February 14, 2011

Prepared Foods are Latest Profit Centers for Kosher Food Retailers

Brooklyn NY…It’s a well-known secret amongst kosher retailers that prepared foods are “profitable and an important part of a kosher grocery store or supermarket.” At Brooklyn’s Pomegranate, the prepared food section is positioned near the entrance of the store and by all accounts appears to be the busiest section in the store. Abraham Banda, the store’s owner, says he invests a great deal into constantly improving his prepared foods, even retaining a world-class chef to improve every one of his dishes. Upscale stores like Landau’s in Boro Park have also recently upgraded their prepared food sections in an effort to attract younger customers and to boost profits. In interviews with a half dozen retailers, Kosher Today has learned that the prepared foods section offers the retailers margins they do not realize in other sections of the store. One of the retailers said that prepared foods represent nearly 28% of his store’s revenues, up from 10% just five years ago. Other retailers gave figures of 15% - 25%. The retailers agree that they have experienced a dramatic increase in demand for a broad array of prepared foods by younger customers. “Their very busy lifestyle means that they will be dividing their week between home cooking, serving prepared foods, and eating out,” said one retailer. “We are also catering to a new generation of kosher foodies who covet themed prepared foods.” The retailers say that another significant change is the demand for a more diverse menu that goes beyond the traditional Shabbos foods. “I sell almost as much cholent on a Wednesday than I do on a Thursday or Friday, but the big news is how much of the exotic dishes I sell almost everyday” said one of the retailers. He admitted that markups often exceed 100% and are a good way to balance the tiny margins realized in other sections of the store. Some like Banda said that margins were still not great because of the high cost of research and development as well as labor.

In mainstream supermarkets, there has been a major shift towards healthier prepared foods. Whole Foods Market has recently stepped up its prepared foods offerings. Its new “Health Starts Here” initiative plans to offer healthier pre-fab options, limiting add-ons such as refined flour, sugar, oil and processed ingredients. If there is one complaint by kosher consumers it is that there are not enough “healthier” prepared food options. Convenience is a key driver for U.S. consumers who are increasingly turning to prepared foods purchased at the supermarket deli for in-home suppers, reports market research firm The NPD Group, whose recently released “DeliTrack” study finds easy at-home meals to be the top-ranked reason that consumers buy supermarket prepared foods. According to NPD’s “DeliTrack,” about one in five adults purchases a prepared food item in a typical week. When making prepared food purchase decisions, consumers’ top picks are chicken or turkey items, sandwiches, deli salads such as potato salad, and leaf salads. These four types of foods account for just over half of all deli-prepared food purchases. In kosher, the popular dishes include fish, dips, salads, and many side dishes.

 Abraham Banda, the store’s owner, says he invests a great deal into constantly improving his prepared foods, even retaining a world-class chef to improve every one of his dishes. Upscale stores like Landau’s in Boro Park have also recently upgraded their prepared food sections in an effort to attract younger customers and to boost profits. In interviews with a half dozen retailers, Kosher Today has learned that the prepared foods section offers the retailers margins they do not realize in other sections of the store. One of the retailers said that prepared foods represent nearly 28% of his store’s revenues, up from 10% just five years ago. Other retailers gave figures of 15% - 25%. The retailers agree that they have experienced a dramatic increase in demand for a broad array of prepared foods by younger customers. “Their very busy lifestyle means that they will be dividing their week between home cooking, serving prepared foods, and eating out,” said one retailer. “We are also catering to a new generation of kosher foodies who covet themed prepared foods.” The retailers say that another significant change is the demand for a more diverse menu that goes beyond the traditional Shabbos foods. “I sell almost as much cholent on a Wednesday than I do on a Thursday or Friday, but the big news is how much of the exotic dishes I sell almost everyday” said one of the retailers. He admitted that markups often exceed 100% and are a good way to balance the tiny margins realized in other sections of the store. Some like Banda said that margins were still not great because of the high cost of research and development as well as labor.

In mainstream supermarkets, there has been a major shift towards healthier prepared foods. Whole Foods Market has recently stepped up its prepared foods offerings. Its new “Health Starts Here” initiative plans to offer healthier pre-fab options, limiting add-ons such as refined flour, sugar, oil and processed ingredients. If there is one complaint by kosher consumers it is that there are not enough “healthier” prepared food options. Convenience is a key driver for U.S. consumers who are increasingly turning to prepared foods purchased at the supermarket deli for in-home suppers, reports market research firm The NPD Group, whose recently released “DeliTrack” study finds easy at-home meals to be the top-ranked reason that consumers buy supermarket prepared foods. According to NPD’s “DeliTrack,” about one in five adults purchases a prepared food item in a typical week. When making prepared food purchase decisions, consumers’ top picks are chicken or turkey items, sandwiches, deli salads such as potato salad, and leaf salads. These four types of foods account for just over half of all deli-prepared food purchases. In kosher, the popular dishes include fish, dips, salads, and many side dishes.