For decades, we’ve looked at retail foodservice consumers and their purchasing decisions under the scope of two major points — price and convenience.
If it’s not a tremendous value and it’s not ready to eat, or at least tantalizingly close to consumption-ready, consumers are likely to pass by a foodservice option in their local supermarket or c-store. At least, that’s how the thinking went.
But according to new research from instore magazine and Cypress Research Associates, consumers say that freshness is the No. 1 purchasing driver over all other attributes.
The study revealed that 96 percent of consumers say that they have purchased fresh prepared foods to go from a supermarket deli, bakery or c-store. While price and convenience are very much still an integral part of consumers’ purchasing decisions, 91 percent of the study’s respondents said the freshness of the food was either important or extremely important, the highest of all categories.
It’s a trend that Scott Fox, vice-president of bakery operations for Dorothy Lane market, says is already in play in the industry.
“Price is not the impression we put the most focus on,” he says. “Instead, it’s the freshness and quality of the product, along
Diane Earl, senior director of prepared for United Supermarkets, says she agrees. United’s 37 locations across Texas — along with its Market Street, Amigos, Albertsons Market and United Express locations — have put even more emphasis on freshness lately, and the initiative includes more than just taste.
“Freshness is, first and foremost, on everybody’s mind now,” Earl says. “It has to look great in order to sell. If it doesn’t look like it was just prepared, they’re not going to pick it up.”
United, in fact, has a designated chef who — along with the company’s R&D department — works on the appearance of food in order to enhance its fresh appeal. “That’s all he does,” Earl says. “He works on recipes and does extensive research on how long the product looks great under heat. That’s how important freshness, and the perception of freshness, really is. People shop with their eyes.”
Underscoring this, the study revealed that the top reason those who say that they haven’t bought prepared foods from a c-store in the last year is that it isn’t fresh enough. So what can c-stores do to change that?
The National Association of Convenience Stores has actually long been on the case, encouraging more c-stores to incorporate fresh foods into their offerings to dispel the notion and exploit this room for growth based on consumer demand. The association also has its reFresh Initiative, launched two years ago, that focuses especially on food offerings in c-stores and works to show their proprietors how they can take advantage of the trend for a bigger bottom line, and contribute to spreading the word that c-stores’ food offerings can be just as fresh as those sold in other channels.
“Last year we published findings from the Hudson Institute that showed that one of the three big opportunities that c-stores have is to tell people that we have fresh food,” says Jeff Lenard, vice-president of strategic industry initiatives for the National Association of Convenience Stores. “Too many don’t go beyond the gas island to see how stores have evolved to have much more fresh offerings. We also heard a similar message from Frank Beard, who recently tried an experiment and ate nothing but gas station food for 30 days. He says that based on his experiences, we can tell the consumer a better story — about how we can take the store to them, as opposed to expecting the consumer to come to the store. And, by the way, Frank lost six pounds during his experiment – while finding and eating healthy food, all from convenience stores.”
There’s one thing that came through across both supermarkets and c-stores however, and that’s the marked increase in consumers that are purchasing prepared foods from them.
“Nearly 40 percent of consumers tell us their purchases of fresh, already prepared foods from foodservice retailers are increasing, clearly lead by millennials,” says Marjorie Hellmer, president of Cypress. To be specific, the increase is 38 percent across all consumers, with the numbers decreasing according to age. Fifty percent of millennials say that they now buy prepared foods from supermarkets and c-stores more often than in the past, with 38 percent of Gen-Xers and 26 percent of Boomers saying the same.
Perception key in healthfulness
As part of the survey, respondents were asked to rate the importance of eight factors on a five-point scale when considering whether or not they would buy a prepared food item from either a supermarket or c-store.
As noted, the numbers that came back from this question showed that shoppers value freshness first, convenience second, and a fair price third when they consider whether or not to purchase a prepared food. Most respondents say the freshness of the food is the strongest shopper motivation, with 91 percent of them rating this quality as a four or five on the five-point scale. Eighty-six percent gave the same rating to convenience, with the actual price/value of the food coming in third at 82 percent.
Now, considering the overwhelming demand for organic, locally-sourced, and other buzzword-oriented foods in the marketplace, it might seem strange that healthfulness of the food came in sixth out of the eight qualities on the purchase-priority scale. When broken down by generation, it seems even more odd: Gen X is the one most driven by healthfulness, with 68 percent of them deeming the quality ‘extremely important,’ while around 60 percent of millennials and Boomers agreed.
Why would millennials rate the health aspect of food so much lower in priority than satisfying a craving or indulgence, while at the same time they’ve largely led the charge on sustainability and transparency, and the overall demand for healthier and more understandable ingredients? There are a variety of explanations for this, as those experts brought in to review the data for themselves affirmed.
According to Eric Richard, education coordinator for the International Dairy-Deli-Bakery Association, it’s more about how any given shopper perceives that one word — healthy — to be.
“While the ‘healthfulness’ of a product is still an important consideration for some consumers, I think these results illustrate consumers’ growing desire for ‘real’ food,” Richard says. “This means food with natural ingredients (including real sugar) and fewer ingredients, as well as being ‘free-from’ certain other ingredients. In many cases, it also means ‘fresh’ and not containing any artificial preservatives or flavors. This is a shift from the previous ‘healthfulness’ trends that focused more on replacing those perceived undesirable benefits with other substitutes.”
Lenard adds that it’s important to remember that the words healthfulness and fresh are closely intertwined, and distinguishing between the two words can be different from person to person. So while healthfulness may appear down in the ranks, the overwhelming response to freshness sets this into perspective.
“Healthy is still a very important attribute, but it’s somewhat wrapped into fresh,” Lenard says of the two qualities. “Again, NACS consumer surveys show similar results. ‘Fresh’ tests better than any other word — even words like healthy, wholesome, and nutritious — because it’s the only one that also is a proxy for taste. Fresh is a shortcut for people to think both tasty and healthy.”
So by and large, when it comes to these answers regarding why a millennial consumer buys the prepared foods that they buy, and what might make them want to buy more of them, it really comes down to the semantics of fulfillment, as Hellmer said when Cypress and instore first presented the survey results to industry executives via webinar.
“If we look at the effect by age groups,” she said, “purchasing drivers are generally the same across generations, with the exception of millennials purchasing decisions being driven more by gratification.”
Millennials always valued craving, indulgence and comfort over Boomers in the survey, though Gen Xers, who valued healthfulness the most, concurred with their younger counterparts on their next three values, showing that it’s these four qualities that will draw in the most consumer dollars.
Though as Phil Lempert, food industry analyst and editor of SupermarketGuru.com points out, this doesn’t mean that millennials and Gen-Xers agree on everything — the data merely shows that millennials are more driven by gratification than older generations.
“Millennials are very different than Gen-Xers,” he reminds us. “Millennials want the following from their foods: spontaneity, adventure, taste, free-from ingredients, freshness, uniqueness, no GMOs, an understanding of where their food comes from and of the company that makes their food, and how that company fits into the community. They never want to eat the same food twice in their lifetime.”
And that too can explain why millennials can on the one hand spearhead huge changes in the industry that lean toward being more health-conscious, and on the other, want qualities like indulgence and comfort out of their food more than older generations. For them, the two aren’t mutually exclusive. And when viewed through that lens, there really doesn’t seem to be any great disparity at all.
Why c-stores don’t reflect well in stats
There is one fact that all of the data seemed to point out loud and clear: when considering where to purchase their prepared foods, shoppers more often look to supermarkets than c-stores, and for a variety of reasons — all of which can lend insight into how to kick up those profit margins for the latter.
“Among all respondents, 93 percent have purchased prepared foods from supermarkets and 61 percent from c-stores,” Hellmer says. “Slicing the data by our three age groups, we see that millennials and Gen-Xers are the leaders in purchasing prepared foods from both channels, but with much higher proportions buying from supermarkets.”
Though again, there are other factors to consider. “There definitely is a disparity, but it may not be as great as consumers say,” Lenard adds, who as part of the NACS has grilled consumers on anything and everything related to c-stores, and found that sometimes it’s their very convenience that can work against them during those surveys.
“Consumers are much more likely to recall supermarket visits because they have a limited set of favorites that they regularly use,” he says. “However, they also may go to dozens of different convenience stores during a year, whether in town or on the road, and they may not easily recall each visit. We’ve encountered the same situation in polling, and found that c- store trips are often too convenient and hassle-free to stand out, and that we needed to prod respondents to get a full recall of their experiences.”
Richard, having done ample survey work himself in regard to the supermarket channel with IDDBA, also says there’s more to see between the lines of these results than you might think at first, and context is key.
“I think (the cause of the gap) comes down to two factors,” Richard says. “First, traditional supermarkets continue to expand their selection of prepared food items in keeping up with industry trends and tastes. Second, most consumers do the majority of their shopping in supermarkets. They’re already in the store, so it makes logical sense that they would be more likely to purchase prepared food items there rather than at c-stores. That said, it’s important to note that some c-stores have made a strong push in capturing a greater share of the freshly-prepared market by adding more in-store options for shoppers, like made-to-order sandwiches and freshly-baked bread.”
Supermarkets are on the right track
Of the 950 people surveyed for this study, only 70 of them said that they have not purchased any prepared foods from a supermarket in the last year. Both groups were asked to rank their level of agreement with various statements regarding supermarkets’ prepared foods offerings — that they are fresh, interesting, convenient, and so forth — and those answers were then compared and contrasted to gain further insight into these shoppers’ minds.
What was uncovered is a clear demonstration that not only does almost everybody know about retail foodservice and buy prepared food items, but they’re very happy about the development within the industry — and rate their supermarket’s prepared food performance far higher than those who haven’t bought any in the last year, giving them an average approval rating of 38.25 percentage points higher than their counterparts.
Ninety-five percent of those those same consumers who say they have purchased prepared foods in the last year also rated supermarket performance highest in the quality of being easy to grab-and-go. Grab-and-go is followed by being able to satisfying a craving in the moment, freshness, having strong visual appeal, and of course, indulgence.
“Among non-purchasers, it’s worth noting that 77 percent recognize that supermarket prepared foods are easy to grab-and-go,” Hellmer says. “There is a clear opportunity for supermarkets to improve perceptions among those non-purchasing consumers that their prepared foods are fresh, a good value for the price, and are visually appealing. If you improve these perceptions and add to it the already strong recognition that the items are easy to grab-and-go, supermarkets will have a full-value proposition in the most important purchasing drivers.”
Richard agrees, adding that perceived health benefits and a prepared food’s ‘free-from’ or ‘full-of’ ingredients list are also important to tout.
“Today’s shoppers want to know where the food they’re consuming comes from,” Richard says, “so it’s important for retailers to promote this in all of their messaging channels, from the product’s label and display signage, right up to its marketing — be it print, Web, or social media.”
Richard also suggests that catering to younger generations’ adventurous palates is a good way to up-jump sales. “Retailers should stay in tune with trending cuisines and flavors to develop new grab-and-go concepts, and think outside of the box when they develop them, in ways that make your stores stand out.”
And as you might have already guessed, younger respondents are more inclined to agree with the favorable statements about grocery stores than older ones — millennials and Gen-Xers gave supermarkets higher approval over Boomers in five of the eight categories rated, differing by 10 to 16 percentage points from their elders.
Profit potential shows itself
So what are the most frequently purchased prepared foods in the supermarket? The data is as encouraging as it is obvious: baked goods and fully-cooked meats take the top spots. Because who doesn’t like being able to pick up some rolls with their rotisserie chicken on the way home from work, or a slice of cold cream pie with their hot wings?
“This finding shows the overall trend in prepared food consumption at the supermarket level,” Richard agrees. “As recent studies have shown, people are eating away from home at a higher percentage than in the past. Supermarkets can capitalize on this by offering a variety of choices for shoppers looking for fully-cooked meal options, and baked goods pair nicely with these fully-cooked meals.”
Richard went on to say that while bakery department sales have actually gained by 5 percent over the last year, in-store bakery bread sales have actually remained flat — or in some cases, they have even dropped off. But in light of prepared foods, the time has never been riper to kick those sales back up.
“Retailers can boost their bread sales by pairing it with other products that shoppers might naturally purchase in the same basket, like in the rotisserie chicken example,” he says. “These correlations exist both in fresh perimeter departments and in center-store, and they create opportunities to engage shoppers on eating occasion ideas, and ultimately, help to drive sales.”
Following closely behind baked goods and cooked meat are deli sandwiches and prepared salads, with the four categories seeing only 7 to 11 percent of respondents saying that they would not or would never buy those items, and the rest predominantly saying they already have or would.
The white space for future growth, of course, lies within that section of people who ‘would’ buy these items. “There’s a clear opportunity for growth across all of these categories,” Hellmer says, “but in particular pizza, side dishes, prepared salads, and cold and warm deli sandwiches have great potential.”
That potential can translate into very real profits. For example, this means that there’s potentially 36 percent more people— which translates to 342 out of every 950 of your customers — that would start putting their money where their mouth is if you begin offering prepared pizza. Thirty-two percent would buy sides alone. So if your supermarket sees 950 or more shoppers a day, expanding your offerings could lead to a marked increase in sales.
C-stores still fight wrong perceptions
Convenience stores tell a different story. Of the eight different categories rated in regard to their performance, they share their top three with supermarkets (easy to grab-and-go, satisfies a craving in the moment, and is indulgent) but lacked a high performance in freshness and visual appeal, which came in at 59 and 65 percent, as compared to supermarkets’ 79 and 78 percent.
While supermarkets’ positive ratings ranged from 51 to 95 percent, c-stores’ rated 47 to 91 percent among purchasers of prepared foods. Similarly, non-purchasers rated supermarkets’ performance between 19 and 77 percent, while c-store non-purchasers rated their performance between 17 and 69 percent, showing again that overall — whether or not you buy them — supermarkets are viewed as having better prepared foods than c-stores. And again, it all comes back to what is actually perceived as fresh.
“(The perception of) health in the c-store environment has always been low,” remarks Lempert. “It’s about the c-store shopper who is used to seeing a roller grill with hot dogs that are sitting there all day — that’s the image baked into their brains. I think it’s time for brands to treat c-stores the same way they do supermarkets, and that means giving them promotional materials and sampling opportunities so customers can understand the exact attributes of the food and become users.”
C-stores face a number of challenges in highlighting the freshness of what they have, Lenard says. With their limited space and less frequent deliveries, they’re unable to really convey that critical attribute as easily as supermarkets can.
The advantages that supermarkets have over c-stores are in the realm of perception, he says, but it’s not all bad news — c-stores have a lot of opportunity for growth right now. Most of them just have to change the way they look at how they’re offering their foods and setting up their displays.
“At grocery stores, it’s critical to have displays that have an abundance of product — no one will purchase that last apple because the assumption is that it wasn’t good enough for everyone else,” he says. “A display may not ‘pop’ in a consumer’s mind when you only have a few pieces of fruit.”
Lenard also stresses the importance of changing the way c-stores perceive themselves, urging those retailers to not only walk a mile in the shoes of their consumers, but in the shoes of their competition as well. Doing so could make all the difference in driving profits up, he says.
“We’ve seen that some of the best examples of c-stores that have transitioned to having more fresh offerings are those in which the leadership teams have a grocery background,” he says. “Kwik Trip is one example — the company has about 400 stores, and it sells 400 pounds of bananas per store per day. Green Zebra is another example; their CEO Lisa Sedlar was previously the CEO of a grocery chain. And of course there’s Trader Joe’s, which started out as a convenience store called Pronto Market.”
Furthermore, this data shows that for convenience stores, the bulk of their prepared food sales really are a result of their being at the right place at the right time, satisfying today’s predominant consumer desire for instant gratification. Simply put, it’s the convenience of convenience stores that keeps their prepared foods selling. And when you consider how millennials and Gen-Xers value indulgence, for example, convenience stores are already designed to cater to them, with the impulse buy at the top of the mind.
“Convenience stores are well-placed to benefit from the trend toward immediate consumption,” Lenard agrees. “Eighty-three percent of all items purchased at a convenience stores are consumed within an hour of purchasing. Expanding your food offerings can also capture a greater share of sales for travelers. Instead of stopping to get gas, something to eat and use a restroom at multiple places, they can just make one stop at a convenience store.”
Richard agrees, pointing out the ‘within an hour’ stat and noting that while c-store customers are not likely to be looking for ingredients for home cooking, they are often seeking a quick and easy meal solution, which only holds more promise for the channel.
“For other consumers, c-stores could be a food-shopping destination, just as a traditional retailer,” he says. “This demand has spurred some c-stores to expand their food selection, including fresh perishable offerings, as more consumers view it as not just a place to fill up with gas, but to purchase food items for themselves and their family.”
Healthy is huge for c-stores shoppers
When asked about their purchasing history, respondents showed that fresh prepared foods are bought from convenience stores about half as often as they are purchased at grocery stores. On the flip side of that coin, however, convenience stores showed the greater promise when it came to future growth opportunity.
This is illustrated by the fact that supermarkets have a range of 17 to 36 percent of respondents saying that they would purchase certain cuisines there if they were offered, while c-stores jumped that with a range of 29 to 36 percent who say they would.
“By looking at what people would purchase we can see clear growth opportunities in c-store prepared foods across all categories,” Hellmer says of the data, “but in particular some of those healthy-for-you sets like fresh-cut fruits, veggies and prepared salads.”
This further illuminates the current perception of c-stores being the place to go for indulgent (but not necessarily healthy) foods, as well as the coming demand for that to change. The potential for a future shift in this perception is immense — for example, 63 percent of people surveyed say they have or would buy salads from c-stores, and 62 percent say the same of freshly cut fruits and vegetables.
It should be noted that the foods that were offered as options within the survey were slightly different for both retail channels. While respondents are asked if they would purchase baked goods, fully-cooked meats, deli sandwiches, prepared salads, sides, pizza and sushi from supermarkets, they were not asked if they would purchase sushi or sides at a convenience store, but rather burritos and fresh cut fruits and vegetables. Baked goods, deli sandwiches, prepared salads and pizza were included as categories for both channels.
As in supermarkets, millennials lead the pack in percentage of those who have purchased these six cuisines at a c-store before, with Gen-Xers only beating them out by 1 percent in purchases of deli sandwiches and baked goods. Overall, millennials’ purchase history of these items ranged from 38 to 53 percent, Gen-X from 28 to 54, and Boomers from 13 to 28, further showing a predictable, steady increase of prepared foods at c-stores in the future. Those products that currently sell best among the two younger generations are deli sandwiches, baked goods and pizza. Freshly cut fruit and vegetables came in last, though as mentioned before, this could very likely change as the industry grows into itself with the support of millennial dollars and their changing attitudes toward what’s healthy and where they’re willing to buy it.
Everyone wants snacking options
As many other studies have shown, snacking is increasing among Americans, and that held true when instore asked respondents about their purchasing behavior in regard to daypart. According to our survey, purchases of prepared foods for snacking is increasing above all other eating occasions by 22 percent, with dinner increasing at 21 percent, lunch at 19 percent, and breakfast at 13 percent.
“Snacking is probably the biggest trend I’ve seen in the 15 years I’ve been in the industry,” says Earl (of United Supermarkets). “People want small, convenient and fast.” United is responding to that demand with products like compartmentalized snack packs and, even more recently, eight-packs of slider sandwiches. The sliders, she says, have been utilized mostly for snacking, but also for office parties, tailgating and kids’ lunches.
Naturally, millennials are leading the way when it comes to purchasing more prepared foods for all four eating occasions, too. Snacking is the most common occasion for purchases of prepared foods across all generations with the exception of Boomers, whose prepared food purchases are highest for dinner. Dinner, in fact, is the most popular for the other generations after snacking, followed by lunch. Again, we see that breakfast is getting the least amount of favor, with 20 percent of millennials, 13 percent of Gen-Xers and a mere 6 percent of Boomers seeking out prepared foods for the occasion.
The majority of survey respondents (65 to 69 percent) say that their purchases are remaining the same for all four occasions measured. But when it comes to decreasing frequency of these purchases, breakfast shows the highest number by far, with 19 percent saying that they’re buying less prepared foods to start their day.
Whether this leaves breakfast open as a white space full of potential to grow or an occasion that has seen its time pass and will continue to shrink, only time will tell — but according to the survey results, breakfast is the only daypart where purchases of prepared foods are decreasing more than they’re increasing (though for perspective, 68 percent say that their breakfast purchases are remaining the same).
Fox, with Dorothy Lane Market, says the breakfast daypart holds potential. The challenge is that consumer behavior takes a sharp downturn during breakfast when compared to all other dayparts.
“The thing with breakfast is it needs to be convenient. It needs to be quick,” he says. “And you’ll find that people often eat the same thing for breakfast. Lunch and dinner, you’re always looking for something different, but I think you’d be amazed how many people tend to eat the same thing every morning.”
Earl suggests that supermarket breakfast sales might be impacted by the market. United’s stores in West Texas, for example, are experiencing strong sales with products like their breakfast burritos. The company’ locations in the Dallas-Fort Worth metroplex, on the other hand, have seen much slower success.
“In DFW, it’s more of a commuter situation,” she says. “People are in their car and they don’t have time to stop and walk in to get something. That’s further illustrated by the fact that breakfast sales are huge in those areas on the weekends.”
The future does look bright
The good news overall for the retail foodservice industry is that while most respondents — around 60 to 70 percent — said that the frequency with which they purchase prepared foods has stayed the same, more said that it is increasing than decreasing.
“For the subset who indicated that their purchases are increasing, we asked why and found that convenience is the leading driver of this increase,” Hellmer says. “This is followed by the improved quality of the food, its affordability, providing healthy food options, and because it takes less time to prepare the food for themselves or others.”
By all means, 67 percent say that convenience is their top motivator for buying prepared foods. While still considerable in their percentages, these foods becoming more available and the opportunity for bold flavor combinations were lower in rank, at 40 and 30 percent.
So if the American palate is becoming so much more diverse, bold, adventurous and spicy, why do the two reasons that included these qualities rank in the bottom three reasons for purchase? That can be explained with one word: tastemakers.
It’s the tastemakers that are driving these trends right now, but it always takes a while for a trend to become fully manifested in the populace at large. Retailers should stay in tune with trending cuisines and flavors. This survey is a snapshot of the here and now, with the idea that if one can understand what is happening in the present as well as what has happened in the past, then they stand the best shot at predicting the future.
For example, one might also ask that if convenience is such a leader among these reasons, why haven’t we seen more of an increase in sales within c-stores? Again, we haven’t seen it yet, but clearly the demand is there, so it’s almost inevitable that the more convenient those convenience stores make themselves in regard to their prepared foods, the more they’ll start selling them. All in all, the future of retail foodservice is extremely promising.
For c-stores in particular, Lenard and NACS see nothing but expansion in prepared foods, an increase in sales, and resulting reatiler growth in the future.
“There are three factors that c-store retailers cite as drivers of business,” he says, “the weather, gas prices and food. The first two are essentially beyond their control, but food presents the biggest opportunity to continue to grow sales. These findings very much mirror what we are seeing at convenience stores. Consumers are seeing more fresh items in convenience stores and they are buying more of these items. But, they also tell us they expect much more – and that is the real opportunity.”
And not just for them, but for all retailers — today’s retail foodservice customer is encouraging it more every day, with every purchase. As Lenard points out, it’s never been a better time to be in the business of prepared foods.
“The good news is that we aren’t ahead of the trend here,” he says, “but right in line with it.”