There was a time when the deli department was the supermarket’s family department. It was not a department for the elite or well-to-do; it was the everyday department for the middle class. It was not overly expensive, and chopped ham, especially if it was on sale, was often the highest tonnage item, along with potato salad. There was no prosciutto di Parma, truffle salami, sushi or expensive artisan cheeses. Instead, there were at least 40 different kinds of lunch meat, 15 to 20 varieties of sliced-to-order cheeses, and dozens of salads, many of which were prepared in-store using fresh ingredients. Prepared foods usually consisted of rotisserie chicken on the East Coast and fried chicken in the rest of the country, and there were other ancillary products like pickles, specialty breads, cream cheese spreads and maybe some candy. In some regions of the country, specialty cheeses and expanded prepared foods were common.
The changes that have happened to the deli were predictable, as new technologies emerged and consumer lifestyles changed. However, as time has gone on, the “family” aspect of the deli department has gradually decreased to the point where some chains are looking to eliminate the service deli in place of all pre-packed foods. Interaction with the customer diminished due to more self-service options. A narrowing of item counts may have helped with overall shrink and reduced the amount of linear feet needed for the deli counter, but it also lessened the excitement. Gone are impulse sales, which was the life blood for delis. For the most part, seasonality is gone. Fresh fruit salad comes in jars, and it is not the freshly-cut melons and strawberries that were very popular. Tomato and onion salads and fresh cucumber salads are a thing of the past. Today, prepared foods are often bought frozen to be thawed out at store level, and they are not any better than the prepared entrees and sides found in the frozen food aisle. The one general exception is rotisserie and fried chicken, which are still high-volume items. These two items are often better than homemade and better than most restaurants, so it is no surprise that their popularity is still strong.
One very popular addition and a shining star in the deli is the rapid expansion of specialty cheeses. In some chains, it has evolved into a separate department.
There are reasons for the diminished status of the deli department. Technology has grown exponentially. Early on, technology allowed for great advances in the frozen food arena. The quality of frozen fruit and vegetables has taken over canned food, because it is tastier, retains texture and is lower in salt. Every kind of potato and pasta is found in a typical frozen food department, and prepared food choices have exploded, making cooking at home less of a necessity.
Technology also has changed the packaging industry. Cold cuts and lunch meats, commodity and specialty salads, pickles and olives are readily available pre-packed, reducing both labor and shrinkage and increasing self-life. The downside is retail prices have also increased just as rapidly. Retailers never considered the labor and shrink savings, and they kept the same gross profit expectations. Consequently, today $4.50 a pound for commodity potato salad is the norm, far outpacing inflation. If a customer wants a rotisserie chicken and 2 pounds of potato salad, the potato salad will cost more than the chicken.
Supermarkets, and especially deli departments, are plagued with competition from every non-traditional corner. Drug stores, gas stations and movie theaters all sell food. While the largest share of stomach was once owned by supermarkets, today restaurants dominate the food landscape. Restaurants have a huge advantage – the food is usually much better, no one must cook and there is no clean-up.
The last few years have offered several bright spots for supermarkets and delis. COVID, however tragic, forced many people back to home-cooked meals, as restaurants closed and/or reduced operating hours. Many people were no longer going into the office and worked from home. Some still are. Home schooling became the norm; even colleges went to online classes. All this was a benefit to supermarket sales.
This last year, food prices have soared for many reasons. The war in Ukraine, the breadbasket of Europe, has increased demand for U.S. exports. Climate change has brought hardship to many areas, including California. Whether it is climatic events, lack of labor or disease, shortages are affecting the food supply. Restaurant prices have risen, and rightly so; however, that does not change the fact that people are looking for ways to decrease their food costs, and eating at home is one of the ways to save.
Retail chains need to decide what they want to do with their deli departments. It can go back to being the family department offering prepared food alternatives. Increased variety with excellent customer service and fair pricing drive customer counts. People are willing to cook, and they are looking for tasty alternatives to always eating out. There are opportunities if retailers want to put in the effort. If retailers decide it is not worth the effort, deli departments will just be another department offering pre-packed products on shelves for self-service.