Prepared foods and meal kits are convenient for customers. It’s plain and simple. Busy parents love having the ability to quickly drop by a grocery store to pick up a fully cooked chicken for dinner. Young professionals and busy students buy couscous and quinoa salads in bulk. Artisan baked goods are popping up at bakeries that used to just bake plain bread and buns.
According to the Food Marketing Institute (FMI), deli and prepared foods is the fastest growing retail category. Sales growth on the perimeter of grocery stores was 2.7 times greater on average over the past four years than increases for the whole store. Perimeter departments account for a substantial percentage of store revenue, and that number is only growing.
Here are some of the reasons why I believe they’ve become so popular, and what food retailers need to do to meet these rising consumer demands.
Prepped meals are perceived as cheaper and healthier
Instead of spending a lot to eat out, people are choosing to go to the grocery store. It presents a unique middle ground between cooking everything from scratch and going out to eat. Not only are these prepared foods cheaper, there’s the added bonus of not having to wait for service, or tip a waiter.
Plus, portion size is completely controllable. In larger chain stores, prepared foods often display nutrition facts, so the consumer knows exactly how many calories are being added to their daily totals. They can buy as much as they like, or as little.
The options are endless
Prepared food options can be vast in a store, including anything from raw veggies and hummus, to cheese cubes with grapes, to deep-fried favourites like chicken wings or potato wedges, to gourmet options like eggplant cannelloni or shrimp pad thai.
Many stores offer mix-and-match options where customers can choose two or three different foods to create a custom meal. Atlantic salmon with steamed asparagus? Easy. Roast beef with horseradish and mashed potatoes? No problem. Freshly-rolled sushi with wasabi and soy sauce? Go for it.
It creates an experience for the customer
But there are clearly issues with meeting the rising popularity of meal kits and prepared foods. The right packaging and refrigeration units need to be used. Foods are much more perishable when prepared fresh, and the odds of shrinkage increase. Preparation is labour-intensive. The high-profit margins that are possible with prepared foods can easily diminish or disappear from food spoilage, utility bills and cost of labour.
To counter this, online meal kit subscription services have also risen in popularity in recent years. What’s intriguing here is that these services are experiencing difficulties creating a sustainable business model. Loads of money needs to be spent in their marketing to actually acquire customers, and then the customers don’t usually stick around. HelloFresh and Blue Apron hold onto only a fraction of their customers for longer than six months.
In fact, research shows that 85% of online meal kit subscribers want an in-store option for their kits. Grocery stores eliminate a lot of the pain points of online meal kits. No subscription is needed, it eliminates delivery costs, and the kits are available where the food already is! So, food retailers and online meal kit services are teaming up to offer kits in-store. Costco has added Blue Apron kits to some stores, while Albertsons bought meal kit pioneer Plated in the fall of 2017.
The connection here is the element of customer experience. There is something alluring about weighing options in a store rather than online. When it comes to fresh, prepared foods and kits, all five senses are involved. However, the rise of online meal kits also reveals a weakness of grocery stores — while there are plenty of options when it comes to prepared foods, many stores aren’t showing the customer how to put it all together. Recipes on a website or printed on cards in-store aren’t enough. Customers want the experience of cooking meals without the hassle of prepping everything themselves.
It’s clear that prepared foods and meal kits are rising in popularity, and retailers need to meet these new demands head-on. At Cayuga, we offer an extensive line of heated or refrigerated units and display cases for fresh and prepared foods. We can also create a custom design to fit your store’s or company’s need. Ask us about it, and let’s chat!