- Baby Non-Food Products
- Baking/Cooking Staples
- Household Products
- Kitchen Products
- Paper Products
- Personal Care
- Pet Products
- RESEARCH & AWARDS
Retailers today have begun to morph into lifestyle-based extensions of their shoppers—they aspire to become regular destinations, meeting myriad needs, and are evolving into brands themselves. At the core of this branding are the aspects unique to each retailer—like their private label lines, unique prepared foods, the overall ambiance of the store, and so on. And the more effectively retailers can align themselves with their target demographics across multiple product areas, the better.
As this branding continues, the ways in which retailers integrate foodservice into their operations provides a distinct opportunity to capture an incrementally higher percentage of shoppers’ away-from-home food dollars, entering into direct competition with restaurants throughout the day. When a retailer becomes a dining destination, they’ve jumped the gap, and subsequently resonate with their shopper base on a completely
Foodservice Profit Potential
Dynamic foodservice offerings help drive overall growth. “Prepared meals and beverages continue to evolve in the supermarket space, and we’re very excited and positive about the growth opportunities,” said Brian Darr, managing director of Datassential.
Just as private label products can often offer a value proposition compared to national brands, retailer-branded foodservice, due to lower overall cost inputs compared to restaurant chains, can undercut restaurants on price. As Technomic notes in its 2012 “Retailer Meal Solutions” report, nearly 9 out of 10 consumers strongly consider overall value and price when making retail meal solutions (RMS) purchases, “likely because cost is one of the key reasons consumers purchase RMS instead of visiting restaurants.”
This value connection takes the shopper further down the road of integrating the retailer, as a brand, into their schema. “Prepared foods can really help build the store’s brand,” said Darr. “If the prepared foods area is popular and becomes a destination in and of itself, the patron may visit more frequently, and they shop the aisles more frequently while picking up prepared foods. In general, if they are getting great food and have great experiences in all of the departments, then it will help the store’s overall branding and image, and possibly loyalty.”
Carefully cultivated in-store foodservice initiatives have driven increased revenue across multiple departments. “In the fall of 2013, we conducted a large consumer/shopper survey, and qualitative interviews with deli executives,” said Darr. “Most of the executives indicated they have experienced growth in all areas around prepared foods—entrées/meals, sides, grab-and-go and the bakery.”
In the convenience channel, foodservice has likewise proven a significant driver of revenue over the past few years. In April 2014, NACS noted that convenience store foodservice sales accounted for 18.0 percent of store sales in 2013, an increase of 2.4 percent over 2012. Foodservice was also tapped as a category that’s driving significant profit, accounting for 29.1 percent of gross profit dollars during 2013.
Technomic’s December 2013 report, “Convenience Store Shopper Insights,” notes that 7-Eleven is the C-store leader in foodservice. Its survey found that two-fifths (39 percent) of convenience store foodservice users purchased a foodservice item from 7-Eleven in the past two months. The report also found that one-third of consumers (34 percent) say they would have visited a restaurant if they had not purchased prepared foods from a convenience store on their most recent visit, with 26 percent saying that restaurant would have been a quick-service restaurant (QSR).
The drugstore channel is also benefiting from foodservice innovations. Technomic notes that 3 in 10 consumers who purchase RMS, and more than two-fifths of those aged 18–34, say they have visited drugstores such as Walgreens for prepared foods. “Further, nearly a third of these consumers purchase prepared foods at drugstores once a week or more often,” notes Technomic. “Consumer data indicates a net gain in purchases of prepared foods at drugstores over the past year, particularly among younger consumers. Consumers attribute these increases largely to the affordability, fast service and convenience at drugstores, and indicate that—just like other retail segments measured—these increased purchases come at the expense of fast-food restaurants.”
Branding the Concept
Fast-casual restaurants like Panera and Chipotle have seen significant growth in recent years. The NPD Group recently noted that fast-casual has outperformed all other restaurant segments in 2013—a feat that segment has accomplished over the past 5 years.
This poignant fact hasn’t been lost on retailers, noted Darr. “We’re seeing more fresh prepared/prepared on-site items—pizza, sandwiches, etc. Additionally, some retailers are putting together true meal packages where they are cross-promoting other departments—desserts from the bakery, maybe wine, and flowers from the floral department as they try to ‘build a higher check average’ just as a restaurant would.”
Approaches to in-store foodservice vary rather widely, including grab-and-go items, chef-prepared dishes, self-service hot food areas, smoothie and juice bars, and more. Many traditional and specialty grocery stores have even added dedicated sit-down cafés and restaurants with full table service. These stores seem to have really thought about their prepared foods operations, noted Darr, and many have the look and feel of a standalone, fast-casual type of restaurant, with inviting décor, layouts and lighting.
Formats popular with in-store foodservice also include wine bars and brewpubs. As Technomic notes, “Pub-style concepts are among the most popular installations inside upscale supermarkets, as customer interest in craft beer and local wine fuels expansion of adult-friendly onsite dining venues.”
Understanding regional and local shopper demographics will help pinpoint logical directions for retailer-branded foodservice product development—and what works in California won’t necessarily work in Kansas or New York, so regional customization of offerings is vital to success. “We’re seeing menus expand to include a wider variety, covering everything from better-for-you options to more home-style/comfort foods and more ethnic influences—Mediterranean, regional Italian, regional Asian,” said Darr.
Retailers can use multiple approaches to promoting and merchandising aspects of their foodservice options—including social media, smartphone apps, in-store promotion, etc. It’s essential that shoppers know what is available. “Stores need to build better awareness of their departments and increase traffic,” said Darr. “In our study, we found that only about one-third of the regular shoppers knew what their preferred supermarket offered in the way of prepared foods and bakery. Additionally, only about 40 percent of shoppers regularly visit the prepared foods and in-store bakery area of their preferred supermarkets. That’s far less than the other perimeter areas, like produce, meats and dairy.
“Stores need to create some excitement/energy around their prepared foods areas and build interest,” continued Darr. “They need to promote visiting the area. We think once you get the shoppers in the area, it is going to be much easier to turn them into buyers. They need to see the great displays, see the colors, see food being prepared and served, and smell the wonderful aromas. All of those things build interest.”
Part of this equation is for the retailer to begin to see themselves as a bona-fide foodservice operator. “They should consider the restaurant and food options in a few block radius of their stores as the competition and see if they can attract those diners,” said Darr.
In order to capture more foodservice spending, retailers need to cultivate concepts that resonate with their core shopper base—and quality expectations continue to rise. As the economy improves, spending on retail foodservice items has the potential of dropping off as shoppers migrate back to restaurants.
As channels blur and more cross-channel competition ensues, the lure of becoming a one-stop-shop has increased potential and viability. “Retailers can also tout the convenience factor of ‘one-stop shopping’ in order to boost incremental RMS traffic and sales,” notes Technomic. “An RMS format allows consumers to purchase meals while visiting retailers for groceries, gas or other items. In turn, this saves consumers time, since they only have to visit one location instead of two or more. Consumers indicate that this is important to them. Nearly half of consumers polled (47 percent) most often purchase RMS at their preferred store because it is the same store where they shop for groceries.”
A key factor here is convenience. “Overall, convenience is the No. 1 purchase driver for consumers’ increased prepared meal purchases, and is boosting RMS purchases most strongly at traditional supermarkets, convenience stores and mass merchandisers,” notes Technomic. “However, the freshness of the food is more important to consumers at specialty and upscale supermarkets than convenience.”
We live in an era where high degrees of individualization and customization are the expected norm. “Consumer data points to opportunities for retailers to leverage their customization options and new and unique food offerings in order to gain share of foodservice occasions,” notes Technomic. “Nearly two-fifths of consumers (38 percent) believe that retailers provide more opportunities for customization than restaurants, and one-third of consumers (33 percent) say they are more likely to try new or unique foods at retail stores than at restaurants.” Leveraging this higher degree of customization through flexible foodservice options will work in the retailer’s favor.
This capability for customization can come in multiple forms, including through made-to-order menu flexibility and, for carry-out items, an inherent ease of further customization once the customer gets home. Some grab-and-go items should also have an ability to store well for future consumption, aiding shoppers with short-term meal planning. Technomic notes that the availability of made-to-order hot items that can then be further customized to personal tastes at home is particularly appealing to younger shoppers aged 18–24.
“To get more of the restaurant dollars, the shoppers want more options,” said Darr. “They should be able to have great selection of items that can be prepared for them, and they want a great selection of prepackaged items for when they are in a hurry and want that grab-and-go option. Again, these stores are competing with the restaurants in a few block radius around them, so options absolutely need to move beyond rotisserie chicken, standard take-and-bake pizza and standard grab-and-go sandwiches.”
Items like rotisserie and fried chicken are commonplace—and popular. “However, one of the leading menu-development trends for chicken across industry segments calls for ‘better’ chicken items,” notes Technomic. “‘Better’ chicken items tout not only all-natural, organic, free-range and other health-halo-related types of claims, but specialty claims as well, such as those with globally inspired seasonings and sauces, and fire-grilled chicken dishes.” For carry-out/to-go items, high-quality packaging is paramount, often with capability for reheating in the microwave or oven.
Technomic suggests that “signature” fried snacks, a wider variety of vegetable sides, higher-quality pizzas, a focus on specialty sandwiches and burgers, and a move toward ethnic flavors are also among some of the foremost retail foodservice menu trends. “Some of these trends are seen in made-to-order fried convenience store snacks, wood-fired artisan pizzas at upscale supermarkets and the continued proliferation of regional Mexican and pan-Asian ready-to-heat entrées.” Technomic also reports that one-third of consumers indicate they are more likely to try new or unique items from a retailer’s prepared-foods section than from a restaurant, lowering the risk involved in experimenting with new items.
Creating unique—but still accessible—fare for kids’ menus also presents significant opportunity for retail foodservice. This is an area where nutritional rubrics should factor into decision-making, reflecting the strong national focus on kids’ health-and-wellness.
Sandwiches have nearly universal appeal throughout the day. “One notable trend for lunch and dinner sandwiches calls for the promotion of specialty varieties—especially at traditional supermarkets and upscale supermarkets,” notes Technomic. “This includes a greater selection of breads, spreads and condiments, proteins, and cheeses for sandwiches, offering more than just the conventional deli-style build.”
But retailers need to carefully pick their foodservice spots. Breakfast—competing largely with QSRs—continues to prove a difficult daypart for supermarket retailers to crack. “One area that we haven’t seen supermarkets, in general (there are some exceptions), do a great job with is breakfast,” said Darr. “Breakfast has been a growing daypart on the restaurant side for the last 5 years. Supermarkets do well with the dinner daypart and are gaining ground at lunch, but they really lag in capturing more of the breakfast daypart. Supermarkets need to figure out a way to make their morning options more attractive and more accessible. It needs to be as easy to get breakfast at a supermarket as it is to get it from a QSR if they are going to capture more of that daypart.”
Making access to ordering and receiving items at retail quick and convenient, perhaps via drive-thru service or online ordering with curbside delivery, might help drive more breakfast growth—and throughout the day.
As Technomic reports, convenience stores do a better job with breakfast: “Convenience-store prepared foods not only dominate RMS breakfast occasions, but represent the greatest growth for RMS breakfast foods over the past two years. Nearly half of consumers who purchase prepared foods from convenience stores at least once a month visit these locations for RMS breakfast in general, up from two-fifths of consumers polled in 2010.”
Many retailers across multiple channels have already found success with in-store foodservice, but Hy-Vee’s Market Grille and Market Café, H-E-B’s Central Market banner, Walgreens and 7-Eleven serve as emblematic examples across the traditional supermarket, specialty supermarket, drugstore and convenience channels.
Channel: Traditional Supermarket
The Market Grille at select Hy-Vee locations is a full-service restaurant concept serving breakfast, lunch and dinner, with the dinner daypart as its central focus; Market Grille also offers a Sunday brunch (offering Create-Your-Own Eggs Benedict, an omelet station and a bloody Mary bar, among other options). The full dinner menu includes appetizers, pasta, aged steaks, pork chops, seafood, made-to-order sushi and more. Seasonal al fresco dining is available on the patio, and the concept includes a bar area. Craft beers are on tap, along with cocktails and an extensive wine list. Hy-Vee notably works with Stevens Point Brewery to develop exclusive Baraboo craft beers for its foodservice menu—as well as for retail sale in Hy-Vee stores as part of its store brand lineup.
Market Café, Hy-Vee’s scaled-down in-store foodservice concept, offers beer, wine and a more-limited menu highlighting appetizers, salads and sandwiches.
While Hy-Vee currently features Market Grille and Market Café concepts in only 10 of its 235 stores, that number will reportedly grow to 75 over the next two years—both at new stores and retrofitted into existing locations.
Market Café menu selections include:
• Firecracker Shrimp (tempura shrimp in sweet-and-spicy Firecracker sauce)
• Asian Salad with chicken or shrimp (greens, snap peas, carrots, red peppers and wontons with house-made sesame-ginger dressing)
• Burgers, including a Peanut Butter Burger
• Pork Tenderloin Sandwich (an Iowa classic—Hy-Vee has a strong Iowa presence)
• Flatbreads (Tomato Mozzarella, BBQ Chicken, Meat Cravers or build your own)
The expanded menu offerings at Market Grille include:
• Bacon, Jalapeño and Maple Wontons with wasabi mayo
• Cha-Ching sushi roll (tempura shrimp, tuna, salmon, tilapia and surimi topped with spicy mayo and teriyaki sauce)
• Pizza and flatbreads, with multiple ethnic options like Italian, Greek and Sicilian, plus build your own
• Cobb, Southwest, Asian, Greek, Caesar and other salads
• Multiple sandwiches and burgers, with latter options including a Maytag burger (topped with Maytag blue cheese—another nod to Iowa)
• Multiple pasta options, including four types of mac-and-cheese (three-cheese, smoked with bacon, white Cheddar, baked truffle)
• Several steaks and chops, including a Hawaiian Rib Eye (an Amana rib eye marinated in soy sauce and pineapple juice) and The Iowa Chop (seared and finished with a caramelized onions and garlic demi-glace)
• House-smoked meats like ribs, chicken and turkey, as well as a Smoked BBQ Meatloaf
• A few different takes on fish and chicken, including Pretzel Chicken (breaded with crushed pretzels, served with Triple Mustard Sauce)
Market Grille also offers a dinner buffet, with selections from hot food stations, and a kids’ menu.
Understanding how to regionally distinguish your business can prove an integral branding move, something Hy-Vee clearly understands as demonstrated by the local and regional touches across its Market Grille and Market Café menus.
Central Market (H-E-B banner)
Channel: Specialty Grocery
H-E-B’s Central Market banner offers multiple in-store foodservice options through its Chef’s Case, in-store cafés, hot food lines and sandwich bars. In-store dining is available via indoor seating areas or outdoor patios.
Central Market Café menu items include:
• Tortilla soup and other daily, “made from scratch” soup specials
• Cobb, Grilled Salmon, Asian, Steak, Caesar and Mediterranean salads, as well as a Tropical Shrimp Salad (romaine lettuce, toasted coconut chips, grilled pineapple with paprika, Cotija cheese, toasted pepitas, red quinoa and herb-grilled shrimp with lemon garlic vinaigrette)
• Several sandwiches, including a Turkey & Bacon Panini (turkey, bacon, fontina cheese, chipotle aioli and arugula grilled on rosemary bread) and an Asian Chicken Wrap (char suichicken salad, fried wontons and toasted almonds with spicy honey-sesame dressing wrapped in a flour tortilla)
• Several tacos and tortas, including a Pork Torta(Cuban-style pork, diced hatch chiles, pickled red onion, tomatillo avocado sauce, Cotija cheese and slaw on a bolilloroll)
• Multiple burgers, including its Deep Eddy Burger (bacon, guacamole, pico de galloand pepper Jack cheese)
• Pizzas, including Build Your Own options
Tilapia, Grilled Chicken Breast and Roasted Salmon and Quinoa in a special “Wellness” menu section
Several “Handcrafted Bowls” featuring rice or pasta, including its Salmon Ravioli bowl (cheese ravioli with salmon, capers, red onion, dill and Parmesan cheese in a dill caper cream sauce)
A kids’ menu is also available, featuring traditional favorites.
Over in the deli, Central Market offers “chef prepared” items like Mediterranean Seafood Stew and Barley Pistachio Salad, as well as in-house roasted pork loin, “roasted daily by our executive chefs using exclusive rubs and marinades.”
Central Market also showcases its culinary chops through its Chef’s Case and hot foods area, offering items like:
• House-smoked meats like beef brisket, pork ribs, turkey and chicken
• Chicken poblano enchiladas
•Cowboy casserole (fusilli, chicken and bacon in a creamy tomato sauce “spiked” with chiles and onions)
• Breakfast tacos (smoked brisket, eggs, onion and Cotija cheese)
Central Market highlights another carry-out option through its daily “Dinner for Two” specials. Stores typically have two selections available, including one tagged with a “700” in a red circle on menus indicating that it contains 700 or fewer calories per serving. The menu also includes wine-pairing suggestions.
At an increasing number of Walgreens “flagship” locations—all located in large cities—as well as at its Duane Reade stores, foodservice takes a prominent position. This foodservice diversification largely stems from Walgreens’ 2010 acquisition of Duane Reade, who expanded capabilities in this area.
Foodservice items at these flagship and Duane Reade stores can include:
• Made-to-order smoothies and juice drinks—including “energy juices”—at the Upmarket Juice Station
• A salad bar, known as Upmarket Chop
• A coffee bar, known as Upmarket Café, featuring made-to-order coffee and espresso drinks, as well as iced and frozen coffee drinks
• Sushi and sashimi made by in-store sushi chefs
• A frozen yogurt bar
• Sandwiches and wraps
• Pastries like bagels and croissants made at in-store bakeries
Walgreens flagship stores serve as proving grounds for new items, with select concepts then eventually migrating into other stores.
Channel-blurring is ubiquitous these days, and this strong move by Walgreens into foodservice is a clear indication that anything is fair game in today’s retail market.
7-Eleven has been on a major push of late to expand its fresh food offerings. This effort has been largely spearheaded by Kelly Buckley, vice president of fresh food innovation for 7-Eleven, who has a strong foodservice background that features high-level stints at Applebee’s and Pizza Hut.
While all 7-Eleven stores carry cold, grab-and-go foodservice products, only select stores have expanded into hot foodservice items, including:
• 14-inch pizzas cooked to order in Turbo Chef combination ovens, or by the slice
• Hot wings in Spicy, BBQ or Asian Style Dragon
• Snack-sized Latin-inspired items like Spicy Beef Mini Tacos (shredded beef, jalapeño and cilantro in a small corn tortilla) and Breakfast Empanada Bites (pastry filled with eggs, cheese, bacon, smoked ham and sausage)
• Go-Go Taquitos in varieties like Monterey Jack & Chicken, Jalapeño Cream Cheese, Buffalo Chicken and Bacon, Egg, Cheese & Potato
• Breakfast sandwiches, including a new, on-trend Egg White Breakfast Sandwich (egg whites, Canadian bacon and Cheddar cheese on a whole-wheat English muffin), which can be toasted in the store
• Several burritos under the retailer’s 7-Select store brand
The selection of cold foodservice items at 7-Eleven includes:
• Sandwiches and wraps, including new “Fresh to Go” sandwiches like the Steakhouse Roast Beef (roast beef, blue cheese, mayonnaise, baby spinach and tomatoes on marble rye) and Bistro Deluxe (ham, salami, Swiss cheese and lettuce with Dijon mustard on Asiago bread); 7-Eleven franchises also sometimes offer regional specialties, like a Cuban sandwich in Miami stores
• Cilantro Lime Chicken Flatbread (grilled chicken breast, pepper Jack cheese, pico de galloand cilantro lime mayonnaise on flatbread)
• Entrée and side salads, including its Very Berry Salad (spring greens, chicken, almonds, strawberries and blueberries with balsamic vinaigrette)
7-Eleven maintains strong quality control over its franchises that enter into the more-dedicated hot foodservice program, while also encouraging franchises to include regionally relevant ethnic items. And its balance between fresh foods geared toward health-and-wellness shoppers and classic, more-indulgent fare helps the chain maintain a growing, diversified customer base.
Foodservice will continue to offer great opportunity to retailers who understand and embrace the changing dynamics of today’s restaurant trends, with one foot often firmly planted in health-and-wellness and the other in affordable indulgence. Yesterday’s model no longer suffices. And those who neglect to update for the times—or hesitate to enter the fray—very well might be left behind.
Packaging and the New ‘First Moment of Truth’
As more consumers shop online, the dynamics surrounding products—how shoppers can interact with the product, formulating all-important product-purchase decisions—change. How shoppers arrive at the “first moment of truth,” when the switch clicks in their mind and they’ve decided to purchase a product, changes in notable ways online, including how we approach packaging.
“It’s evolving consumer behavior; the growing transition to online shopping that’s moving buyers’ first moment of truth,” said Lisa Baer, senior director of market innovation at HAVI Global Solutions. The packaging on the shelf has traditionally been the main point of interaction with the consumer, but that isn’t always the case today. When shifting that interaction online, many new and important variables enter the picture, creating both challenges and opportunities. What’s important is how to connect the brand and its packaging to appeal to the consumer both online and offline. The packaging really may need to speak and function quite differently, Baer explained.
Removing a product from brick-and-mortar can yield new advantages. “Online, space is no longer a restriction to the actual physical size of the retail shelf or backroom storage. Packaging can be much larger, with more space and new areas to list product benefits, usage guidelines, even more room for another new product introduction on the package, like a new flavor or added accessory to the existing product,” said Baer. “When we relieve the size limitations, we could have more space than we had ever previously thought about before. Simply put, in the growing online shopping space, today’s companies can get more creative with some really new, strategic thinking in the way products are presented at all touchpoints.”
While online shopping eliminates the ability of shoppers to pick up a product, physically turning it around in their hands, the virtual environment can replicate much of that interaction through 360° rotation of the product, highlighted callouts of key product and brand attributes (product description, nutrition facts, differentiating and unique brand details, etc.).
Online formats can also add dynamic, new perspectives to this interaction. “The digital framework can give packaging more opportunities,” said Baer. “Utilizing 3-D or digital animation is one example, where brands could, in effect, show how a package is opened, how it’s used and even how it could even be disposed of. Another example is to go further and address some end-of-life packaging issues to directly add value to the brand—and add value to the consumer by explaining how they could repurpose it, reuse it, recycle it.” All of these factors can serve as points of differentiation for the brand.—DJP