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A new look at grocery's meal opportunity

While COVID-19 has thrown retail foodservice for a loop, there are plenty of ways to capture more meal dollars
Research shows cook-and-eat kits are expected to be the fastest-growing segment of meal kits, because of the convenience they offer to newbies in trying new recipes

Research shows cook-and-eat kits are expected to be the fastest-growing segment of meal kits, because of the convenience they offer to newbies in trying new recipes.

There was one grocery category left untouched by the impacts of COVID-19— in the literal sense, that is: meal solutions.

When the world suddenly went hands-off, grocers had to rethink self-serve options like salad bars, soup stations and hot bars. With their shared serving utensils and frequently touched surfaces, these once-popular areas became the stuff of kitchen-contagion nightmares.

Grocers addressed consumers’ safety concerns by shifting to pre-packaged grab- and-go options, but the pivot in meal solutions doesn’t stop there. Consumers’ food preferences and shopping behaviours are changing in the wake of the pandemic—some perhaps for good. For retailers, the race is on to get sales sizzling again in the meal solutions category.

Rick Stein, vice-president, fresh, at the Food Industry Association (FMI) emphasizes that, as in other categories, the foodservice story changes from week-to-week and month-to-month. But his general observation is that in the first couple of months, consumers were primarily focused on food safety. Now, they’re looking for creativity in the kitchen. “They have menu fatigue because they haven’t had a lot of options in terms of traditional foodservice,” says Stein. “They’re also getting a bit fatigued of cooking the same meals over and over again.”

Pandemic or not, consumers want fresh, convenient meals that save them time, offer variety and take up less mental space. While retail foodservice will be impacted by COVID-19 for the near future, there are new opportunities to capitalize on, and ways to meet consumers’ new needs.

In times of uncertainty, people crave what’s familiar. That’s why in the early stages of the lockdown, prepared-food customers “just really wanted comfort food, like chicken pot pie and mac and cheese and all those types of foods,” says Christy McMullen, co-owner of Summerhill Market, which has three locations in Toronto. “Where I see the opportunity going forward is that people have gone out of that comfort food and they’re coming back to wanting healthier foods.”

However, customers aren’t ready to go entirely plant-based. McMullen says at the start, the appetite for vegan prepared foods went by the wayside. “I don’t think people are back to vegan yet, but they are looking for healthier options. Our pre-packaged green salads, for example, are doing really well.”

FMI’s Stein says health and wellbeing is a “huge platform grocers can play on now.” While health and wellbeing was a macro trend prior to the pandemic, he believes there is an opportunity to cater to consumers who have underlying health conditions—a topic that’s getting a lot of attention right now—such as diabetes or heart issues. “My advice to retailers is to have those options available and promote the idea that this is a heart-healthy meal or this is low in sugar,” he says. “You want to create options that customers feel good about buying.”

While there’s been a lot of hype about meal kits in recent years, meal-kit delivery companies have struggled and the mania never quite took hold in grocery stores. That could change, though, as many consumers are stuck at home and making their own meals.
According to The Wall Street Journal, U.S. meal-kit providers like Blue Apron, Sun Basket and Home Chef are expanding operations and adjusting offerings to meet growing demand. Revenue for the sector has almost doubled year-over-year after sinking earlier in 2020.

A recent report from San Francisco-based Grand View Research highlights what types of meal kits consumers will be digging into in the coming years. The cook-and-eat offering is expected to be the fastest-growing segment because of the convenience it offers to newbies in trying new recipes. Heat-and-eat options will also have a large share of the meal-kit market due to busy, overworked consumers. Online is expected to be the fastest-growing channel for meal kits, at 13% from 2020 to 2027.

“If a grocer can streamline the process and use existing stores as micro distribution hubs, the demand for home delivery on meal kits could make it an attractive business,” says Bruce Winder, a Toronto-based retail analyst and author of the new book, Retail Before, During & After COVID-19. “Customers have grown accustomed to some of the convenience that home food delivery has offered during the pandemic—assuming they are willing to pay for it.”

COVID-19 notwithstanding, generation Z (those born between the mid-1990s and 2010) could be a boon to the meal-kit segment. PwC Canada’s “Canadian Consumer Insights 2020” survey found that, not surprisingly, gen Z consumers have a higher tendency to use online food options like meal-kits and food-delivery apps compared to boomers.

“The reality is restaurant food delivery is not completely sustainable on its own when you think about the lifestyle of gen Z,” says Myles Gooding, national retail and consumer leader at PwC Canada. For this young cohort, there is both a convenience factor and an experience factor. “Gen Zs are thinking about, ‘where does my food come from,’ ‘how natural are the ingredients,’ and ‘I feel better when I prepare meals myself and am using fresh ingredients,’” says Gooding. “So, there is a bit more of a conscious play that goes into their gravitation towards meal kits versus fast-food deliveries.”

Not everyone is sold on the appeal of meal kits, though. “When people want to take home dinner, they don’t necessarily want to take home a box and do the prep. They want most of the work to be done,” says Jay Cummings, director of bakery and deli at Freson Bros., which operates 15 stores across Alberta. “So, we found a lot of heat-and-eat and grab-and-go items do really well, but we’ve kind of shied away from meal kits.”

Cummings says he hasn’t noticed any big changes in the buying habits of Freson Bros.’ customers because of COVID- 19, other than they’re taking food to go rather than sitting in the in-store restaurants. The company is forging ahead with new prepared-food programs that were already in development. For example, Freson Bros. recently launched a new made-to-order, take-home pizza program that was two years in the making.

The retailer’s Fort Saskatchewan location features the Father Dough pizza station, where thin-crust pizzas made with in-house sourdough for the crust are cooked in a stone-fired oven. Now, the pizzas are available at every location for customers to take home and cook themselves. “It’s a raw dough pizza, and when the customer gets it home, they put it in the oven and bake it and it pops up like the sourdough at Fort Saskatchewan,” says Cummings.

This fall, Freson Bros. is also launching a new scratch-made, heat-at-home soup program. “With everything that’s going on in the world, it’s important to give people the option to take it home, but still have high-quality restaurant food,” explains Cummings.

With any prepared food option, there’s a growing consideration for grocers: value. Given the pandemic’s economic fallout, consumers are watching their wallets more closely. Retailers now have to address two different types of consumers: ones on the high end and ones on the low end, says FMI’s Stein. “I see it as a bifurcation, where we’re losing that middle ground.”

Even people who have money want value, he adds, so if a grocer is selling a $49 family-of-four meal, it should still offer value. However, “You can’t be selling a $49 family meal to a person who’s either lost their job or is now on entitlement money. You have to have lower price points for the consumers who are economically disadvantaged.” One way to accomplish this is to have a full-service hot bar (more on that later) where customers can select what they want. “That way someone who is more price-conscious has the option of choosing items that have lower costs per pound or per item,” says Stein.

While grocery shoppers went cold on self-serve options, that doesn’t mean it’s the end of soup, salad and hot bars in grocery stores. Some elements can open back up with increased safety precautions, while others can offer the customization of self serve without it actually being do-it-yourself.

Stu Smith, director of fresh programs at Georgia Main Food Group, says the company has re-opened soup bars at its Fresh St. Market and IGA locations, with vastly more stringent safety controls. “We require everything to be wiped down after every use,” says Smith. “We’ve given our customers the availability of hand sanitizer and wipes at our soup stations.”

What he doesn’t see opening back up are salad bars, which the company has at just a few stores. “We have done surveys in our stores that have them, and in talking to our staff and our customers, there’s just not an appetite for salad bars at this point.”

At one forward-thinking U.S. grocer, the robots are coming to the salad bar. ShopRite is piloting Sally the Salad Robot, which offers a contactless and customized salad bar experience, at its Carteret, N.J. store. The robot, made by food robotics company Chowbotics, contains 22 ingredients including dressings, fruits, nuts, vegetables and proteins such as chicken, eggs and ham. Sally can combine two main base ingredients, up to six toppings and a dressing to make a custom salad, grain bowl or pasta salad. Sally also offers menu items such as chicken brown rice bowl and Cobb salad.

Customers get a glove from a dispenser to wear as they tap the screen. The customized salad is dispensed into a bowl that customers can top off with a lid and take on the go. ShopRite said it hopes to roll out similar Sally salad bars at other store locations. In a press release, Jonathan D’Orsi, vice-president of operations at his family’s ShopRite said, “Prior to the COVID-19 pandemic, my family’s ShopRite store was looking for a salad bar solution that was touchless, fresh and innovative. The current health crisis made it even more of a priority.”

Another solution is to get staff to do the serving. FMI’s Stein says some grocers are converting their delis into hot bars that are staffed by someone wearing gloves, a mask and a face shield. “They do these things to show they are making sure the customer gets safe food, and the customer gets to pick and choose what they want and how they want it,” says Stein. “I think customers enjoy the idea of picking out their own. They’re pointing to what they want and they can customize their order.”

For cost reasons, though, Stein says this approach is in the experimental phase. “Retailers will do a financial analysis to figure out if they’re selling enough to pay for that person who is doing the full service. But right now, it’s interesting to see it develop.”

While the pandemic has certainly changed the meal solutions category, one thing remains the same: customers have a big appetite for it. According to FMI’s 2020 U.S. Grocery Shopper Trends report, prior to the pandemic, consumer foodservice spending was on the verge of over-taking food retail spending for the very first time. The research indicates higher retail-sector food spending will continue for the foreseeable future as home cooking displaces spending on foodservice.

“The data shows foodservice at retail was way down in March and April, and not quite as far down in May and June,” says Stein. “It’s not back to even yet, but it’s slowly working its way and that’s because retailers are figuring out ways to address consumers’ concerns.”

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