Prepared Foods Lure Quick-service Customers To Grocers

3/23/2016

"We have so many options. It’s just one more thing cutting into consumers' restaurant visits," said Bonnie Riggs, an analyst with market research firm The NPD Group. "It’s a battle for market share, and it looks like some of the non-food concepts are winning."

Sesame garlic eggplant, chili lime chicken, slow roasted barbecue sandwich. These are just a few of the high-quality, often better-for-you, freshly made foods that are increasingly luring consumers to purchase prepared meals at their local grocery store instead of their favorite quick-service restaurant.

"We have so many options. It’s just one more thing cutting into consumers’ restaurant visits," said Bonnie Riggs, an analyst with market research firm The NPD Group. "It's a battle for market share, and it looks like some of the non-food concepts are winning."

According to new data from Port Washington, N.Y-based NPD, visits to grocery stores for in-store dining or take-out prepared foods have grown 30 percent since 2008.

In addition, Consumer Reports estimates that prepared meals purchased from grocery stores are now a nearly $29 billion-a-year business.

In the 10-month period ended December 2015, NPD found that more than 40 percent of the population purchased prepared foods from a grocery store, compared to 77 percent from a quick-service restaurant.

In a four-week period, consumers made an average of five visits to a grocery store for prepared foods, compared to about 14 visits to quick-service restaurants. While the purchase rate at grocery stores lags behind quick-service eateries, Riggs notes that it is still impressive, given that grocery has significantly fewer locations than quick service.

Perhaps the most concerning research for quick-service restaurant operators is that grocery outlets are going after their best customers, NPD found. According to NPD's QSR Plus Retail Market Monitor data, grocery prepared-food buyers are above-average quick-service restaurant users. In addition, the heaviest grocery buyers account for nearly 30 percent of grocery visits (about seven per month) for ready-to-eat meals.

The greatest weakness for quick-service restaurants in competing with grocery stores is dinner, NPD found. Dinner is most important, followed by lunch, for visits to grocery stores.

"I don't think QSR operators realize the magnitude of their vulnerability, especially at dinner, the daypart they have the greatest challenges," Riggs said.

Convenience may be driving consumers to grab more prepared meals to go, but the reason they are increasingly getting those meals from a grocery stores is all about quality, variety, freshness and healthy options. According to NPD satisfaction surveys, these are the factors consumers look for in prepared meals — and the ones they say grocery stores are delivering best.

"Those attributes that are really important are the ones that these grocery concepts are delivering best," Riggs said. "The more positioning these grocery concepts do, the more they’re going to grow."

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