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Despite a wave of recent news claiming the low-carb craze has seen its peak, recent consumer research indicates many Americans are modifying their diets to include higher levels of proteins, and that will likely remain a boon for supermarket deli departments.
Says Brad Kochenour, director of operations for the four-store Kennie's Market group, "Even though it's logical to assume the low-carb trend is fading, based on everything I'm reading and hearing, it is clear that people have established new buying habits as a result, particularly with deli products."
Using cheese as an example, Kochenour says, "If you look at prices now vs. a year ago, you'll find they're up by as much as $1.50 per pound. But we're still selling a lot of cheese, so obviously the price increases we've had haven't slowed down sales. I believe the whole Atkins thing has spun people into a new buying pattern where they're more tolerant [of price increases]."
While the recent gains registered in the deli have had a favorable impact on the more pricey premium deli lines, Kochenour says the low-carb diets have also breathed new life into staid items like ham, chicken, and egg salads. "We've been pleasantly surprised by how these items continue to trend upward after a pretty dormant run until the last year or so, and, again, I attribute it to the byproduct of the diets that have found more people returning to products like ham salad because they're not afraid to buy them anymore."
During his presentation regarding supermarket delis at June's International Dairy-Deli-Bake 2004 show, Robert Goldin, e.v.p. of Chicago-based Technomic, Inc., urged retail deli executives to reinforce with consumers variety, portion-size options, made-to-order emphasis, and freshness, to further bolster the department's image as a healthful destination.
In the realm of supermarkets' indispensable necessities for establishing a competitive edge, destination is often synonymous with the supermarket deli, affirms Jodi Marsh, spokeswoman for the Indianapolis-based chain that bears her surname.
"Certainly sales in the deli, especially with convenient prepared foods, are continuing to grow with consumers as a big area of interest," says Marsh, whose company recently embarked on a new advertising campaign declaring its staff "Experts in Fresh."
"Rotisserie items, and not only chicken, but also turkey and ribs, remain something that consumers are looking for," continues Marsh, adding that prepared entrees are growing, as well. "In our new Life Style format stores, we launched a new line of Good-To-Go products that is doing quite well and features chicken, pork, beef, and vegetarian selections assembled with side dishes in oven-safe containers," she says.
A healthy assortment of other hot and chilled ready-to-eat foods continues to gain in popularity throughout the chain's store base, which includes 68 Marsh Supermarkets, 36 LoBills, one Savin*$, nine O'Malia Food Markets, and 166 Village Pantry convenience stores throughout central Indiana and western Ohio.
Marsh's new concept store, Arthur's Fresh Market, launched in early July in Syracuse, Ind., puts deli front and center as part of an overall focus on high-quality perishables and customer convenience. At a pared-down 21,000 square feet, the prototype boasts a full-service deli featuring Boar's Head meats and cheeses, a fresh sushi bar, a full-service bakery, a wide variety of prepared foods, a Boar's Head Sub Shop, a large salad bar, and a sit-down cafe with full beverage station.
In addition, the store offers a full range of produce, grocery, frozen, and dairy products; a service seafood and meat counter; floral, wine and beer; and other customer services.
In an effort to capture even more of the away-from-home eating dollar, Marsh also added another weapon to its arsenal of options in April with the launch of its first stand-alone restaurant operation, Trios Di Tuscanos, a northern Italian-themed quick-casual restaurant concept that serves high-end fare in a cozy setting adjacent to its latest Life Style Marsh supermarket in Noblesville, Ind.
What's hot in deli
In his assessment of what's hot and what's not in the deli category, Mark Degner, president of Hoffman Estates, Ill.-based FreshLook Marketing Group, which tracks sales of perishables, says recent data gathered by his firm finds annual sales of prepared deli sandwiches increasing to $1.172 billion, up 11 percent from $1.053 billion the previous year.
"Party trays are showing particularly strong growth," says Degner, noting that sales of cold sandwiches, the largest segment within the sandwich category, were generally flat. "But some major retailers have begun to emphasize their private label sandwiches."
Prepared salads rang up $986 million in sales, up 3 percent from $939 million, according to Degner, who says specialty salads are a significantly growing segment as retailers offer new options besides the ubiquitous cole slaw and potato salads. Much like prepared salads, prepared entree sales are also being buoyed by expanded variety; he reports the category's sales are up 11 percent to $771 million, from $693 million in the prior year.
Appetizers are making especially impressive inroads in the deli case, adds Degner, noting that sales for this segment have climbed 22 percent to $230 million, from $190 million. "Vegetable appetizers, though a relatively small segment of the appetizer category, are particularly strong. The standard fare of fried mushrooms, onion rings, egg rolls, and so forth is also showing solid growth," he observes.
Chicken sets the pace
One anomaly in the trend toward healthy proteins in the deli may be the continued strength of fried chicken, which continues to pace the lineup in many stores. Says Kochenour, "Fried chicken is simply off the charts. We've been having a difficult time keeping up with demand, and we're operating at near capacity on many weekends just trying to keep up with orders."
Kennie's promotes its use of only Perdue extra-large-cut pieces, to enhance the quality and brand attributes of its flourishing fried chicken program, Kochenour notes.
Hot and refrigerated soups have also blossomed into a booming category for the Gettysburg, Pa.-based independent. Kennie's newest location, in Taneytown, Md., is home to a full-service deli department featuring Dietz & Watson's premium meats and cheeses presented in the Philadelphia-based deli supplier's Diamond in the Deli format. Tom Nardi, v.p. of sales for Dietz & Watson, says a combination of signature products and effective training is key to presenting the deli as a center for high-quality, healthful options.
"One of the many things that differentiates us from any of our competitors is our exhaustive efforts to transform the traditional service deli counter into a total deli destination," Nardi says. "Not only do we feature all of our signature delicacies, but we also train the deli associates to encourage customers to think about adopting healthy lifestyles and help them recognize how they can incorporate deli into their daily lives."
Nardi says the program also trains deli associates to communicate to consumers the proper handling and storage of deli products, which is increasingly important. "We are vigilant in requiring all deli associates to focus on their own cleanliness and appearance, as well as handling, storage, and serving of all of our products."
In addition to the health and safety aspects, the Diamond in the Deli program helps merchandise the service deli case with product displays and point-of-purchase signage that are informative as well as attractive, according to Nardi.
Time is ripe for a deli comeback
As the premium deli supplier for many supermartket chains -- including ShopRite, Pathmark, Wegmans, Harris Teeter, Ingles, Giant Food Stores, Cub Foods, and Albertsons -- Nardi debunks the myth that premium deli products can sell only in the departments of high-end operators. "With everybody getting more heavily into perishables, the point of difference becomes less about the retailer and the consumer, and more about the retailer and the manufacturer," says Nardi.
Eric LeBlanc, director of marketing for Springdale, Ark.-based Tyson Foods' retail deli division, says retailers and manufacturers must seize the moment. "There is an outstanding opportunity out there for retailers to create a whole new meal destination for consumers. So many things that in-store delis failed at early on," like pizza, snacks, and breakfast programs, "did so because it was primarily the wrong time or the wrong place. But many of these same lines are now ripe for a comeback, and retailers thus need to select partners that help them expand and position themselves as meal solutions providers," notes LeBlanc.
Tyson's deli division is in the process of rolling out its Deli Specialties meats, a line of 11 innovative multiprotein products, inclusive of prime rib, pork chops, ham, spareribs, carnitas, meatloaf, and pot roast, which will complement deli rotisserie chicken programs. Says LeBlanc, "Each item is unique, on-trend, and operationally simple, and can be prepared in rotisserie, conventional, or convection ovens."
LeBlanc often tells retailers: "When you own a restaurant, the best thing that can happen is to have another restaurant open across the street, because it increases traffic by increasing the meal opportunities in that geographic location. Grocers need to see their deli in the same light, with the mindset that the best way to drive meal occasions is to build the number of meal occasions they can satisfy."
To that end LeBlanc recommends that retailers add various lunch, dinner, snacking, and breakfast options. "Grocers need to realize that consumers want to love them, but they're the ones giving them reasons not to. But it can be done with good-quality products that are properly priced to make an adequate profit."
By and large, he says, "Supermarkets' targeted meal price points are often significantly below what the average consumer pays for a meal at a QSR establishment." However, lower prices send consumers the wrong message, says LeBlanc, "since 'cheaper' translates into 'not as good.' Perception is reality, and consumers are prepared to pay for good food. Retailers need the chutzpah to believe in the opportunities, by offering consumers something special and charging them for it accordingly."
Rather than building programs against existing business, concludes LeBlanc, retailers must build programs for the business they aspire to have.