KANSAS CITY - Many retail grocery departments saw a surge in demand with the onset of COVID, and overall grocery sales were up nationwide.
But not all departments thrived, and some suffered because of the hands-on nature of their products and services. Of these, none has been hit harder than retail foodservice.
A new report from Arlington, Va.-based FMI – The Food Industry Association, however, finds that despite the challenges it faces, retail foodservice is well-positioned to compete for more of the total foodservice pie going forward.
“Food retail business owners navigated state and local challenges to operations and adapted by redistributing labor across the store, and foodservice employees embarked on their new roles maintaining sanitation and supporting shelf-stocking during times of unprecedented consumer demand for essentials,” Rick Stein, FMI’s vice president of fresh, said in the report, The 2020 Power of Foodservice at Retail, which was sponsored by Hussmann Corp.
Almost at the beginning of the pandemic, share of dollars spent at-home and away-from-home for food flipped, with food-at-home dollars moving from 50% in February to 68% in April, and food-away-from-home dollars moving from 52% in February to 32% in April. Still, retail foodservice sales were down 17% March through July, according to FMI.
Fewer trips were made to the grocery store due to shelter-at home mandates. Food, beverage and household product online purchases were up more than half, which contributed to foodservice loss for those businesses without the ability to offer digital convenience as an option.
To address these challenges, the report recommends three main things for retailers to keep in mind when plotting their retail foodservice futures:
- Reinvest in Top-of-Mind Awareness
- Building a reputation for foodservice starts with stronger and more direct communication with shoppers
- Emphasize Convenient, Healthy Meals
Also central to any retail foodservice strategy: highlighting technology solutions.
“Seventy percent of shoppers say the ability to order the food in advance, whether via app, online or phone, would positively influence their decision to order from retail foodservice instead of restaurants or cooking,” according to the report.
The analysis suggests the ease of ordering could be more seamless, from separate apps or integrated apps with grocery ordering, for example, as well as in-store pick up, curbside carryout and delivery options.
COVID fundamentally changed foodservice businesses for both restaurants and food retail. While certainly not at the same devastating levels as restaurants, grocers witnessed similar challenges as state and local mandates shuttered instore foodservice, self-serve and hot food bars.
Food, beverage and household product online purchases were up more than half, which contributed to foodservice loss for those businesses without the ability to offer this digital convenience as an option, according to the report.
Two-thirds of the meals consumers make at home are prepared from scratch with semi- or fully prepared items to complement the meal. Retailers can be a solution for this growing segment of customers, according to FMI.
Additionally, the association’s analysis found that nearly one-third less of shoppers are deciding what’s for dinner on a daily basis compared to 2019, offering an opportunity to help consumers meal plan a few days at a time or even for the entire week. The pandemic continues to limit what restaurants can offer for instore dining due to capacity restrictions and consumers’ wariness of dining out, but carry out and pick up opportunities are popular.
In addition, the study found that nearly 65% of shoppers say they focus a lot or put some level of effort against choosing healthy, nutritious meals when buying from grocery foodservice.
A growing category
Retail foodservice has been an area of growth for the grocery industry for several years, and 2019 was no exception. Leading up to the pandemic, dollar sales for retail foodservice overall (including beverages and other ancillary items) were up 3.4% and deli-prepared foods were up 3.1%, according to Nielsen.
This was based on slightly higher household engagement, at 94.3%, more trips, at 21 per year, and a greater purchase size, at $8.04 per transaction.
However, the pandemic fundamentally changed the growth trajectory of retail foodservice, much like it did for restaurants, according to the FMI report. As retailers had to close self-serve buffets starting mid-March, dollar sales for deli-prepared foods quickly declined. Pre-packaged solutions were able to offset some of these declines, but sales decreased 17% during the pandemic period between March and the end of July.
“Throughout the pandemic, shopping patterns have been very different, with fewer but bigger trips,” the report says. “People were less likely to plan dinner one day at a time (26%) and more plan dinner a few days at a time (46%) or lay out the entire week (29%).”
Meal planning is closely related to eating more meals at home. The number of home-prepared dinners shot up from prior-year levels to an average of five per week. Meal preparation increased across demographics and mixing items prepared from scratch with semi- and fully-prepared items (58%) remains the most common way to cook, according to FMI data.
Five months into the pandemic, some challenges surrounding meal preparation were starting to emerge. Among them: not being in the mood to cook (53%) and difficulty in coming up with new meal ideas (47%).
“There is enthusiasm for meal bundles, all items to prepare one meal, among 49% of shoppers and 68% of high-frequency deli-prepared buyers,” according to FMI.
Store trips, including trips just aimed at buying foodservice items, average 1.9 per week, and three in 10 consumers now purchase from retail foodservice less frequently versus 21% who purchase it more often.
This led to a drop in the share of high-frequency deli-prepared customers, those who purchase from retail foodservice multiple times a week, from 14% in 2019 to 11% now, according to the report.
Awareness also remains an issue, with only 16% frequently even considering retail foodservice when they decide not to cook dinner. The lower engagement with retail foodservice is first and foremost due to fewer store trips, according to 43% of consumers, followed by being concerned about going into the store (39%). Amenities that many want to see are the ability to order in advance (70%), curbside pickup (68%) or stores having drive through (66%).
Not everyone likes ordering kiosks/screens altogether (24%), but even more consumers (48%) are hesitant to touch them right now, particularly boomers.
The pandemic led to a big spike in restaurant orders for pickup and delivery, from 54% in 2019 to 83% and the use of third-party delivery service for restaurant food, from 38% in 2019 to 49% in 2020. Ordering in from restaurants is particularly popular among younger generations. For third-party delivery services, DoorDash and Uber Eats are the two biggest platforms, though some regional differences exist.
“Consumers average 1.9 restaurant orders per week and more among higher-income households, Gen X and urban shoppers. Restaurant ordering is equally driven by three reasons: craving a specific type of food (60%), wanting to treat the household (59%) and the desire to support local restaurants (58%).”
In contrast, only 33% of shoppers have ordered from retail foodservice for pick up or delivery, mostly because it’s not on their radar. More than half, 54%, like the idea of using a grocery foodservice-specific app. Among the 54% of shoppers who have ordered groceries online in the past three months, 52% are interested in adding foodservice items in case they are picking up or taking delivery of orders around dinnertime.
The Power of Foodservice at Retail has consistently found high consumer interest and engagement in grab-and-go. Pre-pandemic, 80% of consumers already purchased packaged salads, well ahead of 63% who bought from salad bars at retail. In hot and cold foods, other than salad, engagement with hot-grab-and-go foods pre-pandemic (89%) also far exceeded employee-served or self-serve solutions.
“If grocery stores were to reopen self-serve areas right now, a large share would not purchase from there, at 45% for salad bars and 43% for hot/cold food buffets,” according to FMI. “About four in 10 would, but only if safety precautions were in place. The top precautions these shoppers would want to see are hand sanitizer stations (68% need to have) and masks for customers (67%) and associates (66%).”
Looking ahead, 67% of consumers feel that the various self-serve areas should reopen once the COVID-19 pandemic is less of a concern.