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The Opportunity For Fresh Prepared


Last updated on June 14th, 2024 at 09:16 am

by Anne-Marie Roerink/Principal, 210 Analytics

Prior to the recession, a popular expression was “time-starved consumers.” But the economic downturn and its aftermath had shoppers shifting their attention from convenience to a host of money-saving measures. Many retailers shifted their advertising and merchandising focus to the needs of the penny-pinching consumer in response. Now, the ever-improving economy is driving renewed focus on convenience and speed throughout the entire path to purchase and across many categories, ranging from ready-to-eat popcorn to ready-to-drink beverages, and of course, deli/fresh prepared.

According to Nielsen, total deli sales reached $24 billion in mid-2016, with 58 percent of dollars generated by fresh prepared. As a percentage of total fresh purchases, prepared foods average 17 percent. While a driver of growth, deli departments can’t be everything to everyone, and strategic decisions relative to assortment, specials, price points, type of meal solutions, etc., must be made in context of the store brand and location, day part, meal trends and the shopper audience, to name just a few. Importantly, getting the deli right can mean significant payoffs, both for the department, total perimeter and the total store, as found by Nielsen Fresh research. Additionally, fresh prepared is an important basket driver. Carts including fresh prepared items average $64 vs. just $41 for the average basket ring.

So what’s up for grabs? FMI’s “The Power of Fresh-Prepared/Deli” report explains.

The fastest-growing perimeter area

Fresh prepared is the fastest growing area in the fresh perimeter, driving both innovation and differentiation among retailers. Fresh prepared as a focal point for food retailers is in full swing, as evidenced by the rising number of “grocerants”—where fresh prepared drives the image and often trip occasion for the store. Grocerants often feature an enhanced dining atmosphere and offer everything from chef-prepared, cooked-to-order meals to grab-and-go solutions. Secondly, and more commonly, retailers across channels and regions are growing their assortment of items and solutions beyond rotisserie chicken and salad bars (but not to the extent of grocerants). Nielsen found that fresh has been an important key to financial success for food retailers.

Deli Is Key to Driving Fresh and Total Store Success

In addition to robust sales growth, deli/fresh prepared is an important driver of overall success in fresh as is demonstrated by Nielsen Fresh research. Retailers were divided into seven groups based on their fresh velocity. Those with a higher fresh velocity (or best-in-class fresh retailers) have a significantly larger share of total deli (nearly 30 percent) than low-velocity retailers. Additionally, high fresh velocity retailers tend to also be more successful in driving sales across the total store. The top retailers are growing sales 10-plus percent whereas those on the other end of the spectrum are seeing sales declines to the tune of -6 percent. This demonstrates the extreme importance of the deli/fresh prepared to the overall health of a retailer.

2nd-$-ShareOutpacing total and center store

Fresh prepared is in demand. While significantly smaller than departments such as meat and produce, fresh prepared is experiencing above-average dollar and volume growth. Nielsen recorded a 5.5 percent dollar gain for the 52 weeks through the middle of 2016, with volume gains of 4.5 percent. However, while household penetration for fresh prepared is high at 96.2 percent, there is great opportunity to grow this segment through increased purchase frequency (currently once every three weeks) and spend per trip.

Capturing more of the meals consumed/prepared outside the home

The numbers present a clear case: getting deli right is important for future success. And market forces are certainly in favor of continued deli growth, as evidenced by these study findings.

• In a typical week, shoppers report that roughly 4.5 of their dinners require some level of food preparation. While shoppers who are more likely to eat out, by definition, become key targets for fresh prepared meal solutions, their trip frequency presents a significant hurdle. The reality is that they visit both the store and the deli less often. As such, driving store trips and building brand awareness for deli/fresh prepared separate from the grocery side are important first steps to improved engagement.

Actual spending data shows that deli/fresh prepared basics have varying opportunities to build trips and spending. For instance, deli-prepared chicken is the highest-penetrated category, and its best opportunity is to stave off the declines in spend and trips per household. Other categories have a chance to grow penetration through increased awareness with sampling and co-promotion (particularly deli appetizers). Opportunities will differ on store audience and location.

3rd-Population• While older generations tend to do more scratch cooking, younger generations’ habits point to a growing opportunity for fresh prepared (and value-added) options to help busy consumers get a jump start on meals at home. Millennials, in particular, increasingly mix and match scratch, semi- and fully-prepared items when preparing dinner. However, regardless of age, income, region or area, a majority of all shopper groups have taken to combining items they cook from scratch with value-added items that are semi- or fully prepared. Attitudes toward cooking and shopping greatly influence consumers’ meal preparation frequency and the makeup of the meals. Shoppers who are pressed for time and/or do not enjoy cooking tend to report a much higher use of semi- or fully prepared items—providing important marketing/positioning ideas with engagement hinging upon the “total value” message and providing plate combination ideas that resonate with these groups. Focusing on convenience throughout the path to purchase increases retailers’ chances of successfully competing with both restaurants and meal assembly kit delivery services.

• Despite best intentions, shoppers admit dinner often requires last-minute adjusting. During the week, eating out is more frequently a last-minute decision, making time and speed important considerations for alternate options to cooking. On the weekend, dining out is more of a planned vs. spontaneous activity, and variety and ambiance become more important. These findings indicate that shoppers are focused on getting in and out of the store quickly on weekdays, emphasizing ordering and pickup ease, separate deli checkouts, click and collect and kiosk ordering. In deli meats and cheeses, Nielsen reports success in the grab-and-go offerings; offering pre-sliced day-of product in varying amounts to save time at the deli counter. Grab-and-go volume has increased significantly over the last 18 months, with peak times being 12 p.m.-5 p.m. on weekends. The flip side for supermarkets is that focus on speed undermines shopper desire to shop the rest of the store. The “4 p.m. planning void” and dinner plan spontaneity provide great opportunity to drive supermarket fresh prepared as an alternate solution to avoid losing the dinner occasion to restaurants. However, in order to take advantage of this opportunity, grocery stores need to become more top-of-mind as an alternative to eating out at restaurants.

Lunch fresh prepared is driven largely by easy and frequent access to the store as evidenced by urban shoppers being twice as likely to regularly stop at grocery stores for prepared lunch solutions. Nielsen found that lunch combinations (pre-made lunch options like sandwiches, snacks and cheese and cracker kits) are helping the perimeter and center of store drive growth by offering simple meal solutions for children and adults alike. Success, much like dinner time, hinges on building a reputation in lunch offerings with an emphasis on speed, price, variety and healthy options.

*Editor’s note: The Power of Fresh Prepared/Deli 2016—Shopper research by the Food Marketing Institute, made possible by Nielsen, Hussman and The Shelby Report, and conducted by 210 Analytics. This is part one of a four-part series examining the report’s findings. Part 1 also appears in the February 2017 print editions of The Shelby Report.

About the author

Shelby Team

The Shelby Report delivers complete grocery news and supermarket insights nationwide through the distribution of five monthly regional print and digital editions. Serving the retail food trade since 1967, The Shelby Report is “Region Wise. Nationwide.”

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