Sliced Thin

ROSEANNE HARPER

Deli meat sales have rebounded somewhat from their dip last year, but there's still a lot of ground left to recover, retailers told SN.

Deli meat sales are going through another flat year, despite a supposed increase in bag lunches during the recession.

Consumer research shows that, nationally, total deli meat sales have at least flattened out, and show some upward movement. But promotional activity has been the major sales driver, retailers said.

Consumers, still very price-conscious, are favoring lower-tier meats, both in service deli and the wall deli, with the latter showing the bigger gains, researchers and retailers said.

“Basically, our sales have come back a little bit, but after a loss of 5% [over the previous two years], we've got a ways to go,” said Tanney Staffenson, advisor, Lamb's Thriftway, Portland, Ore.

Ad sales have a good impact, but not one that lasts for any length of time, Staffenson added.

“It used to be that when we put something on ad, sales would stay up for a while after the sale was over, but that's not true anymore.”

There's also been a shift from the service deli to the wall deli, in fact, to the lower-tier products there. Volume evens out but margins take a hit, Staffenson said, adding that his supplier has told him that's the case up and down the West Coast.

Other retailers described much the same scenario.

At a Harvest Market store in Novato, Calif., sales of deli meat have increased, but customers are purchasing items with promotional discounts at a higher rate than last year this time, said store manager Jeff O'Neal.

There, the bigger increases in dollar sales over last year are seen in prepackaged deli meats, “thus we're moving more tonnage at a lower price per pound,” O'Neal said.

“Harvest Market is working with its vendors to increase promotional activity in both sliced-to-order and prepackaged deli meat categories.”

Like some other retailers, Harvest is looking to offer a greater variety of items on promotion, while convincing the promotionally driven customer to purchase additional products during the same shopping trip.

Last year this time, the Perishables Group, Chicago, which tracks fresh, random-weight deli slicing meats in the service deli, showed sales of the category down 3.6% from a year earlier. Now, that research/consulting firm shows a year-to-date increase, but a tiny one.

“Basically, the category is flat,” said Steve Lutz, the Perishables Group's executive vice president.

The 52-week trend shows deli meat down 0.3% in dollars and up 1.5% in volume, with retail prices down just under 2%, Lutz said.

“But the most recent [deli meat sales] figures we have — for the 13 weeks through the first of May — look a little better. Sales in dollars are up 0.7%, and sales in volume, up 0.5% [year-to-date].”

Lutz said a number of factors are reflected in those figures, but he, like other sources, said the overriding fact is that customers are looking to spend less money.

That's underscored by the fact that premium deli meats, such as Boar's Head, are taking the biggest hit, according to retailers who carry them.

It's also shown in a significant lift in sales of private-label deli meats, which generally carry a lower price point.

Indeed, data from FreshLook Marketing, Hoffman Estates, Ill., indicates that the growth of private label deli meats accounts for most of the growth in the deli meats category. Overall category growth for the most recent 52 weeks is 2.5%, according to FreshLook, but its figures for private-label deli meat sales are big. For private-label, random-weight deli meat sales, FreshLook reports 18% growth in dollars and 22% growth in pounds for the calendar year 2009.

While that growth is twice that shown in the previous two years, it has slowed down recently, Jim Costas, FreshLook's director of client services for deli cheese and deli meat, told SN.

In the latest 13 weeks, growth in that sub-category was just 11.7% in dollar sales, and 10.4% in pounds, and in the latest four weeks, growth in dollars was 11.7% and in pounds, just 9.7%.

“My guess is that people are starting to go back to higher-tier brands,” Costas said.

“The distribution of PL doesn't change much. It's still in the same place it's always been. People just seem to be slowing down on buying it.”

Meanwhile, prepackaged, sliced deli meat is getting a boost in sales, some retailers said — especially the lower-tier meats on the peg board, and especially when they're on ad.

But even so, nationally, wall deli sales of refrigerated, prepackaged lunchmeat are far from robust, with only private-label items showing gains over a year ago, according to SymphonyIRI Group, Chicago.

SymphonyIRI's figures show that for the 52 weeks ending June 13, 2010, total refrigerated, sliced lunchmeat dollar sales are down 0.07% and unit sales are down 0.38%. Figures are for total supermarkets, drug stores and mass market retailers, excluding Wal-Mart. By contrast, for the 52 weeks ending June 13, 2010, private-label, refrigerated, sliced lunchmeat dollar sales are up 3.45% and unit sales are up 1.5%.

Some retailers, including Kevin Stormans, owner of two Thriftway stores — Bay View and Ralph's — in Olympia, Wash., are only now seeing sales begin to crawl upward.

“Deli meat sales have been fairly consistent with store volume, which has been down, but it's lifting a little lately,” Stormans said.

“Sales patterns have been strange. Some weeks up, some weeks down, and that's taking specials and promos out of the equation. Just odd patterns.”

Other retailers said they'd reduced prices, and run a lot of items on ad, which increased volume, but to the detriment of margins.

Others described a brighter picture.

At Kowalski's Markets, St. Paul, Minn., sales of random-weight deli meats in the service deli, including top-tier items, are up over last year, Terri Bennis, vice president of perishables, said.

But she attributed the sales increase to paying a lot of attention to good store-level execution. That's something the International Dairy-Deli-Bakery Association strongly advocates no matter what the economic climate is.

“We at IDDBA push sampling and getting associates to talk about the product all day long,” said Alan Hiebert, education information specialist at IDDBA.

And that's exactly what Bennis is focusing on at Kowalski's.

“We have been more aggressive with demos than we were a year ago, and have done more education with deli associates,” she said.

“I believe the demo program as well as the additional training has contributed to the increase. We may also attract more consumers who are looking for better quality.”

Most of the nine-unit, upscale independent's stores are situated in high-income neighborhoods.

Down South at Piggly Wiggly Carolina, deli meat sales are doing pretty well, Craig Inabinett, deli/bakery director, at the Charleston, S.C.-based, 110-unit chain, told SN.

Sales are trending up in both the service deli and the wall deli, without any indication of a shift from service to prepackaged, Inabinett said.

“Our numbers are up. Maybe they [customers] are making more sandwiches at home. They're also buying more top-tier deli meats than they were a year ago.”

Industry sources said they see a good future for deli meats, both random-weight and refrigerated, prepackaged.

In fact, researchers at Mintel, a Chicago-based consumer research firm, are predicting an 8% increase in refrigerated, sliced, prepackaged deli meats by 2014, and they also foresee increasing growth in the service deli.

“I'd expect there would be more interest in refrigerated packages, but I'd also expect service to pick up in sales,” said Bill Patterson, senior market analyst at Mintel.

“Boar's Head has come out with some sophisticated, complex flavors. Service delis could add more variety and focus on the value. We're stressing to manufacturers that there's value in variety, new flavors.

Patterson explained that research at Mintel shows there's plenty of opportunity for sales of premium or high-tier products.

“We found an interesting dichotomy. In recent research, we found that 60% to 70% of respondents said they'd buy more deli meats if they were less expensive — but 50% to 60% said premium brands are worth the money.”

What's more, it was a young segment of respondents that was most interested in premium brands.

“A full 63% of them said premium brands are worth the money,” Patterson said. “There is definitely a niche market.”

And that is borne out by what retailers told SN.

“Even though our Boar's Head sales are down, that doesn't mean we aren't selling a lot of Boar's Head,” Staffenson at Lamb's Thriftway said.

“The top tier is still very viable. It does a lot of business. I'm confident sales of all our deli meats will come back [to where they were] as the economy lightens up. It's just a matter of when.”