Dealing with Market Demands
September 1, 2007
Dealing with Market Demands
By Richard Mitchell, contributing editor
Bruce Peterson discusses the competitive pressures facing meat and deli retailers.
Bruce Peterson is senior vice president and general merchandising manager for perishables for Bentonville, Ark.-based Wal-Mart Stores Inc., the world’s largest retailer. Wal-Mart’s success has impacted the way merchants in almost any retail category market their products and services. The company, for instance, was a catalyst in the rapid embrace of case-ready meats by grocers across the U.S. by offering prepackaged products instead of store cut items in more than 2,300 Wal-Mart Supercenter and Neighborhood Market Stores.
Q: What is triggering the interest in new meat and deli offerings?
Peterson: Some of it is a demand for more value-added products from consumers who want to participate in the cooking experience but don’t necessarily want to do all the things that are needed to optimize that experience. People, for instance, are less inclined to make their own marinades or go through the marinating process of meat but still want to provide foods for their families that have specific flavor profiles.
Q: How are food producers responding to that demand for value-added items?
Peterson: They are taking the preparation requirements out of consumers’ hands and offering precooked products or other items that just require a small amount of work from consumers, such as adding a particular seasoning.
Q: What are the challenges for producers in offering value-added foods?
Peterson: They must give shoppers the ability to personalize their products with a flavor profile that the consumer thinks is perfect, while at the same time removing the cooking hassles that the consumer either doesn’t want or doesn’t have the time to deal with. Many shoppers still want to participate in the preparation process at home because meat is a center-of-the-plate item. But the question is how much work for them is too much? Another issue is dealing with the lack of cooking skills in consumers between the ages of 18 and 33. Those skills were previously passed down from generation to generation, but that is not always the case today.
Q: What are some of the customer needs that meat and deli retailer should be aware of when merchandising new products?
Peterson: That there are more shoppers seeking healthy and nutritious foods, and many consumers still want to participate to a certain degree in the preparation process. Moms want to feel that they are doing things that help their families’ well being. But people’s time and skill levels must be respected. There also are individual and regional differences. Consumers in the Northeast have different taste profiles than those in New Mexico. And even regional profiles change as people move. Today we’re seeing large population shifts, especially with retiring baby boomers who are moving from the Northeast and upper Midwest to such places as Florida and California.
Q: What can U.S. meat and deli retailers learn about merchandising from their European counterparts?
Peterson: That it is important to provide convenient meals. Europeans for years have been ahead of Americans in food development technologies and how they think of the meat and deli departments. In the United Kingdom you will hear a lot about products called ‘provisions,’ which we call home meal replacement. They are fresh — not frozen — entrees or combo meals that just need to be heated or microwaved, and in some instances can be eaten cold. It’s already big business in Europe and now is a growing business in the U.S.
Q: Why are Europeans the leaders in the convenience food category?
Peterson: They have created technologies and processes that let them get fresh food to market quicker, and that results in better tasting food. Europeans also have different logistics models because manufacturing centers and stores are closer to distribution locations. Food travels fewer miles between the manufacturing outlet and the retail stores in Europe than in the U.S., and European customers also live closer to stores. Consumers also tend to shop more often in Europe because of that proximity and because their homes, refrigerators and freezers are generally smaller. Frozen foods are big business in the U.S., but not so big in Europe.
Q: How are consumers’ changing eating patterns affecting the demand for meat and deli products?
Peterson: Take-out foods are becoming increasingly important. The number-one place where Americans eat breakfast is in the car as they head for work, school or the gym. The majority of business at McDonald’s is done through the drive-in window. Lunch and dinner represent major opportunities for deli retailers that can offer easy-to-serve items. They can include sandwiches, proteins that are diced or cut up in a salad or other entrees. Convenient dinner options are vital because decisions by moms on the foods they will serve often are made just a half-hour in advance. Menu planning is not happening anymore.
Q: What effect are foodservice establishments having on stores’ meat and deli departments?
Peterson: The majority of food dollars are spent through the foodservice rather than the retail grocery channel, and the amount has been increasing for years. As a result, food retailers need to continue to look for more and more ways to recapture that eroding market share. Stores already are offering such convenience products as rotisserie chicken and sandwiches. And they can follow the lead of some national restaurant chains that provide special parking spaces for take-out customers.
Q: Why are foodservice and other retail operators such formidable challengers to supermarket meat and deli departments for “share of stomach?”
Peterson: A certain amount of people are always going to visit restaurants. In some areas there is a quick-service restaurant on almost every corner, and convenience stores also are competing for the business. Though consumers generally will save money by shopping at a supermarket, it often is easier for them to visit a C-store or go through a restaurant drive-thru rather than standing in line at the supermarket checkout. It is a question of what their time is worth.
Q: What measures can meat and deli retailers take to better compete in such an environment?
Peterson: They can entice a segment of consumers who might have eaten out to purchase meals at the delis by offering more products. But it is a very complex issue. Meat and deli operators must understand their markets as the answers to all questions lie in consumer insights. Stores must know their customers and appreciate how shoppers’ needs are evolving. The needs could be based on such issues as ethnicity, age, geography, health considerations — which are becoming more important as the baby boomer generation ages — or finances.
Q: Why is it crucial for stores to meet the precise needs of each shopper?
Peterson: We’re in the age of the customer. They have so many more options of where they can buy products. Shoppers now can purchase produce at a 7-Eleven, and one can even argue that Wegmans (a Northeast grocery chain with a wide range of prepared foods along with dining areas) is a restaurant as well as a supermarket. There also are companies that deliver food to your home and orders can be placed on the Internet. Meat and deli departments need to offer personalized services, as the one-size-fits-all approach does not work. The retailers who have the best handle on their customers and can tailor products and services to them will win big. Those who don’t will lose big.