Dive Brief:

• Store-within-a-store concepts are common in foodservice departments, but Schnucks recently extended the concept to the deli section through a partnership with local supplier Volpi Foods, according to Retail Wire.  
• Last month, the Midwestern grocer installed a separate Volpi Foods branded department offering freshly sliced and cured meats from the artisan supplier. Schnucks staffers work in the department and are trained by Volpi Foods representatives.
• Other grocers have launched innovative store-within-a-store concepts recently, RetailWire wrote. Kroger offers special sections devoted to Murray’s Cheese, the specialty supplier that was acquired by the retailer earlier this year, while Whole Foods 365 stores devote store space to local restaurants through its “Friends of 365” program.

Dive Insight:

A store-within-a-store concept might seem like a stretch in the deli department, but this deal makes a lot of sense for Schnucks.

First off, this is a partnership with a local supplier that’s well known in St. Louis, where Schnucks is based. Brand recognition with customers will be strong, and the concept can also capitalize on the growing demand for locally sourced foods right now.   

Second, and perhaps most importantly, this deal has taken place in a very important category for Schnucks, and for grocers everywhere. Deli sales currently account for just under a fifth of total store sales right now, according to Nielsen Fresh, and are one of the major profit centers for retailers. Although prepared foods lead the way in department sales, deli meats — and especially artisan meats — are seeing healthy growth.

According to Nielsen, specialty meats comprise just 4% of sales in the deli department, but grew 4% in sales and volume in 2016.

Deli is also a brand-driven department. Many grocers offer their own store lines, while names like Boar’s Head and Dietz & Watson have become well known and widely available.

Major suppliers are seeing the value in artisan meats, too. In October, Hormel acquired Columbus Craft Meats, a premium deli meat and salami company, for $850 million. Two years earlier, the meat processing giant acquired natural and organic supplier Applegate Farms for $750 million.

Finally, it’s important to note that deli sales promote higher sales throughout the store. According to Nielsen Fresh, shoppers who buy premium deli meat also buy specialty cheese and chocolate, Greek yogurt and pasta. The firm’s data shows that meat strongly links with 50 different products throughout the grocery store.