Product Disconnect In Prepared Foods Departments

Aug./Sept. 2018 – There is a dirty little secret in the business of prepared foods retailing.

The same retailers who fill their stores with signage promoting local and organic fill their prepared foods departments with completely conventional ingredients.

It is not really a mystery why this is so. A combination of the cost of these ingredients and the need to use alternative production facilities that are capable of segregating ingredients makes it very expensive to produce these prepared foods. One wonders if some of the customers in our top delis aren’t falsely assuming that their favorite store, which they select because they think it is mostly organic, mostly local — that the store’s supply chain has been vetted in terms of worker treatment, impact on the environment, etc. — has a prepared foods section that also reflects these values.

One suspects that, with the rise of omni-channel retailing and, specifically, the use of computer ordering, this reliance on halo-effect marketing will become more difficult.

The very nature of branding is beginning to change, because new tools allow consumers to search for what they truly desire instead of trusting in a manufacturer or a retailer to always provide it. So instead of going to Whole Foods and trusting that all the snacks are healthy or organic, local, ethically-sourced or rainforest-friendly, consumers will be able to put these terms in their laptop’s or smartphone’s shopping portal and select at will. The fact that the producer is Nestle or Kraft won’t guarantee placement in these searches.

Indeed, although Amazon has won praise for efforts to integrate Whole Foods into, one wonders if, in the end, having conflicts of interest of products within the store’s halo won’t rebound against Whole Foods/Amazon.

Maybe consumers will want “pure plays” where online shopping portals have no interest but to serve consumers. So, in other words, no matter what the image of a retailer or a manufacturer or ownership of a brand, if a consumer sets his favorite shopping portal to only show USDA Certified organic products, then that lasagna previously sold based on its association with the store brand won’t even show up in the search results!

One could also imagine a growth in certification bodies. Just as it is third-party certifiers that establish not only that a food is Kosher, but that it meets the specific standards of, say, the Orthodox Union, perhaps consumers will seek foods certified to be in accordance with the standards of the Rainforest Alliance, the non-GMO project or certifications of the future.

So, on the one hand, consumers will be able to restrict their purchases to products that meet their culinary, health, ethical and environmental standards. Because this restrains the sources of food, it might mean consumers will pay higher prices and allow for better profits.

On the other hand, the same technology that allows these consumers to buy just what they want will also tell consumers where they can get it at the best price.

This means, of course, that those standardized foods that are the cheapest to produce will also turn out to not be that profitable to sell.

Retailers need to focus on unique foods that express values consumers are willing to pay for. Then consumers will get products they thought they were getting all along and, for serving their needs, retailers will be able to differentiate themselves in a way that allows them to make a living.            db