Greater assortments of prepared foods, as well as service deli meats and cheeses, are being aimed at a wide range of shopper segments.

Gone are the days when just having a decent service area and prepared foods program were enough to give supermarket deli operators a competitive advantage. Consumers now expect their delis to know — and provide them with — the foods and features that they want. If expectations aren’t met, customers are likely to turn to the plethora of competing food outlets rather than give a second or third chance to the deli where they had a sub-par experience.

“All retailers are looking for growth and everybody is fighting for the shopper’s share of mind and wallet,” says Jon Hauptman, vice president of Willard Bishop, a Barrington, Ill.-based retail food consulting firm. “Having an appealing deli can be a difference-maker for some supermarkets.”

Successful deli operators are able to determine the needs of customers in specific locations, and provide them with relevant products and services on a consistent, high-quality basis.

That is especially crucial today because interest by shoppers in delis is on the upswing. The Perishables Group, a West Dundee, Ill.-based consulting firm, reports that annual deli sales rose 0.6 percent in 2005 to $14.2 billion. The Madison, Wis.-based International Dairy-Deli-Bakery Association (IDDBA) notes that PLU items, which include the majority of service deli products and sales, increased 3.4 percent in the 52 weeks that ended on April 2, 2006, to almost $13.7 billion.

Jonna Parker, Perishables Group senior account manager, says that while greater sales are occurring throughout the deli, expansion primarily is being fueled by prepared foods — which are becoming popular meal alternatives — and specialty cheeses.

Yet, deli operators, despite such activity, still are facing competitive pressures. “Competition from foodservice outlets and other food formats continues to be a challenge,” says Mary Kay O’Connor, IDDBA director of education. “There are an ever-increasing number of places to buy the kind of food offered in supermarket delis. Consumers need a reason to go to the deli, be it personalized service, signature products, convenience, taste or quality.”

Convenience is key

Many supermarket operators are betting that the availability of convenient, prepared meals will remain a key deli attraction. The Washington, D.C.-based Food Marketing Institute, for instance, notes in its U.S. Grocery Shopper Trends 2006 report that 22 percent of consumers at least once a week eat meals at home that were not prepared in the home. Another 49 percent dine in a fast-food or full-service restaurant at least once a week.

Opportunities for delis remain strong as the study also states that only 17 percent of survey respondents list the deli as their source for take-out meals, trailing take-out restaurants and fast-food chains, but finishing ahead of full-service restaurants and smaller food stores.

Hauptman says delis would benefit by meeting consumers’ demands for complete take-out meals, including entrées, side items, salads, desserts and beverages.

“Prepared foods are evolving from the old days when shoppers were just looking for the center of the plate,” he notes.

Indeed, delis are migrating away from the traditional sales base of sliced meats and cheeses and merchandising more hot and cold prepared items. The Perishables Group reports that 48 percent of total U.S. deli sales last year were generated by prepared foods, 29 percent of sales came from sliced meats and 23 percent from sliced cheeses.


Geographically, prepared foods last year accounted for 60 percent of deli sales in the West, 52 percent in the South, 42 percent in the Central U.S. and 36 percent in the East.


Overall, nearly $5 billion was spent on deli prepared foods in the 52-week period ending April 2, 2006, according to a study from the IDDBA and Hoffman Estates, Ill.-based FreshLook Marketing Group.

The majority of sales dollars were for entrées ($1.68 billion), followed by sandwiches ($883 million), salads ($880 million), trays ($499 million) and appetizers ($496 million). The average price of a deli entrée was about $4.29, the IDDBA report notes.

Chicken, meanwhile, is the most popular entrée, accounting for almost 50 percent of overall entrée revenues and 22 percent of total prepared food sales in 2005, the Perishables Group reports. Chicken entrées include rotisserie birds, sandwiches and breakfast biscuits.

Eric Le Blanc, director of marketing for Springdale, Ark.-based Tyson Foods Inc., a leading poultry supplier, says for further growth, deli operators should maintain their focus on hot prepared foods while offering a range of proteins, including pork and beef. It is important, he notes, to market the most popular brands and varieties because flavor and reputation — rather than price — drive deli sales.

“Retailers should use a brand that brings the highest monetary value,” he says. “This allows them to increase consumer confidence and repeat purchases, and to potentially charge more for products.”

He adds that convenience also is a key magnet for attracting consumers to the hot-foods case.

“The hot-foods purchase is not a substitute for dining out, but rather the shopper’s way of saying, ‘I would cook it at home tonight if I had the time,’’ Le Blanc notes.

Convenience elements favored by shoppers, he says, are ease of ordering; ease in getting in and out of stores; and attractive, leak-proof take-out packaging that maintains food temperatures.

“Consumers, once they get those conditions fulfilled, can then look at variety,” Le Blanc says. “Retailers have to expand their offerings and manage the case — and that includes rotating items. Consumers not only need products, they need ideas of what to have for a full meal.”

Self-serve availability

While more shoppers are seeking wider choices of prepared foods, many prefer the freshly prepared hot products. Such foods have historically been marketed in full-service cases, but items are increasingly being situated at self-service displays as retailers leverage newer technologies.

Leading natural and organic retailer Whole Foods Market Inc., Austin, Texas, for instance, has hot-foods bars in some outlets that feature more than two dozen selections, as well as displays for hot soups and rotisserie meats.

Some merchants, including West Bridgewater, Mass.-based Shaw’s Supermarkets Inc., are placing mobile hot cases — such as rotisserie chicken displays — near the checkout to make it easier and quicker for shoppers to purchase deli items without actually visiting the department.

Hot-food bars also are replacing conventional steam cases. The new equipment, with heat and moisture controls, enables items to be kept at the proper temperatures for longer periods of time without drying out.

More food bars also allow operators to merchandise hot and cold products on the same unit.

Hot cases and displays, meanwhile, are being used to merchandise a wider selection of prepared proteins, including diverse ethnic foods. For instance, The Perishables Group’s Parker, for instance, notes that deli sales of hot and cold Asian entrées were up 14 percent last year, and that Italian, Mediterranean and South Asian (primarily Indian) cuisines also are becoming more popular.

In addition, interest in side dishes, soups and breakfast entrées are on the upswing. Revenues for the segments last year increased 14 percent, 20 percent and 15 percent, respectively, Parker says.

Among the most active prepared-foods retailers is Pittsburgh-based Giant Eagle Inc., a chain of 227 supermarkets in Pennsylvania, Ohio, West Virginia and Maryland. The retailer offers various high-quality meal packages on a weekly basis and recently launched a centrally produced chilled prepared-foods offering, notes Tom DeVries, vice president of prepared foods merchandising at Giant Eagle. Selections include complete meals, dinner for two and an assortment of accompanying side dishes.

Healthy, high-quality variety

Healthy, high-quality variety

Traditional deli offerings also are becoming more prominent. Many operators, for instance, are upgrading the quality of foods that are being marketed at full-service counters in response to greater shopper interest in taste and wellness.

“The biggest overall trend in the service deli is eating healthy,” says Voni Woods, Giant Eagle director of deli operations. “Customers are very interested in knowing what is in —and what is not in — their foods, such as if an item is gluten-free, if it has trans fat and if it is low in sodium. They are looking to eat well and feel good about what they serve their families. For this reason, customers also are trading up to high-quality meats and cheeses, including all-natural proteins.”

At the same time, some stores are reducing varieties to simplify the shopping experience and category management.
“Retailers are going to two or three lines of sliced meats instead of five or six,” Hauptman says. Such merchants typically offer value, mid-tier and premium lines instead of multiple mid-tier lines, he notes.

“The idea is not to overwhelm the shopper with so much variety to the point that it all blends together,” he says. “Retailers can dramatically enhance their value image by reducing the number of SKUs in the service deli case.”

Turkey, meanwhile, remains the top-selling deli meat, accounting last year for $1.6 billion in revenues and 36 percent of deli PLU sales, according to the IDDBA and FreshLook Marketing. Next was ham with sales of almost $1.4 billion, accounting for 31.6 percent of PLU sales. Sales of beef and salami totaled $581 million and $316 million, respectively.


Similar to prepared foods, deli meat varieties include an expanding amount of ethnic and health-oriented choices that are leaner, lower in sodium and calories, and carry the natural and organic labels.

Indeed, the Greenfield, Mass.-based Organic Trade Association estimates that sales of organic meats and poultry in the deli jumped 25 percent over the past four years.

“With health news so prevalent, any kind of healthy attribute of food is a strong selling point,” the IDDBA’s O’Connor says.

Overall outlook

Yet, despite the rollout of new varieties of meats and cheeses that are intended to appeal to a wider mix of shoppers, overall activity at full-service counters is declining. The Perishables Group reports that sales of PLU deli meats in the service case fell 2 percent between 2005 and 2006, while cheese sales were down 5 percent.

Parker, however, says the drop is not being accompanied by an uptick in pre-packaged meat sales and it is unclear whether full-service meat shoppers have switched to other products or retail formats.

Some observers say service-deli sliced cheese sales may have migrated into the self-service segment where shoppers are opting for choices that often are not available at the service counter, such as Havarti or Gouda. Cheeses often are merchandised in several store locations, including islands that are situated in aisles and the dairy section.

To help offset such declines, merchandisers must be creative in developing ways to deliver better service, to add convenience and to more efficiently promote the deli, says Bill Pizzico, president of the Prizm Group, a Fort Washington, Pa.-based business development and market research firm.

He adds that deli operators have for too long relied on impulse purchases to spur sales. “Promote what you know you can sell and put together a promotion schedule,” Pizzico advises.

Retailers also need to target the consumers who are most likely to shop the deli, analysts say. Individuals who on average visit the deli more than once a week include non-African-American males with annual incomes above $35,000, the IDDBA reports.

Another attractive segment are young consumers between the ages of 18 and 25 who generally don’t cook or eat out often, but are health-conscious and love fresh food, analysts say.

Delis also are likely to benefit by appealing to environmentally conscious consumers. Merchandising elements can include the use of leak-proof sustainable packaging that reduces waste but is effective in keeping products fresh.

“Retailers and their suppliers will need to have environmentally sustainable offerings and solutions in order to be viewed as special,” Hauptman adds. “Many shoppers will soon be making purchase decisions based in part on the environmental performance of the retailer.”