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Cafe Culture – Opportunity on a Platter

Research in the US says shoppers are spending double the amount of money on meals outside home compared to what they spent in 1970. Nielsen Australia cites double digit sales growth in cafes and restaurants in Australia in 2007 versus less than 5% for packaged grocery. How can suppliers leverage this trend to drive growth in away from home AND in home channels?

There’s no doubt that time-poor Australians are spending less and less time in food preparation, and they’re prepared to spend more money for quality food they don’t have to cook.

What that means for food and beverage suppliers is two-fold:

1. Activating their brands well in Out of Home dinning channels can drive profits; and
2. Opportunities for growth in quality convenient retail meal solutions, for both the grocery channel and non-grocery channels such as convenience.

For most suppliers, non-grocery channels account for a small part of their business. Because of this, they often receive less strategic focus.

It pays to remember what the role of non-grocery channels is for most FMCG companies: Value not volume.

These channels can be a brilliant profit-driver.

Maximising the Out of Home Dining Opportunity: Restaurants and Cafes

One of the reasons why suppliers put these kinds of channels in the ‘too hard’ basket is because they are unsophisticated, often hard to measure, there is such a wide variety of venue formats with different needs and the servicing arrangement is entirely different to grocery. That said, with double-digit growth year upon year, Out of Home dining is only going to get bigger and harder to ignore. So, how to do it well?

Understand the Trade

• Whether this is a new or existing channel for you, it can really pay to do some good trade research to find out ‘from the horse’s mouth’ what works in different kinds of venues and what a good sales and service arrangement looks like from the customer’s point of view. Sometimes these interviews can unearth all sorts of opportunities for growth through new pack and format types, promotions, and savings through minimizing wastage on in-venue activations that may be wasting your money.
• This channel is a diverse one. How have you segmented it? Which segments represent the biggest opportunity through consumer fit, brand fit, venue fit and ease of execution?
• What are the implications for how you activate your brand in the venue? For example, you may have been spending lots of money on posters, only to find that a small percentage of venues (the ‘cheap and cheery’ ones) are using them, the more profitable and ‘classy’ establishments have a cleaner venue policy and you would be better spending your money on table talkers alone.

Understand the Shopper / Consumer

Have you actually spent any time in field, or are you strategizing from the comfort of your desk? It pays to get out and see what’s happening in the channel, regularly, to identify opportunities for growth, and for making savings on things you may be spending money on that are not working. A basic checklist for getting out in field consumer-watching:

• What kinds of consumers are frequenting different channel segments? How do they differ? Why do you think they are there – what are the various ‘occasions’ (e.g. occasions may be socially based, and the food / beverage is a side effect of the social event)?
• Map the consumption occasions for your specific product / portfolio
• How does consumption differ by day part?
• What goes with what, when? Are there opportunities for cross promotion / meal bundling with other suppliers?
• Would new flavour variants or formats extend the number of consumption occasions your product is suitable for?
• Who is consuming your products or similar competitor products in the channel?
• How do they behave? What do they look at, how long do they spend deciding what they want, to what extent are they influenced by wait staff, their companions, or by visible in-venue promotions?
• What are the implications for how you execute in the channel? (Range, visibility and in-store execution, staff-based promotions and merchandise, pricing, bundling etc.)

Leveraging the no-cook and low-cook trend in Retail

The UK has been doing this well for years, with quality, healthy ready-to-eat meal solutions in supermarkets and smaller format convenience stores.

The US is ramping up its focus in this area as well. Food industry research firm Technomic announced this year that it is planning a research study, Retail Meal Solutions: A New and Growing Opportunity for Foodservice Manufacturers, in order to help food manufacturers better understand the retail meal solutions market and tap into new opportunities.

The initiative has come about due to Retailers across several channels – supermarkets, convenience and specialty in particular, wanting to win back the dining out dollar, on the back of Whole Foods’ success with healthy ready-to-eat meal solutions.

What of Australia? The focus will only increase. Major supermarket chains know that a percentage of their sales comes from ‘what’s for dinner tonight’, and they are looking to suppliers to provide better and healthier options for the increasingly discerning shopper.

A checklist of thought-starters for the retail meal solution opportunity:

• Where does your product / offer sit on the premium to value chain? Strong growth lies in unapologetically premium and gourmet offerings. SINKS and DINKS are a growing number of households and for many, a combination of quality, health and convenience is a compelling enough proposition that they are prepared to pay much more. Don’t let Retailers tell you it’s all about price. In this case it’s not – so use your shopper research to prove it and demonstrate the profit opportunity to your Retail partners.
• What is your differentiated offer for the shopper? What makes your meal solutions unique? Growth lies in unique, gourmet, quality – not in more ‘me too’ run of the mill pasta and sauce combos…
• Have you considered partnering with other suppliers to expand your retail meal product offer?
• Have you mapped your consumption occasions to shopping missions and products / categories? What does that mean for where you need to be in store, what time of day you should run any promotions, and the content, messaging and execution of your in-store marketing?
• What about packaging and format? Does it fit with the sales drivers of your particular shoppers?
• How can you leverage your retail meal solutions in non-grocery channels? Which channel segments offer the most opportunity for growth and profit? Petroleum and Convenience? What about specialty – fruit & veg, health food stores? Assess your channel mix by sizing the prize versus brand fit and ease of execution / servicing to identify your top three non-grocery channel segments and focus your efforts there.

The major driver for growth in retail meal solutions lies in better quality, more varied options that mirror the choices that shoppers make when they dine out.

Technomic have said that the increasing popularity of ready-to-eat in the US is being driven by better products on offer. They say suppliers can win by placing a much stronger emphasis on quality and variety, integrating many of the trends shaping restaurant menus, such as ethnic foods, premium ingredients, customization and updated preparation techniques.

Marry this with a strong understanding of your shoppers and channels and what that means for in-store execution – and the retail meal solution may just be the solution for your sales targets as well as your shoppers!

Whether Out of Home or In Home, suppliers can capitalize on the increasing demand for convenience, quality and variety our small-household Australians need. It really is opportunity on a platter.

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