2018 Category Guide: Deli

This is part of Supermarket News’ 2018 Category Guide to fresh and center store categories.

Perhaps no trend is shaping the future of fresh more than consumers’ quest for convenience in the form of prepared foods. That may, in part, explain the 6.7% rise in sales in the deli category in the 52 weeks ending June 30, according to Nielsen. Supermarkets have historically driven prepared food sales through the deli department, and the growth of fresh, prepared and meal kits have converged for a successful year for the category.

Meal kits are one area that shows opportunity to expand sales in that department, as more and more retailers add either their own store-made variations or partner with branded meal kit providers. Sales of these items have grown 26% in supermarkets in the past year, according to Nielsen research.

“While this area is still small, it is a huge opportunity,” said Sarah Schmansky, VP of Nielsen Fresh.

Meanwhile, with the decline in home-prepared meals shared with others, and the increase in immediate consumption away from home, often alone, and driven by Millennials, the lines between traditional grocers and restaurants will continue to blur, said Jay Jacobowitz, president and founder, Retail Insights, Brattleboro, Vt. Savvy retailers can capitalize on this trend with their deli sections.

“Grocers need to convincingly serve the growing immediate-consumption need, which means becoming a viable option to restaurants,” he said. “This entails capital investment in culinary professionals, larger, more complex menus and equipment, kitchen prep areas and retail consumption space.”

Retailers are still trying to figure out how to optimize their delis for the future, said Anne-Marie Roerink, principal at research firm 210 Analytics.

In addition to meeting consumer demands for both healthy and indulgent options, retailers will need to focus on emerging flavors and cuisines. Millennials, she noted, are “seeking fun, flavorful and customizable options.”

According to Roerink, “Convenience is driving dollars across the store, and is likely to continue to drive a lot of innovation in retail foodservice, whether deli-prepared, meal kits, value-added or other time-saving solutions.”

As Nielsen’s Schmansky pointed out in a recent webinar, “grocery delis are no longer just a place to get sliced ham and rotisserie chicken.” She said they have become fast-food lunch and dinner options, serving everything from tacos to meatballs and hamburgers. While meal solutions are hot at deli counters, Schmansky noted, side items like salads and cold-cut sandwiches are losing sales overall.

*Total U.S. All outlets combined, plus convenience stores — includes grocery stores, drugstores, mass merchandisers, convenience stores, select dollar stores, select warehouse clubs and military commissaries (DeCA).