While restaurants and supermarkets fight it out in the prepared food segment, they have forged an alliance in center store
When it comes to restaurants and supermarkets, there’s a growing competition for customers. Both channels have ramped up their grab-and-go, pickup and delivery options, and supermarkets continue to work their way into prepared food in a number of ways – including developing and launching their own restaurants in-store. The competition is fierce for that share of the dining dollar.
But in the supermarket center store, a mutually beneficial truce exists. Here, restaurant brands like TGI Fridays, California Pizza Kitchen, P.F. Chang’s, Starbucks and many more peacefully co-exist with traditional retail CPG brands, providing a unique draw with their familiar brand names. From the freezer case to the coffee aisle to the snack rack and beyond, restaurant brands have found a comfortable niche in the heart of the supermarket.
“Brands that diversify their touchpoints do better than brands that limit themselves to a single source of cash,” noted Jeff Lotman, founder and CEO of Global Icons, an international brand-licensing agency. “Specifically, by putting your food in front of consumers where they are, rather than where you want them to be, you can multiply market share and boost profits, without the hassle of creating a new customer or splurging on R&D.”
Regional restaurant brands, such as New York City’s Rao’s and Michaels of Brooklyn, have proven successful in their local markets.
It’s a win-win proposition, added restaurant consultant Aaron Allen of Aaron Allen & Associates. “The thought process behind selling restaurant-branded products in retail environments is that customers already recognize and trust the restaurant brand,” he said. “If consumers can purchase the restaurant’s products in a grocery store setting, it reinforces the brand recognition and trust even further, so that when they do decide to spend their dining-out dollars, they’ll return to that restaurant.
“The key is not to cannibalize restaurant sales by offering the same products you can get in stores, such as offering frozen versions of popular menu items.”
According to a study from Allen’s consulting firm, 77% of people indicated having bought restaurant-branded products from the grocery store. Respondents with household incomes between $75,000 and $99,000 reported being “significantly more likely to buy restaurant brands.”
Welcome Wagon
Retailers welcome the influx of restaurant-branded products into their stores, and have for some time now. For instance, TGI Fridays, one of the most ubiquitous and successful restaurant brands in supermarkets, has been licensing its brand for nearly two decades and continues to extend its retail offerings. The company, in partnership with Inventure Foods, recently expanded its Party Bites and Potato Skin snack product lines with Chipotle Cheese and Cheddar Bacon Party Bites and Sriracha Ranch Potato Skins.
Beverages are big business for restaurant brands in supermarkets, including ready-to-drink coffee options from Dunkin’ Donuts and Starbucks.
The brand-name appeal and reputation of a restaurant brand like a TGI Fridays or P.F. Chang’s carries weight with customers, said Jim Hyland, VP of communications at Milwaukee-based Roundy’s Supermarkets. “These restaurant brands resonate with customers,” he added. “There is brand loyalty, particularly to restaurants that are multigenerational.”
Roundy’s, a division of Kroger Co. that operates about 150 stores in Wisconsin and Illinois under the Pick 'n Save, Copps, Metro Market and Mariano's retail banners, offers a large variety of restaurant-branded products throughout the center store. “We carry P.F. Chang’s sauces, Olive Garden Salad Dressing, White Castle Burgers, Home Run Inn Pizza, Red Robin Frozen Fries, Nathan’s Frozen Fries, Arby’s Frozen Fries and TGI Fridays Frozen Appetizers,” said Hyland. “The most successful of these products are frozen foods, dressings and sauces.”
Regional restaurant brands have also found success with Roundy’s. Hyland pointed to Milwaukee stalwart Saz’s State House Restaurant, which has grown into a mini empire of catering, festivals and, yes, retail products. Saz’s BBQ Sauce has been a hit for Pick ‘n Save stores in Wisconsin.
Another regional favorite at Roundy’s stores is Al Johnson’s Swedish Pancake Mix from the locally famous Al Johnson’s Swedish Restaurant in Sister Bay, Wis. The uniqueness of this Scandinavian restaurant – in season, there are goats grazing on the grass roof of the wooden building – has made it a favorite among locals and visitors. The owners decided to capitalize on their fame by packaging for retail the ingredients for its most popular dish – hence, the pancake mix and organic lingonberries for home cooks. According to a spokesman for Al Johnson’s, “we are now in every Roundy’s-owned store in Wisconsin plus some Sendik’s Markets, Metcalfe’s Markets and a host of smaller family-operated stores.”
Brand Recognition No Guarantee
Also experiencing success with restaurant brands in the center store is Bashas’ Family of Stores, a family-owned and -operated grocer based in Chandler, Ariz., with more than 100 stores across the state.
“It’s good to have restaurant-branded items in our sets,” said frozen foods buyer Steve Quiros, although he added a caveat: “While it does give an edge when considering an item for our sets, the name alone does not guarantee success.”
He continued, “It’s probably no surprise that restaurant brands show up the most in the frozen foods section of the store. Marie Callender’s dominates the aisle. Others in this area include Chili’s, P.F. Chang’s and Boston Market. P.F. Chang’s is the next-most successful, and its first item ranks in the top 25 of all frozen prepared meals in terms of sales.” Other restaurant brands that perform well in the frozen aisle include California Pizza Kitchen and White Castle, “which is the king with the best sales in our frozen snack set.”
While restaurant brands have their appeal, they also have the challenge of competing with established supermarket brands. For instance, said Quiros, “TGI Fridays has solid sales in the snacks category, but isn’t close to the Hot Pockets brand, which of course isn’t a restaurant brand. Another example: Totino’s pizza rolls and Jose Olé taquitos — both non-restaurant brands — are more popular than the best TGI Fridays item, which is baked potato skins.”
“The restaurant-branded name seems to help a brand get some trial,” added Quiros, “but the quality and price of the item is paramount in terms of repeat buys.”
Beyond Frozen
While Bashas’ most popular restaurant brands are in the frozen food aisle, the retailer has also had success in the coffee aisle, thanks to mega brands Starbucks and Dunkin’ Donuts.
“In the coffee category, restaurant brands resonate very well,” said Bashas’s coffee buyer Keith Fogle, “with the top overall single brand in sales being Starbucks. Starbucks also has the largest selection of any restaurant brand in the coffee category. Next up would be Dunkin’ Donuts with three SKUs in the top 20 performers in our entire coffee category, but with not as many SKUs, they aren’t able to compete with the overall volume of Starbucks.”
He added, “Every day these restaurant brands go head-to-head with the titan brands of the coffee industry, like Folgers, Hills Brothers and Maxwell House, and hold a strong position that isn’t going anywhere anytime soon.”
Bashas’ also carries a number of restaurant-branded grocery items throughout the store – among them, Olive Garden croutons and salad dressing; Spinato’s pasta sauce; Taco Bell shells, refried beans and taco sauce; and Panda Express cooking sauces, to name a few.
Category Manager Marty Hermanson has been surprised at the success of some new items at Bashas’. “I have two brands that are restaurant-branded, and both are in the baking mix category: Cheesecake Factory Strawberry Cheesecake Mix and Classic Cheesecake Mix. Both were new in August 2017. They are ranked fifth and sixth in the bakery mix. We also carry Red Lobster biscuit mixes. We carry the traditional cheddar and — new last year — the rosemary, garlic and Parmesan biscuit mix. The cheddar is ranked No. 2 and is up 20% from last year. The rosemary biscuit mix is new and is already ranked No. 6. It does about one-quarter the sales of the traditional cheddar.”
Regionally, “we carry beer from Four Peaks Brewing Company and beer from SanTan Brewing Company,” said liquor buyer Dan Figor. “They both have brew pubs in the area and are regional brands. They are the No. 1 (Four Peaks) and No. 2 (San Tan) top local craft brands in Arizona, and both are on positive trends.” In addition, Bashas’ carries a line of products from Macayo’s, a popular local Mexican restaurant with good name recognition. “Its products are value-priced, and sales are very good,” noted Category Manager Steve Vander Ploeg.
In the end, said Vander Ploeg, “My experience with restaurant brands is that the cost is a large factor. Customers won’t pay too much extra for restaurant labels. The restaurant brands do resonate with customers, but retail pricing is important. New customers won’t try the item if it’s priced too high.”
When it comes to restaurant brands, consumers approach them the way they do the actual restaurants themselves: A brand name can bring them in the door, but value and a good product keeps them coming back.
Express Lane
SONIC BLAST
Sonic Drive-In’s new grab-and-go products for grocery stores include the fast-food company’s flavors such as Ocean Water and Cherry Limeade in frozen novelties, gelatins, puddings and lollipops. sonicdrivein.com
DUNKIN’ SINGLES
Dunkin’ Donuts brings the big bold roast of Dunkin’ Dark to its smallest-packaged coffee offering, with Dunkin’ Dark K-Cup single-serve pods available in supermarkets. dunkinathome.com
TGI SNACK TIME
TGI Fridays, in partnership with Inventure Foods, brings new, trendy varieties to the world of ready-to-eat snacks with its Chipotle Cheese and Cheddar Bacon Party Bites and Sriracha Ranch Potato Skins. inventurefoods.com
