In recent years the intensity of competition in fresh food 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.

Major supermarkets 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 the past two years, supermarkets captured some volume in the Fruit & Vegetables category as the focus on "value" increased. However, they enjoyed greater success in capturing share in Meat and Delicatessen categories, as consumers reduced their “eating out”, and the specialist delicatessen lost support as shoppers traded down and away from gourmet food outlets.

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 helps explain the advantages the specialists enjoy.

Analysis 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 for competition. The type of fresh food investments made by the supermarkets has ranged from refreshed store layouts and presentations, lower prices to new and improved distribution infrastructure. Some of these investments are set to deliver more tangible advantages in future, but not without a fight.