You are here
As Dickens wrote of the French Revolution, “It was the best of times, it was the worst of times.” The same can be said of the average in-store deli department, whose gains as a result of the uptick in at-home eating during the past 12-month period have been largely blunted by consumer belt-tightening and higher wholesale and retail costs, according to findings revealed in Progressive Grocer’s annual “state of the deli department” report.
Indeed, while the 41 percent of supermarket service deli directors responding to PG’s annual 2009 Deli Operations Review collectively posted the lowest comparable sales increases during the 12-month period ended March 31, 2009, an identical percentage of operators (41 percent) said their deli sales were on par with the prior year’s performance, while the remaining 18 percent reported decreased sales.
Compiled from direct input from a cross-section of retail deli executives surveyed from around the country, our annual “state of the deli” report enlists retailer respondents to share statistical estimates for their average deli department operations – inclusive of same-store sales performance, leading departmental challenges and opportunities, labor, category management practices, and fastest-selling items.
And though the national economy is apparently on the mend, deli directors were in no rush to upgrade the department’s sales outlook for the next 12 months, as evidenced by roughly one-third (32 percent) who predicted higher same-store deli department sales through the end of March 2010, vs. last year’s 77 percent who projected stronger sales this year. The majority of deli survey respondents -- 45.5 percent -- instead told us they expect deli sales to remain the same through the balance of 2009 and into the first part of 2010, vs. last year’s 19 percent tally, while nearly a quarter (23 percent) foresee decreased same-store deli sales, the latter of which again represents the dimmest future outlook for deli sales in years.
Despite the favorable undercurrent that finds many folks eating more meals at home, though, deli directors have good reason to be cautious -- regardless of the profound strides they’ve made in recent years promoting high-margin premium meats, higher-quality prepared meals, and signature rotisserie and sandwich programs that in many markets now rival or outperform established takeout restaurant fare.
A telling statistic of the deli department’s most significant considerations in the past year was revealed by profit results, which found just 23 percent of respondents posting increases, vs. almost half (48 percent) of last year’s survey respondents who achieved higher profits. What’s more, 45 percent of deli executives this year saw downward profits vs. last year’s 23 percent, with the remaining 27 percent noting that profit margins remained status quo from a year ago.
As for what’s deemed to be their single leading operational challenge, a familiar subject -- labor -- was once again fingered as the top concern of deli survey panelists, followed by pricing, equipment productivity/maintenance-related headaches, production-related concerns and sourcing.
In the always insightful roundup of key concerns facing retail deli executives -- who were asked to rate the seriousness of various issues on a scale of one to 10 -- there was a palpable reordering of the ranking this year. The top-seeded issue, recruiting effective employees, interestingly placed ahead of profits and labor costs in slots No. 2 and 3, respectively, a finding that serves to underscore one of the annual study’s – and indeed the industry’s -- most profound dichotomies. Specifically, while deli profits are down, it comes as no surprise that labor costs, as retailers’ recurrent “controllable expense,” are lamented as the chief operational headache-inducer during the past year.
Shrink/waste, product/ingredient costs, sanitation and local economic conditions were next singled out as the leading operational hot spots for deli executives, paced by employee training, attracting more deli shoppers, customer satisfaction levels and food safety. Other top-of-mind operational challenges for deli directors include product quality, competition for other food retailers, equipment costs and non-supermarket competitors.
Parting thought: Among the most insightful aspects of our Deli Operations Review is the open-ended question at the bottom of our survey that asks retailers to tell us one thing they believe their supplier partners could be doing better. This year’s question centered on how to boost deli department profit, and as always, our 2009 retail panelists sliced into a few juicy thoughts. Below is a sample of verbatim responses:
“More product innovation.”
“Better training for personnel.”
“Come see the little guy -- we sell bakery/deli, too!”
“Eliminate minimum orders.”
“Provide us with information about out-of-stocks before actual deliveries.”
“Better retail support with store calls and merchandising assistance.”
“Following their products to store level and making sure employees are trained.”
“Help with training at retail.”
“Short-coded product from suppliers is becoming a big problem.”
“More variety -- we’re seeing too much same-old/same-old.”
“Category management data and better business plans.”