Digesting the 2019 Retail Foodservice Report With Technomic’s Wade Hanson

WGB: Retail foodservice is still booming, but the vibe of our second State of Retail Foodservice report (read full report here) is a tad gloomier than our inaugural study last year. In your view, is this cause for concern?

Wade Hanson: “Cause for concern” is far too strong. This is an offering that the consumer still finds valuable, convenient and of high quality. But in a highly competitive environment, retailers can see slippage in performance when consumers perceive any stagnation. And over the past year or so, shoppers have observed price increases and a lack of “new,” which has led some prepared foods shoppers to expand their consideration set and visit other venues with greater frequency. Technomic remains bullish in the long term on supermarket foodservice. We are forecasting a bump in performance in 2020 largely because we see grocers revisiting strategies and determining how best to reinvigorate their prepared foods selection, promotion and value proposition.

As underscored in the report, something peculiar happened in the past year with supermarket foodservice, which failed to meet expectations and resulted in the lowest category gains in a decade. What do you feel grocers need to do different to reverse the trend?

Many of the leading-edge grocers, which are represented in Tier 1 and Tier 2 prepared foods providers, have stayed on-trend and are offering consumers what they want. However, industrywide, too many stores have not changed or adapted to what consumers want to eat away from home. Too many stores have selections today that are identical to 12 or even 24 months ago. There is a real need for innovation. Grocers need to examine the overall food landscape, understand the specific needs and interests of their local shoppers and introduce prepared items that solve for those needs.

Related:Q&A With Technomic's Wade Hanson

While supermarket foodservice was ranked by Technomic as the sixth fastest-growing foodservice segment in 2018, as opposed to the anticipated third fastest-growing segment, can you give us a brief overview of the high points in the other fast-growth classes of the foodservice trade?

For the purposes of this Q&A discussion, we’ll ignore senior living because much of the growth in that segment of foodservice is driven by demographics and the aging population. But there are some commonalities in the faster growing segments like fast-casual restaurants, fine dining and hotel foodservice. One that is particularly impactful for the consumer is the ability—and willingness—of these segments to customize foods for their guests. We mentioned this dynamic in last year’s inaugural State of Retail Foodservice report, and the importance of personalizing to the tastes of the customer continues to grow. As it’s been said countless times, consumers want what they want when they want it. There are ways for grocers to add elements of customization to their programs without adding significant labor. This should be a top consideration going forward.

Aside from the above points, is there anything that came as a surprise to you about this year’s study findings?

It was surprising to see the low percentage of consumers who are using the prepared foods department to purchase snacks during the day. That could be morning, afternoon or late night. Only about 5% of prepared foods shoppers are seeking out snacks. The reason that’s surprising is because, in the overall foodservice business, snacking is surging. Consumers are eating, on average, more than five times per day. But they are typically still only using grocery prepared foods for lunch and dinner. Most grocers are not offering any meaningful selection of fresh, smaller-portioned snack items, and consumers have taken note of that. In turn, it is not top of mind for consumers to visit grocery stores for these occasions.

Which products or categories in your view are ripest for improvement?

In our survey work, consumers described some fatigue toward two important product categories: sandwiches and side items. These are categories in which many consumers see the restaurant business being far ahead of retail foodservice in terms of creativity and choice.

Limited-time offerings are also touted in this year’s report as being an area of opportunity for supermarket foodservice. Could you give us a few ideas of what types of LTO offers would be ideal for grocers?

Limited time offers have proven in recent years to be a very effective way for restaurants to generate excitement amongst their core customers while also attracting new customers through effective bursts of promotion. But LTOs should be considered as part of a full program rather than one-off introductions. The restaurants that have the greatest LTO success are those that have a formal LTO development process and plan for multiple promotions annually. Grocers would seem to have real opportunity with an LTO approach in the prepared foods department particularly with items like sandwiches, globally-inspired entrees, and desserts. To be most effective, though, grocers will have to more aggressively promote these offers outside of the stores.

What would you envision to be the best thing you could tell me a year from now about the channel?

It would be a very positive sign if a larger percentage of grocers followed the lead of Tier 1 banners and developed solutions that are more similar to what restaurants, food trucks, food halls, and others have introduced to best appeal to the away-from-home diner. Grocers have to recognize that the shopper consideration set includes a wide range of fresh food providers and that they have to provide innovation and value that will resonate with their core customer. If we see prepared foods growth rates approaching the levels of 2016 and 2017, then we’ll know that grocers are making considerable progress in understanding the shopper and adapting accordingly.