Fresh prepared chicken is the poultry industry’s opportunity to tap into sales growth in the supermarket business that is “nothing short of spectacular,” according to food industry analysts speaking at the 2016 Chicken Marketing Summit.
Fresh prepared food sales in U.S. supermarkets totaled $10.8 billion, up 9.8 percent last year, according to IRI data.
Chicken is well positioned, said IRI analysts, to seize a significant share of fresh prepared foods sales, which are expected to double within three to five years.
Fresh prepared food is the supermarket's fastest growing perimeter department.
IRI’s Executive for Protein Practice Elizabeth Ehrhardt said, “Fresh prepared food sales at the supermarket’s perimeter are expected to double in the next three to five years. It is an amazing growth rate that none of the other departments in the grocery store can touch.
“Chicken can play a significant part in being an engine for growth for the fresh prepared category,” she said.
Over the last five years, fresh prepared food sales on the supermarket’s perimeter have been growing by about 6 percent a year. Food sales in the rest of the store have been growing by about 3 percent.
Entrees and appetizers are dominating fresh prepared foods sales, and chicken is ideally positioned to take advantage of the category’s dramatic growth. But seizing the opportunity requires “activation” of demand by supermarkets and chicken marketers as they jointly develop product assortments on a store-by-store basis. This also might include strategically aligning poultry production programs and product lines at a store level.
How the supermarket perimeter is activating demand
“The revolution that we are seeing going on and how food is bought and sold in the supermarket perimeter and particularly in the fresh prepared foods area is nothing short of spectacular,” said IRI Senior Vice President Chris Dubois.
The revolution in prepared foods, he said, is reshaping the supermarket’s perimeter to make it the fulcrum point for deeper and more engaging customer experiences. It involves offerings on the supermarket’s perimeter ranging from sit-down restaurants or easy meal takeout to wine bars with music. The key to boosting sales of chicken and other prepared foods is the customization of the offering for the store’s neighborhood clientele.
DuBois said supermarket leaders are using fresh prepared foods and changes in their stores’ perimeters to reinvigorate their businesses in the following ways:
- Compete with restaurants and specialty channels
- Create stronger emotional linkages with customers
- Create dominant franchises and separate from competitors
- Gain bargaining power with suppliers
“We are seeing retailers shift and move away from center stores, shrinking different parts of their aspect to build a new food theater for their business,” he said.
“This isn’t about the price of corn flakes,” he continued.” This is about creating excitement in the stores where people want to come in and sit down and spend time. This is about creating a gathering response with music, where people can hang out in a Hy-Vee store and have entertainment. It is about creating a different kind of emotional linkage to the customer. And this is what we think is going to be separating the winners from the losers over the next five to 10 years. And the retailers who are creating this kind of bond are the ones who are going to thrive. The ones that do not catch up to this speed are the ones who are going to be declining over time.”
Meat department is the perimeter’s star
Growth in sales of fresh prepared food on the perimeter is surging as some retailer programs gain traction. In fact, 23 percent of retailer market areas tracked by IRI are growing faster than 15 percent.
“What is driving fresh prepared sales growth as the supermarket’s perimeter expands? And what drives sales for one retailer versus another? Every time it comes down to the meat department. The meat driver is the single biggest driver for the customer’s choice for a shopping trip, and this is how retailers are differentiated,” DuBois said.
“This is exactly the kind of growth that can make a big difference in the chicken business,” he noted.
There is radically different development across each category – fried chicken, cut fruits and value-added meals – in the sales rates across the stores.
How do poultry businesses tap the growth in the supermarket perimeter? “This is the place for chicken marketers to plug in and help the retailers grow,” he said. “This is a way to make sure that your chicken business grows just as fast, and chicken can help drive this growth even more.”
Capitalizing on poultry’s opportunity
How can poultry producers capitalize on the fresh prepared opportunities at the supermarket perimeter?
Consider how shoppers decide what to bring home for dinner, Ehrhardt suggested. This involves recognizing the differences in the consumer, the category and the stores.
“If you optimize your strategy to go after those three differences, you will have the chance to capitalize on that growth opportunity,” she said.
“People most likely to buy fresh prepared food include people on the U.S. coasts, households with incomes of $100,000 or more, and households of singles and couples. This is where there is the most growth,” she added.
DuBois noted that leading supermarkets typically have a portfolio of concepts (restaurants, takeout offerings, culinary stations, wine and oyster bars, etc.) that can be tailored to individual store needs. This calls for assessing how poultry marketing programs and products fit the supermarkets’ customer profiles by neighborhood.
Fresh prepared food sales are surging as some retailer programs gain traction.
“There might be a barbecue chicken station in one store and an oyster bar in a store a couple of suburbs over. The leaders in fresh prepared marketing are putting together portfolios that allow them to mix and match offerings not seen before in retail grocery stores,” he said.
Product assortment opportunities also vary by store, Ehrhardt said, and poultry marketers must treat stores individually.
Sales velocities, which differ by product and individual store, provide insight about how to increase fresh prepared chicken sales. The biggest opportunity for sales development is in stores that have customers with a strong affinity for value-added meats but with low sales velocities for those products.
There's significant opportunity in closing the gap between potential and actual sales of fried and rotisserie chicken.
How fresh prepared marketing pays off
IRI research shows that a good fresh prepared department can bring in new, loyal shoppers.
Ehrhardt explained, “Thirty-one percent of fresh prepared buyers have a different primary chain for fresh prepared than total grocery. That’s a unique opportunity to convert them to be regular shoppers. That matters because 76 percent of shoppers spend 76 percent of their fresh prepared dollars at their primary fresh prepared chain.
“How much is that worth? Looking at the total basket ring, when fresh prepared is in the basket, it amounts to an extra $7 on average to the total basket ring. It pumps up the dollar ring by 15 percent over baskets that don’t have fresh prepared. Fresh prepared is a valuable profit driven item to have in the basket,” she said.
“Understanding those shoppers and understanding how they differ by store allows you to activate and take advantage of the opportunity in fresh prepared foods,” she concluded.
