Eddie’s of Roland Park, a two-store grocer in Baltimore, doesn’t have the data-mining abilities of Kroger, the low prices of Walmart or the online presence of Amazon.
But it draws a lunch crowd that would make all three retailers jealous.
Every afternoon, customers crowd the deli department to get their hands on one of the retailer’s signature sandwiches. There’s the jumbo shrimp salad sandwich, the pork barbecue sandwich and a concoction called the “Cloak and Dagger,” made with fresh corned beef, Swiss cheese, coleslaw and Russian dressing, all stuffed between two slices of rye bread.
In a nod to the many public and prep schools that operate nearby, Eddie’s also offers selections like the Waldorf School Sandwich and the St. Paul’s Wrap.
“Both stores see a lot of midday activity from people on their lunch hour, whether it’s the utility crew on break or the trial lawyer who popped over from the courthouse,” Christine Stutz, Eddie’s marketing manager, told Food Dive.
As small retailers look for ways to outmaneuver deep-pocketed national chains, many are turning up the heat on their prepared foods selections. This plays to their culinary expertise, their deep roots in the communities they serve and their ability to quickly roll out inventive new dishes that cater to local tastes.
But starting and maintaining a prepared foods program is very expensive, and fraught with operational pitfalls. If independent grocers take a big gamble and miss in today’s competitive retail environment, they might not get a second chance.
‘None of the big guys do a particularly good job’
The opportunity to serve up fresh meals to supermarket shoppers has never been better. Spending on food prepared away from home has greatly outpaced spending on food made at home in recent years, and nowadays people spend more than $800 billion a year at restaurants and other establishments, according to the U.S. Department of Agriculture’s Economic Research Service.
Supermarket prepared foods departments have seen double-digit sales growth in recent years as they capitalize on the demand for convenient, flavorful meals, according to Sarah Schmansky, director of growth and strategy with Nielsen Fresh. But that growth has slowed over the past year, she said, as traditional grocery offerings have gone stale in consumers’ eyes.
“From an assortment standpoint, it’s a lot of the same stuff we’ve seen in past years: rotisserie chickens, potato salad, chicken tenders and macaroni and cheese,” Schmansky told Food Dive.
Restaurants have done a much better job at innovating, and are claiming a larger share of consumer meal dollars, said Bob Goldin, partner at Pentallect, a Chicago-based consulting firm. Supermarket chains, he said, are often reluctant to spend on labor and — barring a few exceptions — are too operationally muscle-bound to evolve their prepared foods in step with consumer demand.
“None of the big guys do a particularly good job on a consistent basis,” Goldin told Food Dive. “They see the opportunity, they throw resources at it, and then they get frustrated.”
This opens up an opportunity for independent grocers, Schmansky said, which are often more in touch with local tastes, and don’t have to go through extensive testing and recipe development to bring new meal offerings to market.
In Chicago, five-store grocer Sunset Foods offers “chef prepared” dinners that include a fresh protein and two sides. In neighboring Michigan, Busch’s, a 17-store retailer, has sushi and sandwich bars, and recently opened a barbecue restaurant inside its store located in the town of Canton.
In tiny Guilford, Connecticut, The Marketplace at Guilford Food Center has firmly established itself as a meal destination. Three years ago, the current owners took over a space occupied by the Guilford Food Center, which had been the town's grocer since the 1920s. They ripped out all the center store aisles, replaced them with tables and chairs, and built culinary stations around the perimeter, including a made-to-order burger station, salad bar and meat counter.
“We essentially morphed the grocery store into a café where we could serve up gourmet burgers and shakes and salads and all sort of things,” Drew McLachlan, the store’s operations manager, recently told Food Dive.
“None of the big guys do a particularly good job on a consistent basis. They see the opportunity, they throw resources at it, and then they get frustrated.”
Meanwhile, Eddie’s of Roland Park is catering not only to the lunch crowd, but to shoppers looking for convenient dinners. The grocer offers “Gourmet to Go” meals that include fresh entrees like grilled salmon or London broil along with a side such as roasted vegetables or quinoa salad. The meals are assembled in-store and frequently updated by Eddie’s culinary team, Stutz said.
“All the dishes are prepared in our in-store kitchens by a team of chefs and cooks,” she said, pointing out that Eddie’s has some customers who come in and grab dinner every day. “It’s a high-volume operation.”
'There are just so many options'
Effective retailers can make prepared foods look effortless — but the reality is anything but, sources say. Companies need to invest in additional labor and new supply chains. They have to buy expensive equipment. And they have to do a good job of meeting the ever-changing culinary demands of their customers.
It can also be difficult to raise awareness of grocery prepared foods. A recent survey conducted by Nielsen and the Food Marketing Institute found that upwards of 70% of consumers report rarely thinking of grocers as prepared meal destinations, according to Schmansky.
“Getting consumers into the stores is one of the most cumbersome aspects of deli prepared foods,” she said.
All of this falls particularly hard on independent grocers, which don’t have the capital resources large chains have to invest in new programs and marketing.
Large competitors, eager to return to significant growth, are investing deeply in prepared foods. Kroger, Walmart and Albertsons are all rolling out meal kits that incorporate fresh meat, seafood and other ingredients. Although the in-store meal kit market represents a fraction of the sales online subscription companies like Blue Apron and HelloFresh see, it’s a fast-growing channel, with $155 million in sales last year, according to Nielsen.
Across the country, grocers are revamping their sandwich programs and salad bars while also adding new offerings like fresh-made sushi and gourmet heat-and-eat meals. Supervalu’s new Quick & Easy Meals line includes traditional meal kit offerings as well as dinners that can be popped in the oven and ready within minutes.
At the same time, restaurants are evolving their menus, and delivery services like Grubhub and Doordash are making it easier to get flavorful meals in the hands of consumers.
“There are just so many options for consumers to tap into,” Schmansky said.
What can independent grocers do to stay ahead of these challengers? Offering home delivery can address the convenience factor, said Goldin, but retailers first have to deliver on quality and innovation. Grocers need to meet demand for staples like potato salad and turkey wraps, but they can really make their money on signature items that can’t be found elsewhere.
“You have to make your money on those specialty items,” he said. “And you need true food expertise to do that.”
Eddie’s and The Marketplace at Guilford Food Center both have trained chefs on staff. At Belmont Market in Wakefield, Rhode Island, chef Ginger Costa oversees three dozen employees assembling meals and catering orders every day. Belmont’s prepared foods motto: “Real People Making Real Food.”
Schmansky, meanwhile, said independent retailers have to capitalize on local tastes as well as budding culinary trends. Nielsen research shows that sushi has become a popular buy at grocery stores, as have plant-based dishes and Mediterranean-inspired offerings.
Grocers also need to cater to consumers’ growing desire for health and transparency in the foods they eat, she said. Companies need to offer healthy alternatives, and they need to be upfront about areas of concern like calorie counts, sodium and sugar content. The federal menu labeling law set to take effect this spring will bring additional transparency to chain retailers, she noted, and small grocers shouldn’t fall too far behind.
“If you want to be a destination for prepared foods, you have to be looking at those better-for-you offerings,” she said.