Consumers are embracing prepared foods and retailers couldn’t be happier. Supermarkets embracing prepared foods are experiencing significant growth. Grocerants, which are in-store restaurants offering dine-in and take-out meals, generated more than $10 billion in sales last year, according to the NPD Group. Grocerants, combined with other foodservice offerings such as pre-ordered, heat-and-eat, and meal kits, will push retail foodservice over the $35 billion mark in 2017. 

In 2018, prepared foods is likely to grow an additional 10%, which is more than five times the growth-rate expected from traditional restaurants.¹ Astute supermarket operators may achieve even higher growth rates considering prepared foods address two key challenges: 

Convenience

Prepared foods offer today’s time-pressured shoppers a new level of convenience. Many of today’s shoppers do not have the same cooking skills as previous generations—providing another reason to purchase prepared goods. Whether grab-and-go, made-to-order, or in-store dining, consumers now have convenient and healthy alternatives. Multi-ethnic families—those with diverse taste profiles—also benefit from having more choices at the same location.

Differentiation

Retailers will use prepared foods as a key differentiator. Some may opt to hire recognized chefs and focus on healthy dishes prepared with locally-sourced ingredients. Others may introduce neighborhood-relevant specialty items, such as an Irish Cream Crème Brulee for the Boston market. 
Prepared foods, particularly the grocerant, can provide many related services that further connect the diner’s experience to other in-store goods and services. This may include sharing the recipes for Friday’s special via social media or email; inviting diners to a cooking class; featuring a patron’s family recipe; or serving as a meal-planning coach – anything that facilitates diner/shopper engagement and convenience, promotes healthy living, and/or strengthens their kitchen confidence. 

Year of Convergence

Next year, 2018, likely will be the year of convergence, the year when shopper behaviors, technology, and retailers align. Below is a case in point: 
I place my grocery order while seated in the grocerant. After enjoying my braised beef short ribs with locally-grown asparagus, I receive a text notifying me that my grocery order is ready. Scrolling down I see additional details pertaining to my meal items—such as where the grass-fed beef was sourced and how my organic asparagus was grown. Based on my previous orders the app informs me that Wednesday the store will be offering buttered chicken for lunch. I also receive an “eat-one-take-one” offer for Monday. 

In addition to creating banner loyalty, the shopper now has multiple reasons to visit the store. Using machine learning, the operator can offer the shopper a more personalized experience. They also can adjust promotional offers according to day parts or traffic patterns. While the shopper receives great food, convenience, and a better in-store experience, the operator benefits from more trips, improved loyalty, and higher margins due to the price elasticity of prepared foods—all from a consumer that was going to eat at a stand-alone restaurant.  

1: According to the National Restaurant Association, the growth rate for restaurants has been consistent over the past few years. The projected growth rate for 2017 is 4.3% or 1.7% after adjusting for inflation. Similar growth is expected for 2018.

Written by Jim Hertel, senior vice president at Inmar Willard Bishop Analytics. Anyone who has redeemed a coupon, filled a prescription or returned a product, has touched Inmar. We apply technology and data science to improve outcomes for consumers and those who serve them. As a trusted intermediary for over 35 years, we have unmatched access to billions of consumer and business transactions in real time. Our analytics, platforms and services enable engagement with shoppers and patients, and optimize results.

Originally appeared in the December, 2017 issue of Prepared Foods as Be Prepared.