August 2007: Take-out Takes off
by Richard Mitchell
August 1, 2007
Supermarket delis are evolving into popular destinations for convenience-minded shoppers.
Changing consumer lifestyles are triggering a deli transformation. Time-pressed shoppers seeking restaurant-quality meals—but without the cost and inconvenience associated with visiting sit-down establishments—are spurring the rollout of sophisticated supermarket take-out programs.
Such elements as made-to-order sandwiches, hot-food bars, hot-food stations that offer entrées and side dishes, pizza stations, fully cooked rotisserie chicken, hot soups and freshly made grab-and-go meals are becoming commonplace. And additional choices are likely as competition for meals-to-go business heats up.
While delis are departing from their traditional operating model of primarily offering bulk meats and cheese, take-out options are becoming a necessity if delis are to remain important supermarket destinations and revenue generators, analysts say.
“Take-out is not a fad, but a trend,” asserts Ron Paul, president of Technomic Inc., a Chicago-based food-industry consulting firm.
Leading natural retailer Whole Foods Market Inc., Austin, Texas, has been a key stimulus in spurring supermarket take-out initiatives.
One of Whole Foods’ newest stores on Chicago’s Northwest side, for instance, features a plethora of stations aimed at the convenience-oriented shopper. Among the choices are beer and brats, made-to-order sushi, hot seafood soups, brick oven pizza, hot sandwiches, Asian meals and hot buffet items.
Such ensembles are attracting mainstream shoppers in addition to the natural-and-organic crowd, analysts say.
“Whole Foods stores are mini restaurants and that is part of their success,” Paul notes. “They differentiate with high-quality prepared foods.”
He adds that the “take-out ball got rolling with Whole Foods and now other supermarket delis are playing catch-up. They have to offer quality take-out items or consumers will shop elsewhere. The sector is a major growth opportunity.”
Indeed, the market for take-out is potentially lucrative. In an Internet survey conducted by the Washington, D.C.-based Food Marketing Institute, 41 percent of respondents noted that they eat meals at home that are not prepared at home one to three times a month. Eighteen percent eat such meals one or two times a week, and 4 percent do so three or more times a week.
In addition, 44 percent of respondents indicated that their source of take-out food was a non-fast-food or delivery outlet, 23 percent took out from fast-food restaurants, 17 percent had meals from supermarkets, and 9 percent took out from full-service restaurants.
Technomic Research reports that 22 percent of consumers’ meals are prepared away from home, accounting for about 50 percent of food expenditures.
While a portion of those dollars are spent at sit-down restaurants, a growing category of shoppers still are reverting to take-out—and searching for exciting and exotic options.
“Fast-food outlets initially were the only available take-out locations, but consumers then demonstrated that they would be willing to pay more for take-out from casual dining restaurants,” Paul says. “They want more than traditional offerings.”
Besides competing with Whole Foods and other supermarket chains for take-out business, delis also vie with restaurants—and have some inherent disadvantages, analysts note. Foremost is an absence of drive-up windows—forcing shoppers to frequently traverse expansive parking lots and store aisles to reach the take-out section.
“Delis are not the most convenient places to get a meal, but they are a very convenient option if consumers already are shopping in the stores,” says Bruce Axtman, president and chief executive officer of The Perishables Group, a West Dundee, Ill.-based consulting firm.
Supermarkets also have the added advantage of generating incremental business from take-out shoppers seeking side dishes, he notes.
Customers, for instance, might purchase bread, dessert and wine to go with hot rotisserie chicken, Axtman says.
“Those items can’t be bought at KFC,” he notes. “But retailers seeking to capture the take-out audience still have to figure out how to make it easier for consumers because shoppers have so many dining options.”
Yet, some analysts caution that not all supermarkets are suitable to-go destinations.
Carol Christison, executive director of the Madison, Wis.-based International Dairy-Deli-Bakery Association, says take-out initiatives are only “great” if consumers are willing to consider the deli a take-out location for a particular meal or item.
“The risk is in deciding that you want to compete with foodservice outlets before there is a customer base or operational systems in place to deliver quality products,” she notes.
Delis must first react to consumer needs instead of moves by their competition, she says.
Potential take-out operators should consider such elements as customer perception, ease of access, product quality, equipment, packaging, marketing and delivery before deciding whether it is appropriate to launch a program.
A successful operation also requires a corporate commitment to offering quality food.
“That is especially true if the take-out outlet is not considered a destination location, doesn’t already have a reputation for great food, or the customer has to find a parking spot and then navigate the store to get to the counter,” Christison says.
Marcia Schurer, president of Culinary Connections, a Chicago-based food-industry consulting and marketing firm, says that garnering corporate and store support for a high-powered take-out program is one of the biggest hurdles to success.
“Delis must be given the necessary staffing to grow their take-out initiatives, and that includes back of the house production and sales people who are very customer-oriented and driven,” she notes. “They also need to time to be given the time to generate interest in the programs.”
Christison recommends that operators initially offer only a handful of quality take-out selections.
“That will do more to drive customer satisfaction than providing a smorgasbord that’s poorly executed,” she says. “It’s important to understand what you do well and build on it before considering expanding into other areas.”
Some supermarket operators, meanwhile, already are providing a wide scope of take-out foods. Giant Eagle Inc., a Pittsburgh-based chain of 225 stores in Pennsylvania, Ohio, Maryland and West Virginia, has a section of the deli labeled “The Kitchen.”
The area in Giant Eagle’s Fredericksburg, Va., store operates from 11 a.m. to 8 p.m. and offers six types of freshly made sandwiches, five varieties of Paninis—including combo meals featuring sandwiches, drinks and chips—and a hot case with chicken parts and side dishes.
The outlet also has more than a dozen hot chicken combo meals of various sizes, as well as hot rotisserie chicken, BBQ ribs and grab-and-go sandwiches and salads.
Such selections exemplify the efforts by delis to attract lunch and dinnertime traffic. While many of programs still are evolving, a handful of retailers—including the following companies that are profiled in this report—already are pushing programs to new heights.
Most analysts consider Wegmans, a Rochester, N.Y.-based chain of 70 stores in New York, New Jersey, Pennsylvania, Maryland and Virginia—which likens itself to a European market—as take-out’s standard bearer.
Harrods department store in central London is a leading European take-out retailer. The outlet offers a plethora of hot and cold food stations in cavernous halls that are major destinations for both local residents and tourists.
Richmond, Va.-based Ukrop’s Super Markets Inc., which operates 25 stores in central Virginia, is one of the earlier committers to a quality take-out program.
These diverse retailers are among the players that are changing the face of deli merchandising as they respond to greater shopper expectations for take-out.
“The forecast is bullish for the growth of prepared and take-out foods from supermarkets,” Paul says. “Eating in restaurants is not as convenient—or expensive—as bringing food home, and more consumers don’t want to deal with the crowds and noise common to restaurants.”
He adds that most food-service operators haven’t yet reacted to the emergence of supermarket take-out programs, but that is likely to change. Paul predicts some restaurants will simplify their pick-up procedures and introduce signature items to further differentiate themselves from delis.
As a result, he adds that it is vital for the traditional supermarkets to “keep raising the bar on take-out quality.”
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