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Deli-cious conundrum

by Lynn Petrak
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Looking at a slice of the deli-meat category isn’t as simple as it used to be. Just as deli-meat slices come in all sorts of varieties – thick, thin, home-style, better-for-you, indulgent, pre-packaged, sliced-to-order – the deli-meat market as a whole reflects an array of tastes and interests.

Certainly, there are many factors driving deli-meat products, packaging and promotions in both retail and foodservice channels. Some of those factors are directly tied to the marketplace itself, from rising commodity costs to increased industry competition. Meanwhile, certain category drivers – such as interest in healthy, natural, organic and sustainable items – dovetail together, while others – a return to artisan meats, a move toward more budget-friendly SKUs – reflect altogether different consumer demands.

Whether they are longtime deli-meat processors whose brands have been around for decades or newer regional companies, processors offering deli meats understand when it comes to deli meats, there are several key market trends worth heeding.

It’s the economy

As the Great Recession lingers and food prices rise, consumers mind their budgets, both at home and away from home. A recent survey of deli consumers conducted by the Culinary Visions Panel from Chicago-based Olson Communications explored issues related to what has been coined the “new frugality” and found that most buyers intend to continue cost-conscious behavior even when the economy rebounds. “Among the habits that were inspired by the new frugality were using more coupons, cooking more at home and going out less and sharing food. They also indicated a greater consciousness of value in their choices,” says Sharon Olson, president of Olson Communications.

In a separate branding study, Olson’s firm found consumers often turn to store brands when they are looking to rein in costs, including at the deli section. The most-recent research showed consumers value and trust store brands, says Olson, who says respondents identified taste and price as the most important characteristics in purchasing sliced-to-order meats in the deli department.

What’s more, as retailers become more sophisticated in their marketing of store brands, one can expect private-label deli meats to remain a strong contender for the shopper’s food dollar.

“In many cases, a store brand is not obvious to the consumer because it has the look and presentation of a national brand. When a national brand has a relevant and clearly distinguishable difference to the consumer, it will command a premium price – but store brands have closed the gap in many categories,” points out Olson. “We find more consumers listing store brands by name when they are asked about their favorite brands.”

Although price is an important consideration at the point of sale, there is also a value proposition impacting the deli category. “While there certainly are customers who have had to cut back drastically in all areas of their household budgets, we’ve seen evidence that people still shop the deli, but they’re more value-conscious,” says Alan Hiebert, education information specialist for Madison, Wis.-based International Dairy-Deli-Bakery Association (IDDBA). “In other words, deli sales continue to go up, though not as fast. Value encompasses various elements consumers seek in their food purchases, including – but not limited to – quality, price, food source, menu trend, and benefits or drawbacks of consumption.”

Hiebert also notes the importance of marketing and perception when it comes to competing on more than just price. “The message of value can be conveyed through signage, packaging, verbal interaction, social media and merchandising, among others. I think stores and brands that do the best jobs of conveying value stand the best chances of success in the next year,” he predicts.

Decision time

As one might expect in an economy where individual choices are more available and important than ever (see iPads, iPods, direct-order movies, etc.), the importance of variety and choice is exemplified in the way people buy and order deli meats.

Choice extends to slice thickness. Many consumers have been looking for home-style or natural appearances in thicker deli-meat slices, leading to newer products like Oscar Mayer’s Carving Board line. Lest that be viewed as a singular trend, the category also reflects interest in paper-thin slices, such as a new line of Deli Shaved smoked turkey from Bar-S Foods.

“Consumers like to make their own choices when it comes to deli meats,” agrees Olson, noting that offering wide selections is why deli service counters remain strong in many supermarkets. “The service deli offers the opportunity to get exactly what is desired, in the right portion and the right thickness even with a paper between each slice if desired. And there is a strong perception that sliced-to-order deli meat is considerably fresher,” Olson adds.

Obviously, based on palate preferences, consumers’ clamor for choice has also led to a broad span of flavors in the deli category. “Our consumer research has shown us consumers seek flavor varieties. They want to make unique, outstanding sandwiches their own way,” says Erica Rendall, brand manager for the Oscar Mayer brand from Northfield, Ill.-based Kraft Foods.

That’s where one new product line, Oscar Mayer Deli Fresh Combos, come in, Rendall says. “As consumers pack more lunches due to the economy, they seek variety. Consumers have told us they believe a variety of flavorful meats is what helps makes a sandwich outstanding. However, they have to buy multiple packages and many components to make a sandwich with more than one meat. So, we launched Oscar Mayer Deli Fresh Combos to make it easier,” she explains.

Preferences also affect packaging, which is why Oscar Mayer has so many different formats, Rendall notes. “Not all consumers seek the same package so we offer several different options. Some prefer the rigid pack they purchase from the peg, others want a pouch and others seek a package that can be snapped shut. When it comes to lunchmeat, there really isn’t one package type that meets all consumer needs,” she declares.

A healthy outlook

Another hallmark of the deli-meat category as we head into 2012 is the emergence of more and different better-for-you products. Certainly, healthy options in deli meats date back a decade or two, but there are some twists to that subcategory.

The greater availability of lower-sodium deli meats is one example. In 2010, Sara Lee debuted lower-sodium deli meats available at the deli counter; a line that was expanded this year to include new varieties.

Also related to health and wellness is the positioning and development of deli meats as gluten-free. In early 2011, Philadelphia-based Dietz & Watson Inc. teamed up with ACME Markets (a SUPERVALU division) to offer the first dedicated Dietz & Watson gluten-free deli in a suburban Philadelphia grocery store. The venture was unique because the retailer and processor worked to ensure that gluten would not touch any product in that particular deli case. Meanwhile, for all of its customers, Dietz & Watson offers deli meats that are 95 percent gluten-free; all but two of its deli meats – Philadelphia Scrapple and Bockwurst – are gluten-free.

Just as a more natural appearance is in demand, so is the link between natural products and perceived health benefits of deli meats billed as “natural” (fuzzy as that definition can be). As Rendall reports: “Consumer demand for clean labels continues to increase. To that end, we continually look at our products and seek to make ingredient changes that are more easily recognized.”

Biting into foodservice deli trends

Dagwood Bumstead liked his sandwiches simple – piled high and filled with every kind of meat and topping. If the cartoon character were to order a sandwich from a restaurant chain in this century, he might not know where to start.

Similar to the myriad choices at the retail deli, the menu board is increasingly diverse at sandwich-oriented restaurants around the country, including quick-service restaurants. Take, for instance, the demand for better-for-you choices. Subway is one chain that has heavily promoted its healthy option, a move that has been effective: consumer research shows that consumers looking for healthy options gravitate toward that QSR. The Jason’s Deli chain, meanwhile, has addressed burgeoning interest in gluten-free options with gluten-free choices on its menu.

Even at a time when healthier product profiles are doing well in the marketplace, however, there has been a concurrent, if slighter, swell in demand for Old World style – and typically higher fat, salt and calorie – deli meats. Creminelli Fine Meats of Salt Lake City, Utah, for example, earlier this year introduced a new line of artisan deli meats for foodservice distributors, including old standbys like mortadella, prosciutto, capicola and coppa.

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