Dive Brief:
- Ahold Delhaize’s services company, Retail Business Services, is opening a fresh processing facility and culinary innovation center in Rhode Island through its subsidiary Infinity Fresh Kitchen, according to a company press release.
- The facility will be used to prepare fresh food items including cut fruits and vegetables, grab-and-go salads, sandwiches, wraps, and other fresh food items for the deli and prepared food sections. It will initially serve Ahold Delhaize's Hannaford and Stop & Shop banners.
- At the culinary innovation center, the company will test new, private brand food concepts. Construction is underway on the facility and culinary center, with operations expected to begin in September.
Dive Insight:
Value-added goods, particularly in the produce department, are becoming a popular segment among shoppers who are prioritizing health and convenience. Nielsen found that the value-added produce category grew 2% in 2018, and according to the Food Marketing Institute's Power of Produce report, 92% of households purchased some type of value-added produce last year.
The trend isn’t limited to the produce aisle. Many consumers make impulse purchases in the prepared foods section, tantalized by the sight of visually appealing meals and fresh aromas wafting through the store. Nearly 80% of consumers purchased a deli department prepared food item in 2018, generating $12.5 billion in revenue, according to IRI. Costco’s rotisserie chickens have seen 8% growth annually since 2010 and serve as a major driver of add-on sales for the retailer.
Despite the promising sales, there are a few challenges for retailers to meet the ongoing demand for prepared foods. There is a much higher risk of shrink from unsold food considering the time and labor that goes into making grab-and-go items. Unlike a packaged good that can stay on the shelf for several days or even weeks, a fresh, prepared item has an extremely short shelf life. Ahold Delhaize’s new facility could help the retailer better align prepared food supply with demand. Moving the prep facility elsewhere also frees up important square footage inside the store that can instead be dedicated to prominent food displays and in-store products.
As prepared foods become more popular, consumers may start asking whether they can add them to their online shopping carts. Retailers are still figuring out how to add ready-to-eat options to their grocery delivery programs, and Ahold Delhaize's new facility could serve as a fulfillment center or localized hub to help fulfill prepared food delivery.
In addition to its new food facility, Retail Business Services recently opened a 30,000-square-foot facility in Massachusetts that houses 200 information technology employees and an innovation lab. The space is dedicated to finding in-store technologies that will enhance the customer experience and making shopping easier.
