- Grocery stores are eating away at fast food sales, according to executives from several major fast food chains, including Wendy's and McDonald's.
- Grocery prices continue to decline, due in part to lower commodity costs, which is driving consumers toward eating at home rather than out at restaurants.
- Grocery stores are also beginning to offer more fresh and restaurant-quality prepared foods, particularly aimed at millennials seeking convenient RTE meals at lower prices than restaurants.
Prepared foods offer manufacturers an opportunity to appeal to convenience-seeking consumers. Tyson is one manufacturer capitalizing on the sales increases and margins offered by its prepared foods segment. In-store dining and take-out of prepared foods from grocery stores has increased by almost 30% since 2008, according to a recent NPD report.
Tyson and other manufacturers are also using prepared foods and other product development and packaging strategies to approach consumers via the fast-growing e-commerce channel. Home delivery allowed restaurants to beat out grocery stores on that level of convenience for a long time. But now that more grocery retailers have online offerings and other grocery delivery services have seen success, food and beverage brands have found a new way to attract convenience-seeking consumers.
Pricing is another key influencer in consumers' purchasing decisions. Lower prices drove consumers from restaurants to grocery stores during the recession. Millennials identified it as a way manufacturers can create value for their generation in a survey earlier this year, behind innovation and shifting to online channels.
Lower prices, thanks to low commodity costs, continue to help manufacturers achieve profitability, even when sales are sinking, such as for conventional dairy producers like Dean Foods. However, manufacturers should ensure their pricing strategy accounts for commodity voltality so they don't lose consumers when they have to raise prices along with commodity costs, as Smucker found out with coffee last year.
Prepared foods and other fresh convenience products may also appear in different areas of the grocery store where shelf space may not be as highly competitive or overly saturated with other brands. This offers manufacturers an opportunity to stand out physically in addition to the convenience and freshness benefits their products offer on-the-go consumers.