Rethinking the Future of Deli Counters and Prepared Foods

woman working at deli counter

Even before COVID-19, retail deli was in need of innovation. Recent events are helping shape deli trends and reveal the areas most ripe for growth

In January 2020, retail foodservice and deli sales were on track for continued growth through the end of the year, due largely to gains in prepared food and pre-packaged items. Five months into 2020, with COVID-19 pushing consumers to eat at home more, deli customers are behaving differently than predicted. Some deli counters are temporarily closed and for ones that remain open, the unexpected shake-up is creating new challenges. Still, there’s a role for deli and prepared foods in grocery, and new opportunities are emerging, particularly for deli counters able to innovate in ways that address changing consumer preferences, shopping behaviors and health and safety concerns.


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A recap of 2019 and early 2020 deli trends

In 2019, fresh sliced meat and cheese purchases were down 3.2% compared to 2018 figures, while pre-packaged and prepared foods were up 4.9% and 1.9%, respectively, according to IRI Worldwide. In 2020, that trend reversed itself, at least temporarily, during COVID-19 stockpiling, with deli purchases surging in mid-March before mostly normalizing by end of month. During this period, deli cheese and meat sales were up 48% and 38%, and prepared deli items sales dropped off, especially salads, combo meals, soups and desserts.

Sales have since slowed, but not returned to pre-COVID-19 numbers. Time will tell how deli items continue to fare, and we are keeping close watch on sales figures as COVID-19 restrictions and consumer sentiment evolve.

Areas of opportunity for deli

With the line between restaurants and grocery stores blurring more than ever before, including restaurants selling grocery items, there’s reason to believe deli, and especially prepared foods, could play an increasingly key role in consumer lives.

Here’s why it’s time to rethink the deli department:

  • Between 2013 and 2018, retail foodservice grew 3x faster than actual grocery sales, according to Technomic’s 2019 retail foodservice forecast

  • Pre-COVID-19, 2020 deli growth was up 2.8% from a year ago, and 51% of consumers purchased more prepared foods while visiting QSRs less often, per Technomic

  • 26% of consumers said prepared foods are the most important consideration when picking where they shop for fresh foods and 66% of consumers buy prepared foods from retail at least 3x per month, according to IRI data from 2019

  • With at-home dining the new norm in 2020, consumers may want to consolidate purchases and add mealtime variety through prepared foods

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Within deli, it's convenience and snacking that are driving growth, and consumers are especially responding to innovative appetizers, entrees and prepared meals. But revitalization is necessary for continued success, especially as consumer needs evolve in the areas of nutrition, safety and variety.

Retailers who invest in the following areas will win a larger share of consumer preference in the coming months.

  1. Less prepared foods and bulk deli, more refrigerated UPC options. Self-serve stations were already falling out of favor. With COVID-19, consumers are feeling extra cautious about touch points, and the weariness may stay long-term. As a result, soups, sandwiches and sliced meats and cheeses are expected to continue moving from in-house preparation toward a packaged UPC format. This will not only impact perceptions of food safety but also reduce labor.

  2. A greater offering of comfort foods with balanced nutrition. Recent sales figures highlight that consumers crave homecooked, nostalgia-inspiring comfort foods from childhood, such as macaroni and cheese. At the same time, time-strapped parents are looking for easy, family-friendly mealtime solutions that don’t completely sacrifice health. Products that marry these needs could win big with consumers.

  3. More prepare-at-home solutions, an evolution of meal kits. Meal kits were already moving to retail. With the interest in cooking only growing—out of necessity, boredom and the want for more family activities—the category is primed for growth across meal types, from pizza and burgers to gourmet multicourse offerings.

  4. Growing access to convenient and digitally enabled ordering. As consumers continue to turn to online and app-based grocery shopping options, retailers who place their prepared foods and deli items front and center may see a boost in sales. With fewer consumers actively walking by the counter, there’s a need to remind at-home shoppers of deli-based options.

  5. App-enabled to-go ordering for dishes and meals. Just as there’s a need to embed deli offerings in a retailer’s larger online grocery ordering system, there may be incentive to also create stand-alone platforms that make one-click shopping a reality. This will be a bonus for consumers who want to skip the shopping and scrolling and simply order and pre-pay for a meal to go.

  6. An expanded breakfast and lunch menu. Currently, prepared food is losing out on lunch and breakfast day parts to refrigerated prepackaged meals. Retailers that serve hot sandwiches in the deli—including breakfast sandwiches—could easily offer the same sandwich refrigerated for heating at home. Pre-COVID-19, 62% of purchasers of prepared foods bought breakfast from retailers at least once per month, according to Technomic, highlighting the potential need for more robust A.M. offerings.

  7. Menu rotations and seasonal offerings. Recent surveys show that 31% of shoppers say they’d like to see deli flavors and menu options rotate on a monthly basis. As consumers continue to turn to food as a primary driver of new experience, such regular changes could help maintain interest in prepared foods. Because the deli prepared holiday meals category grew by 88% over the past three years, according to IRI, there’s especially room for more seasonal and limited time offer specials that cater to holidays large and small.
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  9. Deli as meal planning solution. As consumers continue to straddle the line between wanting to scratch cook and worrying about the time commitment, retailers have the opportunity to align product portfolios to consumers’ meal planning needs. This can be done via a recipe-focused sell-in strategy. Items can be designed to focus, inform and assist today’s consumers with meal-planning, such as through mix-and-match complimentary offerings across prepared foods and UPC refrigerated selections.

  10. Setting up prepared foods to compete directly with QSR. As the chicken sandwich wars continue, an unexpected competitor has joined in the fight: retail stores. With more retail locations offering up inexpensive versions of QSR favorites, the deli counter may allow stores to position themselves as a one-stop-shop for staples as well as special occasion indulgences previously only available at restaurants.

To learn more about how COVID-19 is affecting the food and beverage industry, including changes in consumer preferences and purchasing behaviors, visit Kerry’s COVID-19 resource page.

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