Gas Prices May Be Super for Food Markets
By George Anderson
An editorial in one of the grocery industry’s trade publications says the high price of putting gas in cars may just be what supermarkets need to gain some traction for their businesses.
David Orgel, the editor-in-chief of Supermarket News, says that recent research by ACNielsen, which found that 31 percent of consumers are eating out less often because of high gas prices means they will be relying more on food stores.
“Call it restaurant-meal replacement (RMR), to turn a recent industry phrase on its head,” he writes.
The findings of the Nielsen research cited by Mr. Orgel have found support in a new study from Information Resources, Inc. According to IRI, consumers began shifting the allocation of their dollars away from out-of-home entertainment and dining.
John DeJesus, president/CEO of Foodmaster Super Markets in Chelsea, Mass., told SN that he has seen the shift taking place in his home market: “It started with the high-end restaurants feeling it a little bit, and now the middle-of-the-road restaurants are starting to feel the pinch. The only way [consumers] are going to make their dollars last longer is to buy groceries and cook at home, and cut out the extraordinary expenses – and going out to eat is one of them.”
IRI says its research suggests that shifts in spending have offered up some surprises. “Contrary to what some analysts expected, the channels benefiting most from the uptick in spending were the major CPG channels of trade – grocery, drug and supercenters; while dollar and club stores – sales dipped. The latter outlets were significantly impacted by rising gas prices due to their focus on serving either lower-income consumers, who have very limited disposable incomes (dollar store consumers), or highly cost-conscious shoppers, who may have switched to a one-stop shopping outlet in closer proximity to conserve gas (club store shoppers).”
Moderator’s Comment: Where should supermarkets concentrate their efforts to take advantage of the restaurant-meal replacement opportunity, as David Orgel
calls it? How can they turn this opportunity into a permanent (or at least longer-term) advantage? What should traditional grocers be looking for from competitive formats to avoid
having this opportunity swept out from underneath them? –
George Anderson – Moderator
Probably not rocket science. People unable to eat out as often…still want the experience of meals they might not be able/choose to create for themselves…..still want the convenience of not “doing” the cooking…..
Is anyone else seeing this as yet another indication of the opportunities in ready-to-eat product? Move past the meat and potatoes, and into the restaurant fare.
Make it painless!!!
Shoppers returning food dollars to at home meals are ostensibly sacrificing something. Given the basic premise that they are coming back to supermarkets due to gas prices/economic hardship, it then follows that they have previously made the choice to leave the “at-home experience” and channels for some reason — quality, convenience, atmosphere, social, whatever. So the number one thing food store operators can do when they return is to make it as painless as possible for them to get a meal for the table (TV tray?) that also provides as much of the away from home experience as they can.
Take my local (walking distance) Jewel for example. When I enter the store, I can pick up a hand basket, get a fresh baked loaf of bread, pick up chilled wine, cheese, fresh fruit, prepared appetizers, salads, entrees, etc. from the deli, hit the cash machine and the self scan all within 100 steps and 5 minutes. And I do it at least three times a week.
But the merchandising mentality that makes this happen is very different from traditional grocery approaches. The goal is not to keep me in the store for thirty minutes and get me to put twenty or thirty items in a cart for a $50 ring. The goal is to get me in and out of the store in 5 minutes (okay 10) with 5 items and a $30 ring…and they do it every time.
Restaurant Meal Replacement is Home Meal Replacement one step removed. Yes, customers will do what they have to do to make their budgets work. Yes, supermarkets may see an increase in business in the short term. That is likely to happen no matter what the supermarkets do – consumers are figuring out how to make their budgets stretch. However, the real opportunity for supermarkets is the possibility of regaining lost customers and making them loyal customers. I echo Len Lewis’ comments: supermarkets have to seriously rethink the idea of Home Meal Replacements – how can that be done to produce high quality solutions that work on a tight budget? The supermarkets solving this problem for consumers are likely to have regained some loyal customers.
This is a good example of a positive external influence. The good food marketers will attempt to develop an offering that keeps these new customers when economic conditions favor the return to dining out.
With a couple of exceptions, supermarkets have not been good at the restaurant business. However, they can be the assembler of ingredients (bagged salad, chilled meals, bake off bread, great tasting deserts from the in-store bakery, etc.) that allow the meal preparer to “take credit” for a home-prepared meal. However, the key to supermarket success in this area is to focus on “convenient involvement.” Make it easy to shop (end caps focusing on complete meals), easy to pay, and make it easy to prepare.
If supermarkets are able to execute a “convenient involvement” strategy they may, in fact, be able to limit some of the inevitable losses that will occur when consumers feel they can again afford to eat-out more often. Consumers eat-out today because supermarkets have not provided them with a better alternative. If supermarkets can change this perception, the current economic situation may be the catalyst for permanently reclaiming lost meals.
Few conventional supermarkets have the wherewithal to provide restaurant meal replacement. Typically, only the finest upscale supermarkets seem to be able to accomplish this. Their customers could probably care less about the price of gas. If you can afford the expensive restaurant meal replacement at supermarkets, you can afford to eat at Applebees in the parking lot. Most supermarkets can’t even make decent fried chicken or pizza. I can name a few supermarkets that do an excellent job at this but they are few and far between. This issue has been talked about off an on for several years and nothing much has come of it. I don’t see any change in this pattern.
Len makes good points above about what supermarkets will need to learn if they are to truly take advantage of this. There’s an opportunity to capture some long-term “share of table” if consumers discover a viable middle ground between cooking and going out. A friend of ours has a great catch phrase when asked if she made the delicious dinner being served: “This is great. Did you make this?” “I made it possible….”
More supermarkets should learn how to “make it possible” for consumers to serve restaurant-quality meals with take-out convenience.
Well, anyone who reads this regularly knows that I am simply not a fan of prepared meals. I cannot resist the opportunity to point out the obvious opportunity here – show the people how fast and easy it is to cook. Take advantage of the hype about eating fresh, healthy foods and maintaining a balanced diet. Supermarkets are the ideal venue for tastings and demonstrations. Don’t encourage shortcuts – lead the way and show adults and children alike that there is a huge world of flavour – without any kind of additives or preservatives – and an experience that they might enjoy. Encourage them to cook and eat together. Supermarkets can work with local schools and families and even chefs to show people how to use ingredients and help them learn new habits. Go on, enjoy yourself.
Higher gas prices notwithstanding, and whether we are the era of “Restaurant Meal Replacement” or “Home Meal Replacement”,
this would seem to be a great opportunity for the supermarket to further evolve, to move away from being fairly predictable, i.e., sort of boring, and innovate into a Broadway-like “Food Theater” that changes and/or rotates its “world of fine meals” and supportive presentations regularly.
Wouldn’t that be more labor? Yes! Would that change standard operating procedures and costs? Of course, but those questions focus on the problems not the supermarket opportunity. A lot of consumers would respond to a new brand of supermarketing if one were to be created and offered.
Supermarkets, generally speaking, while well operated, are a bit static. Each time you go into the same one you are confronted with yesterday’s sameness – layout, displays, offerings – which, of course, appeals to a great many habit-bound shoppers. That’s the plus side. But habits can be motionless and hurdles in front of progress. This may be “break-through” time for the supermarket operator who can dramatically change his or her Featured Show every month to appeal to those curious shoppers seeking a non-predictable, effervescent place in which to spend their discretionary time and more of their money (saved by driving shorter distance to the local supermarket). Perhaps I am too enthusiastic but … Think about it.
The point here is that people are trying to save money. Save Wegmans in our market (and it is not an option for anything other than the occasional “WOW that looks good” trip, where I buy more than necessary–kudos to Mr. Wegman, now my kids know what Japanese rice candy is!), I can’t think of a single grocery store that is (Okay, maybe Publix for a sandwich in Atlanta) a Restaurant Meal Replacement. Whether your experience is big screens and a football game, or white tablecloth and a string quartet, you will NOT get that at a grocery store. Home Meal Replacement is the right term.
Now to echo Ms. Hurst’s comment–what supermarket operators have a chance to do is TEACH PEOPLE TO COOK, or at least how to boil a bag of something pre-cooked (see the Washington Post food section October 5 for great developments in this area), or ASSEMBLE a meal. Is anyone co-marketing Rachel Ray’s cookbook with the ingredients needed to make the meal? How about Bon Appetite’s meals in minutes sections, again with the ingredients available. Cookbooks don’t have to be science fiction!
Don’t put too much stock on the carry-out side. I know a lot of people do it and they must live a lot closer to the restaurants than me–calamari does not travel well and neither do fries!
Supermarkets are generally more convenient to get to than warehouse clubs, but I believe that medium price restaurants will be most impacted by energy prices. McDonald’s seems to be doing fine, so it seems as though fast-food places still have plenty of life. I believe that dollar stores will not benefit because the lion’s share of their customers are low-income people with the least discretionary spending. It’s true that they’ll get some new customers, but they’ll shoot themselves in the foot by continuing to open way too many stores.
Gee, home meal replacement–what a concept!
I’m certainly in favor of supermarkets developing the prepared foods area of the business. However, a take home meal is not going to provide a “restaurant experience.” There is simply no substitute for going out, being served and having someone else clean the dishes.
However, there is a need for higher quality ready-to-eat and other prepared meals. Supermarkets also have to learn how to make the business profitable. That means learning about batch cooking and day-part marketing and merchandising. You can’t make the chickens at 11:00 a.m. and sell them for dinner at 8 p.m. You will only lose customers.
Also, let’s not forget the rest of the store. I hate to repeat my previous comments in this forum, but supermarkets have to focus on selling meals throughout the store and not just aisles and aisles of ingredients–cross merchandise, build special endcap displays and sample, sample, sample.
I would echo Mr. Delzell’s comments. Instead of “Home Meal Replacement,” the retailer has a window of opportunity for “Restaurant Meal Replacement.” Provide a similar experience of food quality and portability that restaurants are providing. Curbside service might not be practical, or even necessary, but other levels of convenience such as selection, meal planning and packaging are a must. It might be a good time to dust off the HMR concepts that never got much traction and refresh them with a focus on today’s consumer.
Fewer trips to a closer store to buy everything is an obvious way to save on gas costs. This can and should be an opportunity for supermarkets as they are generally located closer and have everything compared to club stores and limited assortment stores. And the in-store deli with prepared meals offers true restaurant meal replacements for the two income families that either don’t have the time or the energy to prepare home-made meals from scratch. For all these reasons and more, it seems like the supermarkets have a real window of opportunity right now. It will be interesting to see how many are able to capitalize on it.
Agreed that the rising gas prices once again brings about a change in economic and social habits. The HMR program in most cases is “not” an RMR at all as half, if not more, of that experience is the art of being catered to. This shift does not apply to all shoppers equally anyway. Those low income families are not the demographic who is being pulled out of the restaurants in the first place. The key, however, is that a vast majority of the people who would take advantage of an HMR program are those who don’t have time or don’t want to cook themselves regardless of other economic issues. This situation is in fact heightened by the rise in gas prices, but it will remain a viable option for those people with a time-challenged lifestyle.
The key for the retail industry is “who else,” other than the traditional Supermarket chains, will pick up on this opportunity? The door is open for others …
Has everyone forgotten — there are two segments of shoppers that we should address. Shoppers who less
frequently go out to eat/rely on preparing meals…good for
supermarkets; and then, the second more important segment,
richest generation in U.S. history, the Baby boomers, X and
Y generations who go out anyway, whether gas is $1.25 or $3.00
per gallon… lifestyle doesn’t change.
And, as important, delivery service hasn’t stopped or declined in my city – Louisville, KY. – or Chicago, or LA.