Dive Brief:

• In addition to its store locations, gourmet retailer Plum Market runs the cafeteria operations at a few private schools in its home state of Michigan, according to Supermarket News. 
• Plum began serving meals at Detroit Country Day School seven years ago after the school’s headmaster convinced CEO Matt Jonna to take on the responsibility. Now, Plum operates a separate PlumSmart school foodservice division in addition to its Plum Kitchen corporate foodservice division and its retail stores.
• Plum’s foodservice division serves around 5,000 customers each day, and could serve twice that number over the next two years as the retailer adds new accounts. Jonna told Supermarket News that he hopes to expand Plum’s foodservice operations nationwide over time, and that he considers his company more of a “food and beverages service business” than a retailer.

Dive Insight:

As Plum CEO Matt Jonna told Supermarket News, the company didn’t plan on getting into school foodservice. The arrangement came about thanks mainly to the headmaster at Detroit Country Day School, who appreciated the retailer’s focus on healthy, all-natural food.

Now, in addition to that account, Plum also provides meals to the prestigious Grosse Point Academy, as well as a host of local corporate clients like Lear, Taubman Centers and Williams International. Plum also operates six stores, including a 3,000-square-foot location at the Detroit International Airport, which serves packaged and prepared foods.

Plum’s operations are unique in food retailing, and not easy to emulate by any means. The gourmet retailer operates a sophisticated all-natural foodservice operation and built up business through savvy corporate connections. But its diversified business points to lucrative new revenue opportunities for grocers that are steadily ramping up their foodservice offerings.

Across the industry, grocers are focusing less on canned goods and frozen meals and more on high-margin prepared foods. According to research firm Technomic, foodservice sales are projected to outpace total retail sales this year with 4.9% growth. Supermarket fresh prepared foods, the firm notes, is expected to grow sales by 9%.

With industry competition increasing, retailers are eagerly seeking new revenue opportunities in stores and beyond. Indeed, supermarket operators increasingly want to tap into meal opportunities beyond the typical stock-up shop. Kroger CEO Rodney McMullen said at Kroger's annual investor conference that he wants his company to take dollars away from restaurants and other foodservice operators, not just other grocery stores. Hy-Vee has diversified its operations to include restaurants and convenience stores. Like Jonna at Plum Markets, Hy-Vee executives have said the company is more than just a supermarket these days.

With Amazon, discounters and Walmart all growing in power, the need for retailers to diversify is greater than ever. But restaurants, catering companies and other players aren’t going to cede ground willingly. Grocers will need to invest deeply in resources and expertise — a risky move in a low-margin industry, but one that can increasingly deliver profit.