THE EVOLUTION OF FOOD RETAIL. Sarah Schmansky & Colleen McClellan June 2016
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1 THE EVOLUTION OF FOOD RETAIL Sarah Schmansky & Colleen McClellan June 2016
2 WHAT WE WILL COVER: 1. TODAY S CHANGING LANDSCAPE 2. THE POWER OF THE PERIMETER WITH DELI IN THE DRIVER S SEAT 3. OPPORTUNITIES FOR GROWTH BASED ON LOCALIZATION 4. HEALTHY THE IMPACT ON FUTURE DELI OFFERINGS 5. A WINNING STRATEGY FOR ALL
3 HOW SHOPPERS SHOP IS EVOLVING SHARE OF CHANNEL SHOPPERS PURCHASING FRESH THE PAST Grocery dominant channel Center store growing and innovating Fresh driven by commodity CONVENIENCE & GAS MASS & SUPERCENTER WAREHOUSE & CLUB GROCERY THE PRESENT Channel competition high Center store grow slowing Fresh changing and innovating Nielsen Perishables Group: Homescan Total ShopperView Specialty Panel 35% 84% +6% HH Fresh Trip growth 88% +1% HH Fresh Trip growth 99% -1% HH Fresh Trip decline AS MORE OPTIONS BECOME AVAILABLE
4 DISRUPTIONS ARE CHANGING THE WAY WE BUY FOOD Source: Company web sites
5 #1 U.S. consumer concern after the economy is health Half the world thinks they re overweight Sales of produce, health and wellness-oriented categories are growing stronger than center store sales
6
7 78 million Boomers hold: 70% of disposable income, and account for 50% of CPG sales
8 In 1970, 1 in 5 Americans were In 2018, 1 in 3 Americans will be In 2060, 1 in 2 Americans will be Multicultural
9 I limit my fast food intake by having more prepared food. They taste better, prices are comparable, and it s convenient. -Datassentials Survey Respondent
10 THE DELI DEPARTMENT IS THE FASTEST GROWING SECTOR OF THE STORE Fresh Department Dollar and Volume Growth 2% 4% 3% 7% 5% 5% 4% DOLLAR GROWTH VOLUME GROWTH 4% 6% Dollar Share of Deli Department Deli Beverages, 4% Deli Cheese, 17% Deli Meat, 21% Deli Other, 0% Deli Prepared Foods, 58% 1% MEAT PRODUCE DELI BAKERY SEAFOOD Source: Nielsen Perishables Group FreshFacts Total U.S. 52 weeks ending 4/25/2015 vs. Year Ago
11 THE DELI IS A KEY DIFFERENTIATOR IN TOTAL STORE SUCCESS $ Share by Fresh Department DELI SUSHI 8% 5% 4% 5% 5% 4% 4% 8% 8% 7% 8% 8% 6% 9% PACKAGE MEALS DELI ENTREES DELI SANDWICHES 30% 32% 34% 31% 31% 29% 34% 16% 18% 17% 11% 21% 18% 29% 33% 36% 38% 39% 43% 44% 25% Seafood Bakery Produce Deli Meat PROCESSED LUNCH MEAT BREAKFAST SAUSAGE DELI SPECIALTY CHEESE HIGH FRESH VELOCITY RETAILERS LOW FRESH VELOCITY RETAILERS HAMS FRESH FIN FISH Deli plays an oversized role at best-in-class-fresh retailers and high fresh velocity equates to total store success FRANKS Source: Nielsen Advanced Fresh Perspective Research: Winter 2015
12 In millions Store that have high Fresh velocity $35 +10% +3% +4% +1% -1% +0% -6% Total food $ chg. vs. YAGO $30 $25 $20 also have high Store velocity $15 $10 $5 $ HIGH FRESH VELOCITY RETAILERS LOW FRESH VELOCITY RETAILERS 50% Total food dollars (per store) Half of total food sales are fresh at top-performing fresh retailers Total fresh dollars (per store) 30% Source: Nielsen Advanced Fresh Perspective Research: Winter 2015
13 INCREMENTAL DELI TRIPS DRIVE STORE DOLLARS Pre-sliced Meat Salads Service Cheese Prepared Chicken Appetizers/Side/Desserts Snacks Pizza Bulk Meat 51 Dips/Spreads/Toppings Specialty Cheese MOST HHS PURCHASE FROM ALL AREAS OF THE DELI Source: Homescan Total ShopperView Specialty Panel 52 Weeks Ending 3/26/2016
14 DELI HAS THE FLEXIBILITY TO INNOVATE FRESH LOOKING FOOD PRE-ORDER KIOSK WELL-TRAINED STAFF GRAB-N-GO % of Store Offering Deli Amenities Cooking Classes 50% Music/Entertainment 57% Cooking Demos 61% Beer/Wine Area 72% Complimentary Wi-Fi 86% Beer/Wine Tasting 89% In-store seating 96% FUTURE Meals from Online Only Restaurants Anticipated triple revenue growth in 2016 New Snack Packs 24% $ growth for Deli Snack Packs with Cheese Variety of Gourmet Meals Prepared at Culinary Kitchens 8% increase in $ sales for Deli Entrees Source: Nielsen Perishables Group FreshFacts, The Sophistication of Supermakret Fresh Prepared Foods FMI/Technomic 2016
15 AND LEVERAGE PROVEN BRANDS TO WIN Restaurant brands accounted for 1.2% of Deli and 2.1% of Deli Prepared dollars Dollar Growth 8.9% 8.9% 6.1% 7.2% Deli Deli Prepared Restaurant Brands Rest of Deli Source: Nielsen Perishables Group FreshFacts Total U.S. 52 weeks ending 4/25/2015 vs. Year Ago
16 Copyright 2016 The Nielsen Company. Confidential and proprietary. RETAILER OPPORTUNITIES FOR AT HOME Innovation & Customization In-store amenities Travel/reheating advancements 16
17 The convenience of picking up dinner on my way home from work is more appealing as we juggle schedules. -Datassential Survey Respondent
18 COMMUNITITES IMPACT PREFERENCES & PURCHASES How to leverage the hyper local trend to grow deli
19 Copyright 2016 The Nielsen Company. Confidential and proprietary. national regional hyper local 1980 s what s popular overall 2000 s census regions or other major sub-division beyond true local flavor 19
20 Copyright 2016 The Nielsen Company. Confidential and proprietary. CHICAGO Italian high indexing foods Beef 1,670 Mostaccioli 908 Giardiniera
21 Copyright 2016 The Nielsen Company. Confidential and proprietary. ST. LOUIS Provel 262 miles to Chicago high indexing foods 12,406 Toasted Ravioli 11,452 Canneloni
22 Copyright 2016 The Nielsen Company. Confidential and proprietary. AND the restaurant community influences deli purchases 22
23 FOOD COMMUNITIES what do I sell where
24 26 distinct area types U S R o Reflects the interaction between people living in the area & the restaurant environment urban suburban rural o Habits and preferences of surrounding customers and the unique set eating establishments that flourish by responding to those preferences.
25 Fast Food Rural Hubs Rest Stop Americana R
26 Sushi sales Fast Food Rural Hubs 12 to 1 ratio of deli chicken to sushi sales Deli chicken sales
27 U HIP STOREFRONTS & HOT SPOTS Coffee shops, cafes, and small eateries
28 Sushi sales Hip Store Fronts and Hot Spots 2 to 1 ratio of deli chicken sales to sushi Deli chicken sales
29 Copyright 2016 The Nielsen Company. Confidential and proprietary. 1-approach doesn t fit all units may need to localize 29
30 TOP CHICKEN TRENDS Chicken at Breakfast (waffles, biscuits, maple syrup, energy bowls) Elevated Breading (panko, tempura, pecan, hand battered/breaded) Mediterranean Chicken (shawarma, gyro, tzatziki/yogurt sauce, skewers) Pulled Chicken (healthy alternative, BBQ, Mexican, Asian dishes)
31 COUNTRY BASICS A little bit of everything, not a lot of anything Elevated Breading Add an upscale edge options are few but balanced variety of traditional, mid-priced American cuisine. Hand Breaded +26% Hand Battered +15% Panko +52% Note: All growth rates are 4-year percentage changes (2015 vs. 2011).
32 URBAN ORDINARY Urban desert Mediterranean Chicken ethnic yet healthy appeal lowest density of dining locations higher presence of ethnic restaurants. Mediterranean, Caribbean, Indian, South American Tzatziki +38% Shawarma +37% Gyro +13% Note: All growth rates are 4-year percentage changes on chicken menus (2015 vs. 2011).
33 URBAN ORDINARY + COUNTRY BASICS Pulled Chicken Pulled (or shredded) chicken can give either an ethnic or Southern flair to menu items. BBQ Asian Mexican
34 THE NEW HEALTHY POTENTIAL RISKS TO DELI SALES
35 I am trying to eat healthier. A lot of the prepared foods are high calorie and high fat. There is also no nutritional information for most of the foods. -Datassential Survey Respondent
36 Copyright 2016 The Nielsen Company. Confidential and proprietary. HEALTHY 1.0 HEALTHY 2.0 HEALTHY 3.0 WEIGHT MANAGEMENT FEEL GOOD FUNCTIONAL 1980 s to early 2000 s early 2000 s and beyond early 2010 s and beyond Low-fat Low-calorie Low-carb Local Natural Organic Protein Antioxidants Superfoods 36
37 Copyright 2016 The Nielsen Company. Confidential and proprietary. PULSES: crops harvested for their dry seed lentils chickpeas pinto beans kidney beans black-eyed peas fava beans protein fiber vitamins amino acids 37
38 Copyright 2016 The Nielsen Company. Confidential and proprietary. LENTILS +69% menu growth over past decade versatile soups, salads, sides, and more potential meat substitute 38
39 Copyright 2016 The Nielsen Company. Confidential and proprietary. CHICKPEAS +290% menu growth over past decade also a potential meat substitute salads, falafel, hummus, and more 39
40 Consumers state they MOST want healthy options from the following categories: Meat & Poultry Deli Snack Bread Bakery Datassential, New Healthy Keynote 2016, N=1006
41 When consumers were asked how GROCERY STORES could improve PREPARED FOODS Hot and cold prepared foods should have nutritional and ingredient labels 66% Prepared foods sections should make foods from scratch as much as possible 65% Best way to present healthy products is to highlight them with healthy labeling 63% Cold salads and bars should have a both green and grain salad offerings 62% Hot prepared sections should offer more vegetable-based/vegetarian options 55% Datassential, New Healthy Keynote 2016 N=1370
42 How to motivate purchases of prepared foods 1. Comfort-food favorites are a launchpad for healthier graband-go. 2. Food with a story highlighting scratch style preparations such as: House Made, Scratch, Hand-Breaded etc. 3. Nutritional information may draw attention to prepared foods section. Q: which of the following do you agree STRONGLY regarding the PREPARED FOODS SECTIONS? Datassential, New Healthy Keynote Report 2016 N=1370
43 Copyright 2016 The Nielsen Company. Confidential and proprietary. KEY GAPS How restaurants are responding vs. demands Operator Consumer Gap Antibiotic-free / hormone-free 19% 43% <<24%>> Sourcing indicated 18% 38% <<20%>> High protein menu items 13% 32% <<19%>> Smaller portions of higher quality meats 15% 33% <<18%>> Meats blended with plant-based ingredients 13% 30% <<17%>> More informative menu descriptions 12% 29% <<17%>> World Cuisine Dishes 21% 28% <<7%>> 43
44 WELL RECEIVED CHANGES More World Cuisine 86% More high protein items 83% Higher-quality meats 78% High-impact preps on produce 78% Less expensive cuts of meat 77% Antibiotic free 75% Blending plant & animal proteins 75% LEAST SUCCESSFUL Add / replace meat with non-meat 50% Reducing overall menu size 49% Reducing portion of animal protein 45%
45 Brick Oven Roasted Chicken Unbranded PI 99 Uniqueness 32 Bertucci s Half chicken marinated with lemon, fresh sage and garlic for 24 hours then baked to juicy perfection in our 650 degree brick oven. Served with.
46 Mediterranean Chicken Burger Branded PI 85 Uniqueness 49 Back Yard Burgers A delicious blend of all-natural chicken blended with spinach, mozzarella, quinoa and peppers flame grilled and served on 5-grain flatbread with crumbled feta cheese.
47 CAMPFIRE CHICKEN Enjoy camp-style cooking over an open fire with a half chicken seasoned with Cracker Barrel Campfire spice blend and slow roasted 'til tender with fresh carrots, corn on the cob, red skin potatoes, chopped onion, and tomato wedges. We cook and serve it in foil to seal in all the savory juices. Purchase Intent Liking Uniqueness Draw
48 WHAT DOES THIS ALL MEAN?
49 THERE IS A WINNING STRATEGY FOR ALL! Strengthen Basics 1. Emphasize convenient, portable, on-the-go complete meals & snacks 2. Communicate about the Deli cross promote & draw them in 3. Connect with your consumer through Food with a Story Build Innovate 1. Leverage restaurant brands to build perception. 2. Cater to different meal occasions via variety of products 3. Compete with on-trend foods and add local preferences 1. Elevate your deli to a dining destination. 2. Be transparent to win the health-conscious consumer 3. Consider technology as vehicle for promotion
50 THANK YOU! Sarah Schmansky, Director Colleen McClellan, Director
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