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OPINIONRetail Foodservice

Maximize Opportunities by Refreshing Prepared Foods

Variety and targeted offerings bring excitement to the menu
Photograph: Shutterstock

With consumerism continuing to shift toward convenience and personalization, prepared foods have become a key growth driver for retailers and manufacturers. This trend becomes very evident when looking at the total U.S. dollar growth rates in the past three years for the deli prepared foods (7.8%), refrigerated meals (31.4%) and refrigerated dips/spreads/condiments (16.4%) areas of the store. It also is echoed by consumer sentiment, with 80% of household shoppers buying deli prepared foods and 68% of respondents to IRI’s 2018 Fresh Foods Survey saying the prepared foods department is more important to them than it was last year.

In recent years, the strongest growth rates in prepared foods have been with smaller meals and snacking. Deli prepared appetizers have grown by 24.6%. Similarly, in the refrigerated section, side dishes have grown by 26.5% compared to a year ago, accounting for almost 40% dollar share of total refrigerated meals. As consumers add more snacking occasions to their day, the deli prepared and refrigerated dips categories have seen sales gains of over 30% in the past three years. Mini-meals and snacking should continue to act as growth drivers for retail prepared food sales as American eating habits throughout the day change.

However, the pace of growth is slowing for overall deli prepared foods, and there are opportunities for retailers to innovate their assortment and to better reach younger consumers. The dollar growth rate for deli prepared foods increased by 2.7% compared to one year ago, just 1% higher than the average all edible category growth. Some of these dollars have been traded to the prepackaged, refrigerated aisle, where manufacturers continue to invest and innovate around convenience and personalization.

Refrigerated meals outpaced the deli prepared foods department, with 8.3% sales growth compared to a year ago. This trend is noticeably clear when comparing the entrees and salad categories. Refrigerated entrees grew at 14.9% compared to a year ago, outperforming the 3.4% growth of deli prepared entrees. Deli prepared sales declined by 2.4%, while the refrigerated prepared salad/fruit/coleslaw category grew 6.2%. Deli prepared foods, however, remain an important aspect of a retail store offering (accounting for 15% of all perimeter sales) and a trip driver (12 purchase occasions for the average shopper per year), so it is critically important that retailers continue to invest in their prepared foods section.

Antidote to Staleness 

Part of the slowing growth rates in deli prepared is due to a lack of innovation and underindexing performance with key consumer groups. IRI survey information indicates that consumers have noticed a lack of change in the retail foodservice menu over time. As with restaurants and other categories in the store, there are opportunities to combat staleness in the prepared foods section by refreshing the assortment of offerings and bringing excitement to the menu.

This is a unique area of the store, where retailers have room to experiment with different specials and offerings over the course of the year. There is opportunity to personalize menu offerings based on local shoppers, such as events or sports teams important to the area, as well as changing assortment to cater to seasonal and holiday periods. The continued success of the deli prepared holiday meals category, up 87.5% in the past three years, shows a positive consumer response toward these types of efforts.

Introducing new, targeted offerings may also be the key to developing prepared foods with younger generational groups. The generational groups currently spending more than average in retail prepared foods are older baby boomers and retirees. However, key consumer groups such as millennials and households with children are spending less than average.

As a result, attention should be focused on developing targeted options for millennials, such as locally sourced and kid-friendly options to reach families. An increased purchase occasion for just one 1 of 10 deli prepared shoppers is a $109 million opportunity for the prepared foods department and an overall $366 million basket opportunity for retailers. Accordingly, the key for continued growth in retail foodservice lies in engaging these key shopper groups and driving purchase occasions. To do so, retailers will need to be willing to update their in-store menus.

Editor’s note: James Carlson is a consultant with IRI.

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