Grocers need to maximize value while balancing input costs for prepared foods
Consumer spending on commercial foodservice overtook retail food and beverage in 2015 and has continued to climb, maintaining its upward trajectory. Until that is, the Coronavirus pandemic hit and both commercial food service, and grocery deli and prepared foods took a devastating nosedive.
As foodservice sales fluctuated from week to week, deli and prepared food outperformed bakery, deli meat, and cheese consistently in terms of dollar sales. Grocers had to adapt quickly in the fight to regain lost sales due to rapidly changing consumer preferences.
Primary Consumer Concerns of Safety and Convenience
The initial response from consumers turned from traditional open to packaged product out of concern for safety and hygiene. In response, many food retailers shut down their self-serve or hot counters, retrofitting them into temperature-controlled grab-and-go or ready-to-eat counters. The anxiety over safety has still not dissipated. Recently released data from Acosta and Menu Matters found that half of shoppers are concerned about risking exposure to covid-19 when grocery shopping.
Having to shoulder more responsibilities, consumers desired “fresh, convenient meals that save them time, offer variety and take up less mental space,” wrote Canadian Grocer. Office, school, and restaurant closures increased the number of meals and snacks shoppers ate in-home. The need for convenience drove changes across foodservice, bakery, and deli. In foodservice, grab-and-go meals out-performed most deli-prepared categories. The rising star in deli has been random-weight, pre-sliced meat and cheeses as the staid sandwich experiences a revival amongst younger workers without children and shoppers look for options with fewer touchpoints and longer shelf life. And in bakery, fresh, unwrapped in-store bakery products have declined, replaced with single-serve, individually wrapped pastries and snack items, and smaller portion sizes. Restrictions on the size of public gatherings mean smaller celebrations and a need for smaller cake sizes too.
Emerging Consumer Trends of Value and Variety-seeking
As the story continues to unfold, two new consumer trends have emerged. Consumers are expected to become more risk-averse, with price a stronger purchasing driver. Year to year, shoppers are currently paying 4% more for the same groceries. To offset rising food costs, they will look for value and quality.
After months at home, meal fatigue is beginning to set in. Consumers are tired of making the same thing day after day. Research by Sun Basket found that on average, a person has cooked the same meal 28 times since the beginning of the pandemic. To alleviate the monotony, half are eating more takeout and delivery but are open to the idea of pre-made meals and meal kits as a healthier option that gives them greater control over their diet.
How Foodservice Can Adapt to New Consumer Preferences
Using Scales’ Digital Messaging to Nudge Deli Back to Top of Mind
Advertise Mealtime solutions on department scales with customer-facing screens. image courtesy of Ishida
Extensive research by FMI in 2019 into deli and foodservice shopper profiles revealed that the deli customer is highly coveted. But even back then, deli customers were not purchasing frequently enough to ensure continued sales growth, simply because deli was not top of mind as a meal solution. The pandemic exacerbated this problem and in order to drive less-frequent in-store trips to the grab-and-go section or hot entrees, grocers need to leverage their digital asset management solutions to nudge consumers with in-store reminders. Nudges are most powerful when they are used at the point of action. Department scales with customer-facing screens and self-service scales are often used to highlight in-store promotions, but changing the messaging to highlight healthy, convenient food service and deli options will provide shoppers meal ideas and inspiration they can add to their cart right away.
Scale management solutions, such as Invatron’s E-PLUM, can automate the transmission and importing of digital messaging images and videos from corporate to selected scales across an organization, making the process seamless.
Effectively Managing Demand for Pre-sliced Meat and Cheeses
Today’s mission-driven shoppers appreciate the option of quickly and safely picking up packaged pre-sliced meat and cheese, thereby avoiding the crowds and long lines at the service counter. Rolling out a pre-packaged meat and cheese program in real-time is crucial to avoid lost sales from these crowd-adverse consumers, but it’s nearly impossible to track demand, or what requires restocking and reordering when store associates are literally run off their feet. For grocers who already have a fresh item management solution to manage in-store production the demand forecast engine quickly adapts to these new SKUs and will generate production and order recommendations that will increase in accuracy daily. Precision is key: underproduction leads to missed sales, but overproduction can drive shrink above standard levels.
Using Recipes to Rapidly Scale-Up Variety and Allow Store Customization
a built-in workflow enables food retailers to quickly test and roll out new recipes
Shoppers wanting more diverse flavors and variety from supermarket foodservice is not new. There is now an added sense of urgency as food retailers have to compete with quick service and fast-casual restaurants as the go-to solution to address meal fatigue. Albertsons CEO Vivek Sankaran attributes in part their 27% same-store sales growth in Q2 to their ability to customize meat and deli selections. It helped set the company apart from competitors that focused on more commodity offerings and limited assortment. “It is not just having the availability of fresh, but it’s the commitment to providing additional customization around that fresh,” Sankaran told Grocery Business.
A recipe management solution streamlines bringing new dishes to market with a built-in workflow that enables food retailers to quickly test and roll out new recipes. Core recipes are items offered at every location, while stores have the flexibility to customize their prepared food offerings from a library of corporately approved recipes.
Never before have consumers turned to food retailers for prepared solutions for breakfast, lunch, and dinner. Shifting production seamlessly between meal dayparts is only possible with a technology solution that offers multi-cycle production plans based on intraday patterns. A multi-cycle production plan is used for an item like chicken or in-house baked bread that needs to be prepared and restocked continuously throughout the day and whose demand waxes and wanes in the leadup to a mealtime rush.
Controlling and Tracking Input Costs to Maximize Value
For price-conscious consumers in a recessionary market, value means sufficient quantity for an affordable price. Grocers need to maximize value while balancing their input costs. In addition to shrink reduction and labor savings, recipe management allows food retailers to track fluctuations in ingredient prices and calculate the total cost of production including ingredients, packaging, and labor. This way they can ensure profitability while offering the largest serving size possible and adjust when margins become too thin.
These departmental changes are imperative for foodservice sales to rebound. Technology can help manage some of the risks in expanding recipe variety to improve value, advertise in-store, and determine the demand for a brand new pre-sliced meat and cheese program.