We have covered the launch of Tesco’s Fresh & Easy extensively, and since Wal-Mart launched its small store concept, Marketside, we have written pieces, both here and here, comparing and contrasting the concepts.
Although the formats have much to differentiate themselves from one another, they share one important element besides being a significantly smaller footprint than conventional US grocery stores: They share an emphasis on “ready meals” or fresh prepared food. We are referring here specifically to food that is prepared by a vendor or in a commissary and then packaged for the consumer to reheat.
These items are very popular in the UK and to a minor extent are sold in many supermarkets in the US. It is also true that in high-income areas, particularly urban areas, it is common to have specialized grocery stores that sell some variant of these products.
Yet we wonder if both Tesco and Wal-Mart aren’t misinterpreting the consumer research as to the extent of the market for these foods in the United States.
The UK consumer came to the habit of buying these ready meals during a time when two circumstances existed:
First — which is still true — it was during a time when few UK consumers had large American-style refrigerator/freezers. So they had little choice but to shop frequently.
Second, the UK lacked the vibrant restaurant culture of the US — which also is still true today, though to a lesser extent. Particularly the UK lacked a large selection of moderately priced restaurants.
Neither of these circumstances are evident in the United States and, yet, these seem almost prerequisite to wanting these “ready meals” in large numbers.
To some extent these “ready meals” strike us as an “in between” product squeezed on both ends by more compelling propositions.
If the focus is economy, then one has to think that frozen foods will win out and, in fact, with the economy tightening, frozen foods are showing good numbers. Not only are frozen foods much less expensive to begin with, but they are economical in two other ways: First, because they can be stored easily, one does not have to make extra shopping trips, which costs both time and money, and, second, the shelf life is for all intents and purposes, forever.
These traits make frozen foods fit in more with American lifestyles. At the Pundit household, we’ve thrown out plenty of fresh prepared foods but never a LeanCuisine. Life just often isn’t predictable. You buy something like these “ready meals” and then one kid gets invited to dinner at a friend’s house, the other has a practice the timing of which means everyone is going to eat fast food. Whoever was shopping forgot there was a PTA meeting that night and one spouse has to work late and so the office is ordering pizza. Next thing you know, those “ready meals” look a little grungy — especially if in a moment of optimism one bought a whole bunch of them — and they wind up in the garbage.
Of course for many, price isn’t enough… what about quality? Well most Americans do associate fresh with quality. Yet if fresh equates with quality then, inevitably, consumers will interpret restaurant take-out food — prepared, literally, to order — as higher quality than “ready meals.” We praised Marketside for being smart to have a service deli, cook pizzas in front of people, in-store rotisseries, etc., not just because consumers will value these fresh products but because we thought such cooking would create a “halo effect” for the “ready meals” and consumers might think they were made fresh right in the store.
The “ready meals” strike us as inherently a weaker offer than take-out on three counts:
First, they are not as fresh. They are made in commissaries a day or more in advance.
Second, they are not as good. We were talking to some consumers about the Pad Thai dish at Fresh & Easy. It is pretty tasty, they said, but it just doesn’t taste like Pad Thai from a Thai restaurant. If any of these shoppers want to pick up some dinner, they can easily zoom by a local Italian place, Thai place, Mexican place, Chinese place, Indian place, Barbeque place, Sushi place and more.
These restaurants are all specialists. It is very difficult for any supermarket to produce “ready meals” in each of these categories that will be equal in flavor and taste to what these specialists produce.
Third, the restaurant take-out can be customized. If one prefers broccoli today instead of spinach with the chicken, no problem. Mrs. Pundit would like her broccoli steamed, Mr. Pundit will take it sautéed in garlic and olive oil — once again no problem at our local Italian place — but it’s a big problem if we are buying “ready meals” where the option is only what is there.
In addition, the take out is arguably more convenient. We can call from the office, shopping mall, car or soccer practice and it is ready when we get there. Many places now will bring it out to the car. The “ready meals” require us to get out of the car and there is no guarantee the store will even be in stock with the item we are hankering for. If our favorite Italian restaurant runs out of chicken breasts or broccoli, they send a kid to Publix to buy some until the next delivery. If Fresh & Easy and Marketside run out, they are out.
So if frozen foods are more desirable from an economy angle and take-out is better from a quality angle, the market for “ready meals” gets constrained fast.
If we take away the “ready meals,” however, these small format stores are just what the Grandma Pundit would have called a “Superette.” And though they still exist in urban areas where big supermarkets can’t get real estate, superettes have died out everywhere else, giving way to larger supermarkets and smaller convenience stores.
We wonder if the answer is not “ready meals” but a full cooking kitchen as in Sheetz, where you can come in and order hamburgers, salads, sandwiches, etc., and they cook them for you — fresh. The executives at Sheetz are pretty smart. They make a point on their menu of not just offering a “Grilled Chicken Wrap” but a “Made to Order Grilled Chicken Wrap.” They don’t just offer a “Grilled Chicken Salad,” they offer a “Made to Order Grilled Chicken Salad” and throughout the menu they emphasize this “made to order” as a competitive advantage. They also don’t try to be good at 20 different cuisines.
Wal-Mart has made clear that Marketside is an experiment. Well we would encourage them to try one store as a hybrid between a Sheetz on the foodservice end and a Marketside on the grocery store side. That would be a mix that just might work with how Americans actually eat.
These “ready meals” are mostly a foreign concept outside the American vernacular.