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Hard Times Won't Slow Upscale-Meals Momentum

Hard Times Won't Slow Upscale-Meals Momentum

With all the talk of shoppers trading down, you'd think supermarkets would be scaling back on restaurant-quality fare.

Sure, I know, supermarkets figure they can provide a lower-priced restaurant experience at home to cash-strapped consumers. That made sense as long as shoppers were switching from restaurants to supermarkets some months back. But more recently, shoppers began switching from supermarkets to discounters. Wasn't that a sign that supermarkets should reconsider an upscale-meals approach?

Supermarkets don't see it that way. Executives are launching new programs that showcase restaurant-type products with affordable pricing while making sure everything passes the convenience test. They just may have hit on an ideal niche for grocers to fill.

Let's start with the most recent example, from Supervalu. That distributor just launched a new line called “Culinary Connections,” incorporating more than 150 private-label items, such as grab-and-go meals, artisan breads and side dishes. The company touts “chef-inspired” fare at reasonable prices — 20% to 25% below casual dining outlets and 10% to 15% under comparable national-brand items. A chef's image appears on packages. Entree names evoke upscale-eatery fare: Pork Carnitas Enchilada Casserole, for example. Moreover, these products are dispersed throughout the store, from bakery to deli, creating a broad meal solutions message.

Safeway is heading down a comparable road, although not quite as quickly. The company last year tested “quality restaurant-like meals in our stores at a very reasonable price,” a program now expanded to some 50 units, noted Steve Burd, president and CEO, at the recent Goldman Sachs Global Retailing Conference. Safeway has been pleased with customer response, but the biggest hurdle is managing the logistics of expanding it across the country. “So that product will not be completely rolled out for probably almost 12 months,” he said.

Successful restaurant-inspired meal programs aren't limited to private label. BJ's Wholesale Club recently reported good results in selling branded items from Boston Market, Cheesecake Factory and Panera Bread.

There are many other examples of consumers being drawn to a better dining experience at home. A recent SN article, for example, spotlighted upscale, heat-and-eat frozen meal kits, which incorporate ingredients for a restaurant-type meal without charging brasserie prices.

It seems the common denominator in this trend involves consumer behavior. Shoppers are willing to trade down for price, but not for taste or quality. They have become accustomed to better dining and want to recreate it affordably in their homes. Supermarkets and brands need to find the right balance between price, quality and convenience. This is no easy task, but they probably have a motivated consumer base searching for the best options.

Those with the most to lose may be restaurants. If conventional grocers hit on the right formulas, restaurants will have a much harder time pulling consumers back into their establishments once the economy improves.

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