What Role Will Prepared Foods Play In The Deli Of The Future?

February/March 2019 – The role of prepared foods in the modern deli department is, as Winston Churchill said in another context, “a riddle, wrapped in a mystery, inside an enigma.” On the one hand, it is impossible to overstate their importance. In an age where almost everything in the center store is being sold cheaper or more conveniently at a warehouse club, supercenter or via a delivery service, it is increasingly hard to see a future for stores that pin the future on selling Tide laundry detergent, Heinz Tomato Ketchup and cans of Campbell’s Soup.

On the other hand, doing a great job with prepared foods is exceedingly difficult. If the focus is on fresh preparations, it is only upscale concepts such as Whole Foods Market or very high volume stores such as Wegmans that have seen much success. Many U.S. retailers have tried to introduce wide assortments of refrigerated prepared foods, but the outcome has rarely been a success.

In coming to America, Tesco — with its Fresh & Easy concept — thought it could triumph by offering a wide assortment of UK-style prepared foods. This was a priority so important that Tesco persuaded its UK suppliers to open facilities in America. Walmart tried the same with its Marketside concept.

In the end, Tesco had to bail out its vaunted British suppliers, and both Fresh & Easy and Marketside — shuttered their doors. In both cases, the prepared food operations modeled after UK assortments suffered from a kind of Catch-22. They opened the stores with large assortments of prepared foods, which were thought to be necessary to attract consumers and differentiate the offers from those presented by other retailers — and even the typical take-out offerings of restaurants.

In both cases, however, sales volume was not sufficient to support the broad range. As the food was fresh, not canned or frozen, there was substantial shrink. To reduce the amount of product being sold either at great discount or simply tossed, the retailers reduced the range. In a short amount of time, what started as a prepared foods program shrank to just popular favorites such as lasagna and mac and cheese.

Alone, these types of products may or may have not been successful, but they were not enough to be a game-changer when it came to consumer shopping habits. Such a small assortment could not be the magnet that would draw consumers away from other retail concepts. Thus, these stores failed.

There are many categories of prepared foods: Fresh foods accompanied by service — say a wok station or subs made to order; fresh foods without service — pre-made in a store, a commissary or by a vendor, say pre-made sandwiches, such as you would see at Pret a Manger; cooked foods typically prepared by vendors and sold out of service cases — say mac and cheese or the same product pre-packed either by the vendor or the store. There are specialized programs, such as pizza programs, rotisserie or fried chicken programs and specialized displays or food bars — wing programs, olive bars, soup bars, etc.

Again, though, the dilemma remains. The typical supermarket can sustain only a limited number of these programs, and all of us have been to grand openings with numerous service stations — from sushi bars to wine and cheese bars — only to return six months later and find the service employees gone and these once labor-intensive areas being used as extensive display options for semi- or non-perishables. In other words, the sales couldn’t cover the labor costs.

But without this service, it is hard to see how pre-packaged mac and cheese will keep the customers yearning for the local supermarket.

Some vendors point to product differentiation as the answer: Organic, ethnic, local or gluten-free. They point to storytelling to quench the public’s supposedly unquenchable thirst to know where their food comes from. Doubtless this is a solution for some stores, but in a world where Walmart is the No. 1 retailer and Aldi the fastest growing, it is hard to see this as some kind of universal answer.

Yet, the problem remains. How can a store differentiate itself and attract customers? If you are looking for a bet, one can see those Amazon-owned Whole Foods stores bifurcating. Half of each store might offer an expanded foodservice/prepared foods section with expanded seating, pick-up and delivery options. The other half might offer click-and-collect lockers activated by one’s mobile device.

Trader Joe’s has made its stock in trade by offering a kind of epicurean experience with trademark items and flavors.

The deli of tomorrow will have to do the same but with fresh foods. It won’t be easy, but surviving by just slicing meat and cheese and selling it in quarter-pound units will certainly be impossible.              db