A Nielsen ranking of grocery departments found deli, meat, bakery and produce had the greatest year-over-year volume growth last year."
Meat substitutes may be getting the cow’s share of the media attention, but savvy grocery retailers and product makers know grocery stores are only as healthy as their sales around the entire store perimeter.
Among the most important grocery store attributes consumers consider when selecting their primary store are high quality fruits and vegetables (78%), high quality meat (76%) and fresh food deli (49%), according to shoppers surveyed for “U.S. Grocery Shopper Trends 2019,” published by Food Marketing Institute.
What’s more, a recent Nielsen ranking of 16 grocery departments found fresh categories — deli, meat, bakery and produce — had the greatest year-over-year volume growth last year. These are also the four categories, most retailers would agree, that are the most challenging to manage.
Given the importance of the perimeter, here are six strategies and insights to keep in mind to keep fresh sales growing:
Dive Deeper into Deli
With $36.6 billion in sales, the grocery industry’s deli department has been a consistent source of growth as product manufacturers and retailers meet consumers’ changing demands, Nielsen reports. Healthier options like sushi and unique salad recipes, plus a wider variety of items for snacking and entertaining, are driving sales.
Nearly three-quarters of the respondents to Progressive Grocer’s “Retail Deli Review” survey said their deli sales rose in 2018 compared with 2017, and an even greater number — more than 80% — said that they anticipate additional growth during 2019.
But great selection alone, doesn’t drive sales. The top five factors retailers consider most influential to deli sales are engaged associates (58.3%), signature items (43.3%), merchandising/experience (43.3%), product sampling (35%) and active sampling/events (33.3%).
Manage Meal Kits
In-store meal kits have gone head-to-head with subscription services and are winning market share, as supermarket meal kit buyers accounted for 60% of meal kit growth last year, Nielsen reports. More than 185 new meal kit items were introduced in retail stores in 2018.
Still, recent forecasts for category growth are more modest than they were a few years ago. Packaged Facts’ “Meal Kits: Trend and Opportunities in the U.S., 3rd Edition” estimates the U.S. meal-kit market to steadily decline from double-digit sales gains over the next few years to single-digit gains by 2023.
Also, it’s important to keep an eye on space-to-sales ratio. Are meal kits bumping out other opportunities for growth? Retailers must continue to consider the best way to satisfy shoppers who don’t know what they’re having for dinner that night and keep their dollars in the store, rather than in quick-service restaurants.
Cater to Those Who Indulge
Despite consumers’ growing preference for healthy foods, they still want to indulge. The $13.8 billion in-store bakery category, dominated by sales of desserts, sweet goods and cookies, is one of the biggest drivers of in-store trips, bringing shoppers to stores nearly once a week, according to “Power of Bakery,” a report released in April by the American Baker’s Association and FMI.
There are opportunities to increase store visits, as many shoppers have a multi-store strategy, purchasing stock-up center-store items in one store, while looking for specialty bakery items in another. Channel switching most frequently happens for special-occasion items, such as birthday cake and cupcakes.
“The analysis highlights the importance of segmenting audiences to better align innovation, merchandising and marketing,” according to FMI Vice President, Fresh Foods, Rick Stein. “For instance, given that Millennials are nearly twice as likely to exclusively shop the in-store bakery as Boomers, at 30% versus 17%, carrying and highlighting desirable product attributes and claims may help drive sales and loyalty depending upon your store’s demographic.”
Flex for the ‘Flexitarian’
Representing $67 billion in annual sales, the meat and poultry category continues to be a reputation-builder and profit-driver.
Changing consumer preferences bring new opportunities. While meat-eating is still the norm — 86% of shoppers report they eat meat and the category has a nearly 99% household penetration — 13% of Generation Z consumers consider themselves “flexitarian,” mostly vegetarian with occasional meat and poultry consumption, according to FMI’s “The Power of Meat 2019” report, which notes that, in general, women are more likely than men to be flexitarian.
Another important switch in consumer behavior: Branding is carrying more weight in the meat category than it did in the past. Fourteen years ago, nearly three-fourths of fresh meat shoppers and 43% of processed meat shoppers were brand-neutral, according to the report. Today, only 50% of shoppers are brand-neutral when purchasing fresh meat; 39% when buying processed meat.
The timing of meat purchases is key to the category strategy, too. Four in 10 shoppers buy meat or poultry for meals to cover several days; 35% buy more than they need to freeze and use over time and 23%, particularly younger Millennials and Generation Z shoppers, buy meat and poultry for one meal at a time, according to the report.
Not All Diets Are Fads
In the two-plus years since the Keto Diet emerged, millions of consumers have embraced some form of the low-carb, high-fat diet, which restricts high-sugar fruits. In 2018, 6% of households reported someone following the diet, according to Nielsen’s Matt Lally.
The popularity of keto-like diets, which restrict high-sugar fruits, may be showing up in produce sales. Total fruit dollars and units were down 0.8% in the first quarter of 2019, continuing a trend of flat or declining sales for the past couple of years. The exception? Berries, blueberries, raspberries and strawberries, which are allowed on the Keto Diet. Other keto-friendly fruits include avocados, blackberries, plums, lemons, cantaloupe, peaches and watermelon.
Reconsider the Need to Thump the Melons
Conventional thinking about fresh category sales places premium importance on produce merchandising and the shopper’s desire to touch, smell and feel high-quality products. But, the “U.S. Grocery Shopper Trends 2019” report found nearly one-third of frequent online shoppers — those who receive orders at least once every two weeks — bought fresh produce online last year.
Considering the importance of perimeter sales to the consumer, to in-store sales and to the bottom line, the time is always right to take a fresh look at fresh products.