Oser Communications Group

GOURMET NEWS DECEMBER 2016 www.gourmetnews.com YEAR IN REVIEW 2 2 Retail Foodservice Offers a Gold Mine for Grocers BY LORRIE BAUMANN American consumers have decided that they want good food on their schedule, and they'll eat it wherever they can get it. Their grocers are eager and increasingly able to provide that for them, and their customers are loving them for it. So says Wade Hanson, a Principal at Technomic, who presented the company's market research on this subject during a "Foodservice at Retail" conference pre- sented during the National Restaurant As- sociation's annual trade show in May. Technomic has 50 years of experience tracking market trends for the restaurant in- dustry, but over the past decade or two, the organization has directed its attention to foodservice wherever it occurs and has been in the ideal position to observe the phe- nomenon as American consumers began looking for new avenues for their food as the Great Recession put previous options out of their financial reach. It was at that time that the grab and go case at local gro- cery stores became top of mind as an alter- native to fast food restaurants, which were increasingly seen as both unhealthy and un- appetizing choices. "We're in a very differ- ent world right now as far as retail and foodservice are happening," Hanson said. For grocers, the Great Recession has changed the market landscape as well: cen- ter store sales are declining, convenience stores have become more vigorous com- petitors for Americans' food dollars and the grocery retail industry is consolidating through mergers and acquisition activity. "Retail foodservice has been the major ben- eficiary of these changes," Hanson said. "Retail foodservice is really in transition, but poised to be in a very good position." For purposes of their analyses, Hanson and Technomic divide supermarkets into three basic tiers: the foodservice specialists, destination supermarkets and supermar- kets with prepared food departments that may consist of extended deli counters of- fering sliced meats and cheeses. About 10 percent of supermarkets fit into the food- service specialist category, which offer warm ambiance for in-store diners, an ex- tensive array of cuisine and perhaps a checkout area that's dedicated to foodser- vice. About 25 percent of supermarkets fall into the destination supermarket category in which the stores are positioned as full- line grocers with good foodservice options. About half of today's supermarkets fall into the tier that Technomic defines with pre- pared food departments, and many or most of them are currently looking at moving up a tier to the destination supermarket cate- gory, according to Hanson. At the same time, convenience stores are also aggressively moving toward more pre- mium foodservice options, he noted. Consumers are embracing these foodser- vice options offered by supermarkets. In the decade between 2006 and 2015, the an- nual growth rate for retail foodservice was 10.4 percent, compared to a 2.1 percent growth rate for conventional restaurants. On a dollar basis, the money that con- sumers spent for supermarket foodservice during that period went from $12.5 billion to $28 billion. Today, supermarket foodser- vice is a bigger business in the U.S. than K- 12 school foodservice, college foodservice or all health care foodservice. "Consumers are seeing more and more value in what they're experiencing with retail foodser- vice," Hanson said. In particular, con- sumers say that what they spend on a meal in a grocer's foodservice department is comparable to what it would cost them to prepare the same meal at home, while the price of the same meal in a restaurant is perceived to be more expensive. Technomic expects that supermarket foodservice will continue to grow at an an- nual growth rate of about 9 percent over the next 10 years, far exceeding the growth that's expected for restaurant foodservice, and Hanson predicts that retail foodservice will continue to steal market share from restau- rants over the foreseeable future, presenting grocers with a lot of opportunity for profit. In particular, Hanson anticipates that the line between retail foodservice and restau- rants will continue to blur, that younger consumers will drive more widespread use of retail foodservice, and that improving technology such as mobile payments and mobile ordering software will allow more more market segments to compete for the retail foodservice dollar. He suggests that self-serve and made-to-order formats will proliferate in preference to grab and go op- tions. "Grab and go is still doing well, but consumers are gravitating to the idea of customizing their food," he said. Ready-to-heat foods will gain traction, with more ethnic entrees that require re- heating, he predicted. This is not the same as a ready-to-bake option; it's the entree that requires just a couple of minutes of re- heating in the customer's home kitchen, he explained. Transparency in preparation, branding and labeling will help improve consumers' quality perceptions, and the demand for better-for-you prepared meals will continue to grow, which advantages grocery stores over convenience stores, Hanson predicts. "Consumers are becoming more interested in what's in it rather than what's not in it," he said. "Consumer acceptance is on the rise, but so are expectations. Everybody is on a level playing field when it comes to meeting consumer expectations," he said. "Prepared foods gives you an opportunity to differen- tiate. He noted that some stores are already doing 20 percent of their business in pre- pared foods. "It's a gold mine if it's done right." GN New President Brings Fresh Ideas to Specialty Food Association BY LORRIE BAUMANN With a new President at the helm, the Specialty Food Association and its board of directors are taking a fresh look at how the Fancy Food Shows will evolve beyond the vibrant marketplace they already are into a vehicle that provides even greater service to the association's member com- panies, said Phil Kafarakis, who became the SFA's President in July. Kafarakis brings 35 years of experience in the food industry to the table. Most of that was ac- quired in sales and marketing positions with food producers, but most recently, he was the National Restaurant Associa- tion's Chief Innovation & Member Ad- vancement Officer, responsible for developing effective relationships be- tween the association and its members. At the Specialty Food Association, he's eager to help the Fancy Food Shows evolve to incorporate a little bit more education and entertainment around the periphery of the show and to leverage the associa- tion's media and social platforms into re- lationships with member companies that extend beyond the twice-yearly experi- ence of the Fancy Food Shows. The Specialty Food Association will be celebrating its 65th anniversary in 2017, and its growth over those years is a reflec- tion of the innovation and entrepreneur- ship of individuals who might have started their small food companies in a garage but who then went on to create new categories that have entered the mainstream of the American food industry, Kafarakis said. "The Fancy Food Show has been the guid- ing light of the organization and of the food industry in general," he said. He suggested that while the Fancy Food Shows have been extremely successful as a marketplace, they haven't traditionally showcased the entire range of the Specialty Food Association's activities, including the market research that helps new businesses enter and succeed in the industry. Nor has the association been particularly effective in helping members network with each other outside the show floor, he noted. "Our membership is very early start-up and smaller family-run businesses, versus big- ger companies," Kafarakis said. "We see ourselves becoming a greater resource for them as they become market-ready." Newer food businesses face many chal- lenges as they scale their operations up from local production and farmers market sales into national and even international production and distribution, and the Spe- cialty Food Association is positioned to help them navigate the regulatory environ- ment, legislation that may affect them, funding needs, supply chain concerns and connecting with buyers who are aligned with their social values, according to Ka- farakis. "We are evolving so we become a greater service provider to them and getting them market-ready," he said. Currently, the SFA's board has been working on a strategic refresh of its life- time achievement and sofi Award recog- nitions, with sofi categories being re-evaluated to ensure that there's a cate- gory fit for entries that haven't quite fit well into the existing categories in past years. "Strategically, going forward, the sofi platform and the recognition plat- forms will play a major role," Kafarakis said. "We can connect back to the won- derful social values of the organization.... We are going through a very deliberate re- view of the criteria the judging, adding some categories to make it broader, to make it simpler to understand and to take some of the complexity out." As it moves forward, the Specialty Food Association's great strength will be that it's continuing to do what it already does best, which is to communicate the values of the specialty food industry to the greater mar- ketplace, according to Kafarakis. "Given that the consumer is so inquisitive about where their food comes from, and how it was made, the experimental nature of food has brought us into the limelight," he said. "We're celebrating 65 years now, and we want people to know that the creative, in- novative side of food starts here with our members." GN Bob Mariano Retires at 66 Former Roundy's CEO Bob Mariano retired from Kroger on September 1 of this year. He continues to serve as Strategic Adviser to Kroger and Roundy's for the two years following his retirement date. "Bob has been a tremendous leader for Roundy's and the entire supermarket in- dustry. The centerpiece of his career, of course, is the Mariano's chain of stores in his hometown of Chicago," said Rodney McMullen, Kroger's Chairman and CEO. "We see a bright future ahead for our Pick 'N Save and Metro Market stores in Wis- consin and for Mariano's stores in Chicago. And we look forward to our continued partnership with Bob as a strategic consult- ant and advisor. The entire Kroger and Roundy's family extends our best wishes to Bob and his family in retirement." Mariano, 66, began his career in the gro- cery industry in 1967, when he worked as a part-time deli clerk at Dominick's super- market in Chicago. He served in various roles of increasing responsibility, includ- ing senior vice president, before being named president and CEO of Dominick's in 1995. He led the company through an initial public offering in 1996 before the company was purchased by Safeway in 1998. Mariano took on leadership of Roundy's Supermarkets, Inc. in 2002. Roundy's opened the first store under the Mariano's banner in 2010 in Arlington Heights, a suburb of Chicago. Today there are 34 Mariano's store locations through- out the Chicago area. GN

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