Grocers gaining at stealing restaurant takeout traffic

July 26, 2010

Imagine that you're staring down a pavilion of pre-made foods: pizza by-the-slice, ripe-for-pickin' sushi trays, pre-wrapped sandwiches, vats of soup, whole roasted chicken. You contemplate which meal to start on before your thought turns to the coffee stand nearby, and whether you care to dine in or outside.

This mental mirage does not seek to describe a super buffet. Rather, it's the reality of the growing grocery outlets offering takeout and dine-in options.

At last month’s Technomic Trends and Direction conference, Wade Hanson, the company’s director of research and consulting, outlined the mounting offensive strategy of grocers from Kroger to Publix with their not-so-subtle taglines: “A great alternative to a fast-food restaurant,” and “Ten restaurants under one roof,” respectively.  These “grocerants” are striving to more closely resemble restaurants with innovative new packaging and stores rearranged for fast, convenient take-out or dine-in options, he said. New and remolded supermarkets are dedicating a higher percentage of new space to retail foodservice. Meanwhile, the center-of-store traditional section has shrunk by 15 percent.

Customers more receptive than ever

This trend has been going on for a few years now, but grocers are better positioned than ever to steal take-out share from restaurants. Restaurants are still the main source of takeout food – but the stronghold is slipping.  NPD has painted a picture of the scenario in a recent study: Its "Delitrack," which tracks deli-prepared food purchases, shows that nearly two-thirds of prepared foods purchased at retail are from traditional supermarkets. The foodservice research company suggests a few reason this is so, but mainly cites recent demographics to explain. Fewer women are entering the workforce, and preparing more meals at home – but not necessarily from scratch. They’re looking for takeout, but increasingly prefer it to come from grocers, which they perceive as more convenient, healthy, and cheap.

Perhaps this is the reason why supermarket foodservice was among the few segments with actual growth in 2009. This year, the supermarket foodservice sector may have the highest real growth of the industry.  

Still, few restaurateurs have bothered to respond to the attack. The pizza industry especially, Hanson said, has been busy fighting other wars.

“The majors, at least, are very focused on each other as competitors versus what's happening in retail - even though frozen has been performing well and take-and-bake is a threat too,” he said.

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Beating them at their game  

One strategy for restaurants to sheild takeout sales from erosion is by adapting grocers' strategies.

For example, unlike most pizzerias, who often specialize in take-out, by-the-slice, dine-in, etc., many grocery stores offer more than one type of to-go, pre-prepared food – and in many denominations.  “Retail pizza programs have evolved over the years,” Hanson said. “Today they are flexible to meet multiple consumer needs, whether it be whole hot pizzas for a group, individual pies, slices, or take-and-bake pies to prepare at home. Non-pizza offerings with similar ingredients are also increasingly available (e.g., calzones, stromboli).” Therefore, pizzerias should be prepared to be more flexible with their portions and occasions.

The easiest way some have achieved this already is by entering the retail market off the premise of its own stores. Donatos recently erected Jane’s Dough Foods to put its pizzas, breadsticks and more at retail outlets. Home Run Inn, a Chicago pizza chain, is also the No.1 frozen pizza brand in the Windy City. And Uno Chicago Grill has made more frozen retail options one of its first items of business out of bankruptcy.

Finally, grocers like Central Market and Whole Foods have not only copied restaurants by offering on-premise eating areas, they’ve added their own experiential touches like prioritized parking for take-out customers, eco-friendly microwave and oven-safe packaging, and regular in-store chef demonstrations. Restaurateurs will need to be creative to compete with such innovations. Many fast casual chains are adding their own hard-to-duplicate experiential touches. Vapiano, for example, a pizza chain new to the Texas market from Europe, features high-tech restaurants, live music, and German gummy bears with takeout orders.



Topics: Business Strategy and Profitability , Food & Beverage , Operations Management

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