Published on: March 16, 2016by Kate McMahon
I had my annual spring break case of supermarket envy last week, returning to my favorite coastal Georgia retailer with a fresh prepared food department that far surpasses the grocery store chains in suburban Connecticut. The entrée offerings at the St. Simon’s Harris Teeter were appetizing and well-priced (not to mention a 20% off discount on wine by the case ... we can't even buy wine in Connecticut's supermarkets).
I coincidentally came across two studies on the fresh prepared food sector from two different vantage points – the industry and the consumer. Both confirm that busy Americans want healthy meal options in a hurry and the competition is heating up for the dinner-to-go dollar. In addition to traditional takeout food, Uber-style meal delivery services from casual to upscale restaurants are readily available with one click on a mobile phone. Home-delivered meal kits such as Blue Apron and Plated are reaching millions of kitchens a month.
Let’s get back to supermarkets. A survey released last month from the Food Marketing Institute (FMI) and Technomic detailed “the sophistication of supermarket fresh prepared foods” among 28 banners representing 8,000 stores. It substantiated the $15 billion growth of supermarket fresh prepared foods over the last eight years, and found the sector grew by an annual rate of 10.4%, making it one of the highest performing in the entire food industry.
The report also found leading chains are hiring professional chefs to contemporize menus, offering in-store amenities such as café seating and WiFi, re-modeling deli departments, and making long-term investments “as traditional foodservice operators (namely restaurants) aggressively counter this threat to their business.”
To be honest, I haven’t seen any such investments in the chain supermarkets I frequent in Fairfield County, CT. Nor do I sense the connectivity with the customer that is apparent at the Harris Teeter in St. Simon’s or in Winston Salem, N.C., where my college student daughter gets an additional five percent discount on top of the store loyalty card.
The second study, from Consumer Reports, found that more than half of the 63,000 subscribers surveyed buy meals at their supermarket’s fresh prepared food counter. The magazine sent secret shoppers and nutritionists to six major Northeast retail chains to test 24 different prepared dishes.
Among the findings:
• “Fresh” doesn’t necessarily mean made fresh on site, and that some dishes weren’t even prepared in the same zip code of the store.
• Nutritional information, calorie counts and even portion sizes were hard to come by at most locations.
• The Consumer Reports’ lab analysis showed many of the dishes had very high sodium content, and some included packaged processed foods.
• The price differential between buying prepared foods vs. making at home is steep. For example, the Whole Foods Cranberry Couscous cost $8.99 per pound prepared vs. $4.10 if made at home. The best bargain: The Costco rotisserie chicken at $4.99 (a go-to dinner at our house.)
In order to compete, retailers need to be transparent with prepared foods and provide nutritional information even if it isn’t mandated by the FDA for that category. Consumers not only want that information, they will soon be demanding it. The Wall Street Journal noted this week that both big and small suppliers "are rushing to meet consumers’ increasing demand to know more about what’s in their food, where it came from, and how it was produced." I will certainly be scrutinizing fresh prepared items more closely after reading that a cup of The Fresh Market’s lemon orzo contained 938 milligrams of sodium per serving, which is 40% of the daily recommended limit.
I think there is tremendous opportunity here for retailers to gain market share and customer loyalty. They key is preparing healthy options and making ordering, pick-up or delivery quick and easy.
As Tom Furphy said in a recent MNB Innovation Conversation, this should be “squarely in the sweet spot” of retailers today.
Comments? As always, send them to me at email@example.com .
- KC's View: