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Retail Foodservice a Growth Opportunity

NEW YORK, NY (Sept. 25)—A Speak Foodservice webinar on Thursday explored the emerging retail foodservice segment, outlining for traditional foodservice companies the opportunities and challenges presented by this nontraditional market. Guest speaker Maureen Azzato, former editor and publisher of On-the-Go Foodservice and Convenience Store News, defined "new" retail foodservice – prepared ready-to-eat or ready-to-heat foods sold in various retail channels – and said it's one of the strongest growth opportunities right now for foodservice distributors and manufacturers.

"Conservatively, this is upwards of a $52 billion segment," Azzato said. "It represents about 10% of the overall foodservice market. In fact, this is one of the few foodservice segments still growing in this recession." Margins in the segment, she added, average 50 percent to 60 percent for prepared foods, and higher than that for beverages, making it very attractive for all players in the supply chain.

The latest numbers from Technomic show that supermarket foodservice will grow 4.5% this year and c-store foodservice by 1.5%. In 2010, supermarket foodservice is projected to grow 3.5% and c-stores 1.5%. "These are great numbers since foodservice as a whole is down by 3.8% this year. Full-service restaurants were hit the hardest, with sales decline of 8% this year and another 10.2% decline forecasted for next year," Azzato said. "Even QSRs remained flat in 2009 and will have negative growth of 2.4% in 2010, according to Technomic. So retail foodservice is really a bright spot. And nearly 40% of those segment dollars are derived from beverages, where c-stores truly dominate. Meanwhile 60% of sales came from prepared foods, where supermarkets dominate with a 50% share of dollar sales. But c-stores are no slouches. They tallied nearly $9 billion in prepared food sales, which is 28% share."

While opportunities in the segment are strong, challenges abound and targeted resources for operators remain scarce. Asked how well foodservice distributors and manufacturers are meeting the unique needs of retail foodservice operators, Azzato said, "Frankly, there's a lot of room for improvement. Execution of foodservice is difficult, as you're dealing with a counter-to-retail operating mindset. Retailers have a front-of-the house mentality. They need to meld that with back-of-the-house expertise, which a foodservice supplier can certainly provide. More and more retailers are hiring experts from the foodservice industry, and many of these professionals are bringing more savvy buying and operations strategies to the game. We're seeing retailers reach out to foodservice distributors, breaking out from exclusively buying from their grocery wholesalers."

DSRs, she added, could be particularly helpful in introducing effective foodservice strategies to retail operations.

Among the biggest challenges the segment faces, according to Azzato, are sourcing foodservice products and equipment that are appropriate to retailers' business and store formats versus those of traditional restaurants.

For distributors and manufacturers, key challenges are connecting with buyers across various channels of retail trade. "It really requires them to be educated in the needs of the retail channels they're servicing. For example, grocery stores are quite different from c-store operators' needs. Also, most manufacturers' foodservice divisions seem to be structured to only serve traditional foodservice. If they have retail and foodservice divisions, they often don't cross-germinate at all—and they should."

Speak Foodservice has additional webinars scheduled on the topic of retail foodservice. One on October 1 will address distributor challenges and opportunities and a third on October 8 will target manufacturer challenges and opportunities. For information, visit www.speakfoodservice.com.

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