Competition | October 2010 | By Daniel Smith

The Ultimate Food Fight

Page 2

“Many options are fresh, sustainable, and local, all of which creates a perception of healthy,” he says.

Indeed, prepared grocery store offerings have evolved from their primitive roots with rotisserie chicken and potato salad. Today’s leading grocery stores, and even a few local players, have created a litany of ready-to-eat options well beyond the norm.

Market District offers a line of smoothies. Buehler’s Fresh Food features crab cakes and beef burgundy on its rotating “Dinner for 2” menu. Dean & DeLuca provides a salmon chowder, while Metropolitan Market sells homemade comfort foods like turkey pot pie. Safeway’s Lifestyle stores host sandwich and sushi stations. Publix offers ready-to-eat kids meals and, in one newer Florida location, a 4,500-square-foot culinary-prepared food experience with more than 80 entrées, including kung pao scallops and cedar-plank salmon.

“There are more choices than ever and that’s real empowerment,” Johnson says. “Overall, the restaurants overlooked the reality of this momentum and how it allowed households to bundle. The grocery channel can offer something compelling and powerful to consumers.”

Perhaps no chain, however, has better characterized the grocerant growth than Whole Foods, the world’s largest retailer of natural and organic foods. Whole Foods positions meal stations throughout its stores, many of which capitalize on the company’s fresh image by offering regional fare.

“You might walk into a Whole Foods at dinner time and the aisles might be empty, but there will be a crowd at those meal stations,” Johnson says.

This is not a passing trend, Johnson says, but rather a swelling competitive reality. He points to a number of supermarket brands creating private-label items to jolt their prepared-meal offerings, as well as convenience stores, which are joining the prepared meals game as well. Later this year, Walgreens will trial individual prepared meals, such as wraps and soups, at many of its outlets.

For Publix and many of its supermarket brethren, the year-over-year growth has spurred continued investment and experimentation.

“There’s customer demand and popularity here,” Stevens says. “Consumers are flocking to these venues to take care of their household’s needs, and we want to fulfill their expectations.”

All of this attention to foodservice comes at a fortuitous time for grocery stores.

“Grocery stores provide supplementary food products and that can keep the customer in-house even as the recession wanes,” Morris says. “That’s an important consideration here as we move forward.”

Defense to Offense

In late July, the NPD Group, which has been tracking in-home eating habits and foodservice trends over the last 30 years, projected that the need for prepared meals would continue to grow over the next decade. Driven largely by convenience, the report surmised, restaurants and supermarkets both have opportunity to claim the consumer’s dollar.

Generating restaurant business, however, will not happen by accident.

Morris says restaurants must enhance their value proposition with price and quality messaging, customer-service initiatives, and convenience to maintain their relevance with consumers. Fundamentally, quick serves must ensure that their menus can compete on value and quality, the two most prevalent factors in consumer eating decisions. For $10 at a grocery store, a customer can purchase a rotisserie chicken, two side dishes, bread, and a drink. Quick serves will need to match that value proposition to ward off this challenge.

“As an operator, you have to recognize that people can and will go elsewhere,” Morris says.

To defend their quick-service brands, operators will have to migrate with a customer that is dynamic, not static. Stevi B’s Loney and his team have investigated building a separate to-go window, simplifying online ordering, and launching aggressive marketing initiatives, such as bounce-back offers to spur to-go sales, all efforts to counter grocery’s competitive momentum.

Additional quick-service solutions include selling at various distribution points, creating smaller units, and licensing. Take-and-bake options, which allow consumers to enjoy a restaurant-quality meal in minutes at home, also offer opportunity.

“In today’s crazy world, dinner doesn’t happen when everyone expects it to,” Long says. “The question becomes: What can restaurants do to appease consumer lifestyles?”

An additional key, Morris says, resides in restaurants offering items that consumers are drawn to and which cannot be easily replicated. That’s why Loney feels confident that Stevi B’s can withstand the supermarket assault in the short and long term.

“We have pizzas you can’t get anywhere else, so that’s a real advantage,” he says, pointing to his specialty offerings like the Macaroni and Cheese Pizza and Loaded Baked Potato Pizza as prime examples. “By better informing our customers, we can make a dent in the business we’re losing to grocery stores.”

One unusual solution Long sees is the opportunity for collaboration, specifically to make restaurant-branded products available in supermarkets. Publix recently opened a Carrabba’s Italian Market in its Sarasota, Florida, outlet—a relationship filled with optimism for both the grocer and the casual-dining chain.

Pages