WGB's 2018 State of Retail Foodservice report takes a 360-degree look at the sector, beginning with its evolution; a breakdown of how Technomic classifies levels of sophistication among retailers within four camps; consumer perceptions of value and experience of retail foodservice; emerging considerations for the next generation of the segment; comparative breakdowns of historical growth; and related need-to-know insights. In conjunction with this report, WGB Editor-in-Chief Meg Major conducted the following one-on-one conversation with Technomic Principal Wade Hanson, who is responsible for managing and executing research and consulting programs for suppliers and trade associations throughout the foodservice industry, and who specializes in the retail foodservice arena.
MM: The insights contained in our first-ever State of Retail Foodservice report provide a one-stop shop of the segment at present. What are the most striking trends you observed in the past 12 months, and how does that compare to earlier years?
WH: As recently as six or seven years ago, when mentioning to others that part of my job was to stay current with the happenings of retail foodservice, I would most commonly be met with confused stares. The reply that I grew to be prepared for was, “You mean the rotisserie chicken department?”
At that time, many of my friends and acquaintances (like most consumers) had yet to be exposed to the advanced foodservice programs being slowly introduced across the country. Those outside of select regional pockets were still accustomed to prepared-foods programs built strictly around salad bars, soup stations and the ever-popular rotisserie chicken.
Today, while rotisserie chicken remains an American favorite, the national grocery landscape has changed dramatically, and food programs have expanded tenfold. In turn, consumers have become increasingly familiar with their local supermarkets’ expansive perimeter selection often featuring emerging ethnic cuisines, both global and local flavors, made-to-order food stations and even in-store restaurants.
Technomic staff visited well over 150 stores across the country in late 2017, and it was striking to see the blurring of the perimeter. The separation of departments—prepared foods, meat, seafood, in-store bakery—is slowly disappearing. The entire fresh perimeter is becoming the destination. And the integration of the departments, operationally, is also evident.
From a culinary standpoint, how do grocery stores stack up with restaurants?
Based on consumer input, restaurants hold an advantage in terms of the quality of the food, flavor profiles, originality and several other food-related factors. But the gap isn’t as significant as some might think. Consumers hold retail food in high regard. They also associate supermarket food with freshness; there is an assumption that stores are inherently using fresh ingredients, given the nature of the business.
Naturally, retailers focus on things such as food quality, value, variety and the seating area. What else should they understand about how consumers evaluate supermarket prepared foods?
Consumers place a high emphasis on cleanliness when selecting any venue to purchase fresh foods from. As a matter of fact, after value, it is a close second in terms of nonfood factors impacting their decision-making process. And, generally speaking, there is room for improvement for retailers. In visiting stores around the U.S., it is apparent that certain stores can be doing more to ensure the perimeter is in the condition expected by shoppers. With all of the resources being invested into these programs, retailers need to make the appropriate investment into consistent cleanliness at food bars, in merchandisers, in seating areas and in visible food prep areas. Floors are particularly problematic.
Which products or categories have experienced the most growth in the retail foodservice segment in the last year? How does this compare to previous years, and to what do you attribute the growth?
In 2017, we saw two product categories really surge. First, ethnic cuisines of all types proved to be very on-trend. Long-standing favorites such as Mexican, Italian and sushi continue to perform, but foods that are historically less commonly seen in supermarkets, such as Indian and Mediterranean, have really come on. Second, retailers have identified beverages—both hot and cold—as a growth opportunity. This had been a somewhat forgotten part of the perimeter, but selection has expanded considerably, and sales reflected that renewed focus last year.
Given the dynamics of the category, what do you consider to be the greatest opportunities—and conversely, the greatest challenges—for retailers on the horizon?
Opportunities are numerous. Just think of how quickly this channel has grown and how large it has gotten. But even those regular retail foodservice customers are buying prepared foods only several times a month. Very few buy 10 or more times in any given month—and that is out of 90 meals, on average, per month. The opportunities are significant, assuming stores can attract consumers for those incremental visits. Some of the biggest challenges lie in becoming more restaurant-like. Grocers need to work with their partners and potential partners on increasing their knowledge of foodservice. That includes everything from sourcing to production to labor.
As the category continues to grow in influence and popularity, are there any emerging trends swirling on your figurative crystal ball?
Expect the activity we’ve seen recently around meal kits to accelerate. Many of the major meal kit companies are struggling with financials, customer recruitment costs and customer complaints about certain aspects of their service. On the other hand, meal kits have a natural fit in a supermarket perimeter environment. The long-term appeal of meal kits is yet to be determined. But we will see more and more near-term activity with meal kits in supermarkets, and that may be seen as an offering that’s actually competing with prepared foods.
If you could offer retailers still weighing the risks/rewards of retail foodservice programs one piece of advice, what would it be?
I would advise them to closely consider the ways that consumers are buying and eating food today. It has changed. We’ll continue to progress down a path toward fresher foods, we’ll see more and more demands for less processed—or at least the perception of less processed—and we’ll see more interest in bold flavors and customization. I would argue that it’s vital to have a foodservice program that meets these types of needs for your local customer base.
What is the single best prepared food or meal you’ve ever eaten in a grocery store?
There really is a tremendous amount of great food in supermarkets across the country. But I’ve had some particularly good meals in Texas. Central Market is always a favorite and I have a fondness for the taco bar at Fresh by Brookshire’s. But if I’m buying for the family, then my kids are requesting pulled pork or beef brisket from our local Mariano’s.