Produce As Wingman: Can Drive Deli Sales, Traffic

By Anne-Marie Roerink, Principal, 210 Analytics, And Rick Stein, Vice President Of Fresh Foods, Food Marketing Institute

Compared with the mature produce category, deli trips, sales, and differentiation have significant room for improvement; produce can play an important supporting role. Produce is a Top 3 driver of store choice and trips and has high connectivity to many other areas in the store.

According to Chicago-based Nielsen Perishables Group, deli sales reached $24 billion in mid-2016, with 58 percent of dollars generated by fresh prepared. Furthermore, the deli department is emerging as a driver of growth, with dollar gains of 4.2 percent overall, and 5.5 percent for fresh prepared. But just like produce, where retailers have to make daily assortment decisions and determine their positioning relative to organic, local, ethnic and other items, deli departments cannot be everything to everyone.

Yet, getting the deli right can mean significant payoffs, both for the department, total perimeter and the total store, as found by the Nielsen’s best-in-class research. So what are some ways in which produce can help drive deli trips and growth? The Food Marketing Institute’s (FMI) report, The Power of Fresh-Prepared/Deli, explains.

While market factors are promising, one significant hurdle for retailers to aggressively grow deli/fresh prepared is trip frequency, which has fallen for the total store, including the deli. As is, only about one in 10 store visits includes deli/fresh prepared. As the No. 2 driver of store choice — versus deli at number 15 — produce can help draw shoppers to the store. After that, the key will be growing deli trips and sales.

Current meal preparation trends show an increasing reliance on the mixing and matching of scratch ingredients with semi- and fully-prepared items. Convenience-focused produce items, such as salad kits, microwaveable packaging, and value-added produce can be cross-merchandised or advertised with deli items to complete the meal solution for the shopper.

An important step in growing deli trips is through a strong reputation and image as a viable restaurant alternative. With some noted exceptions, reputation is precisely where many grocery stores struggle. As a result, even though 96 percent of shoppers purchase deli/fresh prepared once per year, few shoppers think of visiting the deli with regularity when deciding what to do instead of cooking dinner (12 percent). Duplicating the ways in which retailers build and maintain their strong reputation in produce may translate into the deli becoming a more top-of-mind alternative come dinnertime.

One of the consumer perceived drawbacks of freshly prepared deli food is that shoppers deem it less healthy and nutritious than home-cooked meals. With fresh produce’s health halo, an increased focus on fresh fruit and vegetables in fresh prepared may help elevate its nutritional profile.

One noted benefit of deli/fresh prepared is that it introduces shoppers to new ingredients and items they haven’t had or prepared before. This was long seen as a key benefit of meal kits that touted the use of local and unusual produce ingredients. Clearly, retailers too can leverage produce variety and innovation to pique shopper interest in new deli offerings.

Consumers mostly compare deli/fresh prepared to the fast-casual restaurant segment, both in terms of price and quality. This includes restaurants such as Panera Bread, Jimmy John’s and Chipotle. The fast-casual segment has seen aggressive growth in sales and store counts with a focus on fresh, quality ingredients and enhanced ambiance. Produce’s quality and fresh image can provide an important boost to bring the deli a step above the fast-casual segment in shopper choice.

Within deli/fresh prepared, there are many different solution types, ranging from self-serve stations to made-to-order meal stations. Across the population, the meal solutions that draw the highest interest are fresh-prepared and pre-packaged meals and meal kits. Produce is a key ingredient and may help successful positioning of these offerings.

Megatrends that are driving significant sales growth in other parts of the store are highly desired features for deli/fresh prepared as well, according to shoppers. More than one in five shoppers would like to see locally sourced/grown food and organic items. Programs built surrounding these trends in produce may help carry over interest to the deli and drive growth in these higher margin offerings.

While some cuisines have universal appeal, many of the more ethnic cuisines see much higher interest among Millennials. Cuisines with a fairly broad appeal include American, salads, Italian, Mexican and Chinese. Produce plays an important role in all, and the use of local or organic items may provide an interesting twist to a proven favorite.

Food Marketing Institute is a trade association that advocates on behalf of the food retail industry. FMI’s U.S. members operate nearly 40,000 retail food stores and 25,000 pharmacies. Through programs in public affairs, food safety, research, education and industry relations, FMI offers resources and provides valuable benefits to more than 1,225 food retail and wholesale member companies in the United States and around the world.

Source: The Power of Fresh Prepared/Deli 2016 — Shopper research by the Food Marketing Institute. Commissioned by the FMI Fresh Foods Leadership Council and made possible by Nielsen, Hussman, and Shelby Reports. Research conducted by 210 Analytics