The Next Battleground?
By Shonda Talerico Dudlicek
Premium cheeses help deli departments compete for
Consumers say they’re eating out more, but the
truth is, they’re buying their meals out and bringing them back home,
from the deli and other outlets.
According to the National Restaurant Association, the
average household spends $2,276 on food away from home, or $910 per person.
Takeout and delivery accounts for about 58 percent of total restaurant
traffic. And the restaurant share of the food dollar today is 46.4 percent,
compared with only 25 percent in 1955.
Consumers are eating prepared meals not only because
they’re time starved, but they’re eager to try new flavors and
With their expanded offerings for home-replacement
meals, retailers with deli departments are poised to tap into this
burgeoning market to become a destination for dinner and other mealtimes.
As consumers become more sophisticated in their expectations for
premium deli products, cheese processors — along with deli
departments — are offering products in those same flavors and
varieties found at eateries.
With increased competition from all channels —
including restaurants, grocers, superstores and local delis —
retailers with deli departments are searching for a way to differentiate
themselves, says Ed Mackowiak, vice president of sales and marketing for
FreshLook Marketing, Hoffman Estates, Ill. “The prepared deli is the
next battleground and that’s where you’ll sell.”
What retailers are selling through the deli is a wide
selection tailored to their customers, Mackowiak says. “The deli is
important for a couple of different reasons. Number one, there are more and
better offerings. And there has been an explosion of new, different and
unique items. Between flavors and health attributes, there’s been an
explosion of possibilities,” he says. “Number two, consumers
are getting smarter about what they want. They’re beginning to look
for more unique or those items that have health benefits.”
Most deli product consumers visit the deli at least
three times a week, according to the International Dairy-Deli-Bakery
Association, Madison, Wis. They’re short on time and prefer the
convenience of the deli, hail from another part of the world, are between
40 and 59, are overweight and shop for food in places other than a
traditional supermarket, according to IDDBA research.
These deli shoppers are also baby boomers who prefer
robust-flavored and cheeses, says Alan Hiebert, an IDDBA education
researcher who helped compile “What’s In Store,” the
industry group’s annual report. “For several years now,
consumers have been looking for as much flavor as they can get, and I
don’t see that trend slowing any time soon. As the U.S. population
continues to age, it is finding its tastebuds duller than they used to
be,” he says. “Flavored cheeses like pepper jack and dill
havarti should continue to be popular, as should aged cheeses like cheddars
aged for more than a year.”
Cheese processors have responded with a variety of
premium deli products designed to satisfy consumer demands for convenience
and functionality. “Consumers are demanding convenient packaging of
all products, especially in light of how many meals Americans eat in their
cars these days,” Hiebert says.
Sandwich fixings — cheese and lunchmeat —
are among the top three most-popular items sold in the deli, according to
the IDDBA. And natural cheese outsells processed cheese, a trend that
describes the product mix of Tillamook County Creamery Association.
“There are now more sliced natural cheese choices
in a category previously dominated by processed cheese,” says Kathy
Holstad, marketing director at the Tillamook, Ore.-based processor.
“We have a variety of 12-ounce sliced stack packs available at the
deli case, in varieties including Medium and Sharp Cheddar, Pepper Jack and
Swiss, as well as our newest items, Colby Jack and Monterey Jack.
Full-flavored cheeses seem to be most popular, such as Pepper Jack and
Sharp Cheddar. Colby Jack, another popular variety for Tillamook, is more
mild but is still robust in flavor. Our cheddar is naturally aged and still
made using the nearly 100-year-old recipe, and all the Tillamook natural
cheeses have a full flavor.”
Deli cheese is appealing to consumers, Mackowiak says.
“There’s a perception that the product is higher quality and
fresher. So if you see it cut off the wheel of cheese, there’s this
idea that it is fresher and is a higher quality,” he says.
The convenience of exact-weight cheeses that consumers
can grab and go are bringing more shoppers into the deli, says Lance
Chambers, category business director and general manager of Kraft
Foods’ Churny brand. “Packaging has also changed with
consumer-friendly deli slice features such as recloseable packages and
attractive packaging graphics,” Chambers says. “Many retailers
are looking to producers to provide exciting flavors and enhanced
Kraft’s Churny Cheese relaunched its
Hoffman’s exact-weight deli slices in Asiago Fresh and Vermont
Cheddar with new front label graphics and full-color backer-boards
featuring serving suggestions. Hoffman’s 8-ounce slice packages
feature 10 slices, with an inner leaf separating each slice and an
easy-open, recloseable package to maintain freshness. Kraft’s 18
Hoffman and two DiGiorno deli slice SKUs respond to “consumer demands
for flavor adventures as well as their desire to take their favorite
restaurant tastes home,” Chambers says.
“Consumers are constantly looking for their
favorite deli tastes in a more convenient package,” Chambers says.
“Consumers are looking for quality, freshness and a bit of a treasure
hunt of new flavors when they shop the deli.”
Brand identification has become more important on
premium deli products as consumers look for their favorite brands.
“The brand identification in the deli has grown tremendously over the
past 10 years, maybe more,” Mackowiak says. “Vendors are very
interested in creating a brand identity for themselves and not just be
another [product]. And deli retailers have recognized that American
consumers are brand conscious and by offering them brands that they
identify with, whatever those qualities might be, that they can satisfy
One way a company can break into new markets is by
introducing its products through the deli case. Tillamook’s strategy
for entering new markets is to offer its products through the deli.
“In the East, you’ll mostly find us in the deli,” Jim
McMullen, Tillamook’s president and chief executive officer, told Dairy
Field in July 2003. “Our strategy is to go into the deli first.
It’s more cost-effective. It helps give an introduction to our
product. A lot of our strategy, too, is based on the mergers and
acquisitions of the retail grocery industry.”
But, Hiebert adds, quality private label deli products
are a great way for a chain to define itself, compete with premium national
brands and increase customer loyalty.
“Many consumers want higher-quality deli meats
and cheeses, but there always will be consumers who do not want to pay a
higher price for higher quality,” he says. “Providing the right
product balance can be a tricky proposition. Manufacturers can choose the
quality level they wish their brands to deliver and hang their hats on that
quality level. Retailers, on the other hand, often have a wide range of
demographic groups shopping their stores, so they have to offer a wider
range of brands to please their diverse customer bases. Of course, many
chains have defined themselves as upscale/gourmet and carry only
higher-quality deli products. Those chains have consciously chosen not to
be attractive to certain demographic groups with an eye toward serving
their chosen demographics even better.”
Mackowiak expects the deli will be the area of largest
growth for the foreseeable future. “I think retailers are uniquely
qualified to offer this solution to consumers and that the prepared deli
items and take-home meals are a higher margin,” he says, “so
it’s a perfect opportunity for the retailer to maintain or grow
profits, to differentiate themselves from other stores and channels and
also to provide consumers with what they really want, which is prepared or
completely prepared foods.”
Ethnic offerings in both meat and cheese are expected
to become a stronger presence in the deli case, Hiebert says. With cheese a
staple in protein-rich diets and Hispanic and Mediterranean households,
consumers are eager to sample all the varieties.
“Hispanic foods like chorizo and the myriad
Hispanic cheeses that are fast gaining popularity will be mainstream before
we know it,” Hiebert says. “For now, because they are novel and
ethnic, they can command a place among premium products. We’ll see if
they remain premium by definition as they become more widely
Hiebert forecasts three trends in premium deli products
as the use of private label to maintain customer loyalty: stronger flavors
like aged and flavored cheeses, exotic imported items, and convenient
products and packaging. “If people can eat a product in the car with
one hand,” he says, “that product has passed the first
Shonda Talerico Dudlicek is a freelance journalist and
a former managing editor of Dairy Field.
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