Today's food shoppers have more options than ever, and choice continues to grow. As such, retailers across the grocery space need to establish their advantages and tout them to keep customers engaged. And across the brick-and-mortar space, leading fresh departments (bakery, deli, meat, produce and seafood) have become destinations for consumers. In fact, retailers with well-established fresh departments are using these offerings as differentiators to drive growth across the entire store—and that’s something all retailers can learn from.
Top-performing U.S. fresh retailers (determined by total fresh dollar velocity) are experiencing stronger growth across total store sales—4% total store growth in 2016, compared with a modest 1% total store growth in bottom-performing fresh counterparts. Not only do today’s top-performing grocery retailers lead the way with total food product sales, they derive a larger portion of their sales from the fresh departments. In fact, nearly half of all food sales among top-performing fresh retailers comes from fresh products, compared with just 27% among bottom-performing fresh retailers.
So what are the key take-aways for retailers looking to capitalize on consumers’ growing hunger for fresh? For starters, top-performing fresh retailers are putting a major focus on the deli department. This department takes a significantly more prominent spot, accounting for 29% of total fresh sales, while deli sales at bottom-performing fresh retailers only account for 14% of total fresh sales. However, the deli share at bottom-performing fresh retailers has increased 3 percentage points just over the last year—proving that if you provide deli solutions your customers are looking for, sales will follow. In fact, non-leading fresh retailers can take a page from top fresh retailers’ playbooks and focus on varied entrees, meal solutions and convenient options for time-strapped consumers who are willing to pay a premium for convenient prepared food.
Sushi is another fast-growing opportunity in the deli section, as top retailers have as many as 32 different types of sushi to choose from. Sushi has driven strong growth in both grocery (+13%) and drug stores (+20%), while convenience stores have experienced a 57% decline in sushi sales over the past year. While the decline in sales at C-stores suggests a potential lack of confidence in sushi in this channel, the uptick in sales in other channels proves that consumer interest is growing. As such, C-stores have an opportunity to shift perceptions by innovating their deli products and providing consumers with convenient, on-the-go options they’re looking for. Specialty meats and cheese snacks also present an opportunity for convenience and drug stores, as they are driving dollar growth within deli meat and cheese, up more than 3% in the year ended Feb. 25, 2017.
Organic is another key principle helping top-performing fresh retailers grow. In addition to meeting a consumer need, offering fresh options often boosts sales across the entire store. For example, 32% of U.S. households purchase organic produce from top-performing fresh retailers, allowing them to sell more product across the entire fresh departments. In fact, top-performing fresh retailers garner 16% of their produce dollar sales from organic products, compared with only 6% in bottom-performing fresh retailers. Meat is particularly on trend, generating 9% of meat dollar sales at leading fresh retailers, compared with just 0.4% in bottom-performing fresh retailers.
But it’s not just the fresh department that’s seeing a boost from organic product sales. Organic shoppers spend 8.6% more per trip across the total store than those who don't purchase fresh organic products. Other retail channels can take note of the leading organic products in the top-performing retailers and consider adding it to their fresh assortment to drive sales, as well as perception.
At the end of the day, grocery stores with extensive fresh departments are leveraging these differentiating areas to increase sales across the entire store, and it’s proving to be a winning factor. As the growing digital age continues to impact overall trips to the store and as consumers buy more on-the-go meal solutions and seek out convenient products, it’ll be critical to use the fresh departments and the variety within them to create an experience your customers will want to come back for.