The nation’s major supermarket operators are spurring changes in meat and deli merchandising. Reacting to such stimuli as rising labor costs, the aging of the vast baby boomer population, busy consumer lifestyles and the need for additional revenue streams, retailers are moving away from worn operating models.

Among their newer strategies is a greater emphasis on branded proteins—including private-label items; the marketing of valued-added and convenience products; launches of sophisticated and targeted promotions; and the rollout of natural and organic meats.

While methodologies frequently differ in accordance with the unique competitive and shopper dynamics of their individual markets, many chains are similar in their adoption of novel techniques.

“There is more than one way of being successful,” notes Alan Hiebert, research director for the Madison, Wis.-based International Dairy-Deli-Bakery Association. “The trick is deciding on a model and going with it.”

Indeed, Hiebert notes that while some of the largest chains—including supercenters and club stores—carry comparatively small amounts of perishables, others market large assortments of fresh proteins at heavily staffed full-service counters.

Many of the merchants are following the prudent course of targeting specific shopper segments, he says.

“Stores that are stuck in the middle between value and service are losing ground to (retailers that concentrate on one or the other),” Hiebert says. “The days of the one-store family are gone. The monthly stock-up trip and the weekly fill-in trip have different destinations.”

Yet, some chains still are working to attract multiple customer groups. Bentonville, Ark.-based Wal-Mart Stores Inc., the world’s largest retailer which leverages an “Every Day Low Price” strategy to appeal to value-conscious shoppers, also is targeting convenience-minded consumers.

Peter Redmond, vice president of deli and seafood, says many Wal-Mart Supercenters are expanding their hot meals areas as they more actively compete with foodservice locations for take-out business.

“Much of our growth is coming from take-out and meals that consumers just need to finish off in the microwave or heat in the oven,” he notes. “The focus is on servicing the time-starved customer.”

More large chains are targeting take-out because of the huge revenue potential. The Arlington, Va.-based Food Marketing Institute (FMI), for instance, reports that more than 60 percent of consumers at least once a month eat meals at home that were not prepared at home; 18 percent do so one or two times a week; and 4 percent three or more times a week.

Wegmans Food Markets Inc., a Rochester, N.Y.-based operator of more than 70 stores, this year solidified its position as a top take-out destination by launching seafood and veggie bars in its Pittsford, N.Y. store. The bars enable customers to sit at counters and order fully cooked dishes from menus for in-store dining or takeaway.

Publix Super Market Inc., a Lakeland, Fla.-based chain of approximately 900 stores in Florida, Georgia, Alabama, South Carolina and Tennessee—is emphasizing its high-quality made-to-order sandwich program.

Customers can order 10 types of sandwiches and have the option of paying extra for premium meats from Sarasota, Fla.-based Boar’s Head Provisions Inc.

However, while such stations can be large revenue generators, they often enhance expenses because of the need for extra staffing. Hiebert notes that average supermarket deli labor costs are equal to nearly 25 percent of deli revenues, up from about 22 percent a decade ago.

Still, some chains are reluctant to downsize their personnel levels.

“They view service departments as the best opportunity to differentiate themselves from the competition,” Hiebert adds.

Many of the initiatives are generating paybacks. The FMI reports that 17 percent of consumers purchase their take-out meals from supermarkets. The outlets only trail non-fast-food take-out or delivery locations, such as pizza or Chinese establishments (43 percent), and fast-food restaurants (23 percent), in popularity.

Growth possibilities also remain strong. In a 2006 IDDBA survey, more than 50 percent of respondents indicated that they would be more likely to purchase items from supermarket delis/hot foods stations if they had a greater variety of foods to choose from.

Among the merchants seeking to spur demand in the segment is Supervalu Inc., Eden Prairie, Minn., which has a network of approximately 2,500 stores operating under more than a dozen banners. The company is adding varieties of hot foods—such as new types of rotisserie meats—along with fresh sandwiches and side dishes, executives say. They report double-digit growth in rotisserie sales for six consecutive years, and note that additional flavors will be launched over the next few years.

Mining for meat revenues

Many chains, meanwhile, also are revamping their meat cases to add efficiencies and enhance income. More stores, for instance, carry larger amounts of case-ready products and the overall percentage of case-ready offerings is likely to increase over the next few years, notes Randy Irion, director of retail marketing for the Centennial, Colo.-based National Cattlemen’s Beef Association (NCBA).

A 2004 meat case study sponsored by the NCBA, the Duncan, S.C.-based Cryovac Food Packaging Division of Sealed Air Corp. and the Clive, Iowa-based National Pork Board (NPB), found that 60 percent of meat was case-ready, up from 49 percent in 2002. “We expect it has grown since then,” Irion says.

The study found that 95 percent of both chicken and turkey were case ready, followed by ground beef (66 percent), pork (50 percent), lamb (47 percent), veal (37 percent) and whole-muscle beef (23 percent).

In addition, 71 percent of case-ready packages were “in-stock,” compared to 50 percent of store-wrapped packages. In-stock was defined as a product category with at least five packages in the case.

The study includes data from more than 117,000 packages in 104 stores in 43 key metro areas. Case ready was defined as products that come in a packaged state from the supplier and were not re-packaged at the store level.

“Case-ready is changing the complexion of the meat case,” Irion states. “It’s being driven by improved packaging technology—which is resulting in a longer product shelf life—and because stores don’t want to deal with the shrink that is associated with grinding fresh meat in locations each day.”

A new meat case study will be conducted this summer.

Wal-Mart was a key driver of the case-ready movement by offering prepackaged products instead of store-cut proteins in more than 2,000 Wal-Mart Supercenter and Neighborhood Market locations. Irion notes that while in-store grinding enables some retailers—such as Publix—to standout in a crowded market, more merchants are embracing case ready.

“Market forces are pushing retailers to case ready because of greater shelf life, reduced labor expenses, increased product availability and decreased out of stocks,” he adds.

More consumers also are becoming comfortable with case-ready meats. The 2007 The Power of Meat study—published by the FMI and the Washington, D.C.-based American Meat Institute—reports that 75 percent of shoppers are aware that meat may be cut and packaged before it enters stores, and that the majority feel the quality of prepackaged meat is equal to store-cut proteins.

A branding boom

Some large chains also are seeking a stronger meat identity by embracing private-label brands.

Most proteins in Publix’s refrigerated meat case, for instance, display the Publix, Publix All Natural, Publix Premium, and Advantage store-branded monikers. Publix outlets also have selections of GreenWise-branded items—private-label products that are produced without artificial ingredients, colors, flavorings, additives, pesticides, growth hormones or antibiotics.

Safeway Inc., Pleasanton, Calif., meanwhile, merchandises private-label Rancher’s Reserve-branded meats at both the full-service and self-serve cases in such banners as Safeway and Dominick’s.

Rancher’s Reserve undergoes a Verified Tender process to insure tenderness, and animals are grain fed to produce marbling that ensures a tender, juicy and flavorful cut, Safeway reports.

In addition, chains operated by Supervalu Inc., such as Albertson’s, Acme and Jewel-Osco, heavily market such store brands as Blue Ribbon Beef and Steakhouse Choice. The company reports that Blue Ribbon cuts are hand-selected and hand-carved, and are part of a “twice guaranteed” program in which customers unhappy with their purchases receive a refund and another Blue Ribbon Cut for free.

Steakhouse Choice cuts are developed from USDA Choice Angus Beef that is aged naturally and hand carved, Supervalu notes.

While most chains also carry supplier-branded proteins in addition to store brands, many position private-label as a key competitive differentiator.

“A brand can become shorthand for a promise to consumers, such as having a specific quality of tenderness,” Irion says.

He adds that private-label items also are attractive to retailers because they can be supplied by a variety of packers that agree to meet defined specifications.

Still, the majority of consumers are not wedded to specific brands. In The Power of Meat survey, for instance, 72.3 percent of respondents indicated that they have no brand preference when purchasing fresh meat or poultry. In addition, 15.2 percent noted that they prefer a national brand, and 12.5 percent a private label/store brand.

The study also found that 53.4 percent of consumers have no brand preference when purchasing processed meats; 37.3 percent prefer national processed meat brands; and 9.3 percent favor private label.

Store brands, however, still can be strong meat-department magnets, analysts say.

“It is an excellent strategy for retailers to offer a proprietary brand to the extent they can deliver a perceptible and better eating experience with the product and it is marketed enough to make the connection with consumers,” says Rick Sterling, chief executive officer of Sterling-Rice Group, a Boulder, Colo.-based brand strategy consulting firm.

“Private label offers a premium choice relative to the unbranded beef in the case and also competes with other branded products,” he notes.

Consumer health and wellness concerns also are spurring changes at the meat case—including a move by retailers to merchandise more natural and organic proteins.

The Power of Meat study reports that 21.2 percent of respondents purchased organic and/or natural meats in the three months prior to the survey.

“All the top retailers have heightened interest in natural and organic,” says Karen Boillet, National Pork Board director of retail marketing. “They are trying to gauge the sector’s potential, and how best to market to consumers.”

Chicken is the most popular meat in the category, with 73.2 percent of natural and/or organic shoppers purchasing the item, the study notes. It is followed by beef, which was bought by 50.7 percent of the consumers; ground meat (31 percent); fish (26.8 percent); turkey (21.1 percent); pork (19 percent); lamb (9.5 percent); and veal (3.9 percent).

Shoppers 25 to 39 are the most frequent buyers of organic meats, while older consumers are the least likely to purchase such items.

The top reasons given by respondents for purchasing natural or organic meats is better health and treatment of the animal (cited by 44 percent of respondents); better nutritional value (43 percent); better taste (42.6 percent); positive long-term personal health effects (41.9 percent); and freshness (41.9 percent).

“Many retail trends are based on the emotional attachments consumers have with products,” says Al Kober, director, retail, for Wooster, Ohio-based Certified Angus Beef. “That is resulting in greater demand for natural, organic and ‘green’ items.”

Also gaining strength are fresh value-added and premium offerings that satisfy shoppers’ growing demand for items that require minimal preparation and have a superior taste.

Pittsburgh-based Giant Eagle Inc., for instance, a 219-store chain in Pennsylvania, Ohio, Maryland and West Virginia, last year opened two Market District locations in the Pittsburgh area that feature imported and dressed meats, and such exotic proteins as venison, quail and duck.

Bristol Farms, a Carson, Calif.-based chain of 13 stores that is owned by Supervalu and targets the upscale, gourmet-conscious West Coast shopper, sells about 20 types of marinated meats that are rotated seasonally, and 30 varieties of fresh sausage.

“Shoppers are looking for quality foods that they are proud to feed their families,” Kober says. “The emphasis for retailers is to provide them with a better eating experience.”

Not only are merchants offering greater selections of meat, but they also are stepping up their product promotions.

Promodata, an Oakbrook Terrace, Ill.-based provider of pricing and advertising information, reports that total ads for meat from April 1-April 28 increased 12.1 percent over the year earlier period. Beef ads were up 14.8 percent, followed by pork (13.8 percent) and chicken (10.2 percent).

Beef also accounted for 34.6 percent of all meat ads, followed by chicken (18.3 percent), pork (16.1 percent) and turkey (5.5 percent).

Irion says the increase in ads correlates with the growth of branded proteins, as more retailers are trying “to tell a story” about their products.

More chains, meanwhile, are spotlighting additional meat items in the space amount of ad space, Boillot notes.

“Merchants are working harder to attract consumers with ad circulars,” she says. “They want shoppers to buy more than the front page feature item.”

Stores over the next few years also will be soliciting customers by offering additional varieties of meat and deli products, analysts say.

The IDDBA’s Hiebert forecasts the merchandising of more private-label deli meats that come pre-sliced or proportioned for both the service case and peg rack.

He says the largest chains will partner with suppliers to produce customized store-branded products, and smaller chains “will have to find their niches.”

Kober adds that retailers—to remain competitive—must continue to emphasize three merchandising fundamentals: quality, service and value.

“Doing so will enable stores to meet the needs of different segments of customers,” he states. “Some retailers try to be all things to all people and lose focus on what brought them to the dance.”