When a shopper thinks of fresh, they might think of just produce. But grocers know that fresh is so much more than fruits and vegetables. The fresh perimeter comprises nearly half of all retail sales—and it’s an absolutely critical experience to nail. As consumer trends shift and so does the economy, fresh is constantly redefined. No matter what a retail food business model looks like for a grocer, the ‘fresh impression’ is foundational to shopper loyalty and long-term differentiation versus Walmart and Amazon.
Fresh is next—and it must be best
Models of work and living have changed dramatically for grocery shoppers since the onset of the pandemic. Shoppers are looking for convenient, reasonably priced alternatives to dining out. As economic conditions worsen, prepared foods are taking on restaurant competition. In a retail foodservice report from FMI, shoppers surveyed said they wanted creative, prepared meals at supermarkets with restaurant-style amenities available for delivery and pickup. As consumers continue to see grocery as offering better value meals than restaurants, grocers are investing to seize their unfair share in prepared foods.
Whether it’s Wegmans investing in their very own cheese caves, Cardenas showing excellence in Hispanic-centric prepared foods, or SpartanNash promoting prepared bakery and deli items for shoppers seeking convenience and indulgence, major grocers are stepping up fresh prepared to meet this rapidly-growing shopper demand.
With great revenue potential comes great operational responsibility
While prepared foods are a great well to tap into for retailers, the function creates many challenges for store operations. Some common roadblocks:
- Bad data: This especially affects sales, as well as recipe and item data in prepared foods. Grocers need to manage these massive data sets to execute on prepared food strategies such as predicting sales for items. This can become particularly challenging when grocers reuse PLUs, use one PLU/SKU to manage multiple items, stores mislabel product, predicting and incorporating e-commerce demand, etc.
- Hidden shrink: When the retailer is unclear exactly how much of an ingredient is being used to prepare a recipe, associates experience a lack of inventory visibility and can ultimately experience high hidden shrink losses when tools are not available to automate incrementing and decrementing inventory. Having an inconsistent inventory also leads to poor ordering decisions and the vicious hidden shrink and excessively stocked back room cycles continue
- Change management: Prepared foods done in house by grocers requires a tremendous amount of discipline and training to execute on. There are many complexities handling kitchen equipment, cooking techniques, working early hours, finding skilled labor and so on that it can become difficult to find the labor and/or retrain your current labor force to execute
- Missed sales opportunities: Shoppers are asking for help, but associates are flooded with other tasks and using far too many point systems and tools. Even the CEO knows that their stores cannot deliver the best deli if the same associate on duty handles two jobs at the same time…sales and service. Grocers are looking for solutions that reduce the amount of time in the kitchen or back room and increase the time associates can spend on the floor helping customers
Three dimensions to fresh success in grocery
The challenges are plenty, and the stakes are high: stepping up to consumer expectations is going to take some work for retailers. Shoppers want prepared foods on-demand—40% of online sales are now being generated by fresh food departments— They want fresh foods and meals personalized: 66% of consumers say they would like the option to customize their food orders; and 80% of Gen Z and 74% of millennials say they prefer customizable options.
Thankfully, grocers are gearing up for prepared fresh. A 2022 FMI study found more than 80% of regional and national grocers are increasing the space they allocate to fresh-prepared products. When asked their best chance at fighting competition in prepared categories, 66% listed grab-and-go.
A successful fresh retailer wins with:
- Fresh on-demand
- Fresh personalized
- Fresh prepared
Challenges: Fresh “on-demand” comes with challenges. Retailers often find it difficult to support the same fresh assortment online as they do in-store. There are significant operational challenges when it comes to keeping items warm, or syncing up the timing for when a food item needs to be made and when it needs to be ready for shopper curbside pickup.
Online fulfillment also may involve soon-expiring food, and when the inevitable item substitution conundrum hits, shoppers get upset. Store associates picking ecommerce orders are slowed down standing in line for deli or made-to-order items to be completed…and those same items are hard to keep warm and fresh from store to car or home.
Opportunity: Retailers should be unifying online and in-store inventory to supply shoppers the optimal fresh assortment they want for their online orders. Fresh “on-demand” means fulfilling online orders in stages to perfect freshness and maximize labor efficiencies and mitigating food waste through cross-store expiration date management.
In order to deliver effectively with available store team members, ecommerce fulfillment must further connect with fresh operation processes like production planning and made-to-order; making it easy for the teams to manage complex production steps while ensure there is an accurate forecast to help grocers better meet shopper demand for higher-value prepared items.
Challenges: Fresh “personalized” brings its own difficulties to the aisle. Given major increases in food preferences, retailers need to key into a variety of prepared foods to fit each shopper’s taste. This includes regional specificity and tailoring, as well as a store assortment that matches up with local community needs.
Opportunity: A retailer succeeding at fresh “personalized” embraces the power of forecasting. Total store inventory integrity built through AI-driven forecasting will provide stores with real-time accuracy and the ability to withstand the halo effect, cannibalization, seasonality, and promotions. This type of inventory intelligence ensures that even the tricky make-to-sell and break-to-sell arenas are managed with total confidence. Trustworthy forecasting handles demand for a single item broken down into multiple SKUs/products and works with flexible configurations like minimums, safety stock, display order, batch sizes, rounding rules, case sizes, day parts, and waste thresholds.
Leading retailers are taking “personalized” to heart; investing in platforms unify fresh operations and total store inventory: ensuring that prepared foods and the rest of the store are connected and consistent.
Challenges: Roadblocks to fresh “prepared” center on forecasting difficulty, and the challenges this brings up for the associates managing prepared food production and distribution. Deli and prepared food area employees are often bogged down by “kitchen math” when producing recipes, which accelerates shrink potential, decreases ingredient inventory accuracy, and cuts into time associates could be interacting with shoppers. Grocers that manage multiple bakery modes across the chain like frozen and thaw or from scratch also struggle with detached point systems that don’t sync up recipe inventory across models.
Opportunities: Grocers that nail fresh “prepared” success embrace technology tools that lessen the burden of the associate and increase total efficiencies. AI-driven forecasting and computer-generated ordering majorly reduce human error and build trust in a single inventory. This provides associates with ingredient and recipe visibility, allows flexibility across differing models and methods, and totally eliminates “kitchen math.” With an easy-to-use inventory management system, associates are free to interact with shoppers and elevate the in-store experience, while still producing high-quality products. Provide your associates with streamlined tasks and shoppers with the freshest possible store by connecting fresh operations end-to-end, synchronizing data, and watching fresh success flourish.
About Sarah Montogomery
Sarah Montgomery is a senior director in Upshop’s new solutions consulting division, working to develop a new strategic department that acts as a liaison between sales and implementation to increase client adoption and satisfaction. Her sphere of influence scales 145-plus retail customers, including major U.S. grocers like Kroger, Ahold Delhaize, and Wegmans.