A LEAN CONTENDER

MINA WILLIAMS

Low-fat deli meats are hanging in there. As a subcategory, reduced-fat and fat-free versions of popular deli meats -- such as ham, turkey and roast beef -- have been fighting for attention and a bigger portion of sales from the service case in supermarket deli departments for years.

And like many other health-oriented alternatives to conventional fresh products, healthy deli meats have had to struggle against perceptions of inferior taste -- whether justified or not -- and premium price points, compared with their fattier contemporaries.

Well, the struggle continues, but retailers told SN that the low-fat products are making progress. Not only are certain consumers buying them, and returning to buy them again, to trim their own fat, but retailers are noticing incremental sales increases.

"The low- and not-fat deli meat market is in an upward trend," said Roland Asslyn, deli sales manager at Big Y Foods, Springfield, Mass. "The major factor is the quality and taste, which have improved a great deal over the past few years, so customers are purchasing more."

By plugging away at the market, retailers and suppliers have apparently carved out a small but solid -- and growing -- segment of the business just for low-fat and fat-free slicing meats.

Retailers estimate the subcategory currently accounts for perhaps 5% to 8% of total slicing meat category sales.

Manufacturers continue to keep the category alive. They are adding to their programs or starting new ones, introducing new products and reformulating old ones to keep pace with flavor profile advancements.

Angie Nigl, product manager at Emmber Foods, Milwaukee, said the company earlier this year introduced a fat-free roast beef because, "to be competitive in the category, you have to have a low-fat alternative." Meanwhile, deli merchandisers are noting that more shoppers definitely are still trying the category on for size.

And perhaps more tellingly, "Customer response is good and we have had a lot of repeat business," said Asslyn of Big Y.

Another deli source, from a chain on the West Coast, said, "We will never sell the volume in low-fat items that we sell in regular items. We sell ham by the truckload, for example.

"But we recognize that this niche is narrow and growing. We also want to offer products that customers are looking for."

That last desire is another key to the subcategory's resilience. Low-fat slicing meats are giving deli merchandisers an additional tool in their bag of marketing tricks. The products tie in to the growing trend of mainstream retailers tapping the groundswell of consumer interest in healthy or natural foods, made clear by the expansion of natural foods supermarkets.

In response to that groundswell, deli executives said they are becoming more interested in consumers that seek out reduced-fat and fat-free deli slicing meats. It is for these customers that deli departments are offering more of the "less," "low" and "lean" varieties. To some extent, it's a bid to lure customers back to the service deli counter.

"There are those customers that look for organically grown produce, free-range chickens and more healthful alternatives to their dry grocery needs," said the West Coast retailer. "This select number of people will go out of their way to purchase deli products with the low-fat attributes. We want to be the one store to offer the products to meet their every need."

Indeed, this selective customer has emerged as the main force driving sales in the low-fat deli slicing meat market. As evidence of that, retailers reported little to no cannibalization of traditional deli meat sales when low-fat alternatives are integrated into the deli case.

"Sales of these items enhance the sales of the regular counterparts," said Asslyn. "We even have customers that buy a portion of their deli order in traditional meats and add an extra amount of the low-fat items.

"The subcategory is important to the overall volume and improves the department's image by adding a health-conscious alternative to customers in the deli," Asslyn said. "This is a subcategory that has definitely added incremental sales to the deli."

To whatever extent possible, retailers are jumping on the flavor bandwagon. At Big Y, for example, the department offerings in the subcategory have been traded up to the best quality. "This move has definitely helped our volume," Asslyn said.

However, many retailers also told SN that while increases in sales for this niche are good, it is overall volume that drives the business. And these low-fat alternatives are not necessarily carrying their weight in all stores.

A deli executive at a major Midwestern company acknowledged that "these items aren't big sellers for us."

"When they first came out, we thought they would go great guns," added Jack Murdock, deli director at Minyard Food Stores, Coppell, Texas. "But consumers have become very knowledgeable. They read labels and they know that if an item is low in fat, there may be more sodium, sugar or water.

"The sales of low-fat slicing meats is growing; it's just not growing at the rate we thought it would have," Murdock said. "Sales are not even coming close to sales of regular slicing meats, but one thing we have learned is that this [customer] niche will buy if we offer the product."

That awareness has guided some operators to tailor their low-fat programs according to the preferences of certain store groups or market areas.

"We do not have a cookie-cutter approach to our deli departments," said the West Coast retailer. "Each unit caters to the customers of that unit. In some units we carry up to 10 low-fat meats, while in others the entire subcategory has been eliminated."

Again, it is because of the relatively few, but loyal, followers of low-fat foods that these offerings make any sense at all for deli merchandisers.

"These meats are part of the mix," said Mark Elliott, vice president of Orion Food Systems, Sioux Falls, S.D., a branded retail concept provider to supermarkets. "But don't expect this category to be a breakthrough or have the No. 1 seller in the category."

In research conducted by meat supplier Bil Mar Foods, Zeeland, Mich., consumers cited convenience of the product and a fresh, good taste as reason to purchase any deli item, according to Tony Rao, senior product manager.

"Fat-free was low on the reasons why a consumer goes to the deli section. They want taste," Rao said.

Price points and marketing support are two persistent barriers to expanding this category beyond a select niche of the deli business. A notable spread between low-fat and the prices of conventional meats may be hindering sales to many potential buyers, the retailers said.

Turkey, ham and roast beef in low- or reduced-fat offerings range from $4.99 per pound to $5.49 per pound, the retailers reported.

"Price point is an obstacle," Murdock said. He estimated that low-fat deli meats may be as much as 10% higher in retail price than traditional styles of deli meats.

"Our customers have bought and tried the products and, given the price, they go back to the regular offerings," Murdock said. "I have seen regular, water-added ham offered at $2.98 per pound, while Healthy Choice ham is $4.99."

While pricing currently may be worrisome, Orion's Elliott still predicted that leaner, lower-fat meals will continue to warrant higher pricing.

"At restaurants you see the little heart next to a menu item that commands a higher price," he said. "These are higher gross-profit items and, from a marketing standpoint, if you can get a premium price with not as many turns, you are still ahead."

Advertising and promotion would go far to keep sales on track, retailers said.

Minyard routinely runs a full page of Healthy Choice items, including those found in the deli department. The subcategory of reduced-fat deli meats, in addition to the low-fat salads, is advertised each month.

Another effort Minyard undertakes to boost sales is offering a free pint of reduced-fat commodity salad with the purchase of 1 pound of reduced-fat ham.

"Like any slicing meat item, if you don't promote it, it won't sell," said one Midwestern deli merchandiser. "We have found that true of all slicing meats, not just the healthful alternatives. You can't just put it out and expect it to sell."

Co-branding is also proving helpful for retailers who want to offer low-fat slicing meat options with a high profile that can translate into sales.

Orion's MacGregor's Market sandwich kiosk concept has teamed its ingredients with Healthy Choice sliced meats, for example.

"Co-branding with Healthy Choice is good for our sandwich concepts," said Orion's Elliott.