Investing in the Future of Food: Could rising popularity of fresh meals trigger SKU rationalization?
As retailers evaluate how best to meet this rising demand, FreshRealm founder Michael Lippold believes they will stock more fresh ready-to-heat and ready-to-cook options like the prepped perishables his firm helps food industry partners develop and fulfill.
If they do, CPG players could see increased SKU rationalization or a reverse-migration of consumers who recently returned to the center of the store back to the perimeter.
The retail store of the future
Even though many consumers returned to the center store for shelf stable items during the early days of the pandemic, Lippold believes the perimeter will see a resurgence as consumers seek convenient, healthy alternatives to constantly cooking.
And in particular, he says, shoppers will want pre-made meals that are ready to cook or simply need to be re-heated.
“The retail store of the future is going to be more about meal shopping instead of ingredient shopping, and this is not just a future vision you. You are seeing a lot of retailers invest big in this category now,” Lippold said.
As such, he predicts, retailers eventually will offer dozens of fresh meals organized by cuisine, cooking style and the number of people they feed.
Lippold’s prediction is based in part on what he sees in the UK, where he says the concept of shopping by meal already is the norm, and on the wild popularity of the bagged salad category in the US.
“The bagged salad category is $5.5b in the US and when you do a quick mental poll of how many meals do we eat salads versus how many meals do we eat that are not salads, we eat a lot more non-salad meals than salad meals,” he said. “We are looking at a $45b market at some point in the coming years.”
‘Our kitchen is the new coffee shop’
As illustrated by the bagged salad category as well as the rise of grocerants and grab-and-go fresh options over the last few years, consumers already were primed to adopt this trend before the pandemic began, but Lippold believes changes designed to slow the spread of the coronavirus will turbocharge consumer interest in convenient, fresh and nutritious options.
“As much as our kitchen is the new coffee shop or the new restaurant, and we are liking cooking, I don’t think we want to cook seven days a week or 14 meals a week, and this is the problem that we are ultimately trying to solve,” he said, explaining that FreshRealm and fresh meals are eliminating the ‘cooking’ and making meals more about being with family and enjoying food.
Will there be more SKU rationalization?
Many retailers are just starting to bring back products that the sidelined during the pantry-stocking phase of the pandemic to focus on essentials, but Lippold’s prediction comes to fruition some of those products might be cut again to make space for more fresh options.
“Do we really need all those individual ingredients if we can get them in a real simple combined meal solution?” asked Lippold.
Even if retailers reduce the variety of shelf-stable products or fresh ingredients, the quantity and variety of fresh meals they can offer – at least at the beginning – likely will be limited by refrigeration space and capacity to make the meals in house.
FreshRealm can help with the second part of this conundrum, Lippold said, noting the company workers closely with retailers across channels to develop, prep and fulfill fresh meal solutions from its four facilities across the nation.
As demand rises, Leppold adds that FreshRealm is ready to bring on a fifth facility within the next 18 months. He also notes that the company will keep a watchful eye on industry trends and be ready to pivot if necessary.
“There have been a lot of twists and turns in the fresh meal space over the last seven years, but I think we are going to get there anyway. I think COVID just really opened a window for us, and I think the next two to three years will be a really exciting time for the company,” he said.
