Educate the consumer to become a better customer.

Published: July 01, 1995, By Sacharow, Stanley

Future Probe '95, a recent conference, sponsored by Packaging Group Inc., featured more than ten presentations on the nature and future of the food service industry. With retail sales at $295 billion and manufacturer's shipments of $97 billion, the industry deserves a full scale marketing effort on the part of the converting industry.

One of the best papers at the conference was prepared by Marvin A. Spira, director of Eastern Dairy, Dell, Bakery Association. He spoke about how the food service industry impacts the consumer.

While his comments were directed toward a specific region of the country, his thoughts can be extrapolated to reflect the state of the national food service industry. The following synopsis provides the highlights of his presentation.

According to Spira, there are variations of perception of food service in the supermarket industry. This perception changes from one geographic region to the other, but he isolated the very dynamic sales area of Connecticut, New York, and New Jersey.

On a national level in the dairy, deli and bakery industry, almost $50 billion in sales are achieved each year with the figure rising about 4% to 4.5% every year. The Northeast is responsible for about 22.5% of that volume. In dollars, it represents slightly less than $12 billion in sales. Deli counts for about one third of that or approximately $4 billion.

Dairy, Spira said, accounts for the major part of dairy, dell and bakery. It includes juices and heavy categories such as yogurts, cottage cheeses and spreads.

There are many regional differences in the deli and prepared foods areas of supermarkets around the country. Sales of prepared foods made to the supermarkets are handled differently on the west coast, southwestern states and the Midwest.

Space is another basic factor that makes this regional area stronger in the kind of foods they buy. In the Northeast, real estate is more expensive. Many of the major chains and supermarkets are smaller in square footage and the amount of space they can devote to the deli section.

Another major difference, in many areas outside the New York marketing area, is that the distributors of food-service products deliver directly to the supermarkets. The food goes into headquarter warehouses, and it's redistributed from that point. There are also many headquarter commissaries in the Midwest and on the west coast that belong to the supermarket chains. The Northeast probably isn't as focused in food service as other areas.

Changes need to be made in the way supermarket owner's think about prepared foods. Spira feels that when our supermarket chains realize there are dollars to be made, and more importantly, bottom-line dollars, through the hot foods and prepared foods in the deli sections of the supermarkets, they'll start to give more attention to it.

"Supermarkets and their public relations departments must convince the consumer that the supermarket food service area really is selling food instead of groceries," Spira explained.

"Consumer perception about the supermarket is the reason a lot of the food courts and food service departments haven't been as successful as they could have been. There was an optimism among the prepared foods departments that this was another good trend the retailers could ride on, but it didn't quite happen as fast as they projected."

Research by Jonesco Enterprises determined that supermarket retailers haven't realized that success in the supermarket food service business depends on the ability to market and sell food and groceries. Most retailers don't even acknowledge there is a difference.

There are two different methods in the molded and structured way retailers do business now and in the way they must do business in the future with food service in mind. Our supermarkets are distracted daily by minute details and their competitors. Little time is available to study the potential of food service prepared foods departments.

Manufacturers, Spira said, must address this issue in this region. Manufacturers must also offer some successes and statistics to the Northeast corner that have been achieved in other parts of the country.

Manufacturers, distributors and brokers should look at the evolution of retailing food in the supermarkets. Michael J. Kullen opened the first self-service supermarket Aug. 4, 1930, on Jamaica Avenue on Long Island.

People generally shopped in small specialty food stores where customers asked clerks for each item.

The supermarket concept revolutionized food sales in this country and created a trend to larger self-service stores. Chains like National and A&P appeared and grew in popularity as the automobile became the primary means for transporting goods between the home and supermarket.

The trend, as shown in the accompanying chart, reflects the changing eating habits of consumers and where they spend their money for food.

The supermarket industry has responded to this statistical change in the following ways:

* Supermarket formats have been developed in an attempt to customize store types with particular demographic, geographic and psychographic venues such as superstores, warehouse stores, conventional stores, farmer's markets etc.

* The average number of products carried by our supermarkets today has exploded from 7,800 in 1970 to almost 17,000 in 1993. Customers want and expect a variety of choices.

* Basic deli and bakery departments have reached their growth saturation point. Today, almost 80% of all supermarkets have dell and bakery departments.

* The variety of ready-to-eat products has exploded in all departments, including meat, produce, dairy and grocery.

* There has been dramatic growth and experimentation with new food departments, including Chinese and Mexican kitchens, restaurants, sandwich shops and pizzerias.

Nonfood sales have grown to where they now represent 29% of all supermarket sales. Consumers have been trained to do their hardware store shopping at their supermarket.

"Even with all these changes and new concepts, supermarkets continue to see an erosion of their share of the consumer food dollar. Growth has slowed. Smaller companies are being swallowed up by larger ones, and it's becoming more difficult to compete," Spira explained.

Supermarket food service, on the other hand, is one of the major points of differentiation. That's why the operator who can successfully pull together the many facets of this area has a tremendous potential.

It's up to the manufacturers, distributors and brokers to prod, cajole, beg, teach, and stimulate the supermarkets into thinking differently, especially in the Northeast.

Consumers must learn that supermarkets can furnish the same conveniences as they find outside. Our industry must relate to the fact that people now spend more money on fast food service than on food they must sit down to enjoy.

Manufacturers must teach consumers, executives and planners in the retail trade that there are three types of food buying and food purchasing patterns.

They are: later food consumption away from the place of purchase (e.g., typical supermarket food products, cold pizza programs, refrigerated entrees, conventional deli and bakery items); immediate consumption at the place of purchase (e.g., Chinese kitchens, sandwich shops, and franchise outlets); and immediate consumption away from the place of purchase (e.g., fried and roasted chicken, sandwiches, hot pizza and hot entrees).

Equipment manufacturers have been sensitive to the food service trend in supermarkets and convenience stores by providing microwaves, convection ovens, steam tables, rotisseries and refrigerated display cases.

Consumers perceive American supermarkets as suppliers of later consumption foods. This perception must be changed so that the consumer understands the level of convenience and quality that a supermarket can provide.

Most consumers don't think of the supermarket as a viable option for food consumed immediately on or off premises.

There are opportunities for changing consumers perceptions. One success story involves in-store bakery departments. The quality of the in-store baked product now rivals or surpasses the quality of the corner bakery shop.

Manufacturers of baked products realized that consumers want better tasting, higher quality baked goods. Food technology has increased tremendously with the R&D departments of bakery suppliers providing such items as freeze-and-thaw batters to bake high quality cakes, breads and rolls.

The increased efficiency of convection ovens, radar ranges, and microwaves in the bakery department has resulted in high-quality merchandise now available in supermarket bakeries.

The consumer now recognizes this quality which is reflected in the growth of the in-store bakery. The executive of the supermarket chain sees this very dramatically in his bottom line with 50% to 60% markups.

This phenomenon hasn't transferred over to the food service or deli areas yet. We haven't yet conveyed to the consumer that food found in ethnic restaurants is available in the dell department.

The food service industry can protect the business by offering high-quality food, training and service branded food products. Branded national and regional items give a certain name recognition that provides initial credibility and good initial support help. And branded items mean that the retailer will get advertising support.

In some areas, one way that the consumer can be trained to eat food products on premises is to introduce franchises, such as Pizza Hut and Dunkin' Donuts within the supermarket store. The fact that the pizza available at the supermarket kiosk is the same as what's available at the supermarket kiosk is the same as what's available at the neighborhood Pizza Hut gives branded products a built-in comfort factor. Training the consumer in this way can be successful, in the Northeast, it will required more room.