Deli-Cut Balance
By Deborah Silver, Editor
Move over turkey, ham and roast beef. Retailers are making room in the deli counter for enhanced products, new brands and greater variety.  
The deli counter remains a hotbed of activity as various retail channels – mainstream supermarkets, specialty grocers and mass merchandisers – explore ways to attract consumers with new offerings and original takes on traditional products.
“There is clearly an effort by grocers to attract customers via the deli counter, and many retailers are using it as a way to differentiate themselves from the competition,” says Ed Mackowiak, vice president of sales and marketing for FreshLook Marketing, an industry market research firm in Hoffman Estates, Ill. “It’s certainly no longer enough to offer just the ‘big three’ – sliced turkey, ham and roast beef.”
Although those three products will likely continue to be best sellers, processors, recognizing the potential of the deli, are putting time, money and effort into improving their deli-meat programs, from product offerings to packaging options. According to Karen Stewart, vice president of prepared foods for Wichita, Kan.-based Cargill Meat Solutions, there has been an across-the-board willingness to invest in improvements. “It’s an overall upgrading of everything – initial raw materials, cooking methods and delivery methods at the store level,” she says.
They’re upgrading for good reason. The International Dairy-Deli-Bakery Association (IDDBA) in Madison, Wis., reports in its 2006 What’s In Store survey that annual service deli sales continue to climb, up to $14.85 billion in 2005 from $14.35 billion the previous year. The number of actual retail delis has risen as well, to 27,200 in 2004 from 26,900 in 2003, while the size of the average service deli has expanded slightly to 1,450 square feet from 1,440 square feet. And a survey conducted by the Refrigerated Foods Association found that 93.7 percent of households shop the deli.
Private label, public demand
While national and regional branded deli meats still dominate the service counter, more private-label offerings are emerging as retailers look to attract consumers. Indeed, marketers of signature deli meats are spending millions of dollars annually to generate brand awareness and ensure customer loyalty.
FreshLook Marketing reports that private-label items account for about 25 percent of random-weight deli-meat sales, a figure that has remained relatively constant in recent years. However, market share of store-branded items is likely to increase as retailers explore ways to stand apart from the competition. Indeed, Tom Aquilina, president of Aquilina & Associates, a Crystal Lake, Ill.-based sales and marketing consulting firm, notes that more retailers are replacing well-known national brands with their own premium products, carving out a signature-label section in the deli case.
Pittsburgh-based Giant Eagle Inc., for example, with about 220 stores in Ohio, Pennsylvania, West Virginia and Maryland, has attached its private-label brand to some 40 percent of its deli products. “Giant Eagle brands are a way to give customers great value and unique flavors that are only available at our locations, and that strengthens the overall Giant Eagle brand and sets our shopping experience and product offerings apart,” says Kevin Srigley, Giant Eagle senior vice president of marketing.  
But there are obstacles to successfully launching private-label goods. Suppliers of national brands often offer dollars-off coupons and in-store samples to consumers as a means to forestall a switch to store-branded meats. And often the service deli is too small to warrant the development of private-label products, according to Frank Dell, president of Dellmart & Co., a Stamford, Conn.-based retail consultancy.
Private-label products also take longer to catch on because they lack the name recognition of national brands. “While the retailer recognizes the advantages of store brands in the service deli in terms of margins and differentiation, customers are often drawn by the strength, reputation and promotional programs of national brands,” says Jim Hertel, senior vice president of Willard Bishop Consulting, a Barrington, Ill.-based food research company. Moreover, national brands provide shoppers with a higher degree of confidence that product quality will be consistent, he notes.
And prices of deli meats vary considerably, which may cause consumer confusion over the value of private-label brands. Recent data from FreshLook indicates that store-branded deli meats in many instances are priced slightly higher per pound than national brands. That is likely due to the product mix within deli meats, in which the highest volume items – turkey, ham and beef – are typically national brands sold at lower price points and pricier specialty meats, such as prosciutto, are often the store’s private-label brand.
Many retailers are blurring the distinction between private-label and national brands by not identifying the suppliers of products that are marketed behind glass in the full-service deli case. “Consumers don’t have a universal definition of what ‘brand’ means when it comes to deli meats, although they do often equate a recognizable brand name with better quality or taste,” says Mary Kay O’Connor, IDDBA director of education.
Retailers intent on executing a private-label initiative in the deli are more likely to succeed if they already have a well-established center-store private-label program, says Tom Stephens, founder of North York, Ont.-based Brand Strategy Consultants. “If shoppers have accepted the retailer’s brand as a premium, high-quality product and have a positive perception of the line, they will feel likewise in the deli where quality is a major concern,” says Stephens.
Stephens notes that there is no optimal mix of national brand and private-label in the deli counter. That mix will vary, based on local demographics and price. Affluent shoppers, for instance, tend to purchase well-known deli-meat brands, such as Sara Lee and Butterball, which means that in certain markets, retailers need to market fewer private-label products. In addition, baby boomers have shown they are willing to pay for high-quality, healthier food as they get older. “As the population ages, branded meats, particularly high-end and premium store brands, will likely be a growth category,” he says.
Based on statistics, private-label brands could well displace deli products of national manufacturers, particularly if the flavor and quality are there. IDDBA reports that in a list of 16 deli attributes presented to consumers, “carrying brands they know and trust” was not high on the list, ranking 14th among concerns and trailing such choices as “cleanliness,” “consistently good tasting and fresh products,” “safe food handling,” and “quality products.” IDDBA’s  Battle of the Brands study reports that while about 30 percent of consumers are paying more attention to brands, only 11 percent of consumers surveyed said brand is the first thing they look at when shopping for products.
Though more than half of the shoppers said they “often” or “sometimes” look for brands when buying meat at the deli service counter, many are still flexible in their purchasing criteria. Half said they would simply buy an alternative brand if the deli was out of their favorite meat, and 25 percent noted they would purchase whatever was on sale.
In the long run, the key role of private-label deli products may be to strengthen a retailer’s image. “Store brands should be viewed as far more than margin boosters, and should serve as reinstatement of the store identification itself,” says David Biernbaum, president of David Biernbaum Consulting Associates, a St. Louis-based consumer products marketing firm. “Retailers must know their target customers and brands should reflect the store-branding philosophy.”
Premium presence
The supermarket deli is undergoing another kind of evolution. While traditionally a destination for freshly cut turkey, roast beef, chicken, cheese and other proteins, delis are increasingly becoming outlets for premium foods considered healthier and more flavorful than many conventional offerings.
Indeed, retailers are expanding their selection – and enhancing the marketing – of premium items to satisfy the growing segment of consumers who are willing to pay the price for foods that are more appetizing and to compete directly with the growing number of restaurants that provide take-out. Product suppliers, meanwhile, are developing new varieties and stepping up their merchandising of premium meats to help delis meet the increasing demand for higher-end offerings.
“The deli’s growth is in the premium-tier products,” says Harry Tillman, vice president and general manager of business development for Smithfield Deli Group. “Consumers understand quality, and we’re starting to see a change in their buying behavior as they seek more premium brands. That is partly due to products being promoted more heavily within stores and through the media.”
According to Tillman, most delis already are working to enhance their premium sandwich programs. Smithfield also is partnering with retailers to develop signature high-end products. “The flavors will continue to expand over the next several years,” he notes.
Smithfield also is giving greater marketing priority to its higher-end and higher-margin branded products. Among the company’s offerings are Smithfield Premium Lean Generation hams, and the Kretschmar-branded line of premium deli products, which include ham, turkey, salami, roast beef and pastrami. “Commodity items do not generate a lot of revenue for either us or the retailer,” Tillman notes.
Butterball Turkey Co., based in Downers Grove, Ill., also is bolstering its premium deli line with such items as Southwestern Salsa turkey breast, seasoned with jalapeno peppers, tomatoes, bell peppers and spices; Italian-Style turkey breast, rubbed with Italian seasonings along with black and red bell pepper; and Cajun-Style turkey, featuring a combination of seasonings and a surface rub of black and red pepper. “Consumers are increasingly looking to higher-end, premium deli turkey,” says Tom Perlstein, Butterball vice president of marketing. “They want more varieties and flavors that stand up in the sandwich competition.” He contends that as the demand for convenient, high-quality take-out foods grows, retailers that enhance their premium lines will be better prepared to grow their revenues.
And the potential customer base for premium deli products is large. IDDBA reports that the majority of deli shoppers are baby boomers who visit a location at least three times a week, often because it is convenient. According to IDDBA, the greatest portion of the deli sales dollar – 28 percent – goes to sliced meats, followed by cheese at 13.8 percent, hot entrees at 11.5 percent, prepared chicken at 11.3 percent, sandwiches at 7.1 percent, other meat at 4.9 percent and refrigerated entrees at 3.5 percent. And on average, consumers purchase sliced-to-order lunchmeats 2.9 times a week.
The convenience factor
Another trend altering the service deli counter is the demand for ever-more convenient foods. Americans cook less than ever these days. Empty nesters are reluctant to undertake elaborate in-home meal preparations, many young adults don’t know the basics of cooking, and families – many with two working parents or working single parents – are simply too time-strapped to cook. And with fewer consumers eating three square meals a day and more looking for easy meal solutions (translation: take-out), trips to the deli counter are likely to become even more commonplace.
Statistics confirm that convenience is now an overriding factor in shopping behavior. According to IDDBA’s recent survey, Consumers in the Deli: Who’s in Store?, at 22 percent, convenience is the No. 1 reason that consumers shop the service deli.  
That means deli operators must look for ways to capture more of the food dollar by offering greater variety, both in product variety and preparation. “The good delis are the ones that help people solve their food problems,” says Richard George, professor of food marketing at St. Joseph’s University in Philadelphia.
To garner an increasing share of the convenience dollar, retailers are finding ways to compete with quick-service and fast-casual restaurants, with more supermarkets offering deli sandwiches. IDDBA’s Sandwich Study: Consumer Attitudes, Buying Behavior, and Purchase Drivers found that 45 percent of consumers who purchase sandwiches at supermarket delis say they do so because the locations are easily accessible and the process is fast, followed by 18 percent who buy sandwiches at the deli counter for taste considerations, 14 percent for quality of their ingredients and 14 percent for price. Although the majority of sandwiches – 70 percent – are still purchased at lunch time, sandwich sales for dinner are on the rise, accounting for some 20 percent of sandwich orders last year.
IDDBA also notes that of those consumers who avoid supermarket deli sandwiches, 14 percent do so because the products are not made fresh or are pre-wrapped. Another 12 percent consider the sandwiches too expensive or a poor value, 10 percent say deli sandwiches are inconvenient to eat, and 9 percent state that they take too long to prepare.
Research conducted by Springdale, Ark.-based Tyson Deli Inc. indicates supermarkets must offer fresh, made-to-order products if they are to have successful sandwich initiatives, says Mary Stiles, product manager for innovation with Tyson. “It is important to create a freshness perception, and most customers don’t connect freshness with pre-made sandwiches because they don’t see a sandwich station with ingredients,” she says. “A desire for freshness and options in preparing sandwiches has come from every consumer focus group we’ve conducted.”
To make it easier for grocery delis to operate sandwich stations, Tyson Deli launched its “Brown Bag Gourmet” initiative last year, designed to assist deli counters in setting up made-to-order sandwich lines and creating a branded appearance. The vendor also offers branded turnkey sandwich programs at colleges, universities and corporate cafeterias.
Tyson provides operators with all the necessary meats, condiments and merchandising items – including menu boards, signage, napkins, sandwich boxes, cups and carry-out bags – for a branded sandwich program.
Smithfield Deli also has developed a marketing strategy designed to drive deli traffic. Speed, working with retailers to make the deli sandwich a destination stop by helping customize sandwich programs. “We help with signage, flavors of proteins and even introduce new items to help complement an ongoing program,” says Smithfield’s Tillman says.
Taste test
Indeed, creative ingredients are driving a lot of the interest and growth in sandwich sales at the deli counter. “Traditional items, including BLTs, barbecue beef or pork, tuna, and chicken salad still are popular, but now added to the mix are sandwich combinations offering more flavorful meats, cheeses, non-mayonnaise spreads and artisan breads,” IDDBA’s O’Connor says.
Bolder flavors, particularly with ethnic influences, also are showing up increasingly in sandwich programs. Cajun sandwiches include blackened chicken and bourbon-glazed ham. Latino-style sandwiches feature guacamole, black beans and aioli. Asian sandwiches focus on teriyaki-marinated meats. French-style sandwiches are marketed with Brie, tuna, green beans, olives and potatoes. Some other items with distinctive profiles, such as Italian and kosher deli sandwiches, are so common at the deli counter that they are considered mainstays.
“Ethnic flavor profiles are expanding in popularity,” says David Allen, marketing director of Kansas City, Mo.-based Farmland Foods. “Consumers crave new experiences. They want to get away from the boredom of eating the same old product.”
Taste is one of the top purchasing drivers for consumers buying supermarket deli sandwiches, as is freshness. Indeed, shoppers’ strong interest in freshness makes it essential that operators offer made-to-order foods, says Stiles. “Consumers don’t get the perception that a deli sandwich is fresh unless they see it being prepared,” she notes. “That is where traditional sub shops have the advantage because sandwiches at those locations are made on demand.”
Supermarkets already have increased their deli-sandwich revenues by enhancing product offerings and marketing, yet the growth potential of the sector remains huge, says Jon Hauptman, vice president of Willard Bishop Consulting, a Barrington, Ill.-based food research company. “Many service counters still focus on price and not on what is new and different with their sandwiches,” he says. “There’s an opportunity for supermarkets to build on their reputation for selling high-quality fresh food by developing and marketing a standout sandwich program.”
And as delis expand their selection of premium products and brands are more heavily advertised, supermarkets are better positioned to attract more convenience-minded take-out consumers away from well-known sandwich chains, such as Subway and Quiznos.
 “The deli operator’s biggest challenge for sales growth is to successfully stem the loss of business to foodservice, including quick-service outlets, casual-dining establishments and even white-tablecloth restaurants,” says Cargill’s Stewart. “Even fast-food hamburger joints are starting to offer lines of sandwiches that are marketed as lower in fat, healthier and fresher.”
There is also more of a focus by service counters to offer hot sandwiches that use premium meats, such as prime rib, and upscale ingredients like sautéed onions and high-end sauces. “Delis over the past few years have done some things very well, but they haven’t followed the lead of restaurants by offering items from many different product categories. As a result, foodservice has lapped them,” says Stewart. “The goal now is for retailers to incorporate more offerings to win customers back.”
Health matters
Deli-meat processors and retailers are addressing another concern of many consumers: nutrition. Recent data from the American Meat Institute confirms that consumers want lunch meat that is leaner, yet not so lean that taste is compromised. A recent AMI study indicated that, among deli meats described as better-for-you, dollar sales of those described as lean – 90 percent to 94 percent fat free – were higher than those falling in the fat-free, light and low-fat categories. Lunch meats offering healthier formulations – nitrate/nitrite-free and antibiotic-free, for example – also appear to be gaining ground. But “regular fat” lunch meat, such as salami, isn’t suffering: AMI also reports a healthy sales increase for those products.
When it comes to health, the top three concerns about deli foods, according to IDDBA's Consumers in the Deli study, are fat content (mentioned by 48% of respondents), salt content (22%) and freshness (11%).
 Farmland Foods’ Allen adds that deli products that are lower in fat, carbohydrates, and sodium, also are becoming service-counter mainstays. “Consumers are more focused on healthy lifestyles, and retailers are adapting their offerings accordingly,” he says.
O’Connor contends that even the movement toward bolder-flavored lunch meats is in part a response to the healthy-eating trend. “When a product is flavorful, you don’t have to consume as much to be satisfied,” she says.
With recent scares over bovine spongiform encephalopathy and avian flu, more consumers clearly are interested in the origins of their food. That certainly has contributed to the increasing popularity of natural and organic deli products – typically considered a member of the better-for-you category. Although typically sold at a higher price point, consumers seem to be willing to pay the price for what they perceive as the safety of those products.
“Issues about food and health are not new, and, yes, consumers are looking for more healthful products, such as low-fat or low-sodium, in the deli,” says Lou Nieto, president of the packaged meats and deli division for Omaha, Neb.-based ConAgra Foods. “But that doesn’t mean that they’re willing to sacrifice the flavorful deli meats that they’ve always enjoyed.” NP
This story originally appeared on The National Provisioner’s Web site, For more insight into deli meats, the meat- and poultry-processing industries, best practices for processors and daily news updates, visit