Maximizing meat and poultry revenues in supermarket delis is an intricate undertaking.
Not only must retailers market the optimal quantity and variety of bulk and prepared proteins, but merchandisers also must keep pace with evolving shopper interests while remaining a viable alternative to restaurants and other foodservice competitors.
Though deli activity already is strong, operators who focus boosting meat and poultry sales can result in huge paybacks.
About 79 million U.S. households, or 63 percent of all households, already buy deli meat, according to the Madison, Wis.-based International Dairy-Deli-Bakery Association (IDDBA), with “super-consumers” generating a large portion of sales. These buyers represent 12 percent of the households that drive 34 percent of grocery sales, and 7 percent of households that generate 27 percent of foodservice sales, the IDDBA reports.
The super-consumers value ingredient transparency, quality, convenience and having a wide variety of options, the IDDBA states, and such options include health-oriented selections.
In a 2016 consumer survey by Mintel, a global market research firm, 28 percent of lunch meat consumers seek low-sodium selections; 27 percent say they would be interested in buying lunch meats for restricted diets, which can include low-fat and low-cholesterol options; and 20 percent would favor allergen-free selections.
“Of notable concern to consumers of the category would be the quality of the ingredients in the products,” Mintel reports in its October 2016 Bacon and Lunch Meat U.S. report. “Consumers are seeking not only premium/gourmet ingredients, but a lack of meat filler, organic and humanely raised options.”
At least 70 percent of shoppers also seek healthy and nutritious choices when purchasing prepared foods from supermarket delis, says Rick Stein, vice president of fresh foods for the Arlington, Va.-based Food Marketing Institute (FMI).
Merchandisers can respond by giving shoppers more choices, he says. That can include, for example, offering baked chicken, which might have 500 calories, alongside an 800-calorie fried chicken breast.
Though both options may be heavy in calories, customers still feel good about choosing an item they perceive as being healthier than the alternative, Stein says.
More shoppers also want to see what is, and isn’t, in their meat and poultry, he says. These include elements such as antibiotics and growth hormones, as well as the amounts of fat, sodium and calories.
“There is a direct correlation between sales growth and shoppers knowing the content of their foods,” Stein says. “Consumers may not know what antibiotics do or how an organic designation comes about, but when they see such claims, they perceive that something bad could have been in their food.”
A cheer for choices
In addition to wellness-oriented selections, deli customers also are seeking a greater range of meat and poultry options, says Anne-Marie Roerink, principal of 210 Analytics LLC, a San Antonio-based marketing research and marketing strategies firm.
“Shoppers are looking for more meat varieties, particularly because someone else is doing the preparation, which allows them to access cuts or types of proteins that they do not know or have the time to prepare,” she says. “This opens the door for many creative solutions.”
While deli-prepared food revenues still are increasing, retailers primarily offering familiar options limit activity, says Jonna Parker, principal in the Fresh Center of Excellence Group for Information Resources Inc. (IRI), a Chicago-based market research firm. She notes annual prepared food sales growth is far below the 25 percent rate of a few years ago.
“There was a lot of innovative merchandising and product development earlier in the decade, but now there is a cooling off of sales with retailers merchandising the same items year after year in traditional ways.”
Chicken — including rotisserie, fried and wing selections — is the dominant deli prepared protein, with sales for chicken and entrées totaling $3.534 billion for the 52 weeks ending April 22, 2018, compared with $179 million for pork, $125 million for turkey and $98 million for beef, IRI reports. Sales of other prepared proteins and vegetables totaled $1,320 billion. Figures are for multi-outlet locations and include such retailers as groceries, supercenters and mass merchandisers.
“We are not seeing as much innovation in center-of-the-plate proteins as customers would like,” Parker says. “A restaurant wouldn’t survive with the same exact menu five years in a row, and many even rotate selections every three months. But the mainstays on a retailer’s foodservice menu are often exactly the same year after year after year.”
Contributing to the problem is the inability of many suppliers to provide supermarket delis with a broad portfolio of prepared proteins, she says.
Deli operators, meanwhile, can respond to shopper interest in newer offerings by adding grilled and smoked meats to their selections, which is “a great way to let the nose drive the shopping,” Roerink says.
She adds that more consumers also seek fresher and less processed meats in the prepared foods area, including proteins that are locally sourced and organic, and many are willing to pay the typically higher prices for such items.
“The core deli prepared consumer is a higher-income shopper who often values time over money and has an above average focus on nutrition and clean eating,” Roerink says.
With 55 percent of shoppers creating meals that include semi- or fully prepared foods along with items that they make from scratch, the offering of attractive prepared options can drive additional deli activity, according to the Power of Foodservice at Retail 2018 report.
The report is published by the Food Marketing Institute and prepared by 210 Analytics LLC.
“Younger shoppers are more likely to integrate convenience-focused items, which likely means a growing role for foodservice as a meal component or full meal solution in years to come,” the report notes.
Consumers also will seek additional meat and poultry options in the deli prepared section, according to the Power of Foodservice at Retail report.
“Importantly, regardless of how shoppers view their ideal deli, variety resonates with many and can be addressed by seasonality, rotation, special attributes or surprise/chef-inspired meals of the day rather than a wide assortment alone,” the report adds.
A lack of exciting options actually sours some consumers on the deli, Parker says.
“Shoppers are constantly saying that they are not hearing about anything new,” she says. “Not seeing conversions or high penetration rates in the deli should be the first clue to retailers that they are not offering the right products.”
Turkey rules the bulk meat roost
While chicken dominates the deli prepared foods meat and poultry sector, turkey rules the bulk meat case.
Turkey volume sales totaled 254.3 million pounds for the 52 weeks ending April 22, 2018, and had a 0.3 percent three-year compound annual growth rate (CAGR), reports Information Resources Inc. (IRI), a Chicago-based market research firm. Turkey over the last year surpassed ham as the most popular bulk deli meat.
Ham sales totaled 252.4 million pounds with a 1.5 percent CAGR. It is followed by beef with 67.1 million pounds sold and a 0.1 percent CAGR; salami at 59.1 million pounds sold and a 2.8 percent CAGR; and chicken at 53.8 million pounds sold and a 4.8 percent CAGR.
All other proteins, including bologna, loaves, deli sausage and bacon, had total volume sales of 70.3 million pounds and a minus 2.3 percent CAGR.
Average per-pound prices were $8.05 for turkey; $7.16 for ham; $10.21 for beef; $7.17 for salami; $8.35 for chicken; and $6.05 for all other proteins. Figures are for multi-outlet locations and include such retailers as groceries, supercenters and mass merchandisers.
While the majority of deli meat and poultry sales are for “non flavors,” interest is building for spicy options, including Sriracha, Southwest and peppered, along with savory flavors, such as garlic herb and bourbon, says Jonna Parker principal in the IRI Fresh Center of Excellence Group.
Though most deli meats do not feature health claims, products with wellness attributes also are growing in popularity with lower-sodium, antibiotic-free and organic proteins becoming more common, she says.
In addition, freshly cut grab-and-go deli meats are becoming increasingly popular as more convenience-oriented consumers seek alternatives to waiting in line at full-service bulk meat counters, Parker says, noting the products account for about 10 percent of overall bulk meat deli sales.
— Richard Mitchell
Offer customers the proper proteins
Besides merchandising a more interesting range of meat and poultry options, it is crucial that deli operators gear their selections to the interests of each store’s specific customer base, says Patrick Curran, a former supermarket perishables departments executive and president of Patrick J. Curran Consulting LLC, a Naperville, Ill.-based strategic business management services firm. “With neighborhoods more different than ever, it is extremely important to know the consumers and what they want,” he says. “Retailers should avoid the one-size-fits-all approach and offer selections that appeal to their particular shoppers, which can include the type of product or the price point.”
Deli operators also can generate greater income by merchandising unique varieties of higher-margin store brands, Curran says. It is critical, however, that there is sufficient demand for the private label selections in order to cover packaging and production costs.
“There must be economies of scale, which is always the litmus test of whether store brands can be economically viable, he says.
While the optimal amount of meat and poultry selections to merchandise will vary by deli location and often is dependent on the available merchandising space, operators should focus on having some offerings for each of the different shopper segments, such as premium, private label, national brand and organic varieties, Curran says.
“A challenge is always getting more shoppers to come to the deli and to purchase more premium products with higher margins,” he says.
Carrying the proper amounts and types of meat and poultry also is essential for reducing or eliminating waste, Stein says, adding that deli operators can determine the appropriate selections by analyzing sales figures and shrink totals, as well as consumer survey results and trend information.
“There is an opportunity to narrow options down to key and reputational items and not try to be all things to all people,” he says. “Retailers can’t treat the deli like their mustard section in the center of the store.”
To further bolster interest in deli meats and poultry, retailers can include prepared foods in their advertising campaigns and use signs and other marketing vehicles to drive shoppers to the deli from other parts of the store, Parker says. Because many consumers decide on their dinner meal within a few hours of eating, messaging can address the availability of quick solutions or newer options, she says.
Clear away the clutter
While deli case signs spotlighting attractive product attributes can trigger activity, operators must minimize the use of such tools don’t work as well in the bulk meat and prepared food cases, Stein says. “In the fresh business we say that the eyes decide, as shoppers often make buying decisions based on a product’s visual appeal,” he says. “But putting too much signage in front of an item hides the star of the show.”
Instead, deli merchandisers can list calorie counts on recipe boards, Stein says, adding that retailers should not overload the boards with nutrition facts.
“Nobody is reading a menu board that has too much information,” he says. “Other claims should be on the packaging or available on request.”
Yet, a dearth of product data can further alienate the large base of shoppers who “don’t think there is anything for them in the deli,” Parker says.
While IRI research found an overwhelming number of consumers prefer nutritional information to be on packages, deli operators often struggle to provide such data because of inadequate space on containers for such messaging, Parker says.
She notes, however, that “retailers convey the information in the fresh meat case and produce department so there is no reason they can’t do so in the deli. It is not impossible.”
Supermarket deli operators, meanwhile, will also benefit by listing nutrition data per item, rather than per ounce, and emphasizing the superior protein absorption rate in fresh prepared meat and poultry compared with other food products, such as protein bars, Stein says.
Meal kits gain momentum
In-store deli operators can boost meat and poultry sales by including the proteins in increasingly popular meal kits, says Tom Super, senior vice president of the Washington, D.C.-based National Chicken Council.
In addition to such traditional deli offerings, retailers can offer roasted, baked, smoked and rotisserie chicken in meal kits to meet consumers’ demand for variety, he says, noting chicken burgers and gourmet chicken sausage also are novel options.
Merchandisers, meanwhile, can drive more shoppers to the deli and meal kits, which often include a protein, vegetable, salad and bakery item, through cross merchandising with other store departments, Super notes. Promotions can include the distribution of coupons for dollar-off deals, he says.
“A challenge is to provide consumers with chicken that has a different taste and is an adventure in eating,” he says. “Deli meal kits that feature chicken prepared in ways that may be a bit complicated for at-home preparation have increased opportunities to spark sales with a larger ring at the register.”
Super adds that meal kits can add excitement to the deli and provide an alternative to traditional sliced meats and cheese, which many operators rely on “and hope to somehow stay relevant.”
"A section that is supposed to make the consumer's life more convenient should not be overwhelming by presenting a jumble of different types of selections and ideas. Providing clearer ways to shop the section will greatly improve the conversion rate."
— Jonna Parker, Fresh Center of Excellence Group for Information Resources Inc. (IRI)
Merchandising meat and poultry in sustainable packaging also can increase purchases, he says, noting “less wasteful containers that can be easily recycled are a more important part of the purchasing decision.”
Packaging innovations for proteins will be ongoing and likely include options for single-serve portions for the large base of Millennials and Baby Boomers with smaller households, along with grab-and-go packages of sliced fresh deli meats, says Brittany Bailey, director of marketing insights for the Des Moines, Iowa-based National Pork Board.
A need for more picks of pork
Operators, meanwhile, can increase pork activity by offering a range of flavors beyond the traditional honey, brown sugar, hickory and mesquite selections, Bailey says.
“A challenge is being able to provide more choices to appeal to different consumer segments as the flavors still have to be developed,” she says.
Wider arrays of pork also can attract shoppers who usually buy chicken, turkey and beef, and such selections should include health-oriented items, Bailey says.
“Deli pork tends to be indulgent and consumers considering health and wellness usually purchase the other proteins,” she says. “Merchandisers need to understand and take advantage of the product claims that consumers want and offer the pertinent bulk pork deli meats.”
Families with older children and time-starved shoppers are among the most active purchases of bulk and prepared deli meats and poultry, while unmarried singles provide perhaps the greatest potential for sales growth, Parker says.
Retailers can better attract such buyers by offering proteins in packages that hold smaller portions and becoming more transparent with product ingredients, she says.
Better organization within the deli department also can increase activity, Parker adds.
“The prepared deli area often looks like a hodgepodge of products and colors and is confusing to shoppers,” she says. “A section that is supposed to make the consumer’s life more convenient should not be overwhelming by presenting a jumble of different types of selections and ideas. Providing clearer ways to shop the section will greatly improve the conversion rate.” NP