ACNIELSEN: DELIS MISSING A BIG SLICE OF MARKET 2004-08-23 (2)

Roseanne Harper

WASHINGTON -- Supermarket service delis are losing pizza, sandwich and fried chicken sales to other formats, according to new consumer research that suggests supermarkets have a ways to go before they realize their full potential in the prepared-food categories.

A representative from Schaumburg, Ill.-based ACNielsen recently presented statistics that show supermarkets are losing a big chunk of the market for random-weight, prepared foods, which under ACNielsen's definition include pizza, sandwiches and fried chicken, as well as lunch meat.

Jeff Gregori, director of consumer insights, retail services, ACNielsen, said his company's figures show 29% of consumers buy hot and cold sandwiches, but only 13% buy them in supermarkets. What's more, 28% of consumers buy fried chicken, but only 17% buy that product in supermarkets. The biggest gap, however, was in pizza sales. Only 3% of consumers buy pizza at their grocery store, but in the overall market, 24% buy pizza, according to the research.

In terms of dollars spent annually per household, $37 is spent on pizza, but only $9 is spent on pizza purchases in supermarkets.

"This [data] will give you a perspective on what the opportunities are for popular prepared items in the deli," Gregori said. "We also can show who's doing it best because we have information in our home-scan panels that shows where they [consumers] buy the products."

A full 98% of households buy lunch meat or prepared foods in the overall market, and 71% of households buy random-weight, prepared foods in the overall market. Yet only 54% buy random-weight, prepared foods in a supermarket, according to ACNielsen.

There's good news about deli sales, but it could be even better, Gregori said. For instance, he said, in the last year, total perimeter departments' sales were up just 1%, while there's been a 4% growth in deli. The low-carb trend has helped. ACNielsen's figures show that carb-conscious consumers spend 22% more in perimeter departments than those not on any weight-loss plan.

Tracking sales of Universal Product Code items at the same time, the company found supermarket delis hold up very well when it comes to sales of UPC items, especially store-brand items. Yet as sales of those items grow, not surprisingly they cannibalize some random-weight deli sales.

"We see tons of growth in UPC in grocery, but it's somewhat at the expense of random-weight. I see switching -- consumers picking up UPC vs. random-weight," Gregori said.

"Remember, this is not a survey," he added. "It's a report. We have 15,000 households active across the United States that are scanning their UPC purchases and they have a random-weight code book with a collection of about 10 categories. For this [recent reporting], we used 9,000 of those households."

Targeting the right customer is an important key to penetrating the market, he explained. In that regard, ACNielsen figures show that UPC deli purchases are driven by households with children, while random-weight deli purchases are driven by male-only households. Corporate branding, too, paints a bright picture for deli sales.

Other ACNielsen data shows the top 10 major retail chains that are most successful in reaching shoppers with their corporate-brand UPC prepared deli foods. In descending order, they are: H.E. Butt, Hy-Vee, Publix, Harris Teeter, Giant Eagle, Stop & Shop, Pick N Save, Hannaford Bros., Fry's and Albertsons.

Some private-label UPC items have seen phenomenal growth in the past year.

"Corporate-brand, refrigerated chicken, for example, topped out at $32 million a year, three times what it was last year," Gregori said.

In general, great opportunity exists for branding UPC prepared foods, and manufacturers are beginning to jump on it, Gregori added. Until recently, the category has been seen as a commodity, but it can be a significant differentiator.