retail news in context, analysis with attitude

Good piece in the Wall Street Journal about improved foodservice options at supermarkets and convenience stores, which are hoping to "woo eaters from traditional restaurants and burger joints and lead them to buy other goods the stores sell as well."

According to the story, "Sales of prepared foods and baked goods at Whole Foods Market Inc., which pioneered the sale of fresh-cooked items in its stores, more than doubled to $2.7 billion in fiscal 2014 from $1.3 billion in 2007. That puts Whole Foods on a par with restaurant companies like Chipotle Mexican Grill Inc., whose sales were $3.2 billion last year. Other grocery chains are following suit. Industry giant Kroger Co. is experimenting with putting grilling stations between its meat and seafood areas, and Mariano’s, a Chicago-area unit of Roundy’s Inc., has opened new outlets with sushi counters and oyster bars.

"Meanwhile, Sheetz Inc., a chain of 487 convenience stores and gas stations, has rolled out barista stations that offer fruit smoothies and coffee drinks, as well as full-service kitchens that can make items like mozzarella sticks and burritos and provide in-store seating. And Wawa Inc.’s more than 650 convenience stores have counters that make items from French onion soup to custom-ordered sandwiches. The Wawa, Pa., company aims to compete with fast-casual chains like Panera Bread Co. in terms of quality, but at fast-food prices, says Mike Sherlock, vice president of fresh food and beverage."

The story also quotes Bob Mariano, CEO of Roundy’s, as saying that "that running a restaurant is an entirely different business than running grocery stores. It is more complex and requires employees with a different skill set, he said. It’s hard, he added, to get the interior design right, with lighting, ambiance and seating that will encourage customers to stay. Still, he said, margins are better at the restaurants than at the rest of the grocery store, even when the higher labor costs are taken into account."
KC's View:
In many ways, this is an old story. I've been doing this a lot of years, and it is hard for me to remember a time when food stores were not trying to use foodservice offerings to compete with restaurants. Indeed, there have been consultancies that have built businesses out of helping retailers find ways to do so. (And some of them actually worked.)

I do think, however, that in the current competitive environment, it is critical for food stores to play hardball against the restaurant industry … it is all about share of stomach, and I think increasingly consumers think about getting something to eat, not about patronizing one format or another. It is the businesses that successfully create this kind of belly appeal that have a better shot of long-term success, I think.