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Your New Best Customers

Millennials are cooking more, but they want help from the deli

On June 25, in “The State of Fresh: Are Fresh Foods Really Stealing Sales From Non-Fresh Foods?” Nielsen Surveys said overall fresh department sales have increased by five per cent, with deli sales showing a volume growth of six per cent and dollar growth of nine per cent.

The reason for this growth? Changing consumption patterns: more people are assembling meals using prepared and semiprepared products from the deli. A rising generation of consumers want to be involved with food preparation but also want to have much of the work done for them.

Yes, it’s the millennials again — that trendsetting, culture-changing demographic.

“[Millennials] are more into having different experiences. They’re more open-minded in exploring, trying new things, ethnic foods,” says Sami Demnati, key account manager at
Fontaine Sante. “Millennials are very important for any food company because they are the future.”

Millennials are also very important to the deli.

The IDDBA’s “What’s in Store 2015” report says, “Millennials are likely the most frequent customers in the deli, as it appeals to several values the generation tends to share, such as convenience,
variety, the ability to experiment with food without needing culinary experience, and quality and freshness of products.”

Megan Deaust, marketing manager at Bothwell Cheese, says, “Keeping the millennial generation top of mind will continue to be a key driver of success in the deli.”

It’s not a demographic to underestimate. IDDBA research says U.S. millennials will outspend boomers by 2018 as over $65 billion in grocery spending shifts from one group to the other. While these are U.S. figures, Canadian retailers should pay heed. In the Internet age, trends cross borders like they aren’t even there.

For meal assemblers, the border between “home-cooked” and “storebought” is equally inconsequential.

Deli sales are showing both volume growth and dollar growth.
Deli sales are showing both volume growth and dollar growth.
Numbers to Note
From FMI’s (Food Marketing Institute) 2014 shopper study
• 12 per cent of meals sourced outside the home that come from supermarkets
• 24 per cent of consumers who buy fresh prepared meals from the grocery store instead of eating out in order to save money
• 25 per cent of all meals consumed by twenty-something consumers that include items purchased that same day
• 43 per cent of primary grocery shoppers who are male
• 71 per cent of consumers who rate the fresh food deli as an important factor when selecting a primary retailer
• 96 per cent of shoppers who say they notice the nutrition facts panel

“We are finding that consumers are increasingly searching for convenient and simple ways to prepare a meal at home, and the deli helps to bridge the gap by providing consumers with fresh
ingredients to prepare meals or semiprepared dishes to make cooking at home a bit easier, while still allowing for some skill development,” says Chris MacDonald
from Bosa Foods.

The cheese category is a clear example. “Consumers are heading to the deli for premium convenience items, such as shredded, cubed, snack packs, variety packs, slices, party trays, etc.,” says Deaust.

Enter the “Groceraunt.” According to Nielsen’s report “Convenience: it’s what’s for dinner tonight,” in 2013, fully cooked beef and pork outpaced their fresh counterparts’ dollar and volume growth, and dollar and volume sales for fully cooked beef patties increased a remarkable 89 per cent and 77 per cent, respectively.

Paul Douglas from GBS Foodservice equipment says press about the increased profile of hot prepared meals within the grocery store has been substantial over the past year. He says the NDP Group estimates that HMR accounts for $2.4 billion in sales annually and is growing in the high single digits.

“The opportunity to capture the already existing foot traffic within a store and draw them to the hot foods department offers the grocer an opportunity to enhance top dollar revenue and also to improve bottom line numbers due to the increased margins available through a successful prepared meal program,” says Douglas.

So what makes a meal program successful?

Convenience… plus. Convenience is not a new trend, but consumer expectations for time saving have changed. For example, information – deli staff have to be prepared to answer questions.

“Deli operators help to increase the product knowledge of the consumer, providing options and explaining differences and characteristics of product lines, sharing information about the health attributes and origins of the food they are buying,” says MacDonald. Deaust points to another critical area of convenience.

“We have seen an increased demand for varieties that offer smoked and spicy flavour profiles,” says Deaust. “Outside of the cheese category, the trend of convenience flows into gourmet readyto- eat meals, focusing on whole foods, and clean ingredient lists.”

Consumers are avoiding ingredients they can’t pronounce and are making an effort to eat natural, whole foods, she adds, referring to Bothwell’s 100 per cent pure Canadian milk cheese.

Demnati agrees and says millennials favour green, local, healthy, and non- GMO products and will buy them as often as possible. Because of the importance of this, Fontaine Sante is having their products non-GMO certified.

Hummus consumption is another trend indicator. “Hummus continues to be the fastest growing segment within the dip category,” says Demnati, adding that it is an immature market that is still expanding. “The penetration rate in Western Canada for hummus is around 27 per cent. If you look at Quebec, it’s 30 per cent. Ontario is 29 per cent. That means Western Canada is under-indexed in hummus consumption. With less than 30 per cent penetration, that means there’s 70 per cent of households that do not consume hummus.”

Yet, that is. Hummus is a go-to food for the increasing populations of vegetarians and vegans.

According to the Nielsen report, to meet these demands, deliprepared options continue to expand. The number of unique items sold in store for deli-prepared salads and sides each increased by more than 10 per cent in 2013. Variety and flavour are important in imported foods, as well, says MacDonald.

“Consumers are constantly searching for high quality and are constantly being exposed to an expanding and evolving food culture,” he says. “We are finding that many consumers want to ‘travel the world’ via their food, and we have recently attempted to grow our product lines to accommodate this expanded global interest.”

Bosa Food’s new product line from Spain answers that interest.

Many retailers are expanding their deli departments and updating equipment.
Many retailers are expanding their deli departments and updating equipment.

“Gourmet and premium options are more sought-after as consumers are finding it to be worth the time and money to try something new, valuing taste over price,” says MacDonald.

“We are seeing a shift to higher-quality and higher-priced meats taking centre stage behind the glass of many delis and many delis adding on higher price point options to allow themselves the ability to upsell a customer to a better product with better margins,” he says. Hot foods are changing, too.

“Customers are looking for more than just a rotisserie chicken and french fry offering,” says Douglas. “They are looking for a wider variety of prepared foods with a trend towards more healthy products.”

Douglas suggests expanding options for vegetables, creative proteins, and products connected to health-conscious lifestyles, such as quinoa.

Product Showcase

Get the Right Equipment
Adding hot food to your deli is smart, but requires investment in proper ovens and merchandisers to safely hold the product and minimize deterioration, yet display the product compellingly. “The retailer needs to make the investments in physical space to accommodate the department and must have adequate skill behind the counter to produce products in a proper and consistent fashion,” says Paul Douglas, GBS Foodservice equipment.
Clean Labels & Local Ingredients Sell
Millennials are label readers. Combine this with increased efforts to eat local, natural foods and you are well advised to promote products that fit that description. “We believe the highest quality and best-tasting product comes from cheese made with 100 per cent pure Canadian milk. This means there are no artificial ingredients, preservatives, or modified milk ingredients used in the production of our 25 varieties of cheese,” says Megan Deaust, Bothwell Cheese.
Include Upselling Opportunities
The real appeal of higher-priced deli items: making more money by upselling products like the Spagnia line to suit a wider range of tastes and preferences. “We have found that retailers are much better able to control margins in a category plagued by shrinkage/trim loss, customer service costs, and other costs by having a good selection of higher- quality, higher-priced, higher-margin meats in their case,” says Chris MacDonald, Bosa Foods.
Offer Brand Variety
Hummus is the fastest growing segment within the dip category and Sami Demnati (Fontaine Sante) encourages retailers to offer more of it — but not just his line. “Retailers will benefit by bringing two to three different brands and this will benefit their whole category not only the brand, because people are introduced into the category. I know space is limited, but the future is in vegetarian products. People want to eat less and less meat.”

“The products need to be creative, they need to be fresh, and they need to be ready to go when the client wants them,” says Douglas. “We have seen several trends away from the old staple of cooked product resting in heated display cases. Innovative and effective packaging can allow for a retailer to prepackage products and still merchandise them hot and fresh to the customer.”

And don’t be afraid to mix things up: assortment is good, as long as it is orderly.

“Ensuring shelf shopability or ease of navigation is very important in areas of wide product assortment,” says Deaust. “Often shelves or bunkers get cluttered with many brands and varieties. Clear signage, pairing suggestions, and product samples will go a long way to ensuring shoppers do not get intimidated and spend time at the shelf evaluating their options.”

Cros-merchandising is an effective way to help capture sales.

“Retailers should think outside the deli, and look to implement various marketing tactics to drive interest in the deli. Guiding shoppers in how to use the product is a great start,” says Deaust, suggesting Horseradish Cheddar next to Many retailers are expanding their deli departments and updating equipment. prime rib, Jalapeno Monterey Jack next to premade hamburger patties, and shredded cheddar next to the eggs.

“Product adjacencies directly in the deli such as crackers, cutting boards, or honey is a great way to create interest in the category and increase basket size,” she adds.

To accommodate the growing number of deli products, many retailers are expanding the department and updating equipment. This is especially true for hot products.

“We’ve also seen the merchandisers change to new technology that can hold these prepared foods at the proper temperature — food safety — in better condition and for longer periods of time,” says Douglas.

“More and more, customers want this offering to be part of their neighbourhood grocery store,” he says.

While this new generation of consumers is shopping in a different way than previous generations, it does provide retailers with some new opportunities. Millennials and the deli: it looks like the beginning of a beautiful friendship.

 

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