Competition | October 2010 | By Daniel Smith

The Ultimate Food Fight

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“This is an underutilized spot with plenty of opportunity,” Long says. “Why can’t there be the Taco Bell taco bar, KFC-branded chicken and cole slaw, or branded barbecue ribs in the service delis? There’s an opportunity here to leverage the restaurant brand in the grocery store to draw more customers in.”

Such partnerships are something Stevi B’s pursued, but ultimately rejected. Loney cited the supermarkets’ cash-for-product-placement initiatives and fears about cannibalizing the product and sparking tension with franchisees as pressing concerns he could not overcome.

“You weigh all of this out and you see that it’s just not a viable option, and our energy is better placed elsewhere to grow the top line,” Loney says.

Amid the intensifying competition, quick-service restaurants can take solace in one reality: This is no slam dunk for the grocery stores. The customer coming in solely for a prepared meal is far from the norm, as supermarket visits are still driven by the need to shop for a variety of items.

More importantly, supermarkets have struggled with supply chain issues, portion size, and shelf life, trailing well behind restaurants in operational efficiency and the ability to collectively leverage convenience, location, quality, and value. Many supermarkets are looking at brand advantage and are often unwilling to pursue the operational advantages that could propel them to new heights, Long says.

“And ultimately, this could be their downfall and lead to many struggles,” she says.

But for Loney, and many other quick-service operators, the battle rages on. Solutions are sought, new avenues pursued, and counterattacks launched. Nothing can be taken for granted.

Now even Walgreens is competition?

In August, Walgreens unveiled its new expanded food selection in 10 Chicago communities identified as food deserts, or areas that lack access to basic foods necessary to maintain a healthy diet. The company redesigned the stores, located on Chicago’s South and West Sides, to include more than 750 new food items, including fresh fruits and vegetables, frozen meats and fish, pasta, rice, beans, eggs, whole grain cereals, and other meal components.

“We immediately made a commitment to seek solutions for offering these communities more fresh and healthy food options,” says Mark Wagner, Walgreens executive vice president of operations and community management.

Walgreens is also reviewing opportunities to bring its expanded food selection to other food deserts across the country. “We know this issue is not exclusive to Chicago,” Wagner says. “We have more locations in America’s underserved communities than any other retailer. That makes us well positioned to play a role in addressing this important need beyond Chicago.”

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