Deli-licious: Prepared deli shows ‘consistent growth’ as inflation eases
Food price inflation, a major concern for households, is “on track for below average numbers in 2024” relative to the historical norm, Ricky Volpe, associate professor agribusiness, California Polytechnic State University, explained during an FMI – The Food Industry Association webinar.
Compared to 2022 food prices, which saw year-over-year double-digit increases “for the first time since the 1970s,” inflation in 2024 relative to 2023 is “about one-tenth” of peak pricing or a little more than 1% across the grocery store, Volpe said, citing data from USDA’s Economic Research Service.
Between March 2020 and September 2024, upstream costs rose 21.09% compared to retail prices which grew 20.34% between March 2020 and Sept. 2024, indicating that grocery retailers are absorbing some of the cost increases rather than fully passing them to consumers, he added.
Retail wages in grocery also grew 5.64% faster than grocery prices, which were up 2.1% between January 2023 and September 2024, pressuring retail margins, Volpe said.
While egg and meat prices are “still challenging,” other categories, like produce, bakery and dairy, are a relief for budget-conscious consumers Volpe said.
Total deli sales show ‘consistent growth’ YoY
Grocery’s foodservice segment consistently expanded over the past year as it delivered consumers with options that offer value and convenience, said Steve Markenson, VP research and insights, FMI – The Food Industry Association.
Total deli dollar sales “stabilized growth after several years of strong momentum,” increasing 1.4% to $450.9 billion during the past 52 weeks, according to FMI’s The Power of Foodservice at Retail 2024 survey.
Consumer purchasing behavior for fresh, ready-to-eat options reached an average purchase frequency of 9.5 times per year and an average transaction size of $8.30, underscoring consumers’ need for “quick, affordable and satisfying meal solutions,” Markenson said.
Prepared deli rivals quick service restaurants for convenience, affordability
Almost half (46%) of shoppers say deli provides more value than quick service restaurants. Additionally, 70% of shoppers are willing to pay $8 for deli items versus 70% who are willing to pay $10 in fast casual restaurants, explained Rick Stein, VP, fresh foods, FMI – The Food Industry Association.
“This provides an understanding of the price sensitivity for grocers when promoting themselves as a lower price alternative to fast casual, and food service borrowing from the restaurant play book … [to] enhance the shopper experience,” Stein said.
With consumers expecting convenience instore, retailers can implement restaurant-inspired features like online menus, ordering ahead and a pick-up option, he added.
Prepared foods have become a go-to meal solution for lunch and dinner as hybrid work schedules reshape consumer habits. About half, 55%, of hybrid workers report regularly shopping for ready-to-eat, ready-to-heat and ready-to-cook options, Markenson said.
Health and nutrition also are top of mind for consumers, with nearly two-thirds of shoppers prioritizing healthy options when purchasing prepared foods, according to FMI data. Only 26% are “very satisfied” with current available options, presenting an opportunity for retailers to provide healthier and convenient options.
Further, 54% of consumers prepare hybrid meals – combining items from scratch with prepared items – and look to ready-to-eat options to create a quick and balanced meal, he added.
“These trends underline the growing role of retail food service as a solution for modern meal planning, providing options that are accessible, customizable and increasingly aligned with consumers’ health goals,” Markenson said.
