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Retailers Vie for Shoppers’ Dollars in Deli, Dairy and Bakery

In recent years, research done by International Dairy-Deli-Bakery Association (IDDBA) has shown that everything about grocery ­shoppers in America has changed—possibly for good.

by Ashley Bates/staff writer

[gn_pullquote align=”right”]“Ultimately what people want is a healthy product, a product that
tastes good, a product that is ­convenient and a product that is priced right.”
—Alan Hiebert, IDDBA[/gn_pullquote]In recent years, research done by International Dairy-Deli-Bakery Association (IDDBA) has shown that everything about grocery ­shoppers in America has changed—possibly for good.

IDDBA’s 2009 report “The New Value Shopper” showed that America’s challenging economy had fundamentally altered ­consumer food purchase behavior, and IDDBA’s latest research, “Consumers in the Deli,” confirms the 2009 research.

One positive step has been that consumers’ opinions about their own financial situation has improved—slightly—as more Americans have a positive perception of their own personal ­financial future.

According to IDDBA, in 2010 36 percent of Americans felt that their finances would improve, up from 31 percent in 2009.

These financial perceptions influence buying patterns by shoppers, especially in the dairy, deli and bakery departments.

In 2010, the top in-store bakery (ISB) management concern was attracting more shoppers back to the department since visits had dropped dramatically compared to 2004 visits—only 25 percent of customers shopped the ISB weekly.

Price is the most serious consumer-perceived gap in the department by customers.

Prices for dairy case staples on the rise

And price is what’s going up, just across the store on the dairy aisle.

According to the American Farm Bureau Federation (AFBF), the price of eggs and milk are on the rise, along with other staple items.

Coupons are making a huge impact on today’s buying habits as 51 percent of shoppers scan newspaper ads for weekly specials or sales and 44 percent frequently clip coupons before going grocery shopping, the IDDBA said. Internet coupons also are making a big statement along with coupons generated on smartphones.

In the most recent Marketbasket report, the AFBF said in the first quarter of 2011 shoppers reported the average price for a half-gallon of regular whole milk was $2.25, up 1 cent from the prior quarter.

The average price for one gallon of regular whole milk was $3.46, up 11 cents.

The average price for a half-gallon of rBST-free milk was $3.23, up 13 cents from the last quarter, about 40 percent higher than the reported retail price for a half-gallon of regular milk ($2.25).

The average price for a half-gallon of organic milk was $3.70, up 10 cents—about 60 percent higher than the reported retail price for a half-gallon of regular milk ($2.25).

For the first quarter of 2011, the average price for one dozen regular eggs was $1.62.

The average price for a dozen “cage-free” eggs was $3.20, nearly double the price of regular eggs. Compared to the first quarter of 2010, regular eggs decreased 7 percent while “cage-free” eggs increased 10 percent.

One product driving sales in the dairy department is yogurt.

Significant growth in the yogurt category is predicted through 2014, with full fat yogurt taking a sizeable portion (64.5 percent) of the business, the IDDBA reports.

The AFBF also reported that shredded cheddar cheese, vegetable oil, ground chuck and flour increased the most in dollar value compared to the fourth quarter of 2010.

“Home cooks shopping for staples to make their favorite shepherd’s pie or chicken pot pie recipe will definitely leave the grocery store with lighter wallets this quarter,” said AFBF Economist John Anderson, in a press release. “As anticipated, the increased consumer ­demand for meats and dairy products that began in 2009 and continued through 2010 ­remains evident as we look forward to the middle of 2011.

“Retail price increases for some foods are likely to continue throughout the year, as it takes time for farmers to increase the size of their herds to accommodate increased demand.”

To combat rising costs, retailers have to attract customers using different tactics like touting trendy, convenient and healthy selections that also are a perceived value to the shopper.

Delis become a ‘bridge’

According to IDDBA, “Delis are becoming the bridge between dining out and dining in as time-strapped shoppers shy away from steeper restaurant prices, but still desire high-quality, easy-to-assemble meals.”

The prepared food category has grown to about 50 percent of deli sales in the last five years, while deli meat and cheese dollar shares have gradually declined to around 24 percent and 19 percent, respectively.

Versatile rotisserie meats, like chicken, have been flying off of deli shelves. These can be eaten as they are, as well as in leftovers, sandwiches, salads, and soups, noted IDDBA.

Consumers also are finding convenience and value in side dishes they can take home for dinner, as 40 percent of shoppers eat deli meat more than once a week, according to IDDBA’s “Consumers in the Deli 2010” report, which could possibly indicate that they’re brown-­bagging lunches to reduce their meal costs.

Salads found in the deli can be healthy and convenient additions to dinner, or even eaten as snacks. Some stores offer Mediterranean-inspired dishes, Asian-inspired selections and even Middle Eastern fare. These items are becoming the norm alongside hummus, specialty olives, dips and cold salads.

Other trends that retailers are seeing are healthy meal options and ethnic and bold flavors, along with a concentration on freshness.

Fresh ingredients really do come from equipment in the deli, dairy and bakery. New energy-efficient equipment is popping up all over the deli, dairy and bakery departments to keep freshness at its peak and energy usage at a minimum.

“We’ve seen over the past four or five years there’s been a move toward energy-efficient equipment, especially in dairy cases with these more LED kind of lights that draw less power,” said Alan Hiebert, education information specialist for the IDDBA, which is based in Madison, Wis. “We’re seeing lighting that will turn off automatically when there’s no traffic in the area and more efficient refrigeration and more environmentally friendly refrigerants. Equipment fixtures like that is a big investment for stores and they don’t do it that often. They can’t afford to be updating cases every year. It’s a slow trend, a slow movement, but there is a movement toward more efficient pieces.”

Bakery portions go the moderation route

Over in the bakery, smaller portion sizes are also flourishing. Stores are offering dessert shots, mini desserts, simple and lavish cupcakes, gourmet donuts and elaborate desserts for two, according to the IDDBA.

“(Mini desserts, desserts for two) hit on calorie reduction, (and) in the short run it’s a little bit cheaper,” Hiebert said. “It’s not cheaper per ounce, per pound, but it will lower the grocery bill short-term.”

Hiebert added that right now the major trend affecting retailers is price, bottom line.

Fifty-two percent of shoppers are eating fewer baked sweet goods than a year ago, which actually is a slight improvement from 59 percent in 2004.

“For the last year people are really focused on price; that’s the No. 1 thing that people are worried about right now,” Hiebert said. “I think we are seeing some increased volume in some of the lower priced products. Normally, convenience and nutrition are up there but they are being overshadowed by price right now. So ultimately what people want is a healthy product, a product that tastes good, a product that is convenient and a product that is priced right and…the pricing is overwhelming. Obviously, new product development is a study in compromises, and you have to determine which factor you are willing to give up.”

Healthy products that taste good are found all over the deli and bakery, but when considering price, deli meats and cheeses have been some of the hardest hit in a down economy.

But in a new push for healthy offerings, some deli brands have decided to team up with the United States Department of Agriculture to reduce sodium in their meats.

Boar’s Head, a manufacturer of premium meats and cheeses, now offers varieties that are lower sodium. These include new Black Forest Brand 25 percent Lower Sodium Smoked Ham, the Branded Deluxe 42 percent Lower Sodium Ham, Golden Classic 42 percent Lower Sodium Oven Roasted Chicken Breast and No Salt Added Natural Swiss Cheese.

The products are a part of the National Salt Reduction Initiative (NSRI), and Boar’s Head began meeting the 2012 and 2014 category sodium targets 25 years ago, according to a press release.

The NSRI’s goal is to reduce the salt in packaged and restaurant foods. The partnership will track progress of companies for their specific target date and help set goals for sodium reduction.

Other food manufacturers that have jumped on the NSRI goals are Butterball, Kraft, Unilever, Goya, Campbell and Heinz, among many others.

Hiebert said that companies can push an array of buying incentives but companies really have to come through on value to keep profits up as food and fuel costs rise.

“The deli, the perishable departments, have a little more room and their margins are a little higher, but I don’t know exactly how prices are being affected,” he said. “I think different chains are dealing with it differently, (there’s) a lot of different philosophies on what their perishables department is all about. The perishable department is where we see differentiation in stores and chain to chain. Some chains may be willing to accept lower margins within those departments in order to increase volume.”

Hiebert added, “Gas prices are going up, we’ve had a pretty lousy spring weather, which will affect (these choices). Here we are in the Upper Midwest and it’s affecting crops. We just have to see how it affects crops through the rest of the year.

“I’m not an expert on commodity prices, but everything I’ve seen seems to indicate that also prices will go up.”

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