Fresh Foods are the competitive frontier in the retail food market
In recent years the level competition in the fresh food retail increased as the supermarkets invested to capture more of the fresh food spend of their existing customers. Their targets are consumers who buy some food at the supermarkets but choose to buy all or some their fresh food from specialist retailers like butchers, fruiterers, delicatessens, bakers and fishmongers.
“The supermarkets have targeted these customers as the value of this escaping fresh food expenditure is substantial. When the food service component is removed, these fresh food specialists generate over $9.3b in annual retail sales. Given an average 25% of current supermarket shoppers purchasing some fresh food elsewhere the size of the prize is attractive.” 
In 2008 the supermarkets captured some volume in the Fruit & Vegetables category as values declined. However, they enjoyed more success capturing Meat and Delicatessen category share. This is partially attributed to the growth of the take home meat market in mid 2008 as consumers reduced their “eating out”, and the specialist delicatessen loosing consumer support as they traded down and away from what they saw as a gourmet food outlet.
The strengths of these two alternatives retail channels frame how this competition will unfold. The supermarkets clearly enjoy the advantage of the one-stop shop however they continue to be challenged by a surge in customers demand between 4.30 and 6.30pm. This demand is typically driven by those requiring a top up shop or a solution for tonight’s meal. Consumers that are met with lengthy queues at this time they have drifted way to other outlets to buy the fresh food products elsewhere.
Understanding the reasons supermarkets shoppers buy fresh food at specialists frames the advantages the specialists currently enjoy. Figure 1, drawn from the Mealpulse™ panel, shows these reasons and conveys the relative strengths of specialist in each fresh food product category.
These reasons are lead by “better quality”, “better range” and “lower prices” and amount to a strong basis on which to compete. Clearly while the supermarkets are seeking growth in fresh foods, they will have strong competition from the fresh food specialists.
The type of fresh food investments made by the supermarkets has ranged from lower prices to new and improved distribution infrastructure. Some of these investments are set to deliver more tangible advantages in 2009.