MEATY MATTERS 2001

LYNNE MILLER

From marinated chicken breasts and fish fillets to fully cooked pot roasts and stuffed pork chops, value-added meats have never been more plentiful in supermarket meat departments. The category is still young -- and there's ample room out there for more high-quality products, retailers and manufacturers told SN.

Made in-store, or supplied by outside vendors, these new products offer consumers different stages of preparation, appealing to a wider demographic and all income groups. They are aimed at busy consumers who don't know how to cook, don't want to cook very much -- or don't want to cook at all.

Food research companies had no comprehensive sales or market share figures on this developing category. But based on observations, industry insiders confirmed the selection of value-added meats has mushroomed.

"Three to four years ago you could count the number of fully cooked beef products on one hand," said Steve Kay, editor and publisher of Cattle Buyers Weekly newsletter in Petaluma, Calif. "Now it's 300 to 350. It's been a veritable stampede of new products."

Retail-level activity backs up the claim. Wild Oats Community Markets, the Boulder, Colo.-based chain of natural foods stores, is upgrading the value-added section at its 109 stores. Each store carries from 12 to 20 items, ranging from stuffed chicken breasts to kabobs. Come September, customers will see more merchandise, more eye-catching signs, product demonstrations -- and consistency from store to store.

"If we have lemon chicken marinade, I want everyone in the company to use the same lemon chicken marinade," said Robin Hoffman, meat, seafood and frozen food merchandiser for Wild Oats, who estimated the value-added category accounts for 10% to 20% of meat department sales. "We'll make sure recipes are top-notch."

Beyond their contribution to sales, value-added products give shoppers preparation ideas -- and encourage them to buy the raw product to experiment with in the kitchen, Hoffman said.

"If you offer a very good, top-quality product, make a wonderful recipe that tastes good and looks appealing, people will want to buy it," Hoffman said. "We're always looking for a vendor that makes a wonderful product. If not, we'll create our own."

Now more than ever, retailers told SN they're inundated with visits from sales reps pushing their company's latest value-added product lines. That's what is most remarkable about the category -- not the sales volume, but the sheer number of products. Pete Davis, senior director of meat, seafood and sushi for Bristol Farms, El Segundo, Calif., keeps an open mind when he meets with vendors.

"You never know when you're going to see a great product," he said.

But to satisfy his finicky -- and wealthy -- customers, Davis steers clear of nationally branded packaged meats.

Bristol Farms contracts with a handful of small, regional food companies for a variety of one-of-a-kind marinades. The 12-store chain follows the old-fashioned immersion method to marinade meats.

In the warmer months, marinated beef kabobs and tri tips are top sellers, Davis said. In winter, customers like their meat stuffed -- 10 varieties of stuffed chicken breasts, as well as stuffed game hens, turkeys and pork chops are available. In all, Bristol Farms carries 28 to 30 value-added meats.

They can be lucrative -- the items have a profit margin in excess of 50%, Davis said. Sales in the category have increased from 8% to 10% of overall meat department sales five years ago, to roughly 15% to 17% now, he said.

"I tried four years ago to get into the prepackaged thing, and quite frankly my customers wouldn't do it," he said.

Similarly, V. Richard's Market, Brookfield, Wis., relies on local purveyors for an extensive line of regular and low-salt marinades. The concoctions are used to season boneless, skinless chicken breasts in a vacuum tumbler, as well as other meats, which the single-unit independent will marinate for customers on request. The chicken breasts are one of the most popular items, typically retailing for $4.50 a pound.

With the summer grilling season in full swing, customers are paying an extra $2 a pound for fully assembled, uncooked three-pepper chicken and beef kabobs.

"People hate dinking around making those kabobs," said Tim Pellett, meat department manager at the upscale store outside Milwaukee.

In the winter, Italian stuffed pork and beef roasts -- seasoned, tied, rolled and oven-ready -- are top-selling items, retailing at $6.99 a pound.

All the value-added meats are prepared in the store. The extra work behind the scenes pays off -- value-added meats contribute about 30% to 35% of meat department sales, Pellett said.

While V. Richard's and other small operators choose to make their own meats, larger companies rely on manufacturers for all or a portion of their value-added lineup.

D&W Food Centers, Grand Rapids, Mich., sells an assortment of meats supplied by outside vendors, as well as marinated boneless, skinless chicken breasts and other meats made at the retailer's central raw meat-processing facility.

"Certainly the offerings are growing at a faster rate than the category," said Joe Bickley, director of meat sales. "What's increasing the sales in these products is an increase in the products in those categories. We have more promotion and marketing of the products by outside vendors than we have had in the past."

D&W's central plant has increased its capacity at a steady pace in recent years. Having that plant allows the 26-store chain to develop unique marinades, ensures consistent product -- and keeps the mess out of the stores, Bickley said.

"The consistency of product and food-safety considerations are overwhelming considerations, " he said.

Bickley, who calls himself a "poster boy" for food safety, believes supermarkets can never be too careful. By eliminating food preparation in the stores, supermarkets can "go into much more detail with sanitation," he said.

Food-safety concerns, along with other factors, have made retailers receptive to value-added products manufactured by large meat companies with well-known national brands.

Many retailers have found it convenient to outsource value-added products, said William Roenigk, senior vice president at the National Chicken Council, Washington.

"In the back room of a store, I don't think supermarkets are as anxious to do food preparation in that environment as they once were because of food safety and liability," he said.

In his travels, meat industry consultant John Story has observed a proliferation of new, packaged merchandise in meat cases at Cub Foods, Publix, Winn-Dixie and Wal-Mart stores, among others. What he's noticed most are branded products from outside manufacturers.

It makes a lot of sense for retailers to outsource, especially since many of the products are of good quality, he said.

"Stores manufacturing their own [value-added meats] are not doing quite as much of that simply because their costs got too high," said Story, who is based in Reddick, Fla.

The new products "are profitable up and down the line," said Story. "There's efficiency in the way they're producing them. They're not overspending money."

Two established meat manufacturers told SN the value-added segment represents significant growth for their companies.

Over the last five years, Hormel Foods of Austin, Minn. rolled out a number of marinated and fully cooked pork and beef entrees -- and the new lines have delivered sales increases in the double digits, a company official said.

"If you would have gone to a fresh meat case five years ago, you would have seen no brands or just the store's name" on meat packages, said Joe Swedberg, Hormel's vice president of marketing for meat products. "In five years, you'll see most of the fresh meat case value-added in some way, from beef to pork and chicken. This is exploding."

Buoyed by the early success of its new line of fully cooked beef and pork roasts in three Midwestern markets, IBP is about to open a $25 million, 80,000-square-foot, freestanding plant in Council Bluffs, Iowa, dedicated to manufacturing the roasts for national distribution under its year-old Thomas E. Wilson brand name.

"This is a growth area for us," said IBP's Dennis Crawford, vice president of value-added products, based in Dakota Dunes, S.D.