Dive Brief:

• More food retailers plan to allocate additional space to fresh prepared offerings, including grab-and-go, chef-made-to-order stations and self-service, FMI found in its new State of Fresh Foods report. 
• Three-quarters of surveyed food retailers used product differentiating strategies in fresh prepared and food service programs in 2021, and 70% say those efforts were a significant success, according to the report. 
• The focus on fresh prepared offerings comes after sales for that category in 2021 hit $21 billion, up 18.4% versus 2020 and up 10% since 2019, per IRI data cited. 

Dive Insight:

While fresh prepared items only made up a fraction of their sales in 2021, at just 4%, grocers’ increasing interest in expanding this area comes at a time when they are looking to hold onto the at-home eating gains they saw earlier in the pandemic. 

The findings are based on research for the trade group’s Food Retailing Industry Speaks report, which included survey responses from 96 food retailers and wholesalers, representing more than 38,000 stores. Twenty-two food product suppliers also weighed in with their perspectives. 

As the FMI report highlights growing momentum for fresh prepared items, it also indicates areas where retailers may want to reconsider their fresh offerings. For example, grocers may want to boost their fresh prepared offerings online, where the category only accounts for 1% of e-commerce sales but fresh and perimeter sales overall account for 40% of sales.

While food retailers said shrink decreased from 2020 to 2021 for fresh prepared, the category was still the second-highest fresh department for shrinkage last year at 7%, behind deli (8%). Food retailers already seem to be ramping up their efforts to combat shrink, with 30% of respondents claiming to use technology solutions for fresh inventory and demand planning in 2021 and another 21% claiming they plan to do so in the future. 

The State of Fresh Foods report spells potential trouble for in-store dining. Just 18% of surveyed retailers said they plan to increase space for in-store dining over the next two years — the lowest percentage among eight fresh departments outlined in the report. By comparison, 82% of retailers said they plan to increase space for fresh prepared and grab-and-go items.

Twelve percent of surveyed retailers said they plan to decrease space for in-store dining over the next two years.

Furthermore, while in-store dining was among one of the top departments that retailers said they used to differentiate themselves in 2021, less than a quarter (21%) said they achieved success with their strategies. Meanwhile, 60% and 36%, respectively, cited success with their juice bars and catering services.

Full-service restaurants appear to be an exception, however, with only 13% of retailers saying they offered this service in 2021 yet 38% claiming to see success with it.