Grocers Look to Takeout the Competition

Discussion
Jul 10, 2006
George Anderson

By George Anderson


Harry Balzer of NPD Group knows what he’s talking about. When asked by the Orlando Sentinel if Americans (most of them anyway) want to prepare meals at home anymore, he answered, “No.”


Cooking from scratch, Mr. Balzer predicted, “will become like sewing; it will be recreational.”


There’s no doubt that Americans are increasingly looking to feed themselves and their families with meals prepared by someone other than them. Not coincidentally, restaurants and food retailers are seeking to capture a greater share of the takeout business.


Grocers, in particular, have been attempting for many years to grab a greater slice of a market dominated by food service operators.


The results to date have been mixed. While some stores such as Wegman’s, Publix, Whole Foods and others have found success in prepared meals, others continue to flounder.


The key to success for grocers, it appears, is selling easy to prepare dishes that satisfy consumers’ demand for taste while offering items that are seen as being nutritionally superior to traditional restaurant takeout.


Moderator’s Comment: How do the costs of competing in the prepared foods business compare to the market opportunity for grocery stores? What can grocers
do to grab a greater share of the takeout food business?
– George Anderson
– Moderator

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13 Comments on "Grocers Look to Takeout the Competition"


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Mark Lilien
Guest
14 years 7 months ago

It’s hard for supermarkets to compete against restaurants, especially fast food places. Supermarkets have fewer locations, greater food waste percentages, no drive-up windows, often have to pay their staff union wages and benefits, and lack high margin soft drinks. In their favor: supermarkets can produce much greater variety and quality, with lower advertising costs and no franchise fees.

Camille P. Schuster, PhD.
Guest
14 years 7 months ago

Getting this right is a daunting challenge for retailers. Potentially, the ingredients for most meals are in their store. Providing the right array of ingredients for the right mix of customers in a particular store has been a focus for many stores creating a difficult supply chain problem. Now add to that creating the right mix of prepared foods in the right combination for the mix of consumers at each local store — keeping everything hot or cold and fresh and appetizing!!! Getting this mix right is important because when stores do they have very loyal customers. However, it is not a matter of having a bin of dried up fried chicken and crusted over potato salad. Making an effort does not create success. The right offering for the right consumers at the right time at the right price presented the right way is necessary for success.

Greg Coghill
Guest
Greg Coghill
14 years 7 months ago

I think it would be wise to consider the idea that there is a difference between cooking from scratch and preparing a meal. I might not create the stock for gravy, but I cook potatoes/rice/pasta, veggies and steaks/chops/roasts at least 3 times a week (and I am a 28 year old male in NYC!) Cooking from scratch, yes, turning into recreation. Cooking a meal, far from over. As stated above, would Whole Foods be doing so well if most people wanted prepared food at every meal?

Michael Richmond, Ph.D.
Guest
Michael Richmond, Ph.D.
14 years 7 months ago
The top three consumer wants/trends are taste, convenience and nutrition and in that order. Consumers are willing to pay more for value and we continue to use a simple equation to show this: Value = Benefits/Price vs. Competition. So, if you are providing the right benefits – like taste, freshness, time savings, service, less mess, portability, etc – and are doing it better than the competition, then you should get the sales. There was an FMI study done a few years back and 2/3 of people are either time starved or looking for more convenience (only 1/3 were price conscious) and I don’t think that has changed much. If anything, there are more people looking for added convenience. Grocers should look at what they are doing in the meal solutions area and identify what they can do to improve the benefits side of the equation. How about better service; more locations outside of the deli to place meal solutions? Put in some center of store “convenient” meal solutions. And don’t forget how important the packaging… Read more »
Mark Hunter
Guest
Mark Hunter
14 years 7 months ago

Grocery stores are designed today to sell volume, not serve meals; it’s as basic as looking at the layout. All the frozens are in one area, refrigerated in another, etc. We want to eat by meal occasion and we want the meal in an environment that fits our senses. When you combine this with the the fact the most limited resource consumers have is time, it begins to put the traditional grocery store at a disadvantage. The grocery store’s business model is built around being as efficient as possible to help minimize costs. Simply put, it’s designed to save money when the consumer is really looking to save time.

Kai Clarke
Guest
14 years 7 months ago

Although there are more Americans eating out, we cannot ignore the incredible growth of upscale grocery stores like Whole Foods, Wild Oats, etc. Add to this the substantial growth in America’s fixation on food preparation, we are still cooking at home, just in a different way. The key here is what is being prepared. Who retails this product and how it is prepared are anyone’s guess depending on the study you believe. However, one thing is clear: there are more people shopping in gourmet stores, watching the food channel, and transforming the eating habits of Americans such that even Jack in the Box has gourmet sandwiches, as does McDonald’s, Arby’s, Burger King and the like.

Stephan Kouzomis
Guest
Stephan Kouzomis
14 years 7 months ago

With product taste, we must add all the points before it. I might exclude price, if every other criteria is available. But, I might ask the researcher if cooking from scratch will be recreational like sewing, why is it that many young couples and empty nesters are spending enormous DOLLARS for state of the art kitchen equipment?

Maybe a disconnect in the research guidance! Hmmmmmmmmmmmm.

Race Cowgill
Guest
Race Cowgill
14 years 7 months ago
I believe grocery faces two big obstacles in making prepared meals work: 1. Taste. Our data shows that taste is by far the most important expectation of consumers of prepared meals, yet grocery overall has consistently very low marks for their biggest food preparation operation: in-store bakery. Eighty-three percent of consumers tell us that they find items prepared in-store to have “fair” or “poor” flavor. Compare this to executives in charge of in-store bakery operations, of whom 76% say their in-store baked items have “good” or “excellent” flavor. Disconnect. Grocery retailers do not appear to have the expertise or clear vision required to make top-flight flavored prepared meals. 2. Nutrition. If making great-tasting food is beyond the expertise of most grocery retailers, making great tasting moderate-fat and moderate-calorie foods CERTAINLY is. This is a very complex topic, requiring a full understanding of food science. Note how few chain restaurants are able to pull this off, with their $300K per year Executive Chefs in Charge of Development at the national headquarters, who have budgets in the… Read more »
Carol Spieckerman
Guest
14 years 7 months ago

Grocers can grab more share by appealing to aging baby boomers; a gold mine demographic for take-out done well. One way to do this would be to offer take-away choices in small format stores-within-a-store, complete with dedicated entrance, plenty of mobile carts, on-hand assistance for those who need it, and flavorful food in easy-to-open packaging….

Walgreens is a great example of the potential…winning out by being the small format with a captive audience (all those living-longer boomers waiting for prescriptions), and offering everything from apparel to food within an easy-to-navigate format that makes all of that milling around more productive. The same holds true for the few small-format groceries that compete successfully right here in Wal-Mart’s back door. Their loyalists are the over 50 crowd, and prepared meals fly out the door.

Bernice Hurst
Guest
14 years 7 months ago
This discussion comes down to issues of control and perception. Buying takeout from a grocery store means that the customer is in control of portion size and can give (or have) the perception of preparing a meal without actually having to do any more work than selecting, paying and carrying. Rather than simply unpacking and dishing up a restaurant cooked (and presumably individually cooked) meal, there is an element of putting things together and possibly even turning on an oven or stove or microwave to cook prepared but raw or semi-cooked dishes. By accepting the fact that each element of the meal has been prepared in bulk so it is ready to go whenever customers turn up, you are agreeing to contribute some of your own time to the final steps needed to put it on the table. Control again. There is also the ability to mix and match and to buy enough for as many people as will be eating (even an 8 piece pack of chicken for a hungry bus driver as in… Read more »
Shaun Bossons
Guest
Shaun Bossons
14 years 7 months ago
This is a topic that we have been discussing with a number of US retailers recently. We have found that this is more than just a financial issue. First, cooking at home is increasing among American households as it has done in the UK over the last few years. But instead of cooking from scratch, consumers are gravitating toward complete meal solutions such as pasta with sauces and sides or ethnic meals with a number of components. Offering these items in store gives the consumer a convenient option for concocting a ‘healthy’ convenient meal at home while still providing the “feeling” of home cooking together with family. Commonly referred to as occasion merchandising, this approach is becoming increasingly popular in retail. Next, when understanding the value of gaining a larger share of this market, it’s important to consider competitive advantage. If a retailer can introduce more space within the store to Deli, baking, pre-cooked and fresh areas, it can offer the consumer the greater convenience they need and differentiate itself from the competition. In the… Read more »
Karin Miller
Guest
Karin Miller
14 years 7 months ago

I don’t quite buy into the sewing analogy. Homemakers actually saved money at one time by sewing clothing for their family members. Aside from being time-consuming, it is now generally more expensive to buy fabric and sew an item than it is to purchase something comparable at a low to mid priced retailer. Indeed, home sewing has become almost a purely recreational/creative pursuit.

By contrast, I doubt that there will come a day where it is less expensive to buy take-out than to prepare it from scratch, though I have to admit those rotisserie chickens at Costco, while not exactly convenient to acquire, are come close to making the take-out option viable.

Certainly grocers are experiencing some degree of success with take-out and ready-to-heat items, as these are placed at the front of the stores. I would imagine that the increase in non-traditional households would be driving some of this. Another key ingredient to the success of these product programs is no doubt easy access and a quick check-out process.

David Bellso
Guest
David Bellso
14 years 7 months ago

Consumer trends and successful new ideas are surrounded by the fact that consumers want and demand convenience. Shopping is a real pain, and let’s face it…consumers are lazy, tired and always looking for the easy way out. Grocery stores should start looking at a way to better the experience or shorten the time it takes to shop. It is impossible to shop for a whole week let alone the entire month and people are just plain on the go so much they can’t plan that far in advance. There is so much food waste from what you buy in the grocery store due to the weights and measures of current packages. Food Assembly Kitchens will soon start taking a foothold in American homes because of its lack of waste and its great experience.

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