2009 Deli Report
Despite economic woes, the deli sector shows no sign of slowing down.
In fact, supermarket deli-department sales totaled $16.8 billion in 2007, a 4.4 percent increase from 2006, according to The Progressive Grocer’s Deli Operations Review 2008, which reports the results of a national survey of supermarket deli executives.
The deli department accounted for 3.1 percent of all 2007 supermarket sales. Gross income increased at 71 percent of delis, slid at 3.2 percent and held steady at 25.8 percent. The average deli brought in $11,312 in weekly sales in 2007, compared to $11,449 in 2006. But weekly sales per square foot rose from $7.21 in 2006 to $7.64 in 2007. Of the 2007 sales, 31.6 percent came from the self-service deli, compared to 33.3 percent in 2006.
Deli price lookup (PLU) foods (including prepared foods, deli meat and cheese) had combined sales growth of 2.0 percent in the 52 weeks ending March 30, 2008, according to FreshLook Marketing Group’s FreshView Database. Freshlook’s database is census sales data from U.S. grocery-store chains having more than $2 million in sales annually and includes approximately 65 percent of all commodity volume (ACV) from 16,000 stores in 125 retail marketing areas.
Perishables Group reported that total U.S. deli department sales increased 5.0 percent to $20 billion in the 52 weeks ending April 26, 2008. Perishables Group FreshFacts, powered by the Nielsen Co., is census sales data from U.S. grocery-store chains having more than $2 million annual sales and includes approximately 62 percent ACV with more than 13,000 stores nationwide. The data represents all items sold in the deli department including Universal Product Code (UPC), PLU and Number System 2-coded items.
Despite robust sales, 23 percent of in-store delis saw a drop in profits in 2007, a big change from 2006, when profits slipped at 9.3 percent of stores, according to Deli Operations Review. Gross margin dropped from an average of 45.9 percent in 2006 across all in-store delis to 44.2 percent in 2007. Deli Operations Review blames rising labor costs for pinching margins.
From 2006 to 2007, the number of in-store delis jumped 5.7 percent (equivalent to about 1,500 new delis, said to be mostly due to the opening of new supermarkets and supercenters.
Consumer and tech supportThe percentage of consumers who frequent the deli department is creeping up, according to Jennie-O Turkey Store’s Counter Intelligence Deli Consumer Study 2008. The study underscores the fact that deli-purchase frequency has definitely increased over the past four years. In fact, in 2008, more deli shoppers are making more weekly purchases. According to the same study, consumers prefer in-store delis that carry healthy items, self-service meats, full-service cheese, specialty meats, and the brands they prefer. Slightly less important, but still high on the list, are ready-to-eat foods and self-service and specialty cheeses.
According to the International Dairy-Deli-Bakery Association (IDDBA), new technologies are helping supermarket delis boost sales and save everything from time to money to the environment. New equipment enables supermarkets to offer deli items anywhere in the store. For example, more prepared foods are being displayed in self-service hot cases, which now offer better heat and moisture controls so food maintains freshness and safety for longer periods of time.
Some supermarkets are finding that positioning mobile hot cases of rotisserie chicken or other entrées near the checkout is a great way to increase impulse deli purchase by shoppers who may lack the time and inclination to visit the deli.
Pre-sliced phenomenonOn the refrigerated pre-sliced front, manufacturers are offering more pre-packaged, pre-sliced proteins in both thin- and thick-sliced versions to provide an alternative to the full-service deli. Packaged Facts estimates the U.S. market for refrigerated processed meats at $17.6 billion, led by cold cuts, which accounted for 40 percent of the market in 2007, with $7.1 billion in sales on growth of 3 percent.
From 2004 to 2008, according to Nielsen, dollar sales of pre-packaged lunchmeat in pouches nearly doubled at food, drug and mass merchandiser stores (excluding Wal-Mart). The deli pouches category brought in $1.37 billion in supermarkets in the 52 weeks ending June 14, 2008, and was the only pre-packaged lunchmeat category to experience both dollar and volume increases in that period. Nonetheless, sliced remains the dominant lunchmeat form. Household penetration was 75.7 percent for sliced refrigerated lunchmeat and 58.2 percent for refrigerated lunchmeat in pouches in the 52 weeks ending December 29, 2007.
Convenience packaging has become a crucial selling point for pre-sliced deli meats, with easy-to-open, resealable tubs becoming increasingly popular over vacuum packs as a way to increase product attractiveness and better preserve freshness after opening. Some processors, IDDBA says, are using clear clamshell packaging â€” adopted from Europe â€”to communicate a product’s sophistication.
Chicken takes flightPerishables Group reports that chicken sales for the 52-week ending June 28, 2008, represent the largest portion of the deli prepared-foods category at 22.0 percent share, compared with 22.3 percent share the previous year.
Deli-prepared chicken (including rotisserie) comprised 11.0 percent of total deli dollar sales in the 52 weeks ending June 28, 2008. Thirteen percent of deli executives rank chicken as their most profitable prepared food item, according to Deli Operations Review. And Counter Intelligence reports that rotisserie and fried/broasted chicken are among the quickest-growing deli-prepared food categories.
Rotisserie risingFrom 2005 to 2008, there has been a 20-percent gain in the share of deli consumers buying rotisserie chicken, and an incredible 150-percent increase in the percentage who purchase rotisserie turkey, according to Counter Intelligence. The surge in turkey rotisserie customers is likely due to the fact that it is a relatively new product with more room for rapid growth. And it is reported that rotisserie chicken and turkey are among the fastest-growing deli-prepared food categories.
New-product notesLaunched April 2008, Oscar Mayer Deli Fresh Singles are perfect for lunches, family meals or special gatherings. Available in three different cuts and sizes and five varieties including Honey Oven Roasted Turkey, Smoked Turkey, Home-Style Roasted Ham, Honey Smoked Ham and Oven Roasted Chicken, the convenient two-packs of shaved meats are a tasty way to get that deli-fresh taste every time.
Four new Sara Lee deli meats are debuting this fall â€” Sara Lee Fresh Ideas pre-sliced Garlic Herb Chicken and Hickory Smoked Ham, and Sara Lee Fresh Ideas sliced-to-order Virginia Brand Ham with Natural Juices and Deluxe Cooked Ham with Natural Juices.
The pre-sliced Garlic Herb Chicken and Hickory Smoked Ham combine improved-quality meats with a fresh approach to packaging without having to wait in line at the deli counter. The sliced-to-order Virginia Brand Ham and Deluxe Cooked Ham feature premium, whole-muscle meat with natural juices and no fillers.
Sara Lee North America Retail brand Hillshire Farm has launched new flavors in the Hillshire Farm Deli Select® Premium Hearty Slices and Hillshire Farm Deli Select Ultra Thin® product lines. The Ultra Thin line adds Hickory Smoked Chicken Breast and Cracked Black Pepper Turkey Breast to its roster, while the Premium Hearty Slices line adds Hardwood Smoked Turkey Breast and Oven Roasted Chicken Breast.
Farmland All Natural has introduced Shaved Turkey Breast with white turkey meat.
This oven-roasted product contains no added hormones, no artificial ingredients and is minimally processed. It is 98 percent fat free and is retailed in an 8-ounce pack.
Deli propsConsumers want food that tantalizes their taste buds, provides emotional satisfaction, builds their health, and even brings their families closer together â€” all while meeting their budget and time constraints. In short, they want solutions for their meal needs.
To answer the call, the International Dairy-Deli-Bakery Association (IDDBA) has partnered with LearnSomething Inc. to produce an online training program that teaches perishable-food department associates to deliver these solutions. Called Prepare to Serve: Product Solutions for Customers, Fresh Perishable Foods, the program uses online simulated interactions to teach deli, cheese, bakery, produce, meat and seafood associates how to increase sales. In addition, IDDBA is developing a companion course, Product Category Training: Deli Meats, which teaches associates all about the top-selling deli meats so they can answer customer questions with confidence.
Deli-packaging trendsAccording to the International Dairy-Deli-Bakery Association (IDDBA), American deli-packaging trends center on convenience, attractiveness, food safety and quality preservation or enhancement.
Some ways in which packaging suppliers are answering these concerns include:
• Upscale packaging that gives a message of quality.
• More grab-and-go packaging.
• Packaging that can be used to reheat food in the microwave or oven.
• Microwaveable, leak-proof bags for rotisserie chicken, fried poultry and ribs with perforations or special film to prevent fogging, heat-resistant handles so the packages are easy to control, and gusseted bottoms so the bags do not tip.
• Lidded containers with twist-locking seals for easy, spill-proof closing.
• More contemporary shapes like squares and rectangles, rather than circles and ovals. These shapes have the advantage of holding more food in a smaller footprint.
• A film that absorbs oxygen released by packaged meats, reducing the risk of microbial growth.
• Tamper-evident and tamper-resistant containers for deli-prepared foods.
Nanotechnology continues to show promise for improving deli packaging, IDDBA says.
For example, plastic wrap and containers holding nanoparticles of silver, a naturally antimicrobial element, can triple the life of fresh foods.
It is also important to note, IDDBA says, that many American delis are looking to reduce the use of polystyrene foam because consumers perceive this as an especially unsustainable product. Some are turning to polylactic acid (PLA), a corn-based polymer that, after use, can be composted in an industrial composting facility.