Customizable meals at fast-casual restaurants that offer made-to-order tacos or noodle bowls have found a sweet spot among consumers who want variation, portability and convenience at a great price point. Likewise, this same demand has made its way into the grocery retail sector, blurring the lines between retailing and food service.
Leading retailers understand the gravitational pull of bountiful and beautiful fresh foods departments, and they know they can drive top line growth by lifting average customer counts and basket sizes. “Fresh foods pull people in and compel people to buy more,” said Jeanie Wells, operations, expansions and startups consultant. “But fresh foods departments are also much more complex to operate effectively and efficiently so attention to systems and standards is vital.”
According to Food Business News, from 2011-2015 sales of value-added vegetables (prepped, precut or assembled) grew by 15%, and for fruit it was 12%. Bakeries that offered “small bites” or portion controlled options grew sales 21%. Helping people along the path to healthy eating by offering convenience is the grocery industry’s new mandate.
Many food and lifestyle media outlets are also on board, disseminating information on “how to shop” or “get the best deal” out of fresh food departments to put a quick and good meal on the table, reflecting and amplifying these trends. For example, meat departments that focus on educating consumers on how to cook fresh meats, and offer global seasoning options are perceived as offering more value. Even conventional salad bars now come with kale and quinoa as standard items. And customers expect retailers to have the lowdown on where their food comes from.
Clearly, fresh food departments are a recipe for growth. However, managing these departments requires a level of sophistication from preparation to the final product. Wells said the importance of operating strong fresh foods departments has never been greater. “The center store departments in co-ops and conventional stores are becoming more homogenized, but the fresh foods departments have the ability to differentiate food co-ops from other stores in your market.”
“The demand for high quality fresh foods means that stores have to be committed to excellence in the perimeter departments such as produce, prepared foods, meat and seafood, bakery and cheese departments,” she said. To do this successfully, Wells said fresh food managers need to:
- Develop a plan and focus on its implementation
- Safeguard the department’s profitability
- Ensure staff are well-trained
- Verify product is priced to compete
All of the consultants and sources cited in this article believe that investing in planning and procedures is a critical aspect of fresh food success. James Morrell, produce consultant said, “It spills over into all aspects of operations and provides a great foundation for people to connect to your vision.” He strongly believes that taking the time to create and measure goals and getting assistance to reach them is a good investment that pays off in sales and staff morale.
If there’s one area he cannot stress enough, it is investing in staff training and education because people expect that produce staff will be knowledgeable about how to prep and cook produce. “Produce is a hub of activity in a grocery store. Information is a great value we provide to our customers. Staff needs that information available to them, too.” Morrell said that produce departments can support their staff in learning more by engaging in farm visits, doing business and industry training, and offering lots of educational opportunities.
“Sampling and demo programs are so important, to give customers the opportunity to engage in the experience of new tastes and enjoy peak seasonal flavors during their visit,” he said. “The culinary aspects of produce are strong right now. There are more people who want to replicate the things they see, especially in world cuisines.” Morrell also said that anything that saves time like cut vegetables, cooking suggestions, recipes, and cross-merchandising are big trends food co-ops can capitalize on.
Morrell said customer service should be every co-op’s top priority. Engagement with the customer on many levels and offering great service opens the co-op up to ongoing conversations and repeat business. “You should be looking at everything you do through a customer service lens.”
Being able to effectively tell the story of the co-op, the vendors and the food should be all part of the work culture. “You can talk directly with people coming in, so your information about customers isn’t just from a market study. It’s about making connections and building a loyal customer base.”
Deli and prepared foods consultant Kevin O’Donnell thinks that fresh food department managers especially need to be tuned into customer wants and needs, not only to deliver what people want, but also to make sound decisions about what to offer them that is profitable and cost-effective for the operation.
“Retailers really have to recognize that there’s a time-component to a lot of customer buying habits,” he said. “They need options.” For example, made-to-order deli sandwiches are great for customers if they have a little time to wait. Otherwise, pre-packs and premade sandwiches, packaged fruit smoothies and salads in the grab-n-go case should be available. If those things are unavailable, people will go somewhere else.
“To operate efficiently you really have to look at where you put your resources,” he said. There is more prep work involved in bringing fresh produce to the rack or soup and sandwiches to a deli case. Because of this complexity, calculating a true cost of goods or labor expense is complex and requires accurate record keeping and benchmarking at every step.
And lastly, the more preparation time the higher the labor costs. This is especially true when there are full-service counters where people are paying for great personal service in addition to great food. The added labor expense must be covered by the applied margin, which means co-ops depend on accurate systems to make informed decisions. O’Donnell pointed out that it doesn’t take as much labor to make prepacks and it may be what people are really looking for. Getting assistance with evaluating your deli and fresh food department operations can really give retailers a better return on investment. “We want to put things in place for people to easily find them. We’ve designed systems around that concept.”
O’Donnell said that co-ops need to be flexible and adaptable to meet customer needs, especially in fresh food departments. “That’s what’s really changing,” he said. The pace of fresh food department development among competitors has accelerated, especially in conventional markets where people can now get an organic apple, a quick hot lunch and cup of coffee in no time.
Fresh foods departments also have a much more pronounced seasonality than center store departments so there is added menu planning and promotional planning to ensure these departments are reaching people in new ways each month or season. O’Donnell is a strong believer in developing strategic marketing plans that target specific consumers to address these pressures.
“Sometimes I hear from a deli or a co-op where sales are flat and they don’t know why, but they don’t have a strategic marketing plan,” he said. “Without a plan you won’t know how to change it.” He believes getting assistance for this work is important, because flat sales mean missed opportunities, and mistakes often cost more.
He noted that a strategic marketing plan could also assist the organization with going deeper into engaging department heads and staff in promotions to deliver results. “Often co-op buyers do things in a silo. A plan will help you figure out how work together differently,” he said. He also said that setting up administrative tools to track results is important, because you want to know what works and how to best use co-op resources to drive traffic and sales.
Ramping up fresh foods departments seems like a must for any co-op that wants to meet consumers where they are while fighting to hold and grow market share in a very crowded market. Co-ops should approach fresh foods departments with rigor and dedication to strategy and process in order to make sure they contribute to storewide financial goals.