With inflation continuing to stretch Americans’ wallets and impact disposable spending, delis can capitalize on the current economic climate by focusing on lucrative prepared food programs.
“The win is with entrées,” says Heather Prach, director of education at the Madison, WI-based International Dairy Deli Bakery Association (IDDBA). “Deli entrées are outperforming previous years; as inflation goes higher people are eating more at home.”
In IDDBA’s November 2022 State of the Industry Deli Meat and Prepared Foods, Chicago-based IRI reports that deli and prepared food dollar sales increased 9.5% from Oct. 2, 2021 to Oct. 2, 2022. Deli prepared foods are almost an $18 billion category. According to the report, growth has been driven by convenient meal solutions, with entrées and prepared meats showing highest buy rate gains.
“Chicken is not slowing down and is leading the show followed by turkey,” says Prach. “Asian-inspired entrées are still hot and sushi is soaring, followed by American and Italian. We’re also seeing Latin-inspired foods hold ground but not necessarily growing.”
IDDBA’s report reveals sushi and chicken are driving entrée growth, according to IRI figures. Segments leading growth are American, Asian and Italian.
“People are eating beyond meat and potatoes,” Prach notes. “Also, grab-and-go is still outperforming the service deli due to labor issues and delis shortening full-service hours.”
She adds that younger consumers, such as Gen Z and Millennials, are less brand loyal and more flavor oriented.
“Also, delis are more apt to use all the leftovers in the deli,” Prach says. “They used to throw it in the salad bar but are now using these for ingredients in soups and other dishes.”
Products & Trends
Whether sold grab-and-go or behind the deli case, when it comes to deli prepared food, what’s old is new again.
“Consumers are still into classy comfort,” Prach says. “And there’s a nostalgic piece coming back, with mac and cheese, fried chicken and pot pies still hot sellers.”
Fall River, MA-based Blount Fine Foods sells a wide range of comfort food items in its Blount Family Kitchen line. Prepared food items for deli include 12-ouonce grab-and-go meals that are microwavable.
“This augments the in-store prepared foods we offer,” says Bob Sewall, executive vice president, sales and marketing at Blount Fine Foods, based in Fall River, MA. “This line has a 63-day shelf life from date of manufacture, so meals can keep well in the refrigerator.”
Blount Fine Foods also offers Panera Bread pasta-based bowls that are high in protein and nutritious.
“Our varieties include Broccoli Chicken Alfredo and Chicken Marsala, with Panera varieties including Chicken Caprese and other flavors,” Sewall says. “Recently, we launched Blount Family Kitchen Pot Pies; one is a single-serve 12-ounce size that retailers are selling behind the glass as part of their hot foods.”
Reser’s Fine Foods, Beaverton, OR, provides fresh refrigerated deli salads, entrées, dips, side dishes and prepared foods for delis. Popular varieties include potato salad, pasta salad, coleslaw, macaroni and cheese, mashed potatoes, dips, meal kits and more.
“There is no secret that consumers like new twists on old favorites,” says Nathan Roe, Reser’s senior manager, customer & marketing strategy. “Asian spices, Latin American chiles and preparation styles (e.g., rotisserie, roasted) are all part of what’s new in the deli, and we are often surprised by the fun and creative ways deli chefs are bringing new products to their department.”
Reser’s has invested significantly in the broad Meals segment, with a combination of product innovation, category education and operational resources.
“With dozens of new products on the horizon and a commitment to helping retailers hold on to meal solution-seeking shoppers, we are on track to more than double our pre-COVID offerings,” Roe says. “We know that consumers are feeling inflation’s economic crunch. They will increasingly look for meal solutions in the deli that can replace (and often surpass) restaurant options. This will be a key shopping strategy as consumers try to stretch their food budgets without sacrificing the foods they love.”
The biggest opportunity for retailers will be to offer a comprehensive portfolio of prepared foods or complete ‘meal solutions.’ This includes ready-to-heat, ready-to-eat and ready-to-cook kits and single items.
“Product innovation is king, and that translates into packaging, displays, merchandising and offering regional varieties,” Roe says. “Educating the consumer in-store with the right assortments and appropriate signage will also help ensure success. By bringing continued innovation, convenience and value, retailers can help consumers learn to shop for complete meal solutions in the deli that can easily substitute for restaurant to-go items.”
Larry Montuori, vice president, sales at Stratford, CT-based Nuovo Pasta Products says, with the current economy and inflation, consumers will have less expendable income so will be dining at home more in 2023.
“Currently, we are pushing pesto,” Montuori says. “We’re introducing Alfredo, marinara sauce and pesto that’s refrigerated.”
He notes that, when it comes to pasta dishes in the deli, consumers are willing to try higher-end products. In addition, there is market segmentation similar to yogurt, hummus, ice cream and pizza.
“We brought in DOP basil for our DOP basil pesto,” Montuori says. “It has a different flavor and quality. We’re also seeing more imported flavor profiles.”
Nuovo Pasta’s Tour of Italy ravioli line is mirrored after actor Stanley Tucci’s CNN series Finding Italy.
“He goes to 20 regions in Italy, and each region has its own flavor profiles, which is similar to farm to table here in the States,” Montuori says. “Italy has been that way forever, with products very specific to the different regions.”
In addition to a line of Calabrian peppers and smoked mozzarella, Nuovo Pasta has launched a plant-based vegan line that includes sweet potato and cauliflower ravioli using a cashew bechamel made in-house that serves as both a binder and cheese substitute. Its mushroom polenta ravioli with sautéed mushrooms and polenta also is made in-house.
“Everything is clean, true vegan and plant-based,” Montuori says. “We use ancient grain for dough.”
For delis, Don’s Prepared Foods, headquartered in Schwenksville, PA, has a line of Don’s Better Bowls that are meals that include protein and carbs. This line has clean labels, healthy ingredients and features international flavors.
“With high demand for healthy plant-based items and globally-inspired flavors, Don’s Grains, Sides and Better Bowls are a perfect fit for retail deli,” says Carl H. Cappelli, Don’s Prepared Foods’ senior vice president of sales and business development.
Retailers can build brand equity by providing signature grab-and-go cups made in-store.
“And by scooping out in-store, retails can provide cool, healthy, global and unique items to go with any meal,” Cappelli says.
IDDBA’s Prach notes that packaging sustainability is key for Gen Z and Millennials.
Madison, WI-based Placon recently launched a new PET packaging line around deli. These tamper evident deli containers in 8-, 12-, 16-, 24- and 32-ounce sizes have a universal lid that fits on all bases.
“We use post-consumer recycled material, recycled bottles and have our own recycling center site,” says Kali Kinziger, Placon’s product manager. “This new packaging line provides clarity to display the food so people can see it. There is no haziness like with polypropylene. Our lids provide maximum clarity for displaying.”
The lid also is tamper evident for added safety. The new packaging line can be used with cold side dishes, such as salad, fruit, vegetables and dips.
“In terms of deli prepared food trends, salad kits are big,” Kinziger says. “Veggies with grains and dressing in portable cups are popular.”
Issues & Challenges
The dramatic growth of e-commerce and digital marketing has given delis an extra challenge of communicating freshness and convenience in an electronic medium.
“What may be easy to see in the context of clean, refrigerated shelves, near fresh produce and in a pleasant shopping environment, is more difficult in a small, online gallery of images,” Roe of Reser’s says. “Operationally, creating and maintaining a fresh and inviting deli in-store, and regularly assembling prepared items that look as good or better than restaurant options, are other examples of the extra burdens on deli staff.”
Dealing with shrink and shelf life also can test deli departments.
Blount Fine Foods prepared food lines range from 60 to 70 days, while its pot pie, which is sold frozen, has a 14-day shelf life when slacked.
“Labor in the delis is still a challenge,” Sewall says. “But delis are in for a good year, despite the challenges with labor and pricing. It will be another very strong year for sales.”
Montuori says deli prepared food must deliver on quality.
“In prepared foods, people look at the quality since they’re going to eat it soon,” Montuori says. “It’s imperative that delis deliver on quality. If a customer has a bad experience, they won’t buy it again.”
Deli associates must be informed so they can guide customers to what they’re looking for.
“Associates should be selling,” Montuori says. “They have people that stock shelves but in deli you want to be selling.”
Marketing & Merchandising
Prepared food sales are highly dependent on how well the department markets and merchandises its offerings.
One of the ways Reser’s is driving deli sales is with its national retailer programs.
“We have found our in-store promotions to be effective in drawing consumer attention to our products and to the deli, especially when NASCAR races are in town,” Roe at Reser’s says. “Our NASCAR program is entering its eleventh year and is built from our sponsorship of the #19 Joe Gibbs Racing team and driver Martin Truex, Jr. We leverage the energy of racing in key markets over the 38-week season by using our driver’s name image and likeness with racing-themed point of sale materials, in digital promotions with our customers and on our social media channels.”
Meal deals and bundling is effective in increasing basket rings.
“We recommend marketing our 30-ounce pot pie as part of a family meal,” Sewall says. “Delis can market our 12-ounce pot pies with our 16-ounce soup and mac and cheese to create meal combos. Consumers like it because they save if they buy two items.”
Marketing hot or heat-and-eat meals behind the glass also is effective.
“We offer our Blount Family Kitchen items for merchandising behind the glass,” Sewall says. “This is effective with our mac and cheese, sweet potatoes, rice cauliflower and other products. The trend is to sell items together; there are more items in the basket, which benefits retailers, and customers have an affordable, convenient meal, so it’s a win-win.”
Montuori recommends promoting the fact that Nuovo Pasta products require little prep work, and its packaging is sustainable.
“Marketing is about being creative and showing the products’ versatility,” Montuori says. “For example, ravioli and tortellini can be appetizers or center of the plate meals. Also, meal kits are still big, so delis can create menus to allow consumers to pick and choose different items.”
Cappelli at Don’s Prepared Foods recommends cross merchandising and marketing meal solutions.
“Show grains and sides as healthy solutions,” he says. “Also, make it turnkey for consumers with bundled menu items and meal solutions.”
Don’s Prepared Foods can also provide recipe ideas for delis and consumers.
Packaging innovations have taken prepared food marketing and merchandising to the next level.
“Offer versatile sizes of items that consumers can pick up,” Kinziger at Placon says. “Larger containers can be offered for big gatherings and catered events.”
Continued product innovation is important to maintain consumer interest and drive sales.
“We created macaroni and cheese ‘kits’ where deli staff assemble the final product, and the consumer heats—and eats and enjoys—at home,” says Reser’s Roe. “Various components include toppings like flavored breadcrumbs, bacon or barbecue sauce, and the consumer and retailer have options that can change by the week, month or season.”
In a crowded space, creative packaging helps gain attention and presents a classic favorite as something new. Reser’s invested in a package refresh for its branded deli hot sides.
“The design is now synchronized with our top-selling deli salads, so the consumer who buys deli salads who hasn’t tried a deli hot side may be more likely to consider something new from a brand they know and trust,” Roe notes. “We see a growth opportunity for hot deli sides as price-conscious consumers continue to shop the deli as an easy alternative to dining out.”
Unlike cold sides and salads, which can be more seasonal (e.g., potato salad in the summer), hot sides and entrée such baked ziti and scalloped potatoes, are strong sellers year-round, and can easily be paired with a salad and protein, such as rotisserie chicken, to make a complete meal solution, according to Roe.
“People will still battle cooking fatigue at home, so sales of deli prepared foods, meal kits and grab-and-go items will continue to enjoy growth,” Roe says.