Bigger frozen aisles and more meals-to-go: Supermarkets revamp to keep prices down

Tuesday, 15 November 2022

Foodstuffs has begun rejigging the layout of its supermarkets after boss Chris Quin’s “study tour” in North America.

Expect bigger frozen and chilled sections, as well as the return of warm ready-to-eat meals, he says.

Quin, who heads Foodstuffs North Island that operates Pak 'n Save, New World and Four Square supermarket chains said the trip laid bare that inflation and rising food prices was a rampant issue affecting all retailers worldwide, forcing businesses to examine their buying practises and efficiency.

Frozen food was a fast-growing sector driven by demand during the Covid-19 pandemic and subsequent lockdowns. Quin said there were no signs of growth slowing soon, even at the tail-end of the pandemic.

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That was a key takeaway from the three-week trip and gave management the confidence to focus on expanding Foodstuffs’ frozen food category and its ready-to-eat section.

He said consumers were increasingly making the switch to buying frozen food instead of fresh produce as a way to kept costs down amid the cost of living crisis.

The frozen aisles in Foodstuffs supermarkets were already expanding in some stores and the co-operative was looking at its store designs and layout as they came up for refurbishment, he said.

Newer stores aready had a bigger area of frozen chilled aisles. Its newest store, New World Mangawhai, had a much bigger freezer section with stand-up chillers. The same design was also being rolled out to Four Square and Pak 'n Save stores as they were upgraded, he said.

“People are trying to replicate an out-of-home experience at home, for cost reasons or for comfort of entertaining at home rather than being out in crowds. There are a number of different drivers coming together to have people want to entertain more at home.”

The meals-to-go category, warm ready-to-eat meals in oven trays, was another old world portion of the grocery sector making a comeback, particularly in high density cities, Quin said.

Foodstuffs was now looking at ways it could expand its range in that area. “That is a thing those markets do better, and we need to challenge ourselves on how do we develop the model right for New Zealand.

“The hard thing is predicting demand and avoiding food waste, but we’re going to have to reset and do some good development and have another go.”

Giants push into grocery retailing

The Warehouse is making a push into grocery retailing, dedicating more space in its red shed stores for groceries and chilled goods, while the world’s second-largest retailer Costco Wholesale has opened its first Auckland store and is experiencing strong demand as shoppers flock to the West Auckland store. In recent weeks Costco has been struggling to keep its shelves stocked.

The Warehouse is in talks with Foodstuffs about it becoming a wholesale supplier of its grocery product following the Government’s move to force the duopoly to open up its supply networks.

Quin said Foodstuffs was not fazed by the increase in competition in the grocery sector, and it was forcing the group to look at its own buying power and how it offered better prices.

“Our stores compete with each other, and they compete with a number of other brands.

“Every competitor makes us look at price. Costco, we knew they were coming for quite a long time, and we’ve been looking, learning and thinking.”

Quin said there had not been a noticeable drop in sales at any given store since Costco opened.

“But there is no doubt the money that is being spent at Costco is coming out of New Zealanders' wallets and people aren’t getting more income because Costco has arrived … we’ve got to earn the customers’ choice and compete.”

Where to from here for food prices?

Quin said food prices were likely to continue to creep higher as global factors continued to weigh on availability and prices.

The price of goods had been pushed up in price because of war, weather and wages, compounded by high freight and import costs.

Ukraine, for example, produced 40% of the world’s grain that fed chickens and went into many products, which had been behind increases in recent weeks after a period of slowing after an initial spike.

Increasing labour and fuel costs were also a factor and were costs that were not going to ease any time soon, he said.

“We really hope the global factors that are influencing food prices slow down and that we may be seeing the peak, [however] I don’t think the challenge is going away in a hurry.”

According to Infometrics, supermarkets were paying their suppliers 10% more for groceries than they did a year ago.

“The key issue is that the cost of goods from our suppliers is still going up faster than food price inflation. If we can’t hit that off then food prices will keep going up,” Quin said.

Chris Quin’s tips on how to get the most out of your grocery shop

• Seasonal really matters - buy fresh in the season produce and frozen for goods out of season.

• Plan your shop - budget and make decisions online, or through the app before going into the store to do your shop.

• Buy in bulk to get more for your money.