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Is Publix’s Ownership In Crispers A Future Strategy Against Tesco?

Jim Prevor’s Perishable Pundit, October 9, 2007

As Tesco prepares for its US rollout and is expected to rely heavily on a prepared foods offering, one of the obstacles it will encounter is that Americans tend to get much of their take-out at restaurants. Restaurants have better food, more convenient, often offering delivery or curbside pickup service.

Publix has been showing off its strategy for fighting Whole Foods with its GreenWise concept. Yet it may also have a strategy for dealing with the prepared food offer should Tesco’s Fresh & Easy Neighborhood Market come east:

PUBLIX SEEKS NEW LOCATIONS FOR ITS RESTAURANT CHAIN

South Florida grocery dominator Publix Super Markets is quietly running a restaurant business.

The Lakeland-based company is the owner of Crispers restaurants, a quick-casual chain that offers a variety of salads, sandwiches and soups at its 43 locations in Florida.

Publix bought an interest in Crispers in 2002 and increased its initial investment in 2005 to become a majority owner. This year, the company bought the privately held restaurant chain outright for an undisclosed amount and is planning to develop new locations in Florida, some of them alongside Publix grocery stores. In South Florida, there are Crispers in Coconut Creek, Davie, Royal Palm Beach and West Palm Beach.

Consumers today are buying almost half of their food at restaurants and takeout establishments, according to the Washington, D.C.-based Food Marketing Institute, which represents about 1,500 food retailers and wholesalers in the United States and around the world.

Increasingly, supermarkets are crossing the food industry’s competitive lines and joining the restaurant ranks to win back customers and capture a higher-margin business, said Darren Tristano, an analyst for Technomic, a Chicago-based food research firm. Each Crispers restaurant averages about $1.1 million in annual sales, according to the firm’s 2006 research.

”There isn’t a huge difference between what a supermarket does and what a restaurant does,” Tristano said. Both channels are trying to meet the growing demands of busy consumers who prefer tasty, ready-made meals to go, whether from the gourmet prepared foods section of the supermarket or a restaurant that offers carryout services, he said.

Heidi Chibnick, 29, of Sunrise, doesn’t have much time to cook. She and her husband work full-time and have two children, ages 4 and 18 months.

“We go out to eat often,” Chibnick said, while grabbing a quick Crispers lunch in Davie on Wednesday. “Sometimes you can eat out and it’s cheaper than cooking, if you have a coupon or something. To me, it’s a no-brainer.”

The ongoing battle for consumer dollars is what prompted Publix to expand the prepared food offerings in its grocery stores and to invest in Crispers restaurants, which are operated independently of the supermarket chain, said David Haas, spokesman for Crispers.

The company found ways to leverage the synergies between both brands, Haas said. For example, there are Crispers menu options available in the deli departments of several Publix grocery stores and some of the supermarkets issue coupons for a free dessert at Crispers or a meal discount. And the restaurant chain is able to capitalize on Publix’s buying power and distribution channels.

Crispers describes its most distinctive offering as the gourmet salad, or spring mix greens prepared with vegetables, fruits and meats. The restaurant carries its fresh, healthy approach over to its “stacked” sandwiches and wraps, which are made to order with a choice of signature dressings.

Food industry experts compare the Crispers chain to Panera Bread Co., and say its ability to generate significant sales for Publix depends on expansion outside of Florida.

But the company doesn’t want to bite off more than it can chew.

”Right now, we’re at a point where we’re digesting our growth,” Haas said, noting the company will selectively expand in Florida before it considers going out of state.

Although there is some cross-marketing between the restaurant and the stores, and there are some logistics and procurement efficiencies and even a few cross-merchandising opportunities whereby some of the restaurant’s items are for sale in the stores — for the most part, one is a restaurant and one is a supermarket. Maybe Publix knows something Tesco does not?

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