Retailers can spotlight the deli by emphasizing the variety of meal solutions available and highlighting their value."
Though the pandemic changed consumer behaviors, grocery performed well in the face of uncertainty, growing significantly in 2020 with people eating out less and exploring more ways to cook and bake. But not every grocery department fared well. Two of the most popular areas — fresh bakery and deli — suffered.
Early on, in March and April, sales in perimeter categories such as meat, seafood and produce skyrocketed, while bakery and deli sales dove. These departments had the most self-serve options — hot meal, salad and olive bars and individual doughnuts and muffins. Almost everywhere, these options closed due to civic and shopper health concerns. And while other fresh categories have since settled into a new pandemic sales baseline, deli and fresh bakery are still lagging.
The challenge, in part, is skepticism over product handling. Bakery and deli items sold from “behind the glass” or in self-serve bars are handled by staff the customer can’t always see. Though all fresh categories require staff interactions, shoppers seem to have increased concerns with ordering prepared foods that are merchandised unpackaged, including those prepared by someone working behind the deli counter, even if they can see the store associate wearing a mask and gloves and following safety protocols. As one of our retail partners aptly describes the dilemma: Shoppers avoid areas where they are able to handle food themselves, but they also worry about store associates handling foods! And, shoppers want to get in and out of the store as quickly as possible.
Another headwind is the decline in in-store shopping frequency. Prior to the pandemic, grocery shoppers would typically go for a weekly trip, often more. A majority of these customers, even armed with shopping lists, went into the store not certain what they were having for dinner that evening. Grocery retailers made the most of the opportunity, growing their ready-to-heat and ready-to-eat meals and meal parts, such as rotisserie chickens, soups, salads and sides.
Now, as shoppers limit their store visits and move to pantry stocking and bulk purchases that last longer — say two weeks rather than one — the opportunity to sell meals has dropped precipitously, a challenge compounded by shoppers’ desire for more shelf-stable options, such as frozen foods.
So what can be done?
For starters, we’ve seen the deli department experience moderate success with shifting toward prepackaged over service items. How? Pre-sliced deli meats wrapped in the store and laid out on a shelf on the shopper’s side of the glass. The same is being successfully done with deli cheese, olives, sandwiches and other items that were previously sold from self-serve bars. The deli shopper wants the perceived freshness of the products offered in the deli. Prepacking these items make the shopping experience faster and may allow for suspended disbelief on behalf of the customer: If they didn’t see anyone touching the product, it’s probably safer.
Similarly, we’re seeing a move to fixed-weight items like dinner sides such as Bob Evans, Hormel and Reser’s mashed potatoes, mac and cheese, and potato salad. These components allow customers to put together a full meal with less effort. We’re also seeing retailers innovate by expanding from value-added items alone (think pre-marinated meats) to options that include seasoned potatoes or vegetables with the meat. Surprisingly, premade meal kits, similar to popular online order programs such as Blue Apron, have fared less well than retailers’ own meal options — and the reason is unfortunately unclear, whether it’s pricing, the inability to see the components or a serving size too small for households with more people eating dinner at home.
Promotions will be key to deli’s recovery long term, especially as unemployment levels remain high and belts tighten; greater affordability will be a necessary tool to drive sales. Still, with decreased foot traffic, retailers are trying to retain sales revenues and margin by promoting less. In the short term, retailers can spotlight the deli by emphasizing the variety of meal solutions available, offering mix-and-match complete meals and highlighting their value versus restaurant foodservice.
And, finally, grocers need to continue to invest in their digital experiences. Many shoppers remain uncomfortable with the in-store shopping experience and have moved shopping trips online. Better online shopping experiences — with a more effective search bar and item matching capability for deli in particular — will improve department sales. Item description specificity is now even more important when a third party like Instacart is at the deli counter to ensure they get the right flavor of turkey or potato salad.
While vaccines are being distributed now, widespread inoculation will likely take months and we’ll continue to see homes filled with students and other family members, making for larger and more frequent meal needs. The path forward should be oriented around this mindset: promoting deli solutions as safe, quick, easy and fresh options to pandemic-weary shoppers.