COMPETITIVE EDGE

LYNNE MILLER

Competition is fierce for the food dollar, and nowhere is that more true than in the fresh food departments of supermarkets.

It wasn't so long ago that retailers simply competed with other supermarkets. Now with so many formats selling fresh food, it's essential for retailers to do something extra to hang on to customers.

Some retailers are giving restaurants a run for their money. It only makes sense for supermarket chains to upgrade the food-service departments since consumers spend close to 50% of their food dollars on restaurant fare.

If the location and the market demographics are right, an in-store dining area can be a gold mine. High-traffic areas, particularly those with lots of office workers, are prime locations. However to succeed, a retailer must make a commitment to food quality, and make the dining area an inviting place.

Many shoppers count on their neighborhood market to have fresh bread or rotisserie chicken available when they want it. It pays for retailers to adjust production schedules to meet demand.

Perhaps the best way to sell food, particularly new items, is by offering shoppers a taste. Many retailers already know in-store demonstrations are an excellent strategy for triggering sales. Retailers who don't dedicate the time and resources to sampling programs are probably losing sales.

On the subject of losses, dealing with shoplifters is a special challenge for meat department managers. High-tech security products designed specifically for meat departments are on the market, but retailers also can train employees to discourage shoplifting by simply talking to customers. What a concept!

INITIATIVE 1:

Think Like a Restaurant

Consumers spend nearly 50% of their food dollars in restaurants, and retailers need to upgrade food-service departments to capture a bigger share of the market.

“It seems like somehow there's a reawakening that food service is an important department,” said Bill Andronico, president and chief executive officer of Andronico's Markets, Albany, Calif. “There's real growth there, people are eating out more and so on. It's always been a huge area of opportunity for retailers. It's just how you do it, just like any business.”

Industry experts agree that food quality is crucial to the success of a retailer's food-service operation.

“There's so much competition in the fast-food arena so that unless you can differentiate yourself on food quality either through signature product items or some other element — originality or flavor profile — you're just going to get sunk,” said Thomas Miner, a principal with the Chicago-based food service consulting firm Technomic. The food should be at least casual-dining quality, he said.

Andronico agreed. “The food better taste good, No. 1, and it better have value associated with it,” he said. “If you don't get over those two hurdles, then all bets are off. Obviously, presentation goes into the quality aspect as well.”

Convenience is also crucial, experts said.

“I think that the convenience that restaurants offer to busy people is something that has obviously driven us, being food service, to getting 50% of the food dollars,” said Janet Erickson, executive committee chairwoman of the Produce Marketing Association and executive vice president, purchasing and quality assurance at the Del Taco quick-service restaurant chain. “Retail has wisely and appropriately recognized that to get some of that food dollar back, they would be well-served to make their offerings more convenient to busy people.”

Speed of service is essential to convenience. If the interaction between the food-service department worker and the consumer takes longer than two to three minutes, shoppers are likely not to come back to the supermarket, Miner said. The desire to make it convenient has led some retailers to position food service at the entrance or have a separate entrance so consumers can purchase their food more easily, he said.

“With respect to speed of service or order accuracy, it's all about convenience,” Andronico told SN. “Whether it's grab-and-go or over the service counter or some combination, it's important to have that component understood and addressed. It's supposed to be convenient.”

Buffets and hot tables are something retailers should avoid, according to Miner.

“The most common problem in supermarkets is that they will provide cafeteria or buffet food service and that's a segment of the restaurant industry that has been declining in sales nationwide for about 10 years,” Miner said. “The reason is consumer perception of the quality of food is that it's old; it's not fresh.”

Retailers should consider the made-to-order approach, though it would require a stronger commitment to the food-service department, experts agreed.

“One of the upsides to preparing fresh-to-order is that there is much less waste, and the overall cost of operating the food-service department lowers considerably,” Miner said.
— AMY SUNG

INITIATIVE 2:

Dining Areas Require Right Location

Whether a cafe or a seating area earns its keep depends on a number of factors, according to retailers and other industry sources.

Population density and the demographics of the market area can make a difference. In fact, serving lots of daytime office workers can be reason enough for a retailer to offer seating.

“People don't want to go back to their offices to eat at lunchtime. They want a break, away from their desks,” said Richard Travaglione, vice president of perishables at Morton Williams Associated Supermarkets in New York.

“We have seating for 200 at our 57th Street store, and also for about 100 at another of our Manhattan stores,” Travaglione added. “If I had room in the others, I'd put in seating. Definitely.”

Midtown Manhattan's concentration of office workers per city block is probably the highest of any place in the country. Bronx-based Morton Williams, with 11 stores, just purchased a new site in the suburbs north of the city that has no seating, but soon will, Travaglione said. As part of a remodeling, the unit, dubbed Morton Williams — The Fresh Market, will have a balcony with seating for 50-100 people. While there are a few offices nearby, Travaglione is counting on the store's location, in the middle of a huge, popular shopping center, to draw in-store diners.

In upstate New York, Penn Traffic Co., which owns and operates 111 stores under the banners P&C Markets, Quality Markets and Bi-Lo, is looking right now to add seating wherever it makes sense to do so.

“With our Fresh Market stores, we've been adding seating wherever we can,” Jeff Culhane, director of the deli and bakery, said last week. The Fresh Market stores emphasize prepared foods.

“As we remodel stores, we've been adding more seating, anywhere from four to seven tables,” he said.

Whether to have seating or add more seating depends entirely on a retailer's goals and the store's location, he noted. “If a store is looking to be a meal solution provider, then certainly it would be focused on seating.”

If office complexes are nearby or construction work is going on in the area, it would be worth it to have adequate seating, Culhane said.

“That's the lunch crowd, and they utilize seating.”

If the retailer is selling ready-to-eat foods, particularly hot foods, seating certainly would be worth the space it takes up. In fact, it's practically a necessity, said consultant Terry Roberts, president of Merchandising by Design, Carrollton, Texas.

“EatZi's was a prime example,” Roberts said. “Our store surveys indicated over 50% of our customers planned to consume their prepared-food purchases on the premises. Typically the more urban the store location, the more important seating becomes.”

Another consultant agreed that goals and location make the difference. Indeed, he is familiar with supermarkets in urban areas that attract crowds to their dining areas in the evening as well as at lunchtime.

“In urban areas, you've got a lot of potential,” said Howard Solganik, a partner in Culinary Resources, a Dayton, Ohio-based consulting firm. “There are singles and empty-nesters who will eat in the store, at lunch and later. But I think it's important that the seating area look appealing, that it be up front with a cafe feeling to it. If you've made the decision to have seating make it look good, not like an afterthought.”

Culhane at Penn Traffic agreed, saying decor should not be overlooked.

“It's also important that the seating be aesthetically pleasing, comfortable and trendy — and kept clean,” he said. “We have associates assigned to keep wiping down the tables and chairs.”
— ROSEANNE HARPER

INITIATIVE 3:

Cut Your Losses

Fresh meat is a popular target for shoplifters.

In fact, meat and over-the-counter medications are the most frequently shoplifted items in food stores, according to the Food Marketing Institute's 2006 “Supermarket Security & Loss Prevention” report. That's been true for many years.

Retailers should make loss prevention a priority, said William Alford, a consultant to FMI, and president of Charlotte, N.C.-based International Lighthouse Group.

“It's their bottom line, their bonuses, their gross profits,” he said. “They need tools, training and proper education.”

Retailers already have quite a few tools at their disposal. Nearly all of the 42 retail and wholesale companies that responded to FMI's loss prevention questionnaire said they used closed circuit television to combat shrink. In recent years, the cost of CCTV has gone down, making it more cost effective for retailers, Alford said. CCTV can be a deterrent as well as a documentation tool for retailers. Some chains have the systems installed in back rooms where meat cutters can observe customer activity.

But retailers don't need high-tech gadgets to combat theft. Indeed, they already have a low-tech option in place — their associates. Employees can be trained to kill would-be shoplifters with kindness, Alford said.

“Use customer service,” he said. “Use suggestive selling. One manager said if he saw a customer with four or five steaks, he would go up to the customer and recommend steak sauce, or talk to the customer about preparing the meat. Good customers liked it and the bad guys walked out.”

Combining alert associates with technology such as electronic article surveillance and CCTV can help retailers stem their losses, said Morag Harmsen, vice president and general manager of sales and marketing, Checkpoint Systems, NA, a Thorofare, N.J.-based provider of systems for retail security, labeling, and merchandising.

Harmsen said more chains of all sizes are adopting a variety of strategies.

“I'm seeing a lot of retailers develop a layered approach to asset protection,” she said. “They don't rely on one approach. They're using different techniques for different products.”
— L.M.

INITIATIVE 4:

Tweak Production Schedules

Whether they offer doughnuts fresh in the morning, rotisserie chickens at 4 in the afternoon or bread baked several times a day, retailers should develop production schedules around periods of peak demand.

Optimal production schedules satisfy demand and also convey a “fresh” message to customers, retailers told SN. Certainly, it pleases shoppers when bread is hot out of the oven, doughnuts are fresh out of the fryer, and the aroma of hot bread or even chocolate chip cookies fill the air.

Naturally, retailers look at sales from last Tuesday to determine how much product to make this Tuesday, but sales get an extra push when production is closely tied to daily spikes in demand. That's because customers are increasingly aware of freshness and its value to them, sources said. Forget yesterday, evening shoppers aren't going to settle for a loaf of bread that was baked in the morning.

“Production schedules are everything,” said John Chickery, bakery director at 10-unit Riesbeck's Markets, St. Clairsville, Ohio. “We can't predict the future without looking at history.”

On a daily basis, Chickery knows he sells 65% of the company's fresh fried doughnuts before noon. As a result, he makes sure the bulk of production is done early. The fryers are up and ready at 6 a.m. For Riesbeck's, fresh, fried doughnuts are a signature product that bring people into the store.

But over a longer period of time, for instance, Riesbeck checks what was sold when and why. Special situations such as snowstorms could have put a crimp in sales, or a storewide promotion could have pushed sales up.

“We estimate how much we can sell based on the past and allow for 8% to 10% stales,” Chickery said. “It's hard to have $1,000 in sales a day if you only have $500 of product ready to sell.”

Kenneth G. Downey, the bakery sales manager at Parsippany, N.J.-based Kings, chalked up a major sales success story to baking off baguettes several times a day. During a month-long experiment, Downey asked one store's bakery manager to bake off the breads at least three times a day and display them in produce and up front as well as in bakery. Total baguette sales zoomed up 110% over the preceding month. This fall, the program was rolled out chainwide.

“Sales of the baguettes in all the stores are phenomenal,” Downey said.

The breads are time-stamped on a scale label on the white bags that hold the breads. Downey said he makes sure nothing over six hours old is in displays.

“People love things fresh,” he said.

It's not surprising that customers love the aroma of hot bread and like to have a fresh rotisserie chicken ready in the evening to take home for dinner. It's just hard for retailers to execute the strategy, said Howard Solganik, a consultant and partner in Dayton, Ohio-based Culinary Resources.

“Delis are so task-oriented as a general rule,” he said. “They put their best people on in the morning and too many times by 4 in the afternoon, they're gone. [The deli] looks closed down. They're missing a lot of dinner business that way.”

Having fresh baked goods available in the late afternoon can drive sales, he said. “It doesn't have to be bread,” he said. “It could be cookies.”

Several sources recommended cycle baking of bread, muffins or cookies — any product that sells well every day.

“Besides communicating ‘fresh’ to customers, it makes them feel important to your business that you have peak quality ready for them at peak consumption times,” said Terry Roberts, president of Merchandising by Design, a Carrollton, Texas-based consulting firm.

Cycle baking and cooking offers other benefits to retailers, Roberts added.

“Successful bakery and prepared foods programs cycle bake and cook to demand all day long, thereby controlling labor and shrink to maximize sales and profits.”
— R.H.

INITIATIVE 5:

Give Shoppers a Taste

It's a fact — consumers like to know what they're buying and how it tastes.

With that in mind, retailers should use in-store sampling programs to improve their bottom line.

“If it's done correctly, sampling can make the difference between a shopper who is just shopping with their eyes and someone who is making a purchase,” said Thomas Miner, principal of Chicago-based Technomic, a food-service consulting firm.

“It can push the impulse button,” he said. “The way it does that is it pulls the consumers closer to the food and gets them engaged in the quality of the food. If they're looking close enough at the food counter to see the sample and you can entice them over to have the sample, they are much more likely to buy.”

In-store sampling can be executed two ways, experts told SN. Retailers can set up a station where consumers can pick up a sample and keep shopping, or retailers can assign a service counter worker to offer samples and explain the attributes of the product to shoppers.

“In-store sampling, whether it's passive or live, is really an important component,” said Bill Andronico, president and chief executive officer of Andronico's Markets, Albany, Calif. “We've measured it time and again, and, depending on the item and category, it's pretty remarkable even on a passive tasting, what it will do for sales.”

Retailers should be selective about the items chosen for sampling events, he said.

“It provides a platform to introduce customers to signature lines and new items, rediscover new things, or just offer them the best of the best, whether it's quality or value, whatever it is that you're pushing,” he said. “We tend to go on the quality side of course.”

With sampling, the objective is to highlight the food, and bring shoppers closer to the product “where they are much more likely to make the purchase,” Miner said.

Both addressed the dilemma of retailers wanting to provide good customer service, while controlling labor and food costs associated with sampling events.

“When it comes to tastings you want to grow sales, but on the other hand you don't want to give away merchandise,” Andronico said.

“You want to get the vendors involved and you want to demonstrate to the store-level people that it actually is good business, it helps grow the top line, and ultimately the bottom line as a result,” he said.

“Sometimes with the short-term thinking store, they might not see that, so it's really important for the organization to articulate that and to really get behind the program,” he said.

Retailers could improve sampling programs by having more stations and filling them on a regular basis to build up customer habit to come, sample and in turn, purchase, Miner said.

“I don't think retailers do sampling on a daily basis,” he said. “Their sampling programs are sporadic as opposed to regular and stationary so that people come to depend on them. Costco is a good example for sampling.”

Andronico said he believes in-store sampling should support merchandising and marketing efforts. For example, at the stores that offer wine tastings, Andronico's will feature wines that are coming out for the holidays. Associates will explain their attributes to shoppers, including why they complement holiday foods.

“So, it really should tie into your go-to market strategy tastings,” he said. “It's an important component. It adds something that is sensual to the overall shopping experience — that's important.”
— A.S.