The golden arches of McDonald's weren't on view inside or outside the Convention Center during the Food Marketing Institute meeting here last week, but no one had to be reminded of fast foods. Nearly everyone was talking about them.
Supermarket executives who gathered here were clearly girding themselves for a struggle. Government statistics indicate that more than one of every three food dollars is spent away from home and projections point toward one dollar in two ratio by the 1980s. (The dollar ratio has sometimes been confused with the number of meals eaten away from home. The number of meals eaten away from home is one in five). Money spent in restaurants means, in part at least, money not spent for groceries. A survey by Progressive Grocer magazine showed 83 per cent of supermarket chain chief executives see fast foods as a threat and 40 per cent see them as a "major threat."
"What can you do about it?" J.F. Murphy of Swift Processed Meats asked the grocers. "Nothing." he and others from the "if you can't beat 'em join 'em" school told the grovers fast foods and the lifestyle that has encouraged their sales are here to stay. They encouraged the supermarkets to jump into the food service business. "The best approach lies in taking advantage (of the trend)," Murphy said. "If they want it, give it to them."
Currently, according to the trade publication Chain Store age," . . . supermarket chains are rushing to get into the food service business. At present fully half of the top 20 food chains offer some type of food service in at least some units." Held out to the grocers were visions of expanded delicatessen and bakery operations, snack bread for breakfast as well as mid-day eating food service windows opening onto shopping mall passageways and driveways, cafeterias, catering and even a fast foods restaurant adjacent to the supermarket.
"Meet them (fast foods franchises) head on in an exciting, growing, profitable market," Murphy told a seminar group. A vast, two-level hall of exhibition provided ample evidence that, to borrow a phrase from the Redskin George Allen, the future is now. The latest in steam tables, warmers and other delicatessen equipment was displayed. There was ample opportunity to taste pressure-steamed "fried chicken," frozen pizzas, sandwich meats and pre-prepared baked goods.
But on closer examination the issue is somewhat more complex than it may appear. "This has been a copycat industry from the beginning," said one executive who sees supermarket survival in terms of increasing size and nonfood items so a store with half food and half general merchandise would be the "one store at which to get everything for the family."
Among the problems that confront the supermarket executive who would become a fast foods entrepreneur are lack of space within stores that already carry 8,000 to 10,000 items, the difficulty in competing with the speed of service, efficiency and high equality control standards of the better franchises, the fast foods industry's extensive and effective media advertising, the attractive decor and atmosphere within some fast foods restaurants and the fact, established by surveys, that Americans like to eat out.
The industry has nearly doubled in size since 1969 and currently grosses in excess of $10 billion a year. Projections are for a growth of 62 per cent between 1975 and 1980.
Among the reasons cited for the popularity of fast foods are time saved, youth with money to spend, adults with larger disposable incomes, the increase in one-and two-person households, motivation through media. In addition, the greater number of women in the work force has increased the trend to staggered family eating times and decreased time available for food preparation, while the fastest growing segment of the population, 25- to 34-year-olds is a generation that grew up on fast foods and tends to eat when hungry instead of at fixed times.
Taking these factors into account, the grocers are being urged to compete in two ways: Feeding customers in the store, as has been indicated above, and selling them fast foods to eat at home. While most fast foods hamburgers are consumed at the store or in a car, a large percentage of chicken and pizza purchases are taken home. One supermarket mounted a successful sales campaign by claiming "we sell chicken at lower prices than the Colonel." And the market is literally being flooded with frozen pizzas, some of them more than a match in quality and price for the franchise pizzas.
They are being told to capitalize on their ability to price flexibility, compared to the Colonel; to woo large families, for whom dining out is particularly expensive; to move deli departments to the front of the store where sights and smells will stimulate spontaneous purchases. They are being advised to create a "friendly, full-service climate" to help recapture the "old-time market feeling." They are even being asked to "teach women how to romance the (supermarket purchased, fast foods) meal" served at home.
Obviously all this costs money and may require additional personnel. The supermarket operator, who talks frequently of his low profit margins, is likely to be cautious. To encourage him, there was talk of 40 to 50 per cent gross profit margins from steam table sales, total deli and bakery profits of 37 per cent "that can range into the 60s." While additional labor costs are projected, "they can be neutralized," an enthusiast said.
Still, the operator may be cautious. Trained personnel are hard to find. No one has a ready answer for the problem of fast-food growing cold as the customer waits in a checkout line. Supermarket customers are buying more on each visit, but shopping less often.
So the payoff isn't assured and a recent article in Advertising Age said: "A number of Wall Street analysts have come to suspect that the fast-food industry, long considered almost boundless, may actually be nearing its limits."
There are plans for an "eat in" advertising campaign to counter the franchises' publicity. In the meantime, the struggle was put in perspective by one executive, who told a seminar. "We had a luncheon meeting in the hotel to discuss the problem and I reached for a packet of sugar. You know what the message on it said? It said 'Dining Out Is Fun.'"