Thinking of Buying a Fast-Casual Franchise? Read this report first.

Gauging Engagement | by Christopher Wolf

A Call to Marketing Action
Full-service and quick-service unite against the new takeout competition—supermarkets.
Chris Wolf writes about marketing for QSR magazine

In last month’s column I talked about the increasingly humorous and claims-aggressive marketing tactics being deployed by a number of quick-serve and full-serve restaurants that are competing against one another to hold on to customers.

But while the foodservice brethren are trading punches, supermarket chains across the country are stealthily launching some serious price- and quality-competitive claims to woo consumers from both quick-serve and full-serve to their prepared-foods counters.

Since January, I’ve been on a series of multi-city food scouting missions, visiting new and remodeled supermarkets in urban and suburban neighborhoods to better understand the growing prepared foods phenomenon that is bubbling up among leading retail grocery chains around the country.

California-based Safeway is not only busy setting up a new, smaller foodservice-minded concept on the West Coast called The Market, which feature Signature Café dishes to go, but also building enhanced “lifestyle concepts” in Chicago under the Dominick’s banner with extended prepared-foods sections. Supervalu’s Jewel chain in Chicago recently debuted a pilot Urban Fresh format that centers on chefs preparing food all day in open kitchens for city dwellers to pick up after work. The in-store design is very upscale, but the foods are affordable and have everyday appeal.

In the old days, hot prepared-foods were an adjunct to the deli meat counter, but now the prepared-foods section is front and center, taking up more retail space than the produce section, which used to be the first feature shoppers saw when they entered a store. Retailers have seen the growing appeal of ready-to-eat foods for family dinners and have decided that this is a market worth stretching for.

Kroger’s new Fresh Fare concept, which recently opened in Atlanta, has a prominent sign featuring Chef Howard in front of the Bistro by Kroger area. This is where consumers can have foods dished up cafeteria-style or select their own foods at a buffet in the front of the store. There’s also a Meals to Go section, a kiosk full of hot dinner foods, an olive bar, and a selection of ready-to-heat main dishes and sides that put standard Boston Market fare to shame.

Then there’s Lakeland, Florida–based Publix, which recently adapted its cooking school, Aprons, into its own in-store and stand-alone meal-assembly concept. Consumers can put together dinner kits to stock freezers or pick up pre-assembled meals in a pinch. This same brand is used to highlight daytime demonstrations of easy-to-prepare meals with all the ingredients needed for the custom recipes right beside the Aprons kiosk for easy selection and purchase.

Publix also recently opened a Whole Foods-style Greenwise concept that has an extensive in-store prepared-foods area similar to Kroger’s, serving up foods from a state-of-the-art open kitchen full of people in white coats. It all seems to bring the idea of quick-service into a new light.

An aggressive prepared-foods program and heavy capital investments alone should be concerning enough for the restaurant industry. But in this price-sensitive economy, what’s more worrisome is the fact that in recent months, multiunit stores like East Coast-based Wegmans, Dominick’s, and newcomer Fresh & Easy have bombarded consumers with a special promise: Their fresh-prepared foods are not only just as good as restaurant food but also a lot cheaper for feeding a family.

Wegmans, an upscale grocery chain in the northeast, boldly claims, “It is no surprise to some that families can make a meal from prepared foods at Wegmans and spend less per person than it would cost to have a dinner in a restaurant.” Similarly, Fresh & Easy’s chef Mike Ainslie, claims, “Our kitchen products are restaurant quality and far from restaurant prices.”

When I was in Chicago in early January, I saw a prominent in-store display at Dominick’s new lifestyle format with marketing messages suggesting “It’s like dining out at home.”

John Elliott, public affairs manager for Cincinnati-based Kroger, was quoted in the press recently saying, “Customer patterns are changing. There’s a definite move to more prepared meals. We think Kroger is a great alternative to a fast-food restaurant.” Consumers might agree: Kroger reported in December 2008 that its third-quarter sales were up 9 percent versus the same period the prior year.

And if these signs are not ominous enough, consider that Wal-Mart recently dipped its toe into the urban-grocery format with the launch of four Marketside branded units in the Phoenix area last fall. The signs announcing the store openings read: “Marketside: Recommended by food critics and financial planners. Come shop with us.”

Retailers have seen the growing appeal of ready-to-eat foods for family dinners and have decided that this is a market worth stretching for.”

These efforts are not lost on consumers nor the media. Marie Dubuque, consumer education feature writer for online magazine Suite101.com, recently told her readers: “Dinner at a moderately priced restaurant for a family of four will probably run at least $30. That same meal, fully cooked, eaten at home will likely cost as little as $9.99. The difference? Grocery store cooks prepare your food instead of a restaurant chef.”

While we discussed her recommendation, Dubuque mentioned that her hometown supermarket in St. Louis is offering a brown-bag deal that consumers can fill up with a hot rotisserie chicken and side dishes for $10. Likewise, at Sam’s Club, she said, consumers can pick up a rotating selection of ready-to-heat meals like chicken Parmesan, chicken enchiladas, meatloaf, and chicken Caesar salads that can practically feed a family for two days.

“Because of the economy people are trying to save money,” Dubuque says. “People don’t want to cook, don’t want to go out.” Clearly value has moved ahead of convenience when it comes to sourcing meals.

Of course, individually, these supermarket chains I’ve mentioned only represent a market-by-market threat to the restaurant industry; but corporately the implications are spectacular.

No one really took supermarkets very seriously back in the ’90s when many retailers made half-hearted attempts to copy Boston Market by adding a few side dishes to the rotisserie chicken case. But retailers knew they had to do something about the restaurant industry’s growing infringement on their daily home-meal territory.

Now nearly 20 years later, it’s clear that grocery chains are fully committing themselves to offering high-quality fully prepared meals that can compete with restaurants, and consumers are buying. It’s time the foodservice industry takes them seriously as real competition to address.

As director of strategic innovation for The Turover Straus Group, Christopher Wolf serves a wide range of manufacturing and retail-based clients seeking strategic and culinary innovations for consumers and the food industry.