Have We Given Up

As the deli industry gathers in New Orleans for the International Dairy Deli Bakery Association Seminar & Expo, a relevant question is whether the notion of a unified deli industry really makes any sense.

For a long time, the deli trade has been difficult to see as an industry. Many of the manufacturers don’t actually focus on the deli. They’re subsidiaries or divisions of massive food companies whose priority is elsewhere — say the meat case or restaurants.

It’s not uncommon to see producers restructure their deli operation in a predictable way — for a few years, they put in the retail division focusing on the customer, a supermarket. When results fall short, they move the product to the foodservice division — focusing on the product. When this fails to produce optimal results, they realize this is a bird unto itself, and establish a separate deli division. This typically produces the best sales results — but often such small divisions have trouble gaining the heft internally to justify an investment, and they tend to suffer from overhead that restructuring experts see as a target of opportunity. So often the cycle begins again.

There has been a retail bifurcation of the deli trade. In my other life, I facilitate a series of industry share groups. These consist of executives at non-competing organizations who meet to share knowledge, data and best practices. Many of the groups are retail-oriented and include groups in produce, meat, etc. A new bakery group is forming now. Of all these groups, the deli group is perhaps most problematic. More than in meat or produce, deli operations at retail are different from each other, not just in degree, but in kind. One deli sells sliced meat and cheese while another has a sushi bar, a wok station, an olive bar, a barbecue bar, 12 hot soups, etc. No continuum connects selling three slices of salami and operating a Chinese food program — it’s a similarly named department in a radically different business.

Not every store has the volume or clientele to justify dozens of food bars and cooking stations. Yet the alternative need not be a bland assortment of meats and cheeses ready for slicing. What would boost business and thus benefit lots of retailers while energizing the supply base is a new focus on the product? The focus on service is fine for those operators with the volume and clientele, but open a store with lots of service in the wrong location and one may get oohs and aahs on opening day, but six months later, when the shrink overwhelms and the sales don’t justify the labor, one often finds endless displays of peanuts.

A focus on product is different. It may require more buying staff, but the cost can be spread among many stores. It may require new out-of-the-box thinking in marketing, but that’s what those guys get paid for and, mostly, love to do.

It’s astonishing if one looks at core deli meat and cheese operations, how little is done to differentiate and create excitement. Recently I did a tour of 20 different mid-range supermarkets. Not one of the deli operations had any marketing related to the “local” phenomenon. All these operations could have promoted local specialty cheeses, and many were in areas where local meat products could be procured.

Half the industry has simply abandoned procurement. In the short run, it’s probably a big advantage to sign up and banner one’s deli “Boar’s Head” as it enables the retailer to gain from the brand equity. But long term, such a banner precludes the supermarket deli from building its own brand equity. The long-run play is for the retailer to have buyers selecting not one good or even great line but rather great products on an item-by-item basis.

The consumer should have the sense that the retailer is out there finding opportunities. This week its product from a local meat smoker that offers brisket and ribs, next week a specialty cheese from Oregon, and after that some smoked fish.

The marketing needs to tie the deli into the world. How many supermarket delis featured photos of massive cheese wheels crashing to the ground following the earthquake in northern Italy? How many tried to raise money to assist?

It’s 2012 and the most common deli promotion in those retailers not heavy into foodservice is to discount the product. That’s a race to the bottom nobody can win. Manufacturers can’t make money, retailers can’t build a reputation, and consumers don’t get to try a new product or appreciate the best quality.

Too many retail delis are procurement-driven, doing what’s easy on procurement staff rather than driven by marketing to brand-build, reputation-enhance and enrich the consumer experience. What better opportunity — when in New Orleans to walk the show not with an eye on what can be procured and scaled easily, but with an eye to what can be difficult — to remember value often comes through doing what’s hard, not what’s easy?

We have to make delighting consumers our focus — even in delis that can’t have a Korean barbecue station in store.