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Supermarkets and "Made For You"
May 27, 2008
Since the 1950s, supermarkets have been selling groceries, meat, vegetables and other staples in a raw or semi-finished form at low prices. To use these products, customers need to have both the knowledge to convert them into a cooked, edible form and the time to do it. Doesn’t everyone know how to make Pasta Pomodoro (spaghetti with tomato sauce) from scratch? Making dinner at home is neither convenient nor easy but it is generally cheap.
Likewise, since the 1960s, in a direct relationship with a majority of women entering the workforce, restaurants have been selling meat, vegetables and other staples as finished meals in easy-to-use formats at reasonable prices. To use these products customers need to have both a knowledge of complex cuisine and the money to pay for it. Think how many high school kids have a favorite place to go for sushi. Buying dinner out is both convenient and easy but not generally cheap.
It’s easy to blame the economy or high gas prices for declining restaurant sales. But that is simplistic because this trend has been occurring for more than a few years. Something else is happening, with the promise of a significant shift in consumer behavior. Supermarkets are getting into the fully prepared food business like never before. And they are doing it with items and meal preparation techniques that are creative, healthy, low cost, and easy to serve. Let me repeat that: dinner from a supermarket is becoming convenient, easy, and low cost.
Take a quick look at the two graphics from the R&I 2008 New American Diner Study shown here and below. Strategists in the restaurant industry should be very concerned about two freshly prepared, ready-to-eat items. Remember when a restaurant chain selling Whole Chicken was leading the way to a new age of “home meal replacement” business? It’s been replaced with a home meal.
More than that, though, look at how many survey respondents said that Pizza was a supermarket item in the last 12 months—40% to 50%. Pizza is the No. 1 prepared food item consumed in the United States; until recently that meant a restaurant pizza. The other number that should send shivers up your spine, when asked about value, more than 35% of those under the age of 26 thought that a supermarket pizza was a better value than a restaurant pizza. “It’s not delivery, it’s….”
This gets us back to food sampling. During May two of the most creative and leading restaurant companies, McDonald’s and Dunkin' Donuts, took a page from the supermarket play book and offered millions of “free samples” of their new products. Maybe they know something the rest of us are just discovering.
It’s not yet a trend, but if you want to be out in front of the pack, I would suggest you spend more time in your local supermarket checking out that competition than you do checking out the menu in another company’s restaurants.
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Posted by Chris Muller on May 27, 2008 | Comments (2)
In response to: Supermarkets and "Made For You"
Steve commented:
Supermarkets began 12 years ago with the focus on HMR (home meal replacement). They have researched: food preparation, consumer eating trends, food meal period frequency and restaurant growth. During the past 20 years with US population booming there are now 20,000 fewer grocery stores. 7,000 new and growing dollar stores and most important 176,000 additional restaurants. These have been new points of distribution for food. Supermarkets now are getting it; meal assembly is more important that cooking from scratch. On balance, the supermarket of today has 20,000 SKU’s fewer food ingredients that it did 20 years ago. They have been replaced with pre-cooked pre-seasoned, ready to eat product. Finally they have stepped-up and are now selling hot and ready! I agree that this is a new avenue of competition for restaurateurs, particularly during this economic unstable time. They might even pick up market share of stomach it they continue to price right. The real worry for both supermarkets and restaurants are C-stores like WAWA and Sheetz who sell high quality hot and prepared meals to go!
In response to: Supermarkets and "Made For You"
Jonathan Packman commented:
Although things have changed a bit in the months since this blog was posted, it's probably even more true now that customers are viewing supermarket prepared meals as a value alternative to casual dining meals. As a percentage of total store sales, prepared foods meals are still strong; while customers may want to be more frugal than they were before, tired parents in two-income households still don't want to cook when they get home. High fuel prices can only contribute to diners/shoppers' motivation to conserve by buying their groceries and dinner on the same car trip.