The Ultimate Guide to Boosting Profitability With Ready-to-Eat Meals
This post was originally written November 4, 2020 and then updated.
Ready-to-eat meals aren’t just a passing trend—they’re a strategic opportunity for grocers aiming to meet modern consumer needs while simultaneously boosting profitability.
What makes ready-to-eat meals a win-win for both consumers and retailers?
First, convenience. Time is increasingly scarce, and ready-to-eat meals eliminate the need for consumers to buy and prepare separate ingredients. Our pricing research has shown that customers are willing to pay a premium for the convenience of online grocery shopping. Retailers who recognize this, can set their prices at a markup, increasing profitability on existing orders.
Second, personalization. Personalization is another key aspect that customers are coming to expect from retailers. Leveraging a digital platform like Order Ahead from Mercatus, grocery retailers can offer customers an array of ready-to-eat meal options with customizable choices of sides, resulting in thousands of possible meal combinations. This level of configurability not only satisfies the consumer’s craving for a unique experience but also builds brand loyalty, thereby increasing customer retention.
Third, profitability. By providing an expedient, personalized solution for prepared meals, grocers have the potential to not only drive sales of high margin items from their perimeter departments, but also increase average order values. With the market for prepared meals growing steadily, and consumer willingness to pay for convenience proven, it’s clear that ready-to-eat meals are a profitable long-term strategy for retailers.
Fourth, future growth. With a market already worth billions and consumer behavior increasingly tilting towards convenience and personalization, now is the opportune moment for grocers to invest in this segment. Ensuring that customers have access to this valuable segment through digital commerce is essential. As they say, timing is everything—and the time for ready-to-eat meals is decidedly now.
Now that we understand why ready-to-eat meals can lead to success for your grocery business, let’s explore the benefits and strategic recommendations for maximizing your strategy below.
The Benefits of Ready-to-Eat Meals
Ready-to-eat meals offer a multitude of benefits for grocery retailers, ranging from higher margins and brand differentiation to customer personalization and loyalty. Moreover, they fit seamlessly into existing operational frameworks, making them a low-risk, high-reward venture for those looking to tap into this lucrative market. In this section, we will list those specific gains and expand upon them.
1. Gain higher margins per order
One of the most compelling advantages for retailers is the higher per item margin found in perimeter departments. Because these offerings are prepared in-house, grocers are positioned to capture a greater slice of the profit pie. This is particularly impactful given the slim margins often associated with traditional grocery items. By controlling the production, retailers can manage costs effectively and set pricing that amplifies both convenience and profitability.
2. Drive brand differentiation
Bringing perimeter department offerings online offers a unique opportunity for brand differentiation. By sourcing fresh and local ingredients for their prepared meals program, grocers can underscore their commitment to quality and value. This not only elevates the retailer’s brand image but also serves as a competitive edge in a crowded marketplace. Consumers are increasingly discerning about food provenance, and this focus on quality ingredients aligns well with that trend.
3. Offer personalization and convenience
Like ordering from a menu at a restaurant, customers want to be able to order their prepared meals the way they like it. Prefer to choose two sides of mashed potato? Or perhaps one upgraded side of sweet potato fries for an additional $2.00 and one side of coleslaw?
Customers want to be able to personalize their meal, as they would if they were ordering at a restaurant or buying the ingredients and making it themselves. With Order Ahead’s dynamic Build Wizard, customers can see what their customizations will look like, and with a Unified Cart, they can order it alongside their regular online grocery order.
4. Build customer loyalty
When customers experience the convenience and quality of ready-to-eat meals, it builds a strong affinity with the grocery retailer. Customers appreciate when a retailer provides products that align with their lifestyle needs, and loyalty often follows. Over time, this increased loyalty translates into customer retention, as satisfied consumers are likely to return and make additional purchases.
5. Enable private label promotion
Private label products often offer higher margins for retailers, and ready-to-eat meals provide an excellent opportunity to promote these. For example, grocers can creatively integrate private label items into their ready-to-eat meal offerings, perhaps by featuring different seasonal flavors for a rotisserie chicken meal, pizza or sandwich and pairing a private label seasoning or sauce. This creates a synergistic relationship that can be leveraged for seasonal promotions, new private label product innovation and marketing initiatives.
6. Increase operational efficiencies
Ready-to-eat meals are likely already a part of the operational strategy for many grocery retailers. By leveraging the sale of ready-to-eat-meals through online channels, it allows grocery retailers to make the most of the operations that they have in place to serve the in store customers. Order Ahead simplifies order management, assembly, fulfillment, and customer communications to ensure seamless alignment between online and in-store operations. The order management console features a centralized administrative console for product setup, payment configurations, and performance tracking at both corporate and store levels. Meanwhile, the merchant app for order management can be used by perimeter departments to make adjustments to time to prepare, timeslots and general availability based on operational requirements.
These benefits are all powerful levers to help drive greater profitability for your grocery business. In the next section, we will discuss differentiation and evolving the ready-to-eat-meal service to capture as much opportunity as possible.
Going Beyond Regular Ready-to-Eat Meals
By expanding your ready-to-eat meal offerings to include specialized options, grocery retailers can cater to a broader customer base, increase their profit margins, and solidify their brand as a one-stop-shop for diverse dietary needs. Here are a few ideas to evolve your service:
Specialized Diets
The growing demand for specialized diets—gluten-free, nut-free, vegan, and vegetarian meals—provides grocery retailers a great opportunity to diversify their ready-to-eat meal offerings. Consumers who once had to prepare specialized meals themselves or place custom orders at restaurants can now easily order these ready-to-eat options through a grocer’s web or mobile platforms. This not only makes life easier for the consumer but also establishes the grocer as the go-to local source for specialized dietary needs. However, retailers must exercise caution, particularly when it comes to potential allergen cross-contamination, especially for gluten or nut allergies. One way to potentially mitigate this risk is through meal kits that customers can assemble in their own kitchens.
Gluten-Free Options
For consumers seeking gluten-free options, grocery stores can effectively compete with meal delivery and meal kit services. The advantage here is that grocers can offer lower prices since they don’t have to factor in shipping costs. For context, most specialized meal services price their offerings starting from $11.99 per portion. By offering in-store, ready-to-eat gluten-free meals, grocers can attract a wider customer base without the added logistical costs.
Vegan and Vegetarian Meals
When it comes to vegan and vegetarian meals, most competitors in the market are local prepared meal delivery services. These services often also offer keto, low-carb, and paleo diet options. However, these meals are usually delivered in bulk, meaning consumers can’t order a single serving of a specific recipe. This limitation provides grocery stores an advantage, as they can offer individual servings, giving customers greater flexibility and choice.
Healthy Lifestyle Meals
The trend towards health-conscious eating also presents an opportunity for grocers to offer meals tailored to specific medical conditions. Beyond simply offering low-carb or low-calorie options for weight loss, grocers can expand their offerings to include meals suitable for diabetics, which would be similar to their low-carb recipes. This allows grocers to serve a broader demographic and provide a more comprehensive health-focused product line.
Child-Friendly Options
Busy parents often struggle to prepare meals for their children, especially when it comes to school lunches. Grocers can step in to fill this gap by offering prepackaged, child-friendly meals. These meals eliminate the need for additional lunch boxes and offer a variety of options to cater to picky eaters. Grocers can further differentiate their product range by offering fresh, ready-to-eat meals suitable for all age ranges, from toddlers to teens. For instance, emphasizing that fresh baby food options are healthier than canned or packaged alternatives can be a compelling selling point.
If deployed properly, the aforementioned ready-to-eat-meal expanded service offerings can attract new customers and more orders in general. Next, we will discuss how to maintain a profitable service by managing the expenses associated with fulfilling the program.
How to Make Ready-to-Eat Meals Cost Effective
In this section we clarify multiple ready-to-eat-meal strategies that grocery retailers can utilize to significantly enhance the cost-effectiveness of their offerings, leading to increased sales and greater profitability.
Leverage Buying Power
Regional grocers often have significant buying power when it comes to sourcing ingredients for ready-to-eat meals. By regularly working with vendors, they can negotiate discounts and deals that make the meals more cost-effective to produce. This bulk purchasing capability provides a crucial competitive advantage, allowing grocers to offer high-quality meals at attractive prices, thereby driving greater profitability.
In-House Labor Efficiency
Another way grocers can make ready-to-eat meals more cost-effective is by utilizing in-store associates for meal preparation and service. By assigning these tasks to existing staff, grocers eliminate the need to outsource labor to third parties. This in-house approach not only reduces costs but also ensures better control over meal quality and customer service. Store associates can be involved in all aspects of the meal process, from preparation and cooking to servicing the counter.
Cross-Selling Opportunities
Ready-to-eat meals also offer ample opportunities for cross-selling. For example, a rotisserie chicken meal could be enhanced with a lower-selling prepared food item , encouraging customers to try new products. This tactic not only elevates the meal experience but also introduces customers to other products in the store, increasing the chances of additional purchases and a higher order value.
Seasonal and Event-Based Promotions
Grocers can capitalize on seasonal trends and events to offer specific promotions, such as BBQ seasonings during the summer or special meal packages for Thanksgiving. These limited-time offers can create a sense of urgency and excitement among customers, driving increased sales. Beyond seasonal promotions, ready-to-eat meals can also be catered for special events like office parties or birthdays, creating additional revenue streams.
Efficient Inventory Management
Keeping track of customer purchases online can also contribute to cost-effectiveness. By monitoring what meals are frequently bought, grocers can better manage their ingredient inventories, thus reducing food waste. Effective inventory management not only minimizes costs but also ensures that meals are always fresh and available, enhancing customer satisfaction and loyalty.
Mercatus Retailer Spotlight
Freson Bros., a Canadian Independent Grocer of the Year, has partnered with Mercatus to introduce a state-of-the-art online ordering system for fresh and prepared meals. This collaboration is set to revolutionize the way Freson Bros. serves its community, reinforcing its commitment to exceptional customer service and quality.
“Freson Bros. has always been at the forefront of providing exceptional service and quality to our customers,” said Doug Lovsin, president of Freson Bros. “This partnership with Mercatus and the integration of the Order Ahead platform is a natural extension of our commitment to excellence. It not only aligns with our focus on fresh and prepared foods but also elevates our customer service to new heights, making it easier than ever for our customers to enjoy the best of what we have to offer.”
While implementing any one of these strategies can positively impact the bottom line, leveraging multiple approaches in tandem can create an exponential increase in the profitability of your ready-to-eat meal program. Each strategy complements the others, creating a holistic approach that maximizes both customer satisfaction and revenue generation.
How Grocers Can Leverage their Owned eCommerce Channels to Offer Ready-to-Eat Meals
What exactly are the benefits of bringing perimeter department offerings to customers using your eCommerce channel?
A Seamless Brand Experience
First party online platforms allow grocers the opportunity to replicate more of their unique in-store brand experience in the digital realm. Order Ahead from Mercatus enables retailers to make planning for special occasions both easy and convenient for customers. Within the same online grocery order, customers can include a customized ready-to-eat meal or side dish, all set for pickup at curbside or doorstep delivery.
Streamlined Order Fulfillment
One of the major challenges in scaling up ready-to-eat meal offerings is ensuring consistent quality in both products and service. Mercatus’ Enhanced Fulfillment solution is custom-built for grocery retailers, enabling them to scale their meal and grocery order fulfillment services seamlessly. The system is configurable and is able to take into account the unique timing required for each order, allowing your team to assemble, pack, and dispatch orders efficiently.
Flexibility and Customization
Order Ahead not only connects your customers to a wide range of ready-to-eat meal products like rotisserie chicken, pizza, stew, and sandwiches but also adds another layer of convenience for customers. For instance, the rotisserie chicken meal allows customers to choose from a variety of sides, and the sandwich option provides multiple topping selections. This adaptability caters to customers looking for quick, fresh, and healthy meals.
Special Celebrations and Custom Orders
For special occasions, Order Ahead goes above and beyond by allowing customers to fully customize their own cakes, including flavor, icing, filling, photos, and size. On the backend, retailers can set up a limited number of topping options and specify different preparation times. If a cake takes six hours to prepare, that prep time can be included in the order, aiding in the scheduling of pickup and delivery times.
Backend Coordination
Order Ahead is not just customer-facing; it also provides robust backend support. The mobile and web platforms are tightly integrated with the order management console and merchant app. This ensures that the retailers’ department teams are always in sync, receiving incoming orders in real-time and preparing the ready-to-eat meal orders according to the customers’ pickup and delivery times.
By fully leveraging their owned eCommerce channels in these ways, grocers can offer a robust range of ready-to-eat meal options, driving greater profitability and customer satisfaction.
Ready-to-Eat Meals: Critical Thoughts
So, how can grocery retailers better position themselves to succeed in the highly competitive ready-to-eat meals market?
Flexibility and Choice in Fulfillment
When it comes to fulfillment, one size doesn’t fit all. The right fit will depend on your customer base, geographic coverage, and labor models. And let’s not forget the all-important consideration of commission costs. Grocers have the flexibility to use their own associates, gig labor, or a combination of both, depending on what serves their business model best.
The key takeaway here is to select a fulfillment provider that aligns closely with your specific needs and objectives.
The Rise of Curbside Pickup
With the high-cost of delivery, curbside pickup is becoming increasingly important to grocers. Retailers should be proactive in promoting their pickup services by devising a fulfillment strategy that maximizes customer convenience.
The more seamless and reliable you make the curbside pickup experience, the better positioned you will be in capturing a larger share of this expanding consumer behavior trend.
Brand Differentiation from Mass Merchants
Mass merchants have already incorporated ready-to-eat meals into their in-store offerings, posing a challenge for grocery retailers.
To stand out, grocers need to differentiate their ready-to-eat meals solution. One effective strategy is to extend these offerings through delivery and pickup services, not just limiting them to in-store availability. While this presents logistical challenges, particularly in how meals need to be delivered, the effort is worthwhile to deliver on the promise of convenience, while having the opportunity to gain more customers and revenue.
It’s crucial to view meals prepared in-house as an extension of your brand. This approach allows you to treat these offerings like a private label product. By infusing unique options into your ready-to-eat meals, you can set your offerings apart from those of generic national chains or mass merchants. This can be a significant point of differentiation, elevating your brand in a crowded marketplace.
Conclusion: The Future of Ready-to-Eat Meals
As we look to the future, it's evident that ready-to-eat meals are not just a passing trend but a growing market set to become even more robust. According to a comprehensive report by Market Research Future (MRFR), the ready-to-eat meals market is on track to exceed USD 188 billion by the end of 2030.
This underlines the immense potential and staying power of this market, strongly arguing for the timely entry or expansion of grocery retailers into this space. Given the trajectory, it's clear that ready-to-eat meals represent not just a short-term opportunity but a long-term investment that can substantially contribute to a retailer's bottom line.
With consumers increasingly prioritizing convenience and quality, the stage is set for grocery retailers to make a significant impact. The value proposition for consumers is strong, and the profitability potential for retailers is even stronger. Those who invest wisely in this area, paying close attention to quality, convenience, and customer preferences, are likely to be the winners in this fast-growing market.
In closing, the future is bright for ready-to-eat meals, and the time is ripe for grocery retailers to not only enter but thrive in this expanding market with a digital commerce offering. Ignoring this growing trend could mean missing out on a critical opportunity to increase profitability and build a more robust, customer-centric strategy for ready-to-eat meals.
Take Action Now: A More Profitable Future Awaits
Leverage the #1 eGrocery platform for regional retailers to expand your profitability. A seamless solution to bring your customers’ favorite perimeter department offerings online is waiting at your fingertips. Boost your bottom line and provide unparalleled convenience to your customers. Contact us today to see firsthand how Order Ahead can help you elevate your business.
References:
- https://www.grandviewresearch.com/industry-analysis/ready-meals-market
- https://www.statista.com/statistics/1013928/number-of-grocery-app-users-us/
- https://www.marketresearchfuture.com/reports/ready-to-eat-meals-market-1979
- https://www.globenewswire.com/en/news-release/2022/05/12/2442309/0/en/Ready-to-Eat-Meals-Market-to-Cross-USD-188-Billion-by-2030-at-10-98-CAGR-Report-by-Market-Research-Future-MRFR.html
- https://greenly.earth/en-us/blog/ecology-news/global-food-waste-in-2022
