Supermarkets seek growth in foodservice
Charlene C. Price
Having dinner at your local grocery store? Hiring the supermarket down the street to cater a wedding? These choices may sound strange, but they indicate some of the many new developments in food retailing. Foodservice (dispensing prepared meals and snacks for on-premise or immediate consumption) has become one of the most exciting new growth opportunities in the grocery store industry. Unlike the supermarket of yesteryear, which had limited foodservice and convenience, today’s supermarkets offer everything from fresh prepared foods to sit-down restaurants and catering.
The concept of the supermarket as a full-service center is coming into its own at many stores. Supermarkets are increasingly becoming one-stop shopping places, including florist shops, bakeries, photo finishing centers, pharmacies, and even providing home delivery. The full-service supermarket will be even more important in the future as consumer demand for speed and convenience grows.
The Dell and Bakery: The Roots Of Supermarket Service
Foodservice in supermarkets began more than 50 years ago with in-store delicatessens and bakeries. During the 1980’s, the number of delis, their size, and selections grew, so that today’s consumers have wide varieties of ready-to-eat and ready-to-heat products.
Ready-to-eat products are fully cooked and sold hot or cold, with no additional preparation time required. Top-selling items include fried chicken, barbecued ribs, lasagna, and traditionally prepared products like lunchmeats and salads.
Ready-to-heat products are cooked, and prepared entrees are sold frozen or refrigerated, or as a microwaveable/shelf stable product. Frozen and refrigerated products include pot pies, macaroni and cheese, stuffed peppers, and a wide assortment of other items. Nbcrowaveable/shelf stable products include soup, pasta dishes, hamburgers, french fries, etc. Many consumers use these products as the central part of a meal, adding their own side dishes and salad.
According to a 1989 Supermarket Business study, service delis are in 65.8 percent of all supermarkets in the Nation, up from 51.8 percent in 1982. Service delis still account for the largest share of foodservice in supermarkets, with sales reaching $11.13 billion in 1989, a 16-percent increase over 1988. Total supermarket sales rose 7 percent. Average weekly deli sales climbed to a high of $10,600 in 1989, a 13.6-percent increase from the previous year.
Self-service delis are growing also, but at a much slower pace. Fifty-seven percent of the retailers in the Supermarket Business study indicated that they believed their operations would be moving toward more self-service in the future. Self-service reduces retailer labor costs and still provides much of the variety found in full-service supermarket delis.
While sliced meats and cheese still dominate deli department sales, prepared foods have made great inroads since 1982 (figure 1). Although total entree sales were down slightly in 1989, refrigerated entrees increased and will probably continue to gain faster than hot entrees. Hot entrees accounted for 4.9 percent of deli sales in 1989 compared with 3.9 percent for refrigerated entrees, although hot entree sales decreased or products were discontinued more than any other deli items. Other prepared foods have also increased their share of deli sales since 1982: pizza’s share is now 7.3 percent; barbecued ribs, 2.8 percent; and barbecued/fried chicken, 8.9 percent. The market share for salads has stabilized at about 12 percent.
Much of the food served in delis is purchased in bulk ready to portion and serve. A good deal of the food is prepared in stores or commissaries. The number of central commissaries is increasing. Twenty-six percent of the deli operators in the Supermarket Business study had company-operated commissaries, compared with 24 percent in 1988. Those that have commissaries use them primarily for the initial preparation of products.
Moving Beyond Traditional Fare
Many supermarkets now offer a variety of products, apart from their delicatessens, which could be included in the foodservice category. For example, 50 percent of the nation’s supermarkets now offer salad and soup bars; 43 percent, hot pizza sections; 42 percent, fresh pasta sections; 19 percent, tortillerias; 17 percent, ice cream stands; 14 percent, yogurt machines; and 6 percent, sushi bars.
The salad bar has been a popular addition to the supermarket in recent years. However, studies show that its popularity has stabilized. Salad bars are part of a trend toward takeout, prepared foods preferred by hurried, health-conscious consumers. Not only are lettuce, cucumbers, tomatoes, and other traditional salad vegetables offered, but supermarkets now carry a varied selection of other items such as meat, pasta, and seafood, exotic salads, hot soup, and chili. Many supermarkets have extended the self-service concept of salad bars to include soft-serve ice cream and yogurt.
The fresh salad bar has the potential for gross profit margins of 40-60 percent. Some retailers report weekly sales as high as $18,000. The average retail cost per pound of items from the salad bar is around $1.99, but because of the addition of unusual and fancy items, some salad bars are charging more than $3 per pound for fresh salads.
Supermarkets have been edging into the fresh pizza business for the past few years. Pizza is now becoming the food of choice and is closing in on hamburgers as the most popular take-out food. An estimated 43 percent of U.S. supermarkets now offer fresh pizza. One example is Bashas’ Supermarkets in Arizona that offer hot pizza using fresh crusts, prebaked daily at each of the unit’s in-store bakeries. Three pizza varieties are available: plain, sausage/pepperoni, and deluxe, which includes sausage, pepperoni, mushrooms, peppers, onions, and olives. Prices start at $2.99 for a 12-inch hot cheese pizza. Hot pizzas are made to order from a fully exposed work station in the deli department. Orders may also be called in to the store.
For this type of service to continue to grow, supermarkets must be able to provide more customer service by offering an option of eating in as well as installing a phone solely for the pizza department. They must also provide pick-up or delivery service.
Many supermarkets across the Nation have added various types of foodservice for the convenience of their customers. More than half of Safeway’a units now offer prepared foods: lasagna, pastas, barbecued chicken, salads, and desserts, at the deli counter. Self-service salad, soup and sandwich bars, as well as yogurt and ice cream machines, are in some stores. Farmer Jack Supermarkets in Detroit, Michigan, introduced prepared food sections, “Yvonne’s-To-Go,” 5 years ago. The section offers a large selection of freshly prepared entrees, imported gourmet coffee and tea, ice cream, pastries, and other desserts, all prepared in-store. A sit-down restaurant called “The Cafe” serves up to 20 people. Customers have a choice of salads, soups, sauces, frozen pasta items, quiches, pates, and sausages.
In addition to its regular hot and cold barbecued chicken, ribs, and cold sandwiches, Raley’s in California has expanded its take-out food program in select locations to offer complete specialty menus stressing authentic ethnic food. Some stores feature freshly made traditional Chinese appetizers and entrees such as fried won ton, spare ribs, fried rice, chow mein, or stir-fry items like beef with broccoli. Other stores also feature Mexican foods such as chili verde, tacos, enchiladas, and burritos, prepared fresh daily.
Sit-down eating areas in supermarkets have been steadily increasing. More than two-thirds of the supermarkets with service delis have some sort of eating area, ranging from a few chairs and tables to elaborate sit-down restaurants. The majority of these eating areas are quite small-nearly 8 percent are legitimate snack bars and less than I percent are full-scale restaurants or cafeterias. Eating areas in chain supermarkets are increasing faster than in independents. Supermarkets with sit-down eating areas increased from 7 percent in 1980 to 19 percent in 1988.
Shelf-Stable and Other Microwaveable Products Increase
Food processors are getting on the foodservice bandwagon by making their products even more convenient in supermarkets. For years, frozen TV dinners and entrees were the main convenience products. Then came such microwaveable items as packaged fish, pancakes, waffles, and french toast. New microwaveable products, however, are quickly filling up so-called “fast food/take out” sections of supermarkets where in-store microwave ovens and eating areas are available.
The newest innovations are microwaveable fast foods-breakfast sandwiches, hamburgers, cheeseburgers, and potato products such as french fries, nuggets, patties and sticks, and soups and entrees especially for children.
Goodings Super Markets in Florida has set up microwaveable, fast food sections in their frozen food departments. The departments contain such items as hamburgers, french fries, cheese sticks, popcorn, fish or meat sandwiches, pizza, and chicken snacks that are heated and served in the store.
Microwaveable hamburgers and cheeseburgers are competing with fast food chains for the away-from-home food dollar. The microwaveable sandwich business last year totaled an estimated $130 million in sales. Sales are expected to grow by about 20 percent annually over the next couple of years. It is predicted that sales of frozen and prepared heat-and-serve departments will double and quadruple over the next 5 years.
Frozen breakfast items such as pancakes and sausages, and scrambled eggs and sausages, are the best selling entrees according to retailers interviewed by Supermarket News. The scrambled egg/Canadian bacon sandwich is the strongest item in the breakfast sandwich category.
Increased microwave ownership and new packaging technology have been largely responsible for the growth of shelf-stable foods. These items are vacuum-packed in plastic containers and cooked at very high temperatures. Shelf-stable foods are prepared without preservatives and can be kept for years without refrigeration or freezing.
According to a 1989 study by Schotland Business Research, Inc., microwaveable, shelf-stable foods accounted for $250 million in sales in 1988 and could reach $696 million by 1993. Shelf-stable, prepared foods are available in tub, tray, or pouch. Some familiar products are Hormel’s Top Shelf line of oriental pepper steak, beef stroganoff, and beef sukiyaki. Dial Food’s Lunch Bucket line is another shelf-stable product which has a 2-year or more shelf life at room temperature. Products of this type can be heated in a microwave oven in 75 to 90 seconds.
New frozen and shelf-stable microwaveable foods have been developed for children. A number of companies are currently testings meals which come packed in colorful containers and often include activity kits such as stickers newsletters, games, and puzzles. ConAgra frozen foods has a line of eight dinners, such as chicken nuggets with french-fried potato bites, applesauce, and a fudge brownie), chicken, and pizza. Tyson’s Looney Tune Meals have eight entrees including a chicken sandwich, macaroni and cheese, spaghetti and meatballs, and chicken chunks.
Hormel has a line of seven “child-tested” shelf-stable entrees, including spaghetti rings in tomato sauce, chicken chow mein, and beef ravioli.
My Own Meals, Inc., offers five entrees available in 1,000 grocery stores in 10 States and is being test-marketed in 86 Toys R Us stores around the country. Entrees are available by mail order as well.
According to retailers polled at the New York State Food Merchants Association’s Annual Convention in 1989, shelf-stable microwaveable products are the wave of the future. As time goes on, they say, the products will become more geared toward health concerns.
What’s Ahead in Supermarket Foodservice?
Foodservice in supermarkets has come a long way, yet it represents only the beginning. A national survey of deli directors conducted by Jonessco, a research firm in Dallas, Texas, revealed that 62 percent of prepared foods are sold from the deli service counter, but by the year 2000 this will drop to only 38 percent. Many foodservice items will be sold in other store departments. The growth areas during these years are predicted to be foods packaged in-store, foods prepackaged by manufacturers, and partly prepared foods (adding only one or two ingredients at store level). Self-service deli departments will grow as more prepared food items come on the market.
More products will be packaged for microwave preparation. According to Schotland Business Research, Inc., the value of food prepared specially for microwave heating will grow from $5 billion in 1988 to $7 billion by 1993. An estimated 94 percent of homes will contain microwave ovens. The number of microwaveable frozen foods will grow by 25 percent during the next 4 years.
Currently, many prepared foods can be heated in either the microwave or conventional oven. However, as microwave oven use continues to rise, many manufacturers predict prepared foods will become strictly microwaveable.
Consumers spent an estimated $900 million on shelf-stable and frozen microwaveable food products in 1987. According to “The Microwaveable Foods Market” report from Schotland, there is a need for expanded variety in the microwave foods categories. Popcorn and pizza snack products accounted for almost half of the sales of microwaveable foods in 1987. Shelf-stable dinners and entrees, dessert baking mixes, frozen sandwiches and frozen vegetables are the products likely to experience dramatically accelerated growth.
Educating consumers to use frozen microwaveable products properly will help sales. Some consideration is being given to telephone hotlines to instruct people on correct product usage.
Retailers are entering the catering business. Forty percent of the Nation’s supermarkets offer these services. Other customer conveniences in the future will be drive-up windows and separate entrances for the deli and foodservice areas to move take-out and eat-in patrons in and out of the store more efficiently. Separate cash registers in die deli department will follow.
The success of take-out food in supermarkets depends not only on convenience, but also on quality and price. Soggy frozen french fries, costing $1.29, reheated in the microwave oven are certainly no real competition for fast food restaurants’ fries.
A few supermarkets are experimenting with home delivery of groceries. Home delivery offers consumers the convenience they desire and provides retailers an opportunity to compete with the fast food market.
Retailers Will Need To Address Some Problems
Though foodservice in supermarkets is increasing, various problems are still being worked out. For example, there is a shift to fewer hot foods since the first phase of “ready-to-eat meals” because it is difficult to maintain the quality. Heat lamps and steam tables that keep foods hot also tend to dry them out and reheating causes further moisture loss. To avoid this problem, some retailers are selling fully prepared, chilled entrees. Some stores include only those hot foods that can stand up successfully to extended heating.
Although microwave technology is fast, convenient, and provides even-tempered heat, some foods do not respond well to it. Pot pies and french fries, for example, often become soggy when heated in a microwave.
Some foods, such as meats and baked goods, are also difficult to brown. How ever, new packaging can shield certain fast-cooking products for more uniform cooking. Designers are producing packages that enable foods to brown better and get crisper, and that enhance uniform cooking.
In the future, manufacturers expect to see more dinners using shielding devices which reflect microwave energy away from certain components, and susceptor plates which attract energy to enhance browning and crisping. Alcon, a Canadian firm, has developed an aluminum tray with a dome specially designed to promote even heating.
Producing a microwaveable dinner in which all food items are cooked properly has been a challenge for manufacturers. ConAgra in St. Louis includes a meter on the dinner container that changes color when the product is properly heated and cooking is complete.
Fresh prepared foods in the supermarket as well as shelf-stable microwaveable foods have made a significant contribution to consumers’ preference for greater foodservice in supermarkets. The new foodservice products are quick, easy, and convenient to prepare, and quality and taste are improving. Although microwaveable foods appear to be the hot foods for the 1990’s, they will not push other products out of the picture. One industry executive states that products are “always in a state of change and supermarkets will always want to offer options.”
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