Sure – supermarkets compete against other supermarkets. For the most part, anyway.
But nowadays the competitive field is opening up and diversifying. There are now opportunities to compete with restaurants, C-stores, delivery apps, and virtually any other organization capable of putting dinner on a customer’s table.
The new state of play is naturally reshaping store layouts and investment priorities. (It may even be forcing a re-definition of what a grocery retailer actually is, but that’s a story for another day.)
Prepared foods, fresh meals, pizza, sushi, coffee, sandwiches, and grab-and-go offerings have become some of the fastest-growing and most strategically important departments in the supermarket. Retailers ranging from Wegmans and Hy-Vee to Whole Foods Market and regional independents continue investing heavily in prepared foods as they search for new ways to differentiate themselves in an increasingly competitive marketplace.
The evolutionary pressure is everywhere. Traditional center-store products face pressure from private label expansion, warehouse clubs, discount operators, and e-commerce channels. At the same time, labor, transportation, and operating costs are at the top peg and likely to stay stuck there.
In this crowded, expensive, competitive field, prepared foods offer the opportunity for differentiation. This isn’t just my hunch; FMI – The Food Industry Association has repeatedly identified meal solutions and fresh prepared foods as important drivers of shopper engagement and store differentiation.
A box of cereal looks largely the same whether it is sold by Walmart, Kroger, ShopRite, or Amazon. A retailer’s prepared-foods program, however, can be unique.
Walk through many modern supermarkets and the evidence is impossible to miss. Pizza ovens, sushi counters, coffee bars, chef-inspired meal stations, fresh sandwiches, and hot food bars increasingly occupy prominent real estate near store entrances.
In many stores, the deli has become the new front door.
A New Landscape of Foodservice
This evolution is being driven by changing consumer behavior as much as retailer strategy.
Consumers – much less loyal to traditional brands in most cases – increasingly shop according to missions rather than categories. These folks don’t necessarily care that it came from a grocery store (as opposed to a restaurant). They want it convenient and affordable, and they want it available right now.
That creates a very different competitive landscape.
The future battle may not be Wegmans versus Walmart. More likely, it’ll be Wegmans versus Chipotle… or Wawa… or DoorDash.
All of them are competing for the same “food occasion,” and the numbers help explain why.
According to the U.S. Department of Agriculture, Americans now spend more money on food away from home than food consumed at home. (The reasons for this are yet another story for another day.)
Food-away-from-home expenditures have steadily gained share over the past several decades, reflecting consumers’ growing preference for convenience, prepared meals, and immediate consumption.
Circana and other consumer research firms have reported continued growth in prepared-food purchases as consumers seek restaurant-quality meals at lower prices than those offered by traditional dining establishments. For many households facing persistent inflation, supermarket prepared foods offer an appealing middle ground between cooking from scratch and ordering restaurant takeout.
At the same time, convenience stores are moving aggressively into foodservice. They’ve identified it, quite correctly, as an arena for differentiation. Think of the fierce, partisan fondness for the Sheetz MTO, Royal Farms’ fried chicken, the Wawa hoagie. These organizations have staked, in large part, their identity on their foodservice.
According to the National Association of Convenience Stores (NACS), foodservice has become one of the C-store industry’s fastest-growing and most profitable business segments, driving major investments in made-to-order kitchens, fresh food programs, and premium beverages.
The result is a convergence of industries that historically operated separately.
Restaurants are selling family meal bundles, retail sauces, and take-and-bake products. Convenience stores are investing in foodservice programs that increasingly resemble quick-service restaurants. Supermarkets are building restaurant-quality prepared-food operations.
Everyone is moving toward the same middle ground.
This trend may ultimately prove more significant than many of the technology initiatives that dominate industry headlines.
Yes, artificial intelligence can improve operations. Retail media can absolutely create new revenue streams. Loyalty programs are essential for deepening customer relationships.
But none of those initiatives directly answer the fundamental question of where consumers choose to spend their food dollars.
Prepared foods do.
The grocery store of the future will still sell cereal, milk, produce, and paper towels, but increasingly, its margins may depend on how effectively it competes for breakfast, lunch, dinner, snacks – and every food occasion in between.
