Nov 14, 2022

By: Rick Stein, Vice President, Fresh Foods, FMI, and Steve Markenson, Director, Research & Insights, FMI

Power of Foodservice at retail

There is good news on the retail foodservice front, along with a new opportunity to overcome a longtime growth hurdle.

First the good news. Foodservice/prepared foods, hit hard during the pandemic, has solidly rebounded in dollars and units and is surpassing 2019 levels, based on NielsenIQ data. 

Foodservice/prepared foods increased to $31.3B in the 52 weeks ended 8/27/22, which is 9.3% ahead of the year-ago period and 19.2% ahead of calendar year 2019. The growth wasn’t just about inflation and higher prices, as foodservice/prepared foods unit sales rose 2.4% in the latest 52 weeks and 7.2% from calendar year 2019.

​More details are available in our newly released report called The Power of Foodservice at Retail 2022.

Opportunity to Make Foodservice Top of Mind

Now for the opportunity mentioned earlier. Retailers have long faced challenges in making their foodservice top of mind for shoppers. Asked why they would buy restaurant versus grocery deli-prepared foods, 43% of shoppers said that while deli-prepared is a good option, they just don’t think about it.  

The big opportunity now is to raise the profile of foodservice as a strategy to help consumers battle inflation. Now you may be thinking, cooking meals from scratch is likely to be less expensive than purchasing foodservice. That may be true, but many consumers have become accustomed to convenience and aren’t about to give up on it. They want to obtain some of their meals without having to do all the prep work. For that reason, it’s important to compare the perceived value of retail foodservice to that of its main competitor — restaurant meals. And on that score, retail foodservice shines.

Consumers See the Value Proposition

In the latest report, most consumers (53%) say grocery deli-prepared foods represents a good value compared to eating at a restaurant or ordering takeout. Thirty six percent said foodservice is about the same value as restaurant food and only 11% said it’s not a value. The fact that more than half of consumers point to the value of foodservice should be a big selling point. Retailers have an opportunity to communicate this benefit and drive targeted strategies — such as meal deals and bundles — to achieve additional sales and trial. 

The value factor may be the aspect that finally puts foodservice on the radar for a larger share of consumers. Retailers are well positioned if that happens because of their investment plans for this area of the business. Forty four percent of food retailers said they are planning to increase labor allocation to foodservice at retail during the next two years, based on feedback in FMI’s The Food Retailing Industry Speaks 2022. 

This can be a pivotal moment for retail foodservice. Retailers can support their bigger investments with stepped up marketing and communications strategies. That’s a strong one-two punch to drive enduring momentum.

Download The Power of Foodservice at Retail 2022