "These new prepared products are designed to take home, heat and eat. They're still perishable, but they offer retailers a little longer shelf life, than, say, a rotisserie chicken, and they offer consumers the convenience of buying something ready-to-eat, in advance."

Led by industry trade associations like the National Cattlemen's Beef Association and National Pork Board, processors have developed new lines of such products, including Hormel Foods' new beef roast and IBP's Thomas E. Wilson line of precooked meats merchandised in the fresh-meat department. Such items represent the kinds of products bridging the gap between fresh and prepared that retailers may be more eager to embrace in the future, Tedesco said.

Also, an expansion of shelf-life preservation technologies, such as irradiation, modified-atmosphere packaging and even genetic engineering, may make fresh even more viable, retailers said. Such programs also may help supermarkets further develop store brands, which are seen as another new frontier in fresh foods -- particularly meat.

The one perishables department retailers say might have the most to gain from offering more prepared products is seafood. With many consumers confused and even intimidated by fresh seafood, retailers who can figure out how to take some of the guesswork and preparation hassles out of a high-dollar product may enjoy more success. Ukrop's Oliver, for instance, said he's sourcing more case-ready seafood entree products, like marinated catfish fillets, from vendors.

"The idea is to make them more meal-ready," he said.

Improved packaging of fresh seafood also may help retailers not only sell more, but cut down on product loss. Nash Finch's Baker said the company recently rolled out a new Seafood Sensations private label for its supermarket customers. The products represent a new approach to seafood merchandising in that it's sourced and shipped frozen, but merchandised in a semi-fresh form without being represented as truly fresh.

The so-called "Refresh" concept makes use of special Cryovac packaging that helps the item retain a fresh flavor and appearance, he said.

While supermarket companies will turn to better packaging and more vendor involvement in preparation to make fresh-foods operations easier, many stores will still feel pressured to project a food-service image. Consequently, on-site preparation of sandwiches and other grab-and-go foods will likely grow to be an even bigger part of some stores. Baker said Nash Finch-supplied stores are enjoying success with such items as freshly prepared pizza sold whole or by the slice, a signature cinnamon bun product and a selection of fresh-baked breads.

"All of these products also produce great, palatable aromas in the store, and provide an edge for stores competing with the large supercenters, where you more often than not smell tires rather than food," Baker said.

Despite the obvious lure of fresh foods, present business models will force retailers to approach the category with a dispassionate eye on the bottom line. While promising to become less costly to operate in some respects, perishables departments will still demand a careful cost-benefit analysis.

"The fresh side of the store is rapidly evolving beyond the commodity model that ruled it for a long time, presenting retailers with more opportunities to create value for the consumer," said Axtman, the consultant. "But retailers are going to have to be wary of the danger of just creating more costs by spreading more dollars across new fresh departments, without creating that value."

One method of minimizing the danger is to leverage cross-merchandising opportunities to develop a total-store approach to profit, he added.

"I see a continual trend toward integrating fresh throughout the store, and a focus on merchandising more fresh and non-fresh products together," said Axtman.