Why Retailers Should Expand Deli and Prepared Food Departments

With the recent uptick in food prices, it's no surprise that shoppers are reassessing their grocery budgets. What's even more interesting is how retailers are responding to this shift in consumer behavior, with many actively seeking new opportunities to adapt—and even thrive.

1. Harness the Power of Value Shopping

With the spike in food inflation rates, consumers are feeling the pinch in their wallets. In response, grocery value shopping is on the rise. Consumers are opting for larger-sized products with longer shelf-life, recognizing the true value of these purchases as they lower the cost per use. Retailers can capitalize on this trend by emphasizing store discounts and value-driven offerings, as well as highlighting the cost-effectiveness of their products.

Grocery Store Discounts More Important to Consumers Across Incomes

Source: https://www.mckinsey.com/industries/retail/our-insights/the-state-of-grocery-in-north-america-2023

2. Spotlight Meat and Deli/Prepared Foods

Meat remains the largest sales generator in fresh departments, underlining its importance to retailers. Additionally, deli and prepared foods are gaining traction due to their strong margins and appeal to customers seeking convenience. With over 50% of retailers planning to increase deli/prepared foods offerings in 2024, there's a growing emphasis on adding more "grab-and-go" options to satisfy changes in consumer behavior.

Grocery Retail Departmental Sales Growth 2023

Chart: Carlson AirFlo; Data Sources: https://www.freshproduce.com/resources/retail/2023-supermarket-produce-department-benchmarks/, https://www.statista.com/forecasts/311125/florists-revenue-in-the-us, https://www.supermarketnews.com/produce-floral/supermarkets-lose-market-share-fresh-frozen-categories, https://www.freshproduce.com/resources/consumer-trends/2024-produce-industry-report/

3. Meet the Demand for Home Cooking

The shift towards home cooking is gaining momentum, with more than 50% of people intending to cook at home more often in 2024. This shift represents an opportunity for retailers to position themselves as providers of convenient, affordable meal solutions. By offering ready-to-eat sections, hybrid meal options, and high-quality deli and bakery items, retailers can cater to the needs of consumers seeking restaurant-quality experiences at home.

Trends in Food-At-Home Sales by Value and Quantity Diverge Early 2022

Source: https://www.ers.usda.gov/data-products/chart-gallery/gallery/chart-detail/?chartId=106823

4. Address the Shift Toward Frozen Produce

The decline in fresh produce consumption signifies a shift in consumer preferences towards items with longer shelf-life and increased reliance on frozen produce. Retailers can adapt to these changes by providing tips on shelf-life, storage, and freezing fresh produce to reduce waste. Furthermore, pre-packaged produce has been outperforming bulk produce, indicating a preference for convenience and functionality among consumers.

Source: Carlson AirFlo Elite Self-Facer

5. Embrace Innovation and Differentiation

To build sales in 2024, retailers can also focus on private label assortments as well as increasing their fresh offerings to differentiate themselves from lower-priced competitors. Strengthening fresh departments and creating excitement in-store with visually appealing store displays can help to attract customers and drive sales.

Source: Carlson AirFlo Pod Merchandising Systems

Navigating inflation and changing consumer preferences requires adaptability and innovation from retailers. By understanding the trends shaping the grocery landscape and implementing strategic initiatives to meet evolving consumer needs, retailers can continue to thrive in this competitive market in 2024 and beyond.

For more insights and strategies, join us at the IDDBA 2024 conference in Houston from June 9-11. Stop by our IDDBA booth and discover how our innovative merchandising solutions can help you elevate your dairy, deli, and bakery departments, attract more customers, and drive sales growth!