Restaurants face stiffer competition from supermarkets

Supermarkets are no longer just selling the ingredients needed to make a meal. They are selling the meal already put together, prepackaged, and now at some locations, they’re even cooking it fresh and serving it up like a restaurant.

“Gone are the days of trips to the grocery store designed to address a family’s needs for the next one to two weeks,” said Wade Hanson, Technomic principal and director of the firm’s retailer meal solutions (RMS) practice. “Instead, consumers shop more often and use many different types of stores with an eye toward fresh foods and ready-to-eat meals.”

What’s this mean for restaurants? You’ve got more competition, and from a source that looks to be getting more aggressive in keeping customers away from you. Recent research from Technomic shows revenue from prepared foods at supermarkets has increased more than six percent annually during the past five years, and that number grows to 13 percent for mass merchandisers and superstores. Scarier yet, the margins are improving and retailer meal solutions are being looked at as a profit center, not a traffic driver.

It may have started with rotisserie chicken, but now grocers are offering complete gourmet-style meals, selling consumers on a “dining in like you’re dining out” concept (advertises Heinen’s, an upscale grocer in Ohio). Several other supermarket chains are taking it a step further and offering café or fast casual dining options within their stores.

Todds BBQ restaurant debuted at a newly opened Mariano’s Fresh Market a month ago in Frankfort, IL. It serves ribs, other smoked meats and familiar sides like mac and cheese that shoppers can sit down and eat or take home. Mariano’s, a chain of 10 grocery stores in the Chicago area, plans to add the Todds BBQ concept in other stores opening this year.

“Consumers are interested in a higher quality food, but in a more casual setting that they can either eat on premise at a fast casual operation or take with them,” said Brian Darr, managing director of foodservice research and consulting firm Datassential, who was quoted in a recent Supermarket News story.

The new MarketSquare concept launched at a Kings Food Market in Gillete, NJ last month offers Inspirations-To-Go, a section of chef-inspired meal options, including a Hibachi station, hand-rolled sushi, hot soups, a fresh pizza bar and prepared sandwiches. There’s also a full-service café with fresh coffee and pastries.

“It truly is an opportunity for our customers to see, hear, smell, touch and taste a full culinary experience,” says Judy Spires , president & c.e.o. of Kings Food Markets, which now has 25 stores open in New York, New Jersey and Connecticut.

A new full-service taco bar at the recently renovated Brookshire’s Food Store in Shreveport, LA offers shoppers six proteins cooked fresh daily. Two tacos, charro beans and rice cost $5.99. “It’s a convenient, well-priced alternative to dining at a restaurant,” said Trent Brookshire, senior v.p. and division manager for the company, to Supermarket News.

The trend may have started with superstores like Walmart offering McDonald’s and Subway, or even Tops Friendly Markets with Tim Hortons, but now drug and dollar stores are getting in on the action, too.

In March, Walgreens debuted a new flagship store in the Empire State Building, featuring not only on-the-go meal options like wraps, sandwiches and salads made fresh daily, but also its Upmarket Café with fresh coffee, pastries, doughnuts and bagels for sale. Earlier in the month, another property opened in Washington DC with not only those features, but also self-serve frozen yogurt with a toppings bar and a juice and smoothie bar with fresh fruits and vegetables.

Although the competition for customers is getting more crowded by the day, restaurants should remember they have several distinct advantages over grocers: Their primary business is providing a dining experience—from preparing and serving meals to customer service—not stocking shelves and working cash registers.