Opportunities At Hand For Produce Sold Within Supermarket Prepared Foods

Originally printed in the April 2020 issue of Produce Business.

From the procurement and integration of fresh produce to its pivotal role as a supermarket differentiator and profitability mechanism, in-store prepared foods operations take on an abrupt seismic calling, as the global coronavirus pandemic exponentially blankets the United States.

While people are forced to self-quarantine, large meeting places shutter, and restaurants, entertainment venues and schools close down, supermarkets — and the supply chain behind it — have become a haven for food and sustenance, and a vital part of the essential public health infrastructure.

Far-reaching impacts and challenges engulf executives throughout the produce industry in these uncertain times. One thing is clear: The role of supermarkets and produce executives in guaranteeing a continuous healthy food supply has become more critical.

Confronting the crisis and unknown variables ahead, consumers refocus on stocking up necessities, selectively ravaging retail shelves, and sometimes even hoarding shelf-stable, non-perishable foods, including frozen and canned produce items for possible quarantine. But as myriad eating establishments close their doors, another door stays ajar for retail prepared foods, a comforting convenience under these perilous times.

However, supermarkets face many obstacles and reprioritizations in their operations both financially and to protect the health and well-being of their customers and employees. This ranges from adjusting supply chain logistics and inventory replenishments, to reductions and realignments in fresh prepared food options.

Understanding the inner workings of a successful prepared foods department and how it effectively interacts with the produce industry can be a game-changer in a time when consumers are looking for ways to feed their families.

As of press time, retailers are continually adapting to rapidly changing circumstances by eliminating store dining options, self-service prepared food bars and shifting labor-intensive customized offerings to more pre-packaged meals-to-go. Well-honed omnichannel, online ordering and delivery services seem more relevant than ever. Fraught foodservice companies dependent on restaurant business were forming industry partnerships to distribute fresh produce to retailers and those in need.

While resilient industry leaders collaborate to ensure supply chain viability and unceasing food distribution, the opportunity for breaking down silos within the supermarket and enhancing shopper expectations for well-cooked meals and side dishes is laid before us. Understanding the inner workings of a successful prepared foods department and how it effectively interacts with the produce industry can be a game-changer in a time when consumers are looking for ways to feed their families.

UNDERLYING POTENTIAL

“Supermarkets are uniquely positioned to capitalize on prepared foods, with consumer demand for fresh produce, and health and wellness and the convenience aspects. These are all things supermarkets have a halo around, but I think this sector hasn’t fully tapped into the underlying potential,” says Jackie Chi, director of programs and special projects-strategic initiatives, at the Culinary Institute of America at Copia, Napa, CA.

“A strong trained culinary perspective behind the program, really starting with the chefs, is what differentiates those retailers that do it well versus those who kind of see it as something they’re supposed to do, where prepared foods can be an afterthought. I know from talking to a lot of operators, part of the issue is related to the siloed departments within the supermarket structure,” says Chi.

“Retail and prepared foods are like mixing oil and water,” says Steve Petusevsky, a consultant to more than 20 top national retail and natural food supermarkets in the United States, and former national director of creative food development at Whole Foods Market. “It’s an entirely different business model, requiring different skills and expertise, and a lot of times, it doesn’t seem intuitive, but they don’t mix very well unless handled very, very carefully and thoughtfully.

“Most supermarkets are set up by department to be antagonistic,” claims Petusevsky. “Every department has its own cost of goods and its own sales, and is positioned separately, responsible for its own business. If you think about it, each department is set up to be competitive, not cohesive. When I’m brought into a company, I look at the whole store, not just the prepared foods department, but how can I raise the bar in the produce department, in the meat and seafood departments… and I think the culinary kitchen is a way to do that.

“If you’re director of culinary, or the one responsible for planning the culinary department of a large supermarket chain, the first thing you do is a menu matrix, which is a menu that takes into consideration all the different departments that supermarkets now need to have to survive and thrive,” says Petusevsky. “The prepared foods department is a catalyst to maximize sales storewide.”

“When you look at prepared foods, there are multiple things that have to coincide; it’s not just belly-fillers any longer,” says Deborah Jones, sales manager deli, prepared foods for Pavilions, the Southern California premium brand for Albertsons Companies, Inc., based in Boise, ID. “Consumers are looking at healthier offerings and convenience, and they demand honesty in quality, freshness and consistency in our prepared foods. So, we have culinary teams in our stores who partner with our fresh teams in-house. I work closely with our lead fresh buyer, who is on the Pavilions team, and at corporate to integrate fresh produce varieties, organic, seasonal and unique items coming in.

“Deli fresh also has a lot of new plant-based items coming through. I’ve been looking at how I can leverage this trend. In doing specs for the stores, we had a meeting of the minds, and actually extended that plant-based section in produce with an array of cheeses and sliced meats in an alternative set. It’s not about who owns the product. I don’t have the space to really build out, so taking down the barriers, let’s put it where other produce items have lived forever,” says Jones.

When it comes to produce procurement, “The goal is to work with seasonality and what we have to offer in the stores,” notes Jones. “This requires good, 24-hour communication with the produce managers and the cooks and staff within the stores. So, for example, when we know we’re doing fajitas, we need larger quantities of red and green bell peppers — and onions are a staple. It’s ongoing communication between in-house lead cooks and the produce department managers, so the produce manager makes sure he has the right inventory levels to support the kitchen.”

Jones says her goal is to form partnerships within the fresh team and throughout Pavilions’ fresh departments to leverage prepared foods experiences in her stores. “In the old world, it was all about ‘my department’ and maximizing ‘my area’ for all of ‘my product,’ not really thinking outside the box on how to pair things.”

Now there are no longer any silos, says Jones. “Our walls are knocked down. Our goal as leaders of the Pavilions banner is to work together to deliver the best experience and fresh-quality product to our consumer.”

In the Fall of 2017, Eden Prairie, MN-based Supervalu introduced its Quick & Easy meal line of prepared foods that is ready-to-eat, heat-and-eat, or prepare at home. Jody Barrick, vice president bakery/deli and prepared foods at parent company UNFI, explains part of the process in removing silos is to make the concept come to life: “I did a lot of research and found nobody was really bringing meal prep together. Every department was working in silos, so we started putting total meal solutions together, not in our retail stores, but first in our independent stores, incorporating produce and meat and other ingredients for the shopper within the four walls of the grocery store.”

According to Barrick, she and Anne Dament, Supervalu’s senior vice president of retail, merchandising and marketing, started brainstorming about bringing the concept to life. When the shopper comes in, the food is ready to eat, to heat up in a microwave at home or prepped and ready to cook and serve, whether in produce, the deli department, or tied into the meat department to get the shopper to cross shop. “Overall, produce offerings in prepared foods have taken off quite well,” explains Barrick. “We’ve definitely seen a jump in fresh produce in ready-to-eat meals.”

FRESH PRODUCE PIPELINES

“Fresh produce plays a critical role in executing a successful prepared foods program,” says Maria Brous, director of communications at Publix Super Markets, which owns more than 1,200 stores and is based in Lakeland, FL. “During product development of a prepared foods item, fresh produce is typically a requirement, whether it’s used as the main entrée, as a side or to garnish the entrée. Oftentimes, the produce item conveys the overall freshness of the meal. It also improves the overall appeal of the prepared food item.”

Publix has separate prepared foods buyers who purchase most of the ingredients used in store recipes, including fresh produce items that are further processed, says Brous. “Like most all categories at Publix, we follow a category review process and have suppliers submit information about their company and products. We then evaluate their products, cost and oftentimes visit the supplier before making procurement decisions.

“Our walls are knocked down. Our goal as leaders of the Pavilions banner is to work together to deliver the best experience and fresh-quality product to our consumer.”

– Deborah Jones, Pavilions

“For new prepared food recipes that include further processed fresh produce items that we have not sourced before, we typically utilize our different business contacts, including existing suppliers and brokers to understand who in the industry could help us solve the specific need,” she explains.

There are pros and cons to working with different suppliers/distributors for the produce department and prepared foods areas, according to Brous. “Obviously the advantages to working with different suppliers/distributors is the opportunity to be more innovative in the product line or even in the supply chain. Typically, the disadvantage is ensuring consistent, high quality product,” says Brous.

At Encino, CA-based Gelson’s Markets, “We source produce for Gelson’s Kitchen from our own warehouse, and we actually let our consumers know that,” says Paul Kneeland, executive director of fresh operations at the 28-store chain. “Our produce buyers will purchase foodservice packs of our produce through the produce department for our prepared foods. It’s the same buyer, but the specs come from our corporate executive chef. For example, our corporate executive chef needs certain sizes and a certain quality of zucchini and then he tells the produce buyer and the produce buyer orders it. That is slotted separately in our warehouse, so the retail produce does not get mixed up with the Gelson’s Kitchen product,” explains Kneeland.

“Overall, produce offerings in prepared foods have taken off quite well,” explains Barrick. “We’ve definitely seen a jump in fresh produce in ready-to-eat meals.”

– Jody Barrick, Supervalu/UNFI

Most of the time, the produce comes from the same suppliers, but it may just be a different spec, adds Kneeland. “Sometimes it could be something unique, generally something we wouldn’t carry in the produce department. It might be just a bulk foodservice pack of organic baby spring mix in three-pound bags with no retail label,” says Kneeland, who adds that the stores do also cull the produce department every morning for items such as tomatoes, cucumbers, peppers… that are given to the kitchen.

Gelson’s has full production commissary kitchens in every store with chefs in the back-of-house set up like a restaurant, and a dedicated service team in front-of-house for what Kneeland appropriately describes as “a wonderland of prepared foods.”

At Bronx-based, family-owned and operated Morton Williams, anything that is needed for the prepared foods, as far as produce goes, is bought through produce director Marc Goldman. “My produce managers have to coordinate with the deli departments and the kitchen chefs for what they need, which is what they’ve been doing for a long time already. If they just need a half a box, we give them a half a box. If they need a more specialized item or a different item, then we’ll bring it in for them.

“Being that it’s a supermarket, there’s always an outlet. There’s always someplace to go with it,” continues Goldman. “If they can’t use a whole box in the deli kitchen, then we’ll use the rest in produce. So, it works both ways. We’re a small enough chain that we just kind of work it ourselves through the produce department. Sometimes at larger chains, there are different buyers for produce and deli, prepared foods. With the larger chains, there are a lot more rules and regulations, which sometimes takes something simple and makes it more complicated,” contends Goldman.

“It used to be the kitchen would just get the damaged produce items culled from the produce department. Now it’s much more developed than that, and they get the good stuff too.”

– Marc Goldman, Morton Williams

“It used to be the kitchen would just get the damaged produce items culled from the produce department. Now it’s much more developed than that, and they get the good stuff too,” says Goldman. “We buy them the full cases,” he says, adding, “I remember when retailers were resistant to using the old produce for prepared foods rather than throwing it out in the garbage,” something that has become more acceptable with food waste issues coming to the forefront.

“Every year our prepared food offer grows more and more,” says Goldman, adding, “We’ll always continue to do the buying through the produce department.”

OPERATIONS REQUIRE SYNCHRONICITY

“When we first started this journey five years ago with the Pavilions brand, it required a lot of work around understanding the processes, on the backside of everything, there’s still P&L (profit and loss) behind each department,” says Deborah Jones, Pavilions sales manager, service deli, prepared foods.

“The produce department teams weren’t understanding how much to order, not knowing how much will really be used, and then they have to transfer it by the end of the week. This went on for multiple departments. And we really had to set clear parameters around it,” she explains, adding the communication timeline for meat and produce is vital. Those stores have to make sure they have the right amount of product to hold up for the next day but still be in business.

“We had a huge hiccup for awhile. Within our business we were able to build what we call sister codes, billed directly from the warehouse to our deli or to foodservice. That way there’s no worries about transferring product. Our store managers were ordering directly from our warehouse, and it took us awhile to figure out how to manage that. Produce is a little different because of its freshness and seasonality and how things come and go. We’ve ironed it out, but there were absolutely growing pains trying to understand the process, and everyone getting their fair share going in; it’s all about profitability, and the immediate thing is shrink.”

According to Petusevsky, “In any major supermarket these days, you can see the obvious synchronicity between the prepared foods department and the produce department. The culinary department is the only department in the entire store that is able to work off the shrink and the distressed products that come out of the produce department and turn it into money.”

The profit margins are much higher for prepared foods than the other departments, adds Petusevsky. “That’s why supermarkets are so invested to make it work,” he says.

NEW AGE OF PROCUREMENT

With food safety concerns now at the forefront of any conversation around fresh produce, product traceability is pertinent and is something that can be lost when pulling produce from a bulk produce display for processing in a retail kitchen. “In this sense, many supermarkets are now outsourcing their needs to some degree or procuring product directly for their processing needs instead of going out to the shelf to take what they need,” says Dennis Christou, vice president of marketing at Del Monte Fresh Produce, Coral Gables, FL.

One chain that looks outside its stores for prepared products is Supervalu. “When we first started out, we had more labor in the stores, so we were doing a lot of the fresh-cut vegetables in-house. They were coming from the produce department, and we were cutting and packaging everything,” says Barrick of UNFI, whose experience in the grocery industry spans 40 years. “With our independent stores, we look for different partners, where they have a facility to do the fresh-cuts and prepared foods. So, in the Minneapolis area, we actually partner with [Wadena-based] Russ Davis Wholesale. And they produce our prepared foods label, not only for the deli department, but also for the produce department.”

Russ Davis Wholesale delivers fresh-cuts, deli and prepared foods, and salads and sandwiches to Supervalu’s warehouse five days a week,” says Barrick. “We’re looking at facilities like that across the United States. We do a great job with fresh produce, but we don’t have cutting facilities,” she says.

In developing menu options, Supervalu meets regularly to strategize with Russ Davis. “They have a corporate chef they bring in, and we come up with ideas to help develop prepared foods. We’ve licensed the logo for it; whether produced in-store or where produced with Russ Davis, it goes under the Quick & Easy brand.”

Outsourcing prepared food items will vary chain by chain, based on their needs and volume on what the drop size will be, says Jeff Oberman, vice president of strategic programs, ProAct, a Monterey, CA-based national network of produce distributors with 84 distribution centers across North America. “Some chains might work with their traditional produce procurement channels for support of prepared foods. It also depends on if the retailer has its own commissary or if the retailer is looking to purchase ready-made wet salads and pre-packaged prepared foods,” says Oberman.

“Every retailer is going to have a different methodology on how it does procurement. In many cases, in-store foodservice follows a foodservice model, where they’ll be looking at foodservice pack sizes and SKUs,” notes Oberman. “We buy 100 million cases of produce across our network on an annual basis. For our members servicing retail, many are doing so through the traditional produce procurement channels. In some cases, we are providing support for in-store foodservice and deli and their unique needs in those departments,” he explains.

Foodservice distributors have become partners with local consolidation and direct-store delivery as well. “We would have pack sizes in both traditional retail as well as traditional foodservice to satisfy the needs of both produce department procurement and in-store foodservice,” says Oberman.

Outsourced produce distributors also can help with providing either short supply or specialty items that are often needed in a retail/foodservice environment. “We can also provide support on local consolidation and manage food safety and reporting to bring efficiencies,” adds Oberman.

The primary differences may lie in the overall supply chain, says Christou of Del Monte. In most cases, it all comes down to how the retailers ultimately receive the produce they need, be it direct from the shipping point or from a wholesaler. Effectively the pipeline of products designated for retail/foodservice, deli or prepared foods is one in the same, he says. “There can be challenges, however, when utilizing different suppliers as volume may differ between sides of the business,” says Christou. “Using different suppliers takes away the ability to consolidate and volume-buy in order to drive down the cost on the products being procured.”

The challenge of sourcing from multiple suppliers confronts many retailers who are always trying to reduce costs. “If you think about the power of the leverage in pricing we get, staying away from anything third party is my goal,” says Jones of Pavilions. “Right now, we are a 350-store chain in Southern California alone; we have three brands we operate — Albertson’s, Vons and Pavilions. Pavilions is the brand I operate for all deli prepared specialty foods, which is our premium format,” she says.

“Anytime you bring in a third party like fresh-cut manufacturing, there’s a cost. One argument is there is labor involved with doing it in-house. We have to be mindful when we develop these programs to keep it simple to execute, from the recipes to the sourcing of the product to managing the consistency,” says Jones.

RECIPES FOR SUCCESS REQUIRE TEAM APPROACH AND TRAINING

With menus, restaurants are challenged with incorporating fresh produce based on seasonality and availability. It just requires planning menus accordingly, says Steve Petusevsky, a consultant to more than 20 top national retail and natural food supermarkets in the United States, and former national director of creative food development at Whole Foods Market.

But for supermarkets on a much larger scale, it’s a different story, says Petusevsky. “You’re dealing with tens of thousands of customers a day at a supermarket. It’s a huge difference. There’s plenty of room to experiment, if you’re serving thousands of people a day, it gives you the opportunity to monitor and test innovative dishes.”

There’s always going to be a level of expected foods people want, such as the classics — rotisserie chicken and lasagna, and mashed potatoes — and then, according to Petusevsky, there’s two tiers above that. “Instead of a basic rotisserie chicken, you’ll have an Asian sesame hoisin chicken and a Mediterranean lemon lavender chicken, and then there could be a tier above that, such as a duckling with a tangerine soy glaze. Retail foodservice that doesn’t appeal to the masses as well as to particular guests loses out because those foods will be purchased somewhere else. But appealing to the mass market doesn’t mean it shouldn’t be great.”

Encino, CA-based Gelson’s Markets uses a team process in formulating menus, says Paul Kneeland, executive director of fresh operations. “Our corporate executive chef is part of our R&D team, developing new programs and products, and also our staff dietitian has her own line of salads in our cases — Jessica’s salads — based on the Mediterranean diet of fresh produce, proteins and olive oil,” says Kneeland, emphasizing that fresh produce is increasing in prepared foods, especially organic.

“My team at the CIA is talking about leadership and leading the industry, so it can be a bit more on the bleeding edge, but in addressing the business side, we’re always trying to focus on developing strategies that can work for people in their operations, and not just pie-in-the-sky ideas,” according to Jackie Chi, director of programs and special projects-strategic initiatives, at the Culinary Institute of America at Copia, Napa, CA.

There’s a business case for developing great menus in a prepared foods program. “It’s a super competitive landscape, with a lot of consolidation, mergers and acquisitions going on. We think the leaders are the ones that treat retail foodservice as a differentiator. What leaves supermarkets behind in the space of prepared foods is not keeping up with the diversity in flavors and innovation,” she continues.

“There can be a lack of knowledge, attention and care to more produce-forward recipes and cooking. It’s harder for a rote operation to get more produce into prepared foods because there are fewer people who know how to execute a produce-forward program. That’s why it’s important to get culinary people who are trained and who can execute a program like that,” says Chi.

Clearly, if you’re going to do an aggressive prepared foods program, you need culinarians, agrees Petusevsky. Large retailers have a vice president of culinary, director of culinary or culinary innovation, he explains. “Independents may have an executive chef, but it all depends on their expense structure and how much prepared foods they do.

“It makes a huge difference…. I was doing a project for a year in Indiana with a retailer that had no chefs, no culinary director or culinary staff, yet it wanted to build its prepared foods. It had a real traditional deli that only served basic salads, sliced deli meats and cheeses and plain roasted chickens. I created 10 signature items and trained the cooks on how to make them and repurpose the ingredients to extend and maximize their use.”

Training is ongoing at Pavilions, and one of the challenges faced, not only at its stores and across its other store banners and in the retail industry as a whole is employee retention. “If you look at the constant training required because of new recipe innovation and seasonality, we can go through a process where we have our in-house cooks up-to-speed and they’re all on track, and all of a sudden we lose one, and lose another one, and we’re going back to the beginning,” says Deborah Jones, Pavilions sales manager, service deli, prepared foods. “Ideally the goal is to have a backfill of those who understand our program and a partnership with our fresh food teams within our four walls of brick and mortar…It’s very, very challenging.”

WORKING OUT DETAILS REQUIRES SUPPLIER COLLABORATION

“Produce suppliers can help Publix build our prepared foods by ensuring we understand your capabilities and new innovation you are working on that you think aligns with Publix,” says Maria Brous, director of communications at Publix, based in Lakeland, FL.

Growers/suppliers participate in the R&D process, according to Paul Kneeland, executive director of fresh operations at Encino, CA-based Gelson’s Markets. “I think it works much better when we are aligned in our goals. It makes for much better synergies and alignment through innovation. For example, it’s tangerine season, and we’ve already developed a pixie tangerine salad,” notes Kneeland, adding Gelson’s also worked with the California Avocado Commission on some recipes for its kitchen.

“We work with Melissa’s to develop recipes across the store for Hatch chiles out of Mexico in August and September, and we do quite well with that,” he says. “For example, we’ll sell them fresh and roasted in the produce department, then in the seafood department with the salmon burgers and in the meat department Hatch chile cheeseburgers and sausages. In the Gelson’s Kitchen we may have a tomato salad with Hatch chilies, and even corn bread with Hatch chilies merchandised in the produce department.”

According to Robert Schueller, director of public relations at Melissa’s/World Variety Produce, Los Angeles, “Many retailers like Gelson’s have really done a great job of inclusion of Hatch chiles in several dozen different recipes across different departments.” Such collaborations extend to other products on a seasonal basis. For instance, “We do a Zest Fest, which includes a lot of the different citrus varieties from December through March. We see many retailers implementing Zest Fest promotions, blood oranges, tangerines, varieties of grapefruit beyond the typical highlighted in prepared foods recipes.

“Our products are all being procured through the produce department for inclusion in retailers’ prepared foods. It’s all going through produce as a bulk order,” according to Schueller. “The produce department is being forced to supply the other departments, whether it’s Hatch chiles that go into the prepared foods, in the deli, or the meat department, because they’re going to make Hatch Chile sausages.

“The produce buyer, produce director, and produce manager are the experts for procuring the produce needed for the store,” adds Schueller. “The chefs are making the orders through the produce department, so there’s the whole culinary aspect behind it,” he says, noting, “You want efficiencies.”

Some retailers have warehouse kitchens. In this case, Melissa’s ships the product to their warehouses, and then from there it gets distributed to each store. And some of these warehouses have culinary kitchens where they’re prepping. Not all stores are like that. Usually the bigger retailers have the warehouses and the culinary kitchens prepare product before it gets to the store. But at smaller stores the products arrive at the stores where they’re preparing them, he explains.

NEW MODELS BUILT AROUND MEAL KIT CONCEPTS

Grocery retailers have come a long way in the prepared foods segment over the past 4-5 years, says Dennis Christou, vice president marketing, Del Monte Fresh Produce, tracing progress and development back to the emergence of various meal kit delivery companies. “While the initial wave of this model has fallen off some, the overall concept has not been lost on many major retail chains today. In fact, certain groups have partnered with some of the meal kit delivery services, incorporating their concepts inside the retail stores.

“We have also seen a direct reflection in store where chains have expanded upon their prepared foods segment with a variety of options targeting consumers ranging from the single individual all the way to family-size portion,” adds Christou.

“We’ve worked with meal kit companies in the past. Now major retailers are doing Blue Apron-style and grab-and-go meal kits in-house and coming to us asking for certain packs to incorporate, such as a five-ounce bag of broccoli cauliflower florets to fit in this meal kit,” says Crystal Chavez, marketing coordinator, Gold Coast Packing, Santa Maria, CA. “On the deli side, we’ve also worked with retailers and distribution companies that want a salad kit or fresh-cut vegetable foodservice packs. We have our own production facilities and innovation team here to customize products, and we’ll go and talk to the deli chef, and work with the retailer to get out in front as they plan their menus.”