Industry News | December 15, 2008

Could Retail Kill Quick-Service?

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Six percent of the roughly 62 billion commercial foodservice meals and snacks consumed in a year are purchased at retail stores--food, drug, discount, department, and price clubs--and convenience stores represent an additional 7 percent, according to a new report from The NPD Group, a leading market research company. Retail foodservice represents a spending level of close to $13 billion, according to NPD’s recently released Retail Meal Solutions report.

According to the report, which analyzes how retailers are currently satisfying consumers’ needs for ready-to-eat foods, retail ready-to-eat meal and snack purchases increased 2 percent for the year ending August 2008. The quick-service restaurant segment, with which retail stores directly compete in providing convenience meal solutions, served only 1 percent more meals and snacks. The full service restaurant segment realized a downturn.

“Consumers’ increasing use of foodservice for ready-made meals has long been recognized by grocery retailers as an opportunity,” says Bonnie Riggs, NPD restaurant industry analyst and author of the Retail Meal Solutions report. “For some time, retail stores have offered prepared foods in the deli department, but have now expanded foodservice offerings to include a variety of cold and hot ready-to-consume meals and snacks.”

The report dispels the popularly held belief that supper is the prime day part for retail meal and snack solutions. NPD finds supper accounts for only 17 percent of retail meal solutions consumed, but is steadily growing, whereas it’s a weakening day part for quick-serv. P.M. Snack represents the largest share, 35 percent, of ready-to-eat food consumed, followed by lunch with 27 percent share, and then morning meal, which represents a 21 percent share.

“Retail outlets are more dependent on morning meals and P.M. Snack purchases than quick service,” Riggs says. “These are the on-the-go needs that are being met by retailers--consumers making those purchases on the way to work, to eat at work, or in their car. Purchases that otherwise would have been made at a quick service.”

Consumer motivation in purchasing prepared meals and snacks from retail stores include convenience, availability of healthier options, variety, and affordability, according to the report. Riggs points out that these are attributes consumers report lacking at quick-serves.

“As always, it’s a matter of learning and understanding consumers’ needs when it comes to meal and snack solutions,” she says. “With this learning and understanding, there is opportunity here for retailers, foodservice manufacturers, and restaurant operators.”

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