While its share declined over the past 18 months as a result of pandemic shopping trends, supermarket prepared foods are inching their way toward a comeback, according to the 2021 Power of Foodservice at Retail report from FMI-The Food Industry Association, released Wednesday.
During the 52 weeks ending mid-May 2021, grocery foodservice dollar sales reached $13.5 billion, reflecting slight growth over the same period a year ago, at +0.8%. (This is, however, still down from pre-pandemic levels.)
Retail foodservice reflects a wide range of performances (see the table below), from +15.1% for desserts (a small category) to -11.6% for pizza. Meal combos and fully cooked meat (including rotisserie chicken) are two other areas where sales have not yet recovered, according to NielsenIQ data.
Despite the somewhat slow return of foodservice, FMI’s report underscores implications for the grocery industry to capture and expand its pre-pandemic share of the total food dollar.
“Grocery foodservice is at a competitive inflection point when we look at the state of the U.S. food dollar and the fact that 59% of Americans expect to cook as many meals at home as they do now,” said Rick Stein, FMI vice president, fresh food. “The analysis suggests grocers are positioned to be the ultimate mealtime solution in that 39% of consumers view retail foodservice as a substitute for a both a home-cooked meal and a restaurant meal.”
Stein noted that three significant themes emerged out of the survey that have implications for this competitive landscape:
1. Visibility at Retail: More than one-third of consumers, up slightly from 2019, do not recognize their local grocer as a foodservice option due to a lack of menu choices. The report underscores opportunities for increased visibility through marketing and merchandising strategies — all while acknowledging the growing time constraints and cooking fatigue among shoppers to prepare a convenient and nutritious meal. To further promote engagement, shoppers emphasized their desire for retailers to highlight nutrition facts and meal ingredients.
2. Hybrid Meals Support Shoppers: The analysis notes that shoppers are looking for comprehensive meal solutions, not just prepared items. In fact, 55% of those surveyed note a desire for hybrid meal options — or those that are a mix of semi- and-fully-prepared items. It is noteworthy that 64% of consumers who typically prepare hybrid meals say they plan their dinners a few days at a time.
3. Convenience Enabled by Technology: Technology supports shoppers’ strong desire for convenience with more than half of consumers expressing a desire to order deli-prepared items with a smartphone. The survey also points out significant disparities among generations in how they want to engage in retail foodservice ordering. For example, 20% of Gen Z customers prefer ordering from a person versus using their own phone (49%) or a kiosk (31%), compared with 89% of Boomers who prefer ordering from a person.
Among other findings from FMI’s report, prepared by 210 Analytics and made possible by Hussmann Corp. and Produce Marketing Association:
• In June 2021, 36% of consumers tend to mostly cook dinner from scratch. This is unchanged from 2020 and 2019. Across all ages, incomes, ethnicities and areas, the most common way of dinner preparation in the U.S., at 55% of shoppers, is combining items they make from scratch with semi- and fully prepared items. This provides important opportunities for grocery deli-prepared items in a hybrid scratch and convenience approach.
• The share of Americans who purchase grocery deli-prepared foods every few days or daily rebounded to 13%, about even with the pre-pandemic 2019 share of 14%. Lunch and dinner are the biggest occasions for retail foodservice, with urban areas over indexing for all three big meal occasions. All have opportunity to grow household engagement and purchase frequency.
• Eight percent of U.S. consumers do not purchase from retail foodservice at all. An additional 23% do so very infrequently, which is up a bit from 19% in 2019. The share who purchase with more regularity, (daily through weekly) has not yet recovered to its pre-pandemic level. In all, 39% engage at least weekly, down from 44% in 2019.
• Retailers are able to offer a variety of amenities that shoppers say will improve the chances of them buying grocery deli-prepared foods instead of from restaurants. The ability to order in advance leads the list, mentioned by 63% of shoppers. Seven in 10 consumers (71%) like the idea of saving time during pickup by means of an inside pickup station (60%), drive-through (56%) or curbside delivery (51%). Six in 10 (59%) say delivery by either the store (51%) or a third-party (40%) would positively influence their purchase decision.
• Whereas 74% of consumers have ordered restaurant food for pickup, just 36% have done so for grocery deli-prepared foods. Likewise, 56% of consumers order restaurant food for delivery and only 32% have done so for grocery deli-prepared foods. High-frequency grocery deli-prepared users are much more likely to use pickup or delivery. While only 46% of consumers have ordered grocery deli-prepared foods for takeout or delivery, 62% say they would use a grocery store’s foodservice-specific app. This is up from 54% in 2020.
“Grocers confidently acknowledge the power in convenience-driven retail foodservice, as these programs continue to serve as differentiation strategies for their businesses,” said Stein. “As evidenced in this analysis, with the right formula that caters to the customer with supportive technology, food retailers can increase their significance as a destination for health, well-being and meal solutions.”