Blurring the Line Between Grocery’s Prepared Foods and Restaurant’s Fast Casual Meals

Consumer trends are always changing and it should come as no surprise that Millennials and Generation Z are having a significant impact on the local neighborhood grocery store.  The younger generation, along with many other customer demographics, are looking for fresh, healthier foods that are available quickly and as such they are starting to blur the lines between Prepared Foods at your local grocery store and meals at your local fast casual restaurant.

Studies show both an increase in awareness and willingness to shop for Prepared Foods at the local grocery store and a desire to spend less at traditional restaurants.  From 2008 to 2016, In-store dining and take-out of Prepared Foods from grocers has grown nearly 30% and in 2016 alone accounted for 2.4 billion food-service visits and $10 billion of consumer spending according to a study by NPD.  Additionally, a recent 2018 Alix Partners study showed that consumers are planning to spend less per meal this year when dining out at traditional restaurants with 31 percent of respondents in the survey saying that “lower price” was “important” or “very important” to them in defining value.  The confluence of these two trends position grocers to capture a greater share of the fast casual dining market if they can 1) leverage their brand awareness and reputation for freshness, 2) focus on proper pricing, 3) leverage their potential for available space, 4) provide multiple cuisines in a single location and 5) successfully execute within their Prepared Foods department on a daily basis.

• Leverage Brand Awareness and Reputation for Freshness: In a crowded fast casual dining market where restaurants often come and go, the local neighborhood grocery store often has a long standing presence and strong name brand recognition.  With that brand recognition comes the traditional thinking that if I want the freshest food available I go to the local grocery store, not a restaurant.  Another advantage of a grocer’s brand recognition is that it appeals to a variety of demographics, whereas restaurants often target a more narrow demographic.

• Focus on Proper Pricing: As pricing becomes even more of a consideration for consumers, restaurants are at a disadvantage as they tend to have a higher mix of labor-to-food costs than grocers.  The cost of labor is overshadowing the benefit restaurants are seeing from lower commodity costs, allowing grocery stores pricing to remain lower and more attractive to consumers.  Additionally, quick serve restaurants may only analyze and adjust pricing two or three times a year while many grocery stores are constantly looking at their pricing and tend to have a much more structured and rigorous process around their pricing analytics compared to fast casual restaurants.

• Leverage Potential Available Space: With new competition moving into their markets and the rise of on-line retailers, many stores have had their sales negatively impacted.  With decreased sales, many stores find themselves with extra sales floor space and struggle with how to fill it.  Because no one likes the look of empty space on the sales floor, many stores have come up with many unique and interesting ways to fill the extra space, but these solutions are not always the most logical, visually appealing or profitable.  This extra space can be, through varying degrees of realignment to the stores layout, utilized to either expand an existing Prepared Foods department, to create or expand a customer seating area, or be made available for lease to an outside restaurateur (who in addition to driving lease revenue for the store may also use the store as their primary supplier of ingredients).

• Provide Multiple Cuisines in a Single Location: Through the expansion of a stores existing Prepared Foods space and offerings, the co-location of an outside restaurants or a combination of both, the ability for a store to provide a wide variety of cuisines in a single location is a differentiating factor that most fast casual restaurants cannot match.  According to QSR Magazine, a key factor that is driving the retail foodservice revolution, is giving customers more options of where and what they can eat.  The ability to please everyone in your party all in one stop, whether dinning in or carrying out, is a driving factor to Generation Z, Millennials, Families and even Baby Boomers on where they spend their time and money.

• Successful Execution: Proper daily execution of your Prepared Foods department covers a multitude of factors, including, but not limited to having the proper merchandising strategy and standards in place, utilizing effective production planning, using workforce optimization to its fullest, maintaining proper ordering and inventory management, and using proper shrink controls.  Daily success in these areas begins by addressing all of these factors in a holistic fashion that is jointly implemented and continually supported with right tools to ensure proper sustainability regardless of changes in menu, store associates or store leadership.

To make sure that you are capturing your share of the Prepared Foods market, contact the fresh experts at the Stores Consulting Group to learn more about how we can help.