September 13, 2007
Retail Gaining Ground in Foodservice
A growing number of consumers have figured out that they can get a good meal away from home and it doesn’t have to be at a restaurant. According to research from The NPD Group, sales of prepared meals have risen by five percent in retail stores over the past two years compared to three percent for all foodservice.
Convenience stores were first among retailers in generating foodservice traffic. According to NPD, 54 percent of retail foodservice traffic went through stores in this channel. Number two were supermarkets with 32 percent of the traffic, followed by mass merchants (11 percent) and warehouse clubs (three percent).
In terms of rate of growth, foodservice traffic at convenience stores grew three percent over the past two years. Supermarkets (six percent) and mass merchants (11 percent) increased traffic at the quickest pace during the period ending May 2007.
“For years, supermarkets and convenience stores were outlets for packaged foods. But the growth of the restaurant industry during the past 25 years – and especially the growth of take-out meals – has shown everybody in the food market that consumers now want ‘packaged meals,’” said Harry Balzer, vice president of The NPD Group, in a company press release.
The cost of buying prepared meals was predictably higher in restaurants than in retail outlets. According to an Associated Press report on the study, the average check at restaurants was $6.19 versus $3.12 for all retail and $2.99 in convenience stores.
The NPD study was based on a sample of more than 400,000 restaurant customers and nearly 77,300 people who shopped at retail stores.
Discussion Questions: How do you explain the rate of prepared meal growth in retail outlets over the past two years? What retailers do you believe have the most to teach others about doing foodservice right?
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This is combination of things coming together. Long ago, in other times, my Mom’s cooking used to be convenient. I also thought it was healthy and tasty. A real person was trying to make food for my benefit. Best of all, it was inexpensive (free then). When we make it at home now, for my kids, its the same.
Before the web, when restaurants were the social “in” place to be seen and people had more money (weren’t scrimping for mortgages), they got some of the business.
“Just get me something that seems healthy, tastes good and is cheap. And make it fast, I’m in the middle of intense chat!”
Restaurant meals are considered to be more expensive than meals purchased elsewhere. For the past few years, job growth in the American economy has been strongest in the lowest-wage sectors. And restaurant innovation hasn’t been strong enough to build growth that beats inflation. (The real inflation rate of 8% to 10%, not the distorted government statistics of 3%.)
Tesco of course would be near the top of the list but for reasons that others have not realized yet. Speed–the ability for the customer to get in and out quickly. The issue of speed is going to change dramatically the ability of traditional grocers to expand their foodservice offerings. This means we will see a race to build smaller locations and the addition of drive-through pick-up. The challenge here is to find a way to have a pharmacy drive-through and a foodservice drive-through. Both segments represent customer service and customer loyalty.
We will see more change in this area in the next 10 years than we’ve seen in the last 30 years. The smaller operator will be able to move much faster than the big-box/discount players due to their business plan, which relies on sheer size.
By and large, supermarkets are still trying to figure out foodservice. They understand convenience, speed and pricing but have yet to come to grips with batch cooking and the inevitable shrink.
However, there are great merchants–Wegmans, Tesco, Whole Foods, Pret a Manger, WaWa, Carnival, Publix and hundreds of small supermarkets around the country who have a great foodservice program by just doing a few things really well.
The additional cost of tipping the waiter in restaurants and sometimes a parking attendant as well, should not be underestimated. These non-food expenses mount up over time and are not applicable when picking up a tasty dinner at Whole Foods or Safeway to eat at home by candlelight or in front of the big screen.
Consumers are moving to a lowest common denominator approach to eating. If you count a polish sausage sold off a cart at Home Depot as a meal, the pattern is clear–this isn’t dining, it’s fueling and when people fuel they look for the cheapest, most convenient place to fill up.
Without getting too complicated, there is one reason the retailer is enjoying some growth in the meals area. That reason is quality! Both the deli and the frozen food sections have experienced a quantum leap in quality meals in the last two years. The Skillet Meal and Crock Pot meals found in the frozen section in many cases are the equal to a $25 restaurant entree. Hey grab a Bertolli and a bagged salad and you can feed two for $10, easy. I love it, because now I can afford a little bit better bottle of wine. I am afraid the restaurant owner has little defense other than the “take out” window.
I think this trend is a response by retail to the trend of more people eating away from home. We have heard for years of the growth in this sector. Retail has responded by increasing offerings–both numbers and quality. In our area, Publix has taken the lead. The recent opening of the test food service venue in Lake Mary is evidence of this. I have to disagree with some of the posters. Retail has for some time had the “lowest common denominator” items like hot dogs or sandwiches. The trend mentioned above saw retail losing market share to restaurants. Great retailers have responded by adding more variety to recapture the market.
In my market (northern suburban Detroit area) the independents have dominated the foodservice market, because Kroger and Farmer Jack (now gone, hmmmm?) did not choose to offer shoppers a lot of options in this area. As a result, much of the food shopping I do is at three different independents, Whole Foods, and weekly trip to the farmers market.
I skip the traditional supermarket and go to club or mass for the less frequent stock up trips. So do many of my neighbors!
The quality of convenient and nutritious foodservice at retail gets better and better, and you can’t beat the speed factor of stopping in a smaller independent grocer that has interested and helpful staff throughout the stores makes all the difference. If I do spend more time there, it’s because I became engaged and interested as some staff member provided me with help, information and innovative ideas that encourage me to try new things!
In addition to Tesco, another retailer doing convenient, prepared meals well is Bashas’ in Phoenix. Bashas’ stores have a complete dinner for $5.99 which includes a different selection of entrees every day. In addition, this section is located near one door of the store so consumers can walk in purchase their item at the place of selection and walk out. Their upscale store, AJ’s, has expensive, gourmet meals available. Different meals for different prices in different stores and a way to purchase in Bashas’ without having to go through the checkout line.
This industry trend reflects the awareness of consumers who are becoming more price savvy and marketing aware as they do their daily shopping. Add to this the push to promote these meals on all fronts, including c-stores and grocery, as well as clubs and discounters, and you have a retail growth trend in prepared foods. As we see the rise in better prepared foods at retail, we will continue to see this trend grow, especially as the key retailer leaders continue to differentiate themselves on a much lower price. Consumer’s votes, using their pocketbooks, clearly indicate that they want a value meal, fast. They would prefer to pick this out themselves, rather than to wait in line at a drive-through or at the pick-up window at their favorite restaurant. This extends to both single servings and multi-serving meals, as we see c-stores predominate in the single serving area and larger retailers serving both. We will continue seeing this trend so long as the price differential is large, and the selection of prepared foods continues to be of such high quality.
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This is combination of things coming together. Long ago, in other times, my Mom’s cooking used to be convenient. I also thought it was healthy and tasty. A real person was trying to make food for my benefit. Best of all, it was inexpensive (free then). When we make it at home now, for my kids, its the same.
Before the web, when restaurants were the social “in” place to be seen and people had more money (weren’t scrimping for mortgages), they got some of the business.
“Just get me something that seems healthy, tastes good and is cheap. And make it fast, I’m in the middle of intense chat!”
Restaurant meals are considered to be more expensive than meals purchased elsewhere. For the past few years, job growth in the American economy has been strongest in the lowest-wage sectors. And restaurant innovation hasn’t been strong enough to build growth that beats inflation. (The real inflation rate of 8% to 10%, not the distorted government statistics of 3%.)
Tesco of course would be near the top of the list but for reasons that others have not realized yet. Speed–the ability for the customer to get in and out quickly. The issue of speed is going to change dramatically the ability of traditional grocers to expand their foodservice offerings. This means we will see a race to build smaller locations and the addition of drive-through pick-up. The challenge here is to find a way to have a pharmacy drive-through and a foodservice drive-through. Both segments represent customer service and customer loyalty.
We will see more change in this area in the next 10 years than we’ve seen in the last 30 years. The smaller operator will be able to move much faster than the big-box/discount players due to their business plan, which relies on sheer size.
By and large, supermarkets are still trying to figure out foodservice. They understand convenience, speed and pricing but have yet to come to grips with batch cooking and the inevitable shrink.
However, there are great merchants–Wegmans, Tesco, Whole Foods, Pret a Manger, WaWa, Carnival, Publix and hundreds of small supermarkets around the country who have a great foodservice program by just doing a few things really well.
The additional cost of tipping the waiter in restaurants and sometimes a parking attendant as well, should not be underestimated. These non-food expenses mount up over time and are not applicable when picking up a tasty dinner at Whole Foods or Safeway to eat at home by candlelight or in front of the big screen.
Consumers are moving to a lowest common denominator approach to eating. If you count a polish sausage sold off a cart at Home Depot as a meal, the pattern is clear–this isn’t dining, it’s fueling and when people fuel they look for the cheapest, most convenient place to fill up.
Without getting too complicated, there is one reason the retailer is enjoying some growth in the meals area. That reason is quality! Both the deli and the frozen food sections have experienced a quantum leap in quality meals in the last two years. The Skillet Meal and Crock Pot meals found in the frozen section in many cases are the equal to a $25 restaurant entree. Hey grab a Bertolli and a bagged salad and you can feed two for $10, easy. I love it, because now I can afford a little bit better bottle of wine. I am afraid the restaurant owner has little defense other than the “take out” window.
I think this trend is a response by retail to the trend of more people eating away from home. We have heard for years of the growth in this sector. Retail has responded by increasing offerings–both numbers and quality. In our area, Publix has taken the lead. The recent opening of the test food service venue in Lake Mary is evidence of this. I have to disagree with some of the posters. Retail has for some time had the “lowest common denominator” items like hot dogs or sandwiches. The trend mentioned above saw retail losing market share to restaurants. Great retailers have responded by adding more variety to recapture the market.
In my market (northern suburban Detroit area) the independents have dominated the foodservice market, because Kroger and Farmer Jack (now gone, hmmmm?) did not choose to offer shoppers a lot of options in this area. As a result, much of the food shopping I do is at three different independents, Whole Foods, and weekly trip to the farmers market.
I skip the traditional supermarket and go to club or mass for the less frequent stock up trips. So do many of my neighbors!
The quality of convenient and nutritious foodservice at retail gets better and better, and you can’t beat the speed factor of stopping in a smaller independent grocer that has interested and helpful staff throughout the stores makes all the difference. If I do spend more time there, it’s because I became engaged and interested as some staff member provided me with help, information and innovative ideas that encourage me to try new things!
In addition to Tesco, another retailer doing convenient, prepared meals well is Bashas’ in Phoenix. Bashas’ stores have a complete dinner for $5.99 which includes a different selection of entrees every day. In addition, this section is located near one door of the store so consumers can walk in purchase their item at the place of selection and walk out. Their upscale store, AJ’s, has expensive, gourmet meals available. Different meals for different prices in different stores and a way to purchase in Bashas’ without having to go through the checkout line.
This industry trend reflects the awareness of consumers who are becoming more price savvy and marketing aware as they do their daily shopping. Add to this the push to promote these meals on all fronts, including c-stores and grocery, as well as clubs and discounters, and you have a retail growth trend in prepared foods. As we see the rise in better prepared foods at retail, we will continue to see this trend grow, especially as the key retailer leaders continue to differentiate themselves on a much lower price. Consumer’s votes, using their pocketbooks, clearly indicate that they want a value meal, fast. They would prefer to pick this out themselves, rather than to wait in line at a drive-through or at the pick-up window at their favorite restaurant. This extends to both single servings and multi-serving meals, as we see c-stores predominate in the single serving area and larger retailers serving both. We will continue seeing this trend so long as the price differential is large, and the selection of prepared foods continues to be of such high quality.