ON THE SPOT

Lynne Miller / Roseanne Harper / Julie Gallagher / Matthew Enis

Selling fresh food is a demanding business. Yet retailers know there's always a "to-do" list tacked to the wall.

Simply listening to consumers would be a good issue to tackle first. Smart retailers know one-size-fits-all merchandising doesn't work, so their best bet is to pay attention to shopper preferences and make changes store by store. Some changes are small, such as installing bigger, bolder signs to help shoppers navigate the produce department. Other changes, like launching a kosher deli, are more involved.

In a similar vein, retailers could learn a lot from quick-service restaurants. Regardless of the quality of the food, QSRs have mastered the art of delivering fresh, hot meals quickly. At the same time, deli service counters are places shoppers avoid when they're in a hurry.

The speed issue should be a priority for retailers who want a bigger share of the lucrative market for prepared foods. For competitive reasons, some managers are cranking up the speed of service delivery in their prepared foods and deli departments. In some cases, they're using technology to make quick service a reality.

Managers who are serious about category management have a new tool at their disposal -- fresh item management software programs. SN talked to one analyst who used numbers to make a strong argument for FIM programs. Not surprisingly, retailers are reluctant to adopt the systems completely.

With foodborne illnesses and food-safety scares in the headlines, retailers should give some thought to enhancing food-safety training and traceback programs. On the pages that follow, SN reviews the top issues that deserve more attention from fresh-food retailers.

INITIATIVE 1: MAKE IT SNAPPY!

With lunchtime customers in a hurry, it's no wonder quick-service restaurants get the lion's share of their business.

Supermarket delis long have suffered from the perception of slow service. However, a handful of retailers are addressing the problem. Some have rolled out kiosk-ordering and menu-faxing. Others have added dedicated cash registers during busiest hours, and are devoting more space to grab-and-go favorites.

"We're going to incorporate deli ordering into our 'Shopping Buddy' system," said Robert Keane, spokesman for 365-unit Stop & Shop Cos., Quincy, Mass. "When we do that, customers will be able to put their orders into the deli as they walk around the store and pick them up when they're ready. Right now, we have ordering kiosks next to the deli in many of our stores. Customers can specify exactly what they want, even the thickness of slices. The [public address] systems notify them when their order's ready."

The Shopping Buddy system, being tested in three stores and slated to go into additional units next year, is a computer-based program tied into customers' loyalty cards. Shoppers pick up a hand-held computer that tells them where their favorites are in the store and alerts them to specials. Officials hope adding deli-ordering to the system will take care of long lines, Keane said.

Meanwhile, Food Town, Middletown, N.J., started faxing its lunch specials to businesses near its Super Food Town units, officials said. The specials are batch-faxed and e-mailed by 11 a.m. each day.

"A few months ago, at one of our busiest stores, we put a sign-up sheet at the service counter and suggested people give us their fax number or e-mail address so we can send the special and the soups of the day to them," said Elton Reid, director, fresh foods, at 10-unit Food Town. "In a few days, we had around 30 people sign up and we keep getting more. It's given a nice boost to my lunch business."

In Manhattan, where fast service is expected, Morton Williams Associated opens dedicated registers in deli/food service from 11 a.m. to 2 p.m., and again between 4 and 6 p.m.

"We've been doing that for a long time and it works. We do a huge lunch business," said Richard Travaglione, vice president of operations, for the 10-unit, Bronx, N.Y.-based independent. Travaglione and Reid believe a carefully selected variety of fresh, grab-and-go lunch items is key.

"You can pay attention to what people buy and have an appropriate variety ready to go," Reid said. Travaglione has increased the space devoted to fresh-made, grab-and-go sandwiches and single-portion salads by a third over the last two years.

"We have long, island cases in most stores and we're adding them in remodels," Travaglione said. "At a remodel this summer, we just added one. It alone has boosted my deli sales there by $5,000 a week."

Roseanne Harper

INITIATIVE 2: STAY IN TOUCH WITH CONSUMERS

Keeping tabs on consumers is key to staying in the lead, sources told SN.

Successful retailers are holding focus groups and coaching their fresh food associates to solicit feedback from customers. They're keeping an eye on trends. They're tuning in to community demographics and making changes at certain locations, based on what consumers want.

For example, Giant Eagle, Pittsburgh, opened its first kosher deli last week in one of its Pittsburgh stores, and plans to put the delis into additional stores. The move came after the retailer introduced branded, kosher meat in selected stores.

"The offerings we're excited about rolling out in 2006 include our kosher delis and charcuteries," said Voni Woods, director of deli operations for the 216-unit chain.

When training associates, Giant Eagle emphasizes the value of interaction with customers. So does Kowalski's Markets, St. Paul, Minn. Such interaction is one of the best ways to get customer feedback. Kowalski's also holds quarterly consumer meetings to get suggestions on how the stores can improve. Consumers who do not shop at Kowalski's, as well as regular customers, are invited to participate. In addition, the 10-unit chain schedules frequent meetings following the opening of a new store.

"This year, at our new locations, we're having the meetings every other month," said Mike Oase, Kowalski's vice president of operations.

"At Oak Park Heights [opened in June], customers told us they had a hard time getting their carts through the floral and gift section," he said. "We could respond quickly to that by taking some of the merchandise away and opening up the aisle."

When customers said they had trouble finding certain items in produce, Kowalski's put up bigger and brighter product signs.

At Morton Williams Associated in Bronx, N.Y., new, showier meat cases were added this summer to display a heftier selection of value-added meat.

"We've increased variety by 5% to 10%, and these cases show more product at a glance. They have five levels," said Richard Travaglione, vice president of operations, at the 10-unit independent.

Health-conscious consumers have spurred retailers to add more single-serve cut fruit and parfaits. "We've just added at least 4 feet of sherbet-type cups with layers of yogurt and fresh berries in produce," Travaglione said.

Roseanne Harper

INITIATIVE 3: TECHNOLOGY PAYS OFF

Though fresh item management software programs haven't been widely embraced, acceptance is growing slowly among fresh food managers.

FIM programs can dramatically help a retailer's bottom line, one consultant pointed out.

"An average store generating $20 million in revenue with 40% coming direct from perishable sales could see 25% to 33% improvements in total bottom-line profitability with FIM technology," said Scott Langdoc, analyst, AMR Research, Boston, in an AMR newsletter.

Early FIM software deployments have also led to 35% to 65% reductions in shrink, 15% sales lift in fresh food categories and a 30% cut in inventory, according to Langdoc's report "Grocers: Slow Fresh Item Management Adoption Spoils Dramatic, Proven Benefits."

Retailers who for years have depended on managing the tasks by hand remain skeptical of FIM's potential. FIM applications combine data relating to historical fresh food sales and shrink to track inventory and manage production based on sales forecasted down to the time of day.

Though one-third to one-half of fresh food retailers have piloted FIM technology, only 5% to 10% of supermarkets have fully deployed the projects, Langdoc said.

"When retailers see that their [FIM technology] is able to reduce perishable shrink by 50%, they just don't believe the data could be true," said Langdoc. "They're not convinced their shrink problems were that bad" when processes were handled manually.

That attitude may be slowly changing. Eighteen percent of retailers surveyed as part of SN's Annual State of the Industry/Supermarket Technology Report said fresh item management initiatives would command the highest priority in 2005, up from 9% in 2004.

Nevertheless, resistance to change remains a major roadblock, Langdoc said.

"Perishable departments are the bastion of retail traditionalism and not the most change-friendly group of people are managing them," he said. "Managing perishables is really the core art of grocery merchandising, so the introduction of automation is often met with resistance."

Such was the case in Giant Eagle's meat department when Mississauga, Ontario-based Invatron's Periscope FIM technology was introduced three years ago, said Lenny Oddo, service meat manager, Giant Eagle, Pittsburgh. "We experienced some resistance because most of the employees in the store weren't comfortable with using technology," he said. "But since then they've gotten familiar with [Invatron's Periscope application] and operating computers."

Before the software was introduced, the retailer used manual processes like writing down the cost of items that had to be thrown away due to spoilage, without recording details on the type of products. Managers relied on trial and error to set production levels.

Today Giant Eagle uses FIM software in meat, deli, seafood and produce departments to analyze shrink, track perpetual inventory and forecast sales. Associates use handheld devices to record items lost due to shrink and note markdowns in prices.

"In the last year we've taken a real hard look at how we're using the system," said Oddo. "We wanted to make sure that everyone is using it to the best of their ability. As a result we've seen the numbers really spark for us."

Julie Gallagher

INITIATIVE 4: FOLLOW THOSE COWS

Significant hurdles remain for programs such as the U.S. Department of Agriculture's National Animal Identification System, which has promised mandatory full-recording of defined livestock movements by 2009. But, prodded by customers such as Wal-Mart, McDonald's and Albertsons, fresh meat and produce suppliers this year made headway in their efforts to ensure fresh foods sold in the United States will be traceable from farm to plate.

"Everyone in the food supply chain realizes there can be improvements, [and] a collaborative effort between the supply community and Wal-Mart can help take this to a new level," said Bruce Peterson, Wal-Mart's senior vice president and general merchandise manager of perishables, describing the company as "keenly interested in improving the efficiency of food traceback efforts."

The National Cattlemen's Beef Association and American Meat Institute have been working with Wal-Mart to create a standardized animal identification process, and this year they launched a radio frequency identification project designed to track hundreds of thousands of cattle.

In a sign ranchers and feedlot operators have read the writing on the wall, some Midwestern auction houses are reporting that calves with RFID ear tags are now selling for $2 to $4 per hundredweight more than their untagged counterparts. In addition, elaborate programs such as genetic testing have begun to emerge as a new standard for some producers of USDA-certified breeds of cattle, such as Angus and Hereford.

"I'm pleased with where we have come in 2005," said Peterson, noting the animal identification process was just one example of the progress being made by Wal-Mart and other companies. "I feel we have come a long way in understanding what needs to happen, and we've taken steps to move the bar forward."

Produce growers and packers have faced different challenges. For example, the water content in fresh fruits and vegetables creates problems with RFID pallet readers, but during the past two years, the produce industry has made strides to overcome such challenges. Still, other difficulties remain.

"The reality is traceability is fairly straightforward at the case and pallet level," said Gary Fleming, vice president of industry technology and standards for the Produce Marketing Association. "It's just the item level that we're struggling with. On the fresh produce side of the business, we're still dealing with loose fruit."

Noting the industry has drawn criticism over how easily produce can be contaminated, Fleming said growers and packers have to make sure they have good handling practices.

The industry is still working to develop a standardized alternative to the various proprietary traceability systems used by different growers, packers and shippers, he said. The Canadian Produce Marketing Association, in partnership with PMA, released this spring the results of an extensive pilot study entitled "Fresh Produce Traceability, A Guide to Implementation." The study established eight key, standardized data points needed to ensure traceability throughout the supply chain, and PMA hopes the industry will begin to adopt these measures soon.

Matthew Enis

INITIATIVE 5: BETTER SAFE THAN SORRY

Food safety is on everybody's radar thanks to better media coverage of foodborne illness and greater consumer awareness.

Therefore, training associates on proper food-handling practices has taken on new importance. These days, food retailers and restaurant operators are looking for specialized programs, said LeAnn Chuboff, director of science and regulatory relations for the National Restaurant Association Educational Foundation, Chicago.

"The push now is in customizing training programs so it speaks to their operations," said Chuboff.

The NRAEF's ServSafe program is a popular system for restaurant workers, and to a lesser extent, supermarket chains. The restaurant industry alone has used the program to train and certify more than 1.5 million food service professionals, according to NRAEF. Buehler's Fresher Foods, Wooster, Ohio, uses the ServSafe Essentials program to train associates, managers and supervisors in the fresh food departments of all the chain's stores and central kitchen. The company pays for employees to take a two-day class that covers personal hygiene, microbiology, purchasing and receiving foods, pest control, time and temperature control and other related topics. At the conclusion, employees are required to take the ServSafe Certified Food Safety Examination, and answer 75% of 80 questions correctly.

Cheryl Cohen, a home economist who runs Buehler's cooking school, has trained more than 200 employees to date. She travels to the company's stores and teaches the 15-hour course to small groups of 15 to 20 employees. About 10% of Buehler's total workforce has completed the training.

"I know a lot of [employees] don't look forward to going," said Cohen, who is certified by the state of Ohio as a trainer. "They're scared about the exam. I try to keep it light. We play games. We do a variety of different things."

Back in 2000, Buehler's hired an outside company to train associates in safe food handling, said Mary McMillen, director of consumer affairs for the chain. After the program "fell through the cracks," officials decided it would be best to have someone trained in-house to head up food-safety training.

"Cheryl has always been a real champion of food safety," said McMillen, who spearheaded the in-house training. "She does an amazing job with teaching what can be a rather dry subject. She's passionate about it." For Buehler's, the benefits are not that easy to measure. The company thinks training is simply good business.

"Our customers appreciate what we're doing," said McMillen. "They understand we use good food-safety practices. We want our customers to trust us. We're using this as another aspect of helping to engender that trust."

Last month, the Wall Street Journal noted fresh produce is responsible for more large-scale outbreaks of food-borne illnesses than meat, poultry or eggs. Produce safety will be emphasized in a bigger way in the NRAEF's upcoming fourth edition of the ServSafe program, Chuboff said.

"Produce is a tricky commodity," she said. "There's no kill step. You have to handle it differently."

Lynne Miller