Not too long ago, the term retail deli simply meant sliced meat products. Those days are long gone, as the retail deli has since evolved and diversified itself into a slew of different sub-categories, including self-service deli, full-service deli, and take-home deli. The deli used to compete primarily with the meat case for the consumer’s dollar, however those days have since passed, too. Today, the deli’s main competition comes from foodservice as both venues aim to capture consumers making the 4:00 p.m. dinner decision.

In-store delis now offer unique, high-end products prepared in-store by expert chefs, and the deli is repositioning itself away from a value destination towards being a convenient, family, meal-solution provider.

On the whole, in-store delis are “alive and well” in a variety of formats relays Carol L. Christison, executive director of the Madison, WI-based International Dairy*Deli*Bakery Association (IDDBA).

“I travel a lot and am privileged to see some outstanding delis with incredible food presentations all across the country,” she says. “Most operators are offering a combination of standard deli items and more restaurant-quality foods that appeal to the lifestyles, food tastes, demographic makeup, and pocketbooks of their consumers.”

To run a successful in-store deli, retailers must understand what is driving consumers to the deli. Harry Tillman, vice president/general manager of business development for The Smithfield Deli Group, Smithfield, VA, says, “Growth opportunities exist in pre-cooked and hot-food categories. Consumers want restaurant-quality food that’s quick and easy to prepare.”

“The biggest trend we see is retailers in the deli category are moving towards higher-quality, premium products to separate themselves from the ‘me, too’s,’” adds Brett Erickson, director of value-added products for Certified Angus Beef (CAB), Wooster, OH.

Deli lunchmeat achieved $4.1 billion in random-weight sales for the 52-week period ending September 30, 2004, down 1.2 percent from sales from the prior 52-week period, reports Mark Degner, president and chief executive officer of Hoffman Estates, IL-based FreshLook Marketing Group.

“Being down less than two percent is more of a flat number than a declining category,” Degner says. “This has been a static category. From a consumer perspective, it’s sometimes viewed as a commodity category.”

“Consumers may ask themselves if they want to spend $7.99 for a pound of [deli] turkey breast when they can get a cheaper alternative in pre-packaged form,” he says.

“Within the sandwich category are party trays,” Degner points out. “Folks are finding the convenience of the supermarket of acceptable quality when they’re having a party. Folks are saying this is a convenient alternative. They’re thinking ‘If we’re going to have a party, we might as well ring up Dominick’s or Jewel because we can trust the quality.’ “

“I know Safeway and Ahold, in particular, have attached sandwiches with their signature private-label brands in a huge way this past year,” he adds. “We see intense focus from retailers into sandwiches and party trays.”

Arguably, the most exciting retail development has been the emergence of the full-service deli and its attempt to lure the consumer dollar away from foodservice takeout.

Research from Rosemont, IL-based NPD Group shows that in 1988 there were an average of 93 dining-out occasions and 90 restaurant take-out meals eaten; however, in 2003 there were an average of 88 dining-out occasions and 118 restaurant take-out meals.

“The [automobile’s] power-window lever has become the most used appliance in dining,” Harry Balzer, vice president of NPD Group, told attendees at this year’s American Association of Meat Processors (AAMP) annual convention in Nashville. “People can go through drive-thrus, and they don’t even have to get out of their car. They can just roll down their window and pick up tonight’s dinner.”

Balzer says that in order for deli take-out to compete with foodservice, it must be able to compete in three categories: money, time, and “newness.” Balzer adds that it is near impossible for deli’s to compete with prices offered from quick-service restaurants (QSRs) that have succeeded in vertically integrating their operations to offer products at the absolute lowest price. However, for deli retailers, the perception of value is vital. By offering coupons or advertising discounted prices on deli take-out meals, consumers perceive a greater value coming from the supermarket, and they may be more inclined to bypass the drive-thru for the deli department.

“Newness” is where retailers have the advantage. Offering a new or different eating option is key in getting a consumer to drive past the umpteen different restaurants to get to the supermarket. Right now, the biggest “new” is nutrition.

“Consumers aren’t forgetting nutrition,” reads the IDDBA’s What’s in Store 2004 report. “The increasing attention paid to healthful eating and negative media attention on fast-food choices have made consumers more nutrition-conscious.”

The Food Marketing Institute’s (FMI) Food Marketing Industry Speaks 2003 reveals that a total of 93.1 percent of retailers offer fresh, prepared food for takeout. Of stores with annual sales between $50.1 million and $500 million and $1.1 billion or more, that figure jumps to 100 percent. The challenge for retailers and their supplier partners is maximizing sales once the consumers become customers at the deli. Retailers have adopted different strategies from offering diverse ethnic options to co-branding with foodservice establishments.

“Giant Eagle supermarkets offer deli departments that are separate from our in-store prepared foods departments,” relays Voni Woods, director of deli for Pittsburgh, PA-based Giant Eagle. “Our pared foods departments provide a diverse selection of ready-to-eat dishes, as well as a relaxed in-store café.”

“Our chef entrée program has helped maximize sales of our deli take-home products,” explains Jay Volk, vice president of food services for Basha’s. “Each night from four to eight p.m., our deli offers restaurant-quality food at a great price. Our entrées are more than traditional fried or high-fat foods. Examples of the dinners include coconut-crusted chicken, Italian sausage and peppers, and pork tenderloin. We have a variety of more than fifty recipes that are featured in our chef prepared entrées, and we’ve been extremely successful.”

Instead of offering “restaurant quality” food at the deli for take-out, Salisbury, NC-based Food Lion has gone right to the source and has teamed up with Golden, CO-based Boston Market to offer Boston Market chicken  and more at its deli departments. Under an agreement, Food Lion sells Boston Market’s rotisserie chicken, meatloaf, side dishes, soups, and salads in a take-home format. To keep things fresh, Boston Market will introduce seasonal menu items throughout the year, including lemon herb rotisserie chicken, Asian pork loin, barbecue ribs, and a fresh turkey breast.

“Our customers already enjoy Boston Market products in our frozen-food aisles. We think our customers will also enjoy and appreciate having high-quality, ready-to-heat home-style Boston Market meals available in our Food Lion delis,” says Gaelo de la Fuente, Food Lion’s vice president of deli, bakery, and home meal solutions.

Brand	2003 Sales (in Millions)	% Change From Last Year
Oscar Mayer sliced lunch meat	$804.69	2.0%
Oscar Mayer Lunchables	$565.46	-6.1%
Oscar Mayer bacon	$411.87	14.5%
Hillshire Farm dinner sausage	$357.27	-7.5%
Oscar Mayer frankfurters	$339.17	-1.0%
Ball Park frankfurters	$303.19	4.7%
Jimmy Dean breakfast sausage	$212.97	-1.9%
Johnsonville dinner sausage	$171.30	13.1%
Hillshire Farm Deli Selects	$165.12	33.9%
Butterball sliced lunchmeat	$153.08	-3.2

Analysts predict future deli growth will come from technological advancements.
“The growth of the in-store deli will be tied to technology,” says Carol Christison, IDDBA’s executive director. “Whether it’s RFID or some other technology, the future lies with item identification at the front end and traceability along the entire supply chain. If the consumer won’t demand it, the government will [and has in some cases.]”

“Consumers are demanding that our delis be prepared to embrace food and menu planning that allows dietary choices driven by obesity, diet choices due to allergens, lifestyle choices such as organic and vegan, specialty items driven by culinary interest, and ethnic choices that speak to changing ethnic diversity,” relays Nancy Wingfield, foodservice director for Richmond, VA-based Ukrop’s Super Markets. “The ability to be educated in what the consumer demands and needs will also be a critical element for the deli of the future.”

“Right now the deli category on the foodservice side is growing at twice the speed of any other category within foodservice,” says CAB’s Brett Erickson. “But we’re far from where we can be in the hot food deli foodservice area to create an environment of food, flavors, and fun.”

“There is a vast opportunity for growth in the deli by having unique items that can compliment guests’ needs by market,” adds Dave Prostko, group vice president/perishable marketing for Grand Rapids, MI-based Meijer. “Keeping the deli fresh and exciting through a sound merchandising presentation is important to keeping customers coming back to explore for more.”

The deli is one of the most unique opportunities in the food industry. It is a retail category with a foodservice mentality. Operators and their supplier partners have the advantage of designing merchandising campaigns that appeal to consumers who are both looking for foods to keep and store for future consumption and foods to be eaten right now. The opportunity is here. Now it is time to seize it. Carpe Deli! NP

Brand	Dollar Sales (IN MILLIONS)	Dollar Sales % Change Year Ago	Dollar Share
All brands	$250 million	0.6%	–––
Hickory Farms	$20.32	0.9%	8.1
Private Label	$11.71	4.7%	4.7
Oscar Mayer	$11.69	-1.7%	4.7
Hebrew National	$11.28	-0.3%	4.5
Hillshire Farm	$11.02	8.0%	4.4
Old Wisconsin	$11.01	18.9%	4.4
Johnsonville	$10.24	17.8%	4.1
John Morrell	$9.9	1.8%	3.9
Farmland	$8.8	-1.7%	3.5
Gallo Salame	$7.8	0.0%	3.1

Brand	Dollar Sales	Dollar Sales % Change Year Ago	Dollar Share
All brands	$3.07 billion	4.2%	–––
Oscar Mayer	$786.88 million	5.5%	25.6
Private Label	$439.67	-4.1%	14.3
Hillshire Farm	$223.34	52.6%	7.3
Buddig	$135.65	16.7%	4.4
Butterball	$126.88	-8.7%	4.1
Louis Rich	$78.97	-7.4%	2.6
Bar S	$76.47	10.8%	2.5
Land O Frost	$74.64	5.9%	2.4
Hormel	$71.54	21.4%	2.3
Bryan	$51.43	-7.0%	1.7

Brand	Dollar Sales (IN MILLIONS)	$ % Change Year Ago	Dollar Share
All brands	$641.66 million	-4.9%	–––
O.M. Lunchables (meat/cheese/cracker)	$508.35	-7.8%	79.2
Eckrich	$38.45	3.6%	6.0
O.M. Lunchables (Fun Fuel)	$27.56	3.7%	4.3
Hormel	$20.55	24.7%	3.2
Armour (Cracker Crunchers)	$10.24	3.3%	1.6
O.M. Lunchables (Cracker Stackers)	$8.22	289.3%	1.3
Armour (meat/cheese/cracker)	$7.74	-6.8%	1.2
Funny Bagels	$6.17	-17.6%	1.0
Armour (Loco Nachos)	$4.59	-10.5%	0.7
Private Label	$4.47	-7.1%	0.7