Foodservice in Food Retail

Customers enjoying prepared food at Loblaws. Image: Digital Journal

Foodservice in Food Retail
By Dwayne Reno

As the grocery wars begin to heat up food retailers continue to invest in new ways to increase profits for themselves and shareholders. In 2015 I highlighted the growing trend of Canadian grocers indirectly competing with foodservice operators for customers. As the current “grocery wars” plays out in the media for all to see, a few magic words come to mind such as “dwell time” and “diversification”. This week I would like to look at how these two things are helping Canadian food retailers and the impact it will have on foodservice operators.

What is Dwell Time?
Grocers have realized that the longer you can keep shoppers on the promises, the more they will buy this is called “dwell time”. It is the opposite of “table-turning” a popular strategy used by foodservice operators to generate higher profits during peak hours.

Diversification
With increased competition from smaller grocers and general merchandise store such as Costco and Walmart on the rise, many Canadian grocers are focused on differentiating themselves by diversify their locations in the hopes of increase consumer “dwell time”. Diversification has led to huge renovations over the past few years at Loblaws which now offers consumers the general merchandise experience via their Joe Fresh brand and full-service restaurants built into their grocery stores.

An article writing by Statistics Canada stated that “Canadian food stores (Supermarkets) have improved their share of overall retail profits. Their diversification into a wider range of products and increased investment in their stores seem to have contributed to the improved performance of both their sales and profitability,” HERE.

History of foodservice in retail
Food retailers started offering prepared foods in the 1980s and 1990s with roasted and fried chicken. The trend has grown immensely over the past few years with Wholes Foods and other specially food retailer’s experiencing success with prepared foods and proving to other food retailers it can be done economically.
 
Foodservice in retail will continue
Many food retailers are experiencing little growth in basic food retail and with Millennials being open to eating 6 smaller meals per day instead of the traditional 3 meals, as well as locally grown and organic foods. Food retailers are seizing this opportunity to generate better margins since time starved consumers also don’t mind paying $10 or more for healthy prepared foods.

To appeal to their dwelling consumer’s grocery stores are adding full-service eating areas, chefs, and meal preps resulting in many grocery stores looking more like a restaurant or café. All this in very intentional according to the Cleveland Research Company's (CRC) 2014 Prepared Foods Benchmarking found that prepared foods in retail grew 8.7% in 2013 and is expected to exceed $65 billion in the next five years.

How can foodservice operators manage?
“If you can’t beat them join them” seems to be the current practice among fast food chains like MacDonald’s and many more who can be found inside many food and merchandise retailers. Restaurant neighbourhoods are very competitive and since most of the advertising is done by the large fast food chains to generate foot traffic, foodservice operators will have to do more to diversify themselves from the other restaurants in their restaurant row.

Creating seasonal menu items and snack occasion menus are a great way to increase average cheque sizes and will also help foodservice operators increase profits during off peak hours. Also make sure to advertise as much as possible to help generate positive word of mouth and create awareness for your menu specials and promotions.

To find out more about how Building Block Associates can save you time and money on advertising, HERE.

Until next time your customers want to know why they should spend money at your restaurant, bar or cafe. So give them the goods!