Study: Prepared Foods Hold Big Potential

Two recent surveys show consumers are buying more retailer-prepared food, and retailers say their sales reflect the findings. Retailers told SN that while the rest of their business may be suffering in one way or another from the faltering economy, prepared foods is a category that's holding its own. People are still time-starved, and supermarkets have a variety [of prepared foods] that is

CHICAGO — Two recent surveys show consumers are buying more retailer-prepared food, and retailers say their sales reflect the findings.

Retailers told SN that while the rest of their business may be suffering in one way or another from the faltering economy, prepared foods is a category that's holding its own.

“People are still time-starved, and supermarkets have a variety [of prepared foods] that is cost-effective,” said Mike Huegel, deli-bakery buyer at Stauffers of Kissel Hill, based in Lititz, Pa.

The three-unit independent has just opened a new store, its largest, in which it has tripled the size of its prepared foods display.

“With the state of the economy, many of our departments are flat, but we find prepared foods to be on the upswing,” Huegel told SN.

“Before we opened the new store last month, we already had an increase in that category of about 15% year-to-date.”

Another Pennsylvania retailer, McCaffrey's Markets, Langhorne, Pa., is seeing modest growth in prepared foods. Mark Eckhouse, vice president of the three-unit independent, said he expects sales in the category to be steady through the holidays, even though the economy has people shopping a little differently.

Recent data from foodservice research and consulting firm Technomic underscores the potential for supermarket operators.

One of Technomic's new studies shows more than 20% of 1,500 respondents said they're buying more ready-to-eat prepared foods and meals from retail sources than they did a year ago. Of that group — which called convenience a major factor — 55% also said retailer-prepared foods “have improved greatly in the past three years.”

Retailer-prepared foods have been taking a bite out of restaurant sales, and they apparently continue to do so. Indeed, 62% of those people who said they've stepped up their buying of prepared foods and meals from retail sources said they're doing so at the expense of fast-food restaurants.

Technomic researchers found that family and fast-casual restaurants also have been impacted, but to a lesser extent.

Technomic and other research groups have reported a decrease in consumers eating out in restaurants for at least the past year and a half, which is likely sending more business to the retail sector.

Another recent Technomic study related to retailer-prepared foods zeroed in on catering opportunities. That study revealed that a substantial number of consumers turn to food retailers and restaurants for the food they serve guests when hosting parties and other social events in their homes.

More than one in three respondents reported they've ordered meals or platters for meetings, parties and social occasions. Surprisingly, a full 79% of those who ordered such fare said the purchases were for use at personal social occasions rather than work-related events. Moreover, Technomic researchers report that the frequency of the orders was impressive, with 33% indicating they place such orders at least once a month.

“We know that the majority of these consumer orders are currently sourced from retailers, including supermarkets and warehouse clubs,” said Melissa Wilson, Technomic principal.

The findings in an exploratory study conducted earlier this year prompted Technomic to launch a new study, “POP: Parties Off Premises,” to look more closely at the opportunities that both food retailers and chain restaurants may have to address demand for these occasions.

“When I look at what some of the restaurant chains and retailers are doing now, I see great opportunity for them to ramp up their efforts,” Wilson told SN last week.

“Consumers are definitely looking beyond party trays when they're entertaining at home.”

Wilson went on to say that she has observed retailers “vastly expanding” their ready-to-eat offerings and the services related to them — for instance, offering a menu of their prepared foods online, faxing menus out, encouraging call-in orders, even providing drive-up windows.

The Technomic exploratory study showed that 15% of those ordering pickup or takeout are ordering from retailers, 7% from restaurants and 12% from both.

Wilson pointed out that there's a great opportunity for supermarkets to serve this segment of consumers. She, as well as some retailers and restaurateurs, sees catering even for small groups as a natural extension of sourcing food away from home. One big hindrance to more sales is that retailers don't promote that service adequately, Wilson said.

“My personal advice to retailers would be to take a look at what the restaurants are offering and how they're telling consumers about it,” said Wilson.

“My observation has been that they're running their [prepared foods] programs from a retail mind-set, such as pricing [ready-to-eat food] by the pound. There's a lack of signage or daily specials, a general lack of professionalism.”

Wilson named a major grocery chain that she said offers top-quality takeout prepared food, “but I couldn't get a takeout menu.”

Even after asking associates at the ready-to-eat food bar at two or three of the chain's stores, Wilson was told no takeout menus were available.

Such lack of attention to important details squelches much of the opportunity that retailers could grasp, industry sources agreed.

“Making it easy and making your customers aware of what you have are key elements in a successful catering operation,” said consultant Brian Salus, president, Salus & Associates, Midlothian, Va.

“A catering event does not necessarily have to be a wedding reception or a high school graduation. For example, 52 weeks a year, consumers are forgoing Friday night at a restaurant to have their own informal TGIF party composed of wine, cheese, bread and hors d'oeuvres or doing their own tailgate at the Saturday college football game. The smart retailer is creating bundled meals for such casual functions and advertising them through in-store fliers and store websites.”