ATLANTA — Yes, consumers are increasingly concerned about higher prices in instore deli and bakery departments (and pretty much everywhere else).
But no, they aren’t going to stop buying instore products. In fact, retailers who deliver the right kind of premium products stand a lot to gain, maybe more than ever.
Those were among the messages of a June 6 session at the Madison, Wis.-based International Dairy Deli Bakery Association’s annual show led by Cara Ammon and Adam Brohimer of Category Partners LLC.
“This is not about inflation, but inflation is the 800 pound gorilla in the room,” Brohimer said at the beginning of the session, adding that what COVID was to 2020, inflation is to 2022. “It’s messy, and things are going to continue to change.”
Inflation’s toll isn’t in doubt, with unit sales going down as prices go up.
Unit sales in the instore deli rose just 3.2% in the last fiscal quarter, compared to 7.7% unit sales growth in the previous three quarters. The average price of deli items, however, rose 8.6%, up from 4% in the previous quarters.
Instore bakery unit sales were up 8.7%, down from 13.4%, and the average price was up 5.4%, up from 1.5%.
One natural reaction to those and similar numbers might be to slash prices to get volumes ticking back up. But Brohimer cautioned retailers to “be careful not to overcorrect,” and he singled out retail foodservice as one of the categories that shouldn’t suffer from a desire to “make everything cheap” as a way of combatting inflation.
One way consumers are saving money — but not at the expense of instore deli and bakery — is by bringing the restaurant experience home. In November, 67% of Americans surveyed by Nielsen said they were eating at home more. By May, that number had risen to 73%.
People still want premium, Ammon said. But increasingly, they’re turning to a less costly version of it — eating at home instead of at a restaurant.
“Retailers are positioned to benefit from increased at-home cooking and eating,” she said. “And shoppers are more loyal to deli and bakery than to other departments. They can buy Jif anywhere. They’re more particular about where they buy their deli and bakery.”
Especially if their instore deli and bakery departments help them replace what they used to get at the restaurant, Ammon and Brohimer said. In absolute unit gains, for instance, the Complete Meals category was up 11 million units year-over-year, making it the biggest mover in units across the entire instore deli.
“Customers are seeking ‘restaurant equivalents’ at retail, looking for complete meal options.”