Enter the Grocerant: Grocery Stores Winning at Foodservice

Foodservice Brief — March 2016

Grocery stores have it all. They compete in every food category and have a great reputation for variety and freshness. The marketing of prepared foods by grocers has expanded with increased participation, because prepared foods add meaningful sales for top grocers.  

Our data shows in-store dining and take-out of prepared foods from grocers has grown nearly 30 percent since 2008. Estimates of the market size for grocery prepared foods are now nearly $29 billion*. The success of prepared food offerings at grocery has contributed to traditional QSRs’ traffic losses.

 Grocery attracts key restaurant consumers
Over 40 percent of the U.S. population purchases prepared foods from grocery stores. From a potential purchaser perspective, grocery is more than half the size of QSR reach. The purchase rate at grocery lags QSR’s frequency by nearly ten visits in a four-week period. Yet, the purchase rate is impressive given that grocery has far fewer units than QSRs.

 

 

What’s for dinner?
Grocery prepared foods peak at dinner. This meal occasion is tied to the types of prepared foods offered by grocers and the convenience of doing other (stock up) shopping at the same time. The greatest vulnerability for QSR in competing with grocery stores is the evening meal and to a lesser extent, lunch. As prepared foods gain acceptance and more grocers offer more alternatives to fast food, grocers’ competitive edge will improve.

 

 

Loyalty – the next step for grocery stores
Prepared foods purchased at grocery stores are purchased less frequently than foods ordered from a QSR. The majority of buyers who make a prepared foods purchase do so only once or twice in a month. However, watch out for that solid core of heavy QSR buyers who visit grocery stores more than seven times a month. While only 9 percent of overall buyers, they account for 30 percent of the grocery visits for a ready-to-eat meal. 


 

Grocery – a Trojan horse
Those who buy prepared foods at grocery are also above-average users of QSRs. In all cases, grocery prepared food buyers are among the heaviest QSR users. Grocery outlets are building their business on the most important and valuable QSR customer. 

Drivers of demand: variety and healthy options
Visits when prepared foods are purchased from grocery stores are rated higher than QSRs on variety and healthy options. These attributes are among the most important motivators of purchase and customer satisfaction. Grocery prepared foods are also rated higher on freshness and quality. Restaurant operators have to meet their customers’ expectations of the food they offer in order to compete effectively. The QSR advantages tend to be operational or price-oriented, with consumers citing speed of service, value/affordability, and convenient location. 

What’s next?
Many grocers now offer food in specialty categories like Asian, seafood, Italian, Mexican, and barbeque, and some offer comfort foods like meat loaf, pastas, pot roast, and more. Grocers are aiming to cater to all dining needs, including hot, custom-prepared grilled meat, food bars, soups, and sushi. A growing number of grocery stores provide comfortable, casual seating for in-store dining.                                                             

Once again, QSRs are in a battle for market share. This time, grocery stores have taken on the foodservice industry. Increasingly, QSRs need to include grocers as competition and monitor these competitors locally in order to track inroads and market against the features that appeal to their customers.

Learn more about how the grocery channel is changing the foodservice landscape at the NPD Foodservice Summit, April 6-7, 2016. The breakout session The Grocerant: Supermarkets Raise the Bar in Foodservice, will provide new data and fresh insights on this topic.

For more information about the Foodservice Summit or if you have any questions, please contact your client service representative, call Bonnie Riggs at 847-692-1767, or email bonnie.riggs@npd.com.

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