ATLANTA -- Unless supermarkets find a way to make fresh meals work for them, they might as well scratch sales growth from their menu.
That's what consultant Jim Riesenburger, managing partner in Riesenburger, Leenhouts & Associates, Rochester, N.Y., believes. He emphasizes, however, that the business of fresh meals can work in a supermarket environment. Building a program little by little around core competencies instead of rushing into something unfamiliar is the key ingredient for success, he said. And "marrying the outsourcing of certain components with some in-store theater" is part of the success recipe too, he said.
Riesenburger addressed attendees at the HMR Summit '99 conference here earlier this spring. SN interviewed him after his presentation. Poor-quality, poorly-run meals programs are systematically turning away even "pantry-replenishment" shoppers, Riesenburger said. "Supermarkets are eroding their market for prepared food on an ongoing basis because they're trying to fool the customer, and they'll lose their other customers as well."
Riesenburger stressed that today's ultra-competitive environment makes it particularly important for supermarkets to target the fresh-meals customer and to aim to excel with their meals programs.
"From now on, 100% of incremental sales will come from the food-service side of the grocery store. So it's absolutely imperative for supermarkets to make [their collection of food-service programs] work," Riesenburger said.
"The competition is going to get stronger. With the Wal-Mart juggernaut and the continuing consolidation of the large retailers, there's the challenge of margins. [Wal-Mart and the consolidated companies] have such buying power that most supermarkets can't compete [on price], but they can differentiate themselves," he added.
Indeed, he said, the only way to build incremental sales is with fresh-meals programs. The problem is that a lot of supermarket operators have tried "HMR," have abandoned it, and now say it doesn't work, Riesenburger said.
"That's tantamount to saying restaurants can't succeed. Everybody's reading the studies that say supermarkets can't make money with HMR, but nobody is asking why," Riesenburger said.
He said he believes most supermarket operators rushed into the home-meal replacement business with minimum research, no commitment, and without hiring the right people to execute their programs.
"They suffer from labor and shrink paranoia. They put programs in place without the people to back them up. It's like opening a restaurant without a cook or other trained staff."
But some supermarkets did just the opposite and also got in trouble, he said. "They created programs that were too labor- and capital-intensive," he said.
"On the other hand, there are the Wegmans, the Ukrop's, and a few others that started out with a solid commitment and found a way to stay with it. They had their challenges, but they worked them out. They knew it had to work somehow," Riesenburger said.
He pointed out that the retailers who are succeeding with fresh meals have found what they can do themselves cost-efficiently and what they need to outsource.
"You don't compromise a product, for example, by outsourcing some of the components of it. Then you can put it together in the store," he noted.
He said a store, for example, could outsource some its pizza toppings or the steamed shrimp for a shrimp Caesar salad.
"In too many instances, supermarkets felt they had to get into HMR fast before they asked what HMR is," Riesenburger said. "They thought it had to be an entree and side dish and they looked to see who was making it. They began looking at frozen products, which can create a lot of problems," he said.
"Instead, they could have looked at what they've been doing and realized they've been in the HMR business for 30 or 40 years. Then, they could have improved on and supplemented programs they already had," he said.
Rotisserie and fried chicken and sandwiches are examples, he said. Adding some side dishes or salads to a chicken program could make it into a meals program, he suggested. He said, in that case, part of the research necessary would be to find a quality manufacturer to produce the sides.
Retailers should keep programs as simple as they are appealing, he said.
"What do people eat? Maybe pizza one day, a sandwich and a salad, the next. Just make sure you have the best there is, the biggest chicken, the best pizza sauce," he said.
But the backstage activity, bred of lack of commitment and lack of organization, is killing even those programs in some cases, Riesenburger said.
"I was in a store recently where the bakery wanted full retail for the rolls they were selling to the deli. With that kind of thing going on, it's easy to price yourself out of the business."
Riesenburger also said most supermarkets don't seem to grasp the importance of freshness when it comes to prepared foods. He said they're more concerned with shelf life than with what the customer wants: quality and freshness above all. If supermarkets maintain the long-shelf-life philosophy they will not be able to compete with the restaurant business, he added.
Riesenburger listed some prerequisites for freshness, quality and profitability:
The majority of products are made by outside suppliers using top-quality recipes and state-of-the-art cooking and packaging techniques.
A limited number of products will be assembled at store-level to provide animation and theater.
Outsourced products are made only when we order them.
Products are in the store within two days of being produced.
All products have a short shelf life.
Strict attention is paid to maintaining all product temperatures throughout distribution.
There is religious adherence to product code dating.
There's no temperature abuse.
And the rules apply to in-store preparation and assembly too, he said.
"Everybody's getting into panini sandwiches, but to be good they have to be fresh. I see people refrigerating bread or using days-old sandwiches. You can't compete that way," Riesenburger said.
So how do you make a critical-mass panini display and still make sure it's fresh? Riesenburger suggests keeping the varieties to two best-sellers. "You can still stack a platter full of them," he said. He also said a submarine sandwich program should be using the freshest sub rolls possible.
Supermarket culture, however, works against that because the bakery is apt to bake all its rolls at five o'clock in the morning. That has to be changed to ensure freshness and quality, Riesenburger said.
Some supermarkets have brought an oven to the sub program, making it a shop within a shop. That way, they can bake sub rolls all day.
Wegmans Food Markets, Rochester, N.Y., is one chain that has ovens in its sub shops, Riesenburger pointed out. He went on to stress both the importance of freshness and of finding ways to let customers know how fresh products are.
"I was in a Safeway in Oregon where they had fresh, hot Italian bread displayed in four different places in the store -- at the entrance, the bakery, the wine department and at checkout. The aroma was wonderful. At Victory [Super Markets, Leominster, Mass.], they bake hot bread on the hour. That's the way to do it," he said.
He said supermarkets could take a cue from fresh-meals stores like EatZi's when it comes to showing off freshness, and merchandising and offering service.
"EatZi's is committed to making a statement with product and service. Look at their sandwich program and their displays of food." He also said EatZi's understands how to staff at peak [traffic] periods. "It's a restaurant mentality," he said.
Riesenburger said he's amazed that supermarkets in today's competitive environment aren't committing themselves to fresh-meals programs and appointing people to see the programs through.
In the face of statistics that show the restaurant industry is going to take most of the consumer's food dollar in the next decade, most supermarkets are not getting ready to compete, he said.