The rapid growth of e-commerce is forcing change in the way retailers and restaurants do business, according to a panel of chicken buyers.
A group of executives representing grocers and international and regional quick-serve restaurants gathered on July 24, as part of the 2018 Chicken Marketing Summit in Orlando, Florida. The representatives weighed in on how online and mobile shopping, as well as the demand for more delivery options, are changing the way they do business.
The panelists were:
- Mace Ishida, senior manager for procurement at Wendy’s Quality Supply Chain Cooperative Inc. The company is the exclusive supply chain for all Wendy’s restaurants in North America.
- Brent Penzo, senior procurement manager at Slim Chickens.
- Tom DeVries, senior vice president at Giant Eagle Inc.
- Andy Howard, president and CEO of Huey Magoo’s.
Online retailers forcing change
The advent of online shopping is motivating radical changes in how grocers do business. Giant Eagle, a grocer with stores in five states, now offers a number of online-focused services such as click-and-collect shopping and home delivery of groceries. It’s also offering meal deliveries through third-party delivery services.
However, DeVries said these are table stakes for the industry now, and the envelope must be pushed further to compete with the online-first retailers, like Amazon.com Inc., that are rushing into the grocery business with the aim to take business away from brick and mortar retailers.
The next step is moving toward what he called endless aisles, or the online ordering and delivery of merchandise through the chain’s online platform. This service will compete with Amazon by direct shipping products – such as pet food or health and beauty items – to shoppers' homes.
Giant Eagle is also looking to sell non-traditional merchandise online. DeVries said the company is partnering with Ace Hardware Corp. to sell more than 80,000 hardware items online. It also recently acquired Munchery Inc., a company that delivers chilled, prepared meals directly to homes in select cities.
“Online retailers have … sprinted into our space and we need to combat that through thinking differently,” DeVries said.
Issues with third party delivery services
Howard and Ishida said the expectations of the digital consumer are pushing their companies to consider meal delivery options, too. An array of mobile application-based, third-party services are available to bridge the gap between the restaurant and the doorstep.
Howard, speaking for the chicken tender-focused regional restaurant chain, said there’s pluses and minuses with signing onto those services. On the positive, delivery pumps up sales and brings new customers into the fold by increasing the product’s exposure. On the negative, the delivery services are charging a commission of 25 to 30 percent on those sales. To counteract the higher price, Huey Magoo’s is considering a few options, such as establishing a separate menu with higher priced items for delivery.
A mobile-based success story
Penzo said Slim Chickens, with restaurants in 14 states as well the United Kingdom and Kuwait, is seeing positive returns on its mobile application, which offers both online ordering and a loyalty rewards program. So far, he said, the chicken tender focused chain counts 75,000 so-called slimthusiasts, in its rewards program and its application is earning between 2 percent to 2.5 percent of the company’s sales.
Orders placed through the app, he said, are actually doubling the average check amount of in-store purchases. Slim Chickens is using the data collected through its application to learn exactly who is buying what and it’s helping the company market its products, too.
Growing demand for transparency
Along with online and mobile services, consumers are asking for more information about where their food comes from and how it is raised. The panelists offered differing views on how those trends will impact their businesses in the long term.
DeVries identified the demand for transparency as a generational movement that is here to stay. For grocers, that means identifying things like growing regions, farm locations, farmer identification when possible and traceability of proteins like seafood. Giant Eagle, he said, is working to stay ahead of the generational trend.
Ishida said the industry should tackle the issue by listening to and engaging with consumer groups to understand what they are asking for and find common ground. Wendy’s, the world’s third-largest hamburger quick-serve restaurant company, is listening to its consumers and trying to understand their concerns. If consumer demand requires a higher-priced product that would affect the pricing of the final product, then that must be considered, too.
A different perspective on antibiotic-free
Smaller chains are keeping an eye on the trend, but they are also considering what extra costs go with using products like antibiotic-free (ABF) or no-antibiotics-ever (NAE) chicken instead of commodity chicken.
Right now, Howard said, there’s a premium associated with those products that makes it harder for smaller chains to make the switch. If the industry were to make a wholesale change to ABF or NAE chicken – and prices of those products dropped accordingly – that would change the calculus for the smaller brands.
Not everyone sees the value of the ABF or NAE product, either. Penzo said Slim Chicken’s brand identity is focused on hand-breaded tenders, fresh-to-order, hot food and guest interaction. He said he believes those concepts are going to resonate with consumers far longer than ABF or similar product claims.
“We’re going to focus more on what we founded the brand on, and the brand identities, than we are going to just a trend out there, or even a fad, that very well may be gone in the next three to five years,” Penzo said.
