The “foodie” market of New York City might seem a world away from mainstream chicken marketing, but it provides a lens into the buying behavior of consumers willing to spend premiums on poultry as online retailing serves up shopping convenience and broader product assortments to consumers.
Speaking at the 2016 National Chicken Council Chicken Marketing Summit, the meat and poultry buyer for FreshDirect, the leading online grocer in New York’s Northeast corridor, said there is significant market opportunity in high-end poultry products for which consumers are willing to pay for convenience and differentiation.
Online retailing, in fact, offers opportunities for poultry suppliers and grocers to profitably penetrate higher-margin segments with differentiated products.
Stefan Oellinger, category merchant for sourcing meat and poultry, said the online grocer with no brick-and-mortar stores is growing sales in poultry categories like air-chilled, organic, slow-growing and kosher chicken.
FreshDirect is pure play online
FreshDirect serves the $80 billion foodie marketplace in New York City and Long Island; Westchester, Connecticut; and metropolitan Philadelphia. All orders are picked by FreshDirect personnel from the warehouse inventory and trucked directly to the consumer.
The company estimates it has 41 percent market share in the online grocery business in New York with Peapod its closest rival at 23 percent. With sales estimated between $400 million and $500 million, FreshDirect is now constructing facilities in the South Bronx that will triple its warehousing space.
Poultry’s supply chain opportunity
Oellinger told listeners at the Chicken Marketing Summit that the company focuses on differentiating itself by having a better supply chain to offer greater variety of fresher, sustainable products.
“Our strategy is to get fresher food to customers faster by partnering with source suppliers. Consumers want food with better shelf-life dating and cleaner products. They also want us to get food to them sustainably. Our direct online model means less waste.
“FreshDirect is taking orders up to seven days in advance, and we have a good sense of our customers’ needs based on shopping behavior every day of the week. This means we can purchase perishable food products just in time to meet customers’ needs,” according to Oellinger.
Obtaining adequate supplies of premium poultry products, however, is a challenge, he said.
No brick-and-mortar buts lots of chicken
“FreshDirect offers extreme breadth and depth in its poultry product assortment. We offer everything from conventional chicken to ultra-premium air-chilled organic chicken, which is humanely harvested. Every attribute that you can throw at it the customers will buy,” Oellinger said.
“There is more sales and marketing opportunity [for poultry] at the high end,” he said. “Differentiation in product variety continues to produce incremental sales."
“When we added an additional organic chicken category last year, it was said that it would cannibalize our other organic chicken sales but the move generated incremental sales,” he said.
Differentiated variety drives poultry sales
“There is a lot of opportunity to promote chicken without necessarily promoting based on price,” Oellinger told listeners at the Chicken Marketing Summit.
“Differentiated product variety continues to produce incremental sales for chicken. Our fastest growing category now is kosher organic chicken. Many buyers – not traditional kosher buyers – simply perceive it as being higher quality or cleaner or better,” he said.
FreshDirect offers whole slow-growing chickens, and there are plans to add slow-growing chicken parts. Sourcing an adequate supply of slow-growing chicken remains a challenge, he said.
The market opportunity in slow-growing chicken centers around taste, Oellinger said. “The consumer has to be able to taste the difference in order for you to be able to charge a premium price.”
He suggested that there might be opportunity for poultry producers to grow birds with unique flavor profiles without resorting to slow-growing breeds.
“The average palate can’t tell a lot of difference in chicken. But when consumers find something with a noticeably different taste they are going to rave all over social media about it.”
Opportunity for better portioning of chicken
“There is a huge opportunity in the poultry supply chain – not available in brick-and-mortar grocery stores – when it comes to fulfilling online ordering specifications,” Oellinger said.
One such opportunity involves better portioning of chicken parts. “Our customers can get a pack of thighs one week that are 10 to a pack at a certain weight and the next week it is six thighs at that weight. That doesn’t work for their recipe planning,” he said.
Consumer trust and product information
“Especially with poultry, customers ask us where the product comes from and how it is raised and processed,” Oellinger said. He added that FreshDirect is looking for processors to be transparent about where their farms are located.
“The trust issue involves consumers wanting to know that FreshDirect knows where the chicken they are buying comes from and how it was processed. So we are very transparent about our supply chain. Even on our private-branded products, we disclose the identity of the supply partner.”
Oellinger said consumers may not always fully understand the product benefits related to things like air-chilling, but they perceive it as added value and are willing to pay premium prices for it.
Opportunity not limited to New York City
The online food retailing opportunity is not limited to New York City, Oellinger explained. In addition to delivering to customers’ homes in the city, FreshDirect is delivering to their vacation and summer seasonal homes in The Hamptons, New York, and the New Jersey Shore.
There have been higher per order sales of meat proteins and chicken in the suburbs than in Manhattan.
“We see continued opportunity as we expand the FreshDirect service area outside the urban areas,” he said.
How about a chicken and bottle of wine?
While the basket size for online shoppers is larger than for brick-and-mortar stores, the purchasing frequency is lower. That has led FreshDirect to offer a one-hour delivery service backed by a limited (curated) inventory that changes based on the day part.
“It is a huge sales opportunity for us – an example would be the one-hour delivery of a steak and a bottle of wine,” Oellinger said.
Nice enough suggestion, but let’s make that a chicken and a bottle of wine.