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Not all fresh food departments had the same success this past year — but retailers are optimistic about the opportunities that lie ahead, according to the SN Fresh Food Trends Report.

Grocery retailers moving forward in fresh food departments

After a year of highs and lows, the SN Fresh Food Trends report shows fresh categories thriving

To download the full 2021 SN Fresh Foods Trends Survey, click hereFree download is made possible by our 2021 report sponsor Afresh


As the country begins to emerge from the pandemic, the grocery industry is looking back at the changes it underwent over the past year and how COVID impacted sales and shopping behavior — and whether or not those new behaviors and trends will carry on in a post-COVID world.

Certainly the fresh foods departments of supermarkets have seen their fair share of pandemic-related turbulence. Retailers have witnessed significant highs and lows in categories such as meat and produce (both highs), deli/prepared foods (a mixed bag) and fresh bakery and floral (challenged since the beginning of the pandemic). Shopper hoarding, supply challenges, labor issues and the rise of online grocery have all played their part in the changing face of the store perimeter.

The SN 2021 Fresh Food Trends Report, sponsored by fresh food technology platform Afresh, surveyed 116 retailers/wholesalers with responsibility for the fresh food department (including chain, independent and online retailers) on their experiences over the past 12 months and what their expectations for 2021 are. The survey was conducted from mid-March through mid-April 2021.

Overall, fresh foods thrived during the past 12 months. A full 81% of respondents say that sales in perimeter categories increased during that time, no doubt much of that tied to the early grocery sales boom in March and April of last year. For that majority of retailers whose sales have increased, two-thirds reported increases ranging from 1% to 15%, with the largest number (18%) saying sales have risen from 10% to 12%.

While only 19% of respondents experienced sales decreases in the perimeter, nearly half of those (46%) reported a significant decrease of 22% or more. Another 23% of those experiencing sales declines reported more moderate drops of 4%-6%.

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When asked to what they attributed their increases/decreases, the overwhelming answer was unsurprisingly “COVID.” The impact of the pandemic affected every corner of society in 2020, so that’s not surprising, although it is interesting that both gains and losses were attributed to the same cause.

Among the COVID-related reasons for sales increases, retailers mostly agreed that increased eating at home was the biggest driver, as many restaurants were closed and travel restrictions were in place. Here are some of their comments:

• “Additional meals prepared at home.”

• “Allowing hot foods to be purchased with SNAP funds during COVID.”

• “Consumers eating more at home. Increase in consumer sentiment toward healthy/clean eating.”

• “Customers would rather purchase majority of their items from one location instead of multiple locations.”

• “Customers receiving government assistance and stimuluses.”

• “COVID helped fresh, but not foodservice.”

• “COVID stock-up shopping and sustained eating at home.”

• “COVID travel restrictions means people shop more locally, especially when you are in remote locations.”

• “Customers looking for alternative meals versus closed restaurants.”

For those reporting decreased fresh food sales (particularly in deli/prepared foods and baker), COVID was once again the primary cause — but for different reasons:

• “Closing our dining room which lost us 65% of our sales-were able to maintain delivery and carryout.”

• “COVID and hours of operation cut.”

• “Customers prefer less deli interaction.”

• “Decreased walk-in cash customers. Unemployment, loss or reduced income in families make them shop bulk.”

• “Deli's closed down their self-serve area and have been slow to reopen. Consumers also eased up on impulse purchases, which the deli banks on.”

• “Foot traffic has slowed, more people working from home so the neighborhood is quiet.”

• “Less impulse and perishable shopping during COVID shopping trips. Customers purchasing staple items, larger quantities.”

• “People buying more online and things that can be frozen for extended use.”

Fresh assortment

Looking forward, nearly half of respondents (47%) say they expect perimeter sales to increase in the next 12 months, with two-thirds anticipating sales increases from 1% to 9%. Another 21% of respondents expect sales to increase by 10% to 15%.

Sixty percent of retailers say they plan to change their perimeter assortment in the next 12 months. One retailer noted, “We’ll closely evaluate the breadth and timing of various products. For example, I talked with a vendor about extending the season for peaches beyond Labor Day. In other words, we need to challenge conventional wisdom in order to leverage this important area of the store.” Many retailers say they will focus on grab-and-go, ready-to-heat/eat and other convenient packaged fresh meal options; new products; and new flavors and ingredients in prepared foods.

Among other comments:

• “Adjust to meet specific requests that have become more common. People want better quality, read labels more. Prices are changing so consumers want better values over prices alone.”

• “Increase portfolio of fresh seafood.”

• “Less SKUs, focus on the top-selling, higher-profit items.”

• “More packaged fresh options coming. This is attributed to customer demand for food safety.”

• “Offering new lines of products and more facilities in the online experience.”

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Although some fresh categories were challenged during the past year, retailers reported sales margins improved or stayed steady in every category except one — floral, which saw improvement for only 26% of retailers compared to staying steady for 51% and decreasing for 23%. Meat/seafood and produce sales margins improved the most at 66% and 65%, respectively, with dairy (52%) and prepared foods (51%) both improved for more than half of the respondents. At the same time, prepared foods also saw decreased sales margins for 19% of retailers, neck and neck with bakery (19%) and deli (18%). Not surprising, given the challenges seen in those categories in the past year.


To download the full 2021 SN Fresh Foods Trends Survey, click here. Free download is made possible by our 2021 report sponsor Afresh


Facing the competition

Big-box retailers (read that as Walmart, for the most part) are overwhelmingly the biggest competitor to grocers’ fresh food departments, noted by 45% of respondents. Online retailers are a distant second (13%), perhaps because so many retailers now offer their own online programs. Price was cited as the leading competitive advantage by 50% of supermarket retailers, with selection (38%) and convenience (30%) ranking second and third.

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In the all-important prepared foods category, last year there was new competition — COVID-spurred cooking from home, which 43% of retailers cited as the biggest challenge to prepared foods. Another 20% said fast casual restaurants (e.g., Chipotle) and 11% quick-service restaurants. This was a big change from 2019 (the most recent year we did the survey), when quick-service led the pack with 35%. Obviously many of those restaurants were closed or offered limited service in 2020 — and cooking from home was not on the radar as a competitive threat to prepared food sales the way it was during the pandemic.

“In my area, I feel that we are the destination for fresh,” observed one retailer. “Our outer departments draw from all demographics. Walmart is our closest supermarket. They are our main competition. Convenience stores are probably one of the biggest threats to fresh business as more and more have quality, fast, meal solutions.”

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Another retailer noted that competition for prepared food came from “other restaurants in the area who could spend a lot of money on fancy outdoor heated or air-conditioned tents”

While nearly half of retailers (46%) said that convenience was the biggest advantage that competitors had over supermarkets’ prepared food programs, this year a new response was also cited by 26% of respondents — COVID safety measures.

Asked for the best ways to fight competition in prepared foods, an overwhelming 65% of retailers said  grab-and-go, followed by 46% for promotions and specials, and 37% for home delivery/click-and-collect. Other suggestions included specialty meal selections (gluten-free, vegan, etc.), cleaner ingredient lists, more space for prepared foods and more contactless options/safety measures.

While nearly half (46%) of retailers are not planning to add any prepared food offerings or services in the next 12 months, of those that are grab-and-go cases are the top response, with 31% retailers. Fast casual stations (21%) self-service bars (19%) and the deli counter (18%) will also be making a comeback for some retailers. Grab-and-go cases and deli counters are prevalent in most supermarkets now, at 87% and 78%, respectively.

Despite changes in sales in various fresh departments, most retailers haven’t and don’t plan to change the amount of space devoted to these categories. Most retailers are keeping the same amount of space, although some categories have seen more space allotted — namely produce and meat — while floral is the only category seeing a notable loss of space.

The COVID effect

More than two-thirds of retailers said any changes they made to the perishables department in the past 12 months were COVID-related. “We have customers looking for a wider range of complex meals that are simple for the to execute at home,” offered one retailer, while another stated, “COVID just woke us up to a trend that had already been occurring. People want tasty, convenient meals that aren't totally bad for your health.”

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Among other comments on the impact of COVID on fresh departments:

• “Customers are preparing more at home with produce and healthier eating being a go-to.”

• “Due to COVID we had to allocate more space for grab-and-go and packaged fresh meals.”

• “People are returning to work and are looking for quick meal solutions. This segment declined during COVID as people who worked from home would cook full recipes (not already prepped).”

• “Our plan is to build bigger displays for all departments due to increased customer count vs. last year. Prep foods will need to be more about fresh presentation, quality and variety.”

Several retailers have removed salad bars and hot bars, with one saying, “We replaced our large deli salad bar with a grab-and-go case,” a trend seen across the industry in the past year.

Around the perimeter

Fresh departments are still considered the main draw of the supermarket, despite the growth of center store and frozen over the past year. When it comes to signature departments, produce (38%) meat (29%) and deli/prepared foods lead the pack with retailers. Three-quarters of retailers have on-site deli staff and meat butchers. Other service-focused employees in store include seafood expert/fishmonger (48%), floral (47%), produce butcher (38%), cheesemonger (37%), scratch baker (35%) and trained chef (35%).

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When asked their greatest fear for the perimeter, attracting/training qualified employees was the top issue for 31% of retailer respondents. “Due to the enhanced unemployment benefits early on in the pandemic, it was hard to hire qualified staff,” one retailer noted. “Getting help and keeping help has been a challenge due to the wages being paid by other jobs,” another voiced.

Loss of business due to COVID (13%) and supply issues due to COVID (11%) were also on the minds of retailers:

• “I don't know when consumer confidence will return. We rely heavily on dine-in traffic, which is restricted at the moment.”

• “Less foot traffic passing through the store. Less people just browsing due to restrictions.”

• “Being in-stock all the time is a challenge.”

• “The supply chain for fresh produce is less than steady than the growth required. We outsell our supply chain frequently.”

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When asked “What is most important to your shoppers in the perimeter?,” qualilty/freshness was overwhelmingly the top response from retailers at 62%. Convenience (10%) and cost (9%) were a distant second and third, with organic/natural and sustainability/sourcing both singled out by 4% of respondents.

While the majority of retailers agree that the impact of COVID has increased their sales in fresh food departments, we asked them what have been their biggest sales wins in the category in the past 12 months. Here are some of those responses:

• “Bakeable dishes and grab-and-go.”

• “Converting to COVID-friendly packaging for meals vs salad and hot bar.”

• “Prepared meals, plant-based, organic availability, all have kept customers coming back.”

• “Fresh prepared food online with delivery service.”

• “Meals to go coordinated between the deli, produce and meat department.”

• “Meat and fresh produce are driving the business for the company.”

• “Offering fresh cut meats and drilling down to always have fresh produce.”

More than a year after COVID, retailers are now beginning to adjust to the reopening of business and return of customers in-store on a larger scale. But the changes in eating and food shopping habits are likely here to stay for the long term, which means more cooking at home, more lunches at home, and more online shopping and pickup and delivery.

Retailers who can adapt their fresh food departments to this new normal will find the most success. And after the year we’ve had, food retailers have proved themselves to be nothing if not adaptable. Customers will always demand high-quality fresh food — but the changes in how they purchase those will be an opportunity for the grocery industry.

To download the full 2021 SN Fresh Foods Trends Survey, click here. Free download is made possible by our 2021 report sponsor Afresh

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