One of the fastest-growing segments at retail, the service deli distinguishes itself by its assortment of prepared foods.

Once largely limited to cold cuts, fried chicken, and pre-made salads, supermarket delis have widely expanded their offerings, competing directly with other foodservice operators, as well as frozen foods, ready-to-cook meats, and refrigerated, prepared entrées sold in other areas of the store.

The Madison, WI-based International Dairy Deli Bakery Association’s (IDDBA) “What’s in Store 2005” report places service deli sales at $14.35 billion in 2003, up from $14 billion in 2002. What’s more, IDDBA’s 2004 “Consumers in the Deli” report finds that 23 percent of consumers purchase meals to eat at home (that are not prepared at home) from a supermarket deli. Twenty-seven percent of surveyed consumers say they visited the supermarket for takeout food in 2004 – a sharp increase from 19 percent in 2003.

“The deli operator’s biggest challenge for sales growth is to successfully stem the loss of business to foodservice, including quick-service restaurants, casual dining establishments, and even white tablecloth restaurants,” notes Karen Stewart, vice president of prepared foods for Wichita, KS-based Cargill Meat Solutions. “Even fast-food hamburger joints are starting to offer lines of sandwiches that are marketed as being lower in fat, healthier, and fresher.”

To compete with a thriving foodservice industry, retailers around the country are taking steps to expand their prepared foods offerings. “Prepared foods is … definitely one of our most rapidly growing categories and in our big new stores, the 50,000 [square foot] plus stores that we're developing right now and opening, prepared foods get a much bigger percentage of square footage,” says John Mackey, chairman and chief executive officer of Austin, TX-based Whole Foods Market, Austin, TX, whose prepared foods departments offer, among other items, ever-changing varieties of quick entrées, side dishes, soups, rotisserie grilled items, sushi, and sandwiches — all made with natural ingredients. NP