Fresh prepared foods (FPF) are a high-growth category for most grocery retailers as consumers seek more fresh, healthy foods in ready-to-eat formats. As retailers continue to invest in their fresh prepared foods programs, some of the recent innovations and learnings from fast-casual restaurants and international retailers could provide some insights and opportunities for food retailers to grow their FPF business.
At FMI Connect 2014, representatives from Technomic and A.T. Kearney were featured at a session entitled, “Is your store the best restaurant in town?” Mark Baum, SVP of industry relations at FMI, opened the session by framing the business opportunity from the consumer’s standpoint.
“There are 21 meal serving opportunities each week,“ said Baum. “Food service and retail are not distinctions that consumers make. Consumers don’t wake up and say ‘I’m going to do food service or I’m going to do retail.’ They are either going to prepare a meal at home or going to go out.”
The fast-casual category was highlighted during the session, mainly because it is the fastest-growing segment of the food service industry. As a subset of limited service restaurants (e.g., Applebee’s, Chili’s), fast-casual restaurants are personified by better quality offerings, a more contemporary décor, greater appeal to adults and a healthier perception. Examples of these chain restaurants include Chipotle, Five Guys and Panera Bread.
“Over the last 10 years or so, the fast-casual category has grown to become a $30 billion-plus business, and we are projecting a 9-11 percent compounded annual growth rate over the next three to five years,” said Bob Goldin, EVP at Technomic, a leading food service advisory group monitoring research trends and consumer behaviors. “Fast-casual’s continued growth is definitely leading all other food service categories.”
Goldin went on to note that the supermarket FPF category is projected to have accelerated growth over the next few years of 6-8 percent annually. “There is a tremendous amount of headroom in this space for supermarket FPF, particularly if retailers make some incremental improvements in their offerings and in-store execution.”
In reviewing the performance of some of the more successful fast-casual chains, Goldin noted that their strong consumer appeal is a function of the chains’ use of quality ingredients (which are strongly promoted), customized/made-to-order operations, and being “female-friendly” with lighter menu items and décor.
“In addition to having superior unit economics, the more successful fast-casual chains have a heavy focus on catering. This could definitely be a marketing opportunity for supermarket fresh prepared food programs,” said Goldin.
In terms of key learnings from fast-casual chains that could be applied to supermarket FPF programs, Goldin related:
• Consumers are willing to pay for quality
• Promote and merchandise “fresh”
• Focus your menu offerings
• Offer customizable options
• Feature “better for you” options on your menu
• Have an appealing dine-in option
• Leverage your front–line talent
Dave Donnan, a partner at A.T. Kearney, a leading advisory firm working with manufacturers, retailers and distributors, shared some global insights on what is happening with grab ’n’ go and fresh by spotlighting retailers in several regions of the world. Several consistent themes emerged from Donnan’s presentation around what successful retailers are doing globally: focus on high-quality convenience; create limited-time and special market promotions; offer FPF across a variety of eating occasions; and have multiple formats to appeal to your customers (including an in-store dining option and self-service shelves for grab ’n’ go).
Most importantly, Donnan noted, is the opportunity for a retail store to localize its FPF program to the unique interests of its shoppers. Understanding the demographics of those shoppers is key—are they commuters, suburbanites or walk-ins?
Donnan concluded by suggesting that a key to success for retailers is the overall strategic positioning of their FPF program.
“To make your store the best restaurant in town, you have to think about your FPF area as a restaurant, not an extension of your store,” Donnan said. “And hiring someone with food service and chef experience is critically important.”
In the feature photo at top is Bob Goldin of Technomic.