The top performing grocery retailers have superior prepared food sections, says Nielsen
In contrast, retailers that have total sales toward the bottom end tend had about 27% of their sales come from the fresh department.
“The retailers that are driving growth in the industry are focusing on…the deli department, whether deli overall or deli prepared,” Sarah Schmansky, director of fresh growth and strategy at Nielsen, told FoodNavigator-USA.
In the 52 weeks ending December 31, 2016, deli sales on average made up 29% of total fresh department sales of the best performing retailers—specific store names of which Nielsen didn’t disclose—compared to just 14% among the low velocity retailers.
Prepared food make up 60% of deli sales
In the deli powerhouse, where retailers traditionally sell cured meats and cheese, it was prepared foods that made up the bulk of department sales. “Deli prepared foods makes up about 60% of overall deli department sales,” Schmansky said.
“The hot bars, the salad bars, soup bars, rotisserie chicken, sushi—there’s a lot of variety sold in the prepared area overall and it makes a little less than two-thirds of total deli sales,” she added.
In the same time period, sushi drove strong growth in the deli department with a 13% increase at grocery stores and 20% at drug stores, though convenient stores experienced a 57% decline.
The value-add of grocery prepared food
The prepared food section may well bring more trips to the store, as new numbers from Bank of America Merill Lynch revealed that Americans will continue to spend more to eat out than buy groceries to dine at home.
Grocery stores’ delis are at the heart of the rising grocerant trend, where consumers come to grocery stores not just to stock their pantries, but also dine in—or perhaps only dine in. In a study where Nielsen partnered with the Food Marketing Institute (FMI), they found that “consumers found deli-prepared to be very comparable to quick service restaurants,” Schmansky said. “In not only price, but quality and variety sampling.”
The convenience prepared food sections offer consumers is one area where grocery stores can innovate to stimulate more trips, and Schmansky said there is a lot grocery retailers can learn from quick service or fast casual restaurants.
“Retailers need to think, ‘What are [fast casual restaurants] doing that I can implement in store, that showcase we are better at a price per person standpoint, or a freshness and quality standpoint,’” she added.
‘Retailers have everything they need under their roof to pull together a meal kit’
Potentially biting into a grocery retailer’s fresh department sales are meal kits, the craze that has hit the US with no signs of slowing down, especially with Blue Apron becoming the first publicly traded company of its kind and online retail giant Amazon plunging into the space.
“We know it’s not a fad, it’s a trend, it’ definitely here to stay,” Schmansky said.
“There’s a huge opportunity for retailers to focus on meal solutions in store, to really create a destination for their customers,” she said. “The whole digital and online era is definitely impacting brick-and-mortar and visits to the store.”
“But the fresh department is really where retailers can drive trips and frequency back to the store by creating a destination [and] experience,” she added. “The pure fact that retailers have everything they need under their roof to pull together a meal kit, there’ a big opportunity for retailers to capitalize on this growing trend.”
