Archive for the ‘Discussion’ Category

How does meal prep fare?

The first month of the New Year has come to a close and without casting aspersions on everything I see and having you think I just see the negative side, I did want to point out a few things that I’ve noted over the month. And no, it’s not a happy forecast.

The number of stores for sale this month is just shy of 70. If you remember back in August of last year I did roughly the same thing of counting the number of store listing I found as I did research on meal assembly. At that time the number I came up with was 60 stores for sale during the month. So we are slightly above that number. However, this doesn’t count the stores that simply close (something that is probably happening more frequently now). Some owners aren’t putting their stores up for sale anymore and are simply closing their doors and moving ahead with the legalities that involves. How many stores does that account for? I have no way to really answer that, but I think it would be realistic to say that 10 stores shut their doors rather than sell.

So what does that mean? We still have an increase in the number of stores going out of business even if it’s only slight (if you call a 20 store per month increase slight). Basically the market is still decreasing. The number of stores for sale may also start to decline very shortly, but I won’t take this as a sign that the industry is actually getting better. Instead that will mean that owners are just closing their doors and are skipping the sale process. I think it’s nearly impossible to sell a store in the current climate. When you list a store for $25k knowing it cost you around $250k (or more) to get it started that should be an indicator that it’s not a sellers market.

In conjunction with the fickle nature of customers and showing the worth of meal assembly we now have the added burden of rapidly rising food costs. Prices are jumping by leaps and bounds and there is no indication this will be short lived. A recession looms on the horizon which will certainly spell disaster for this industry. Customers already feel meal assembly is a too highly priced luxury they can do without, and these two factors could solidify their opinion once and for all. With most families turning to Hamburger Helper, pasta, Mac and Cheese, tacos and other easy and affordable options it’s hard to say that meal assembly will fit in with a majority of these families new budgets. This new chain of events may very well push meal assembly further outside the mainstream and make it an option most families won’t consider. If things progress along this path we have the makings of a very slow lead in to the New Year which will push us right into the normally slow months of summer. If the summer of 2008 is anything like the summer of 2007 it could be crippling for a majority of owners. This would basically make barely a trickle of business for the first 6-8 months of the year.

Another turn of events has been the news of a new CEO taking the helm of Dream Dinners. It would be hard to dispute that this is an indication that one of the major players in meal assembly is in trouble and is looking for help. To bring in a CEO when your business is expanding faster than you can manage is one thing, but to bring in outside help when your business has shrunk by nearly half is another matter entirely. Owners aren’t paying their royalties, downsizing has taken place and cost cutting measures must certainly be in place. From the outside this looks to be a company in trouble. The market is shrinking, owners aren’t happy, the revenue stream is drying up and this looks to be a scramble to keep the ship afloat as long as possible. Whether you call the new CEO and changing of staff the best hope or creating a scapegoat it certainly gives the appearance that the corporate office is starting to feel the same effects that store owners have been feeling for awhile. Is this the start of a corporate decline into bankruptcy? Does Dream Dinners have enough reserves and market savvy to prevent closing their own business? Time will certainly tell, but this could be interpreted as a very rocky start for Dream Dinners. And considering the change in CEO wasn’t brought up in a press release or touted by the company as great and exciting news it does makes you wonder.

Dinner by Design continues to flaunt massive expansion plans across the Midwest. They have staked out a huge area of the country as their stomping ground and where they will build their meal assembly empire. This contradicts what owners are saying about those same locations where stores are closing and business is very slow. They have announced big expansions before but as yet very few of their new stores have actually opened (pre-buyout). It’s an audacious plan and quite frankly seems to fly in the face of reason, but keep in mind there is a big difference between saying you will do something and actually doing it. You can say a city will support 40 more stores and you can say this huge tract of land across the country is a prime location for more meal assembly stores, but that doesn’t mean it will come to fruition.

Merger and buyout rumors had us talking but considering what could be instability at the head of Dream Dinners, any talk of mergers is even more fanciful than it was previously. Talk of My Girlfriends Kitchen being acquired was also bantered about, but there is still no official documentation to support that. But even if it is true, what’s to be gained? Why takeover a company that really has no market share, no household branding and very little market penetration. Where is the return on investment and how do you plan on using those assets? Again, if it is true, it doesn’t seem to make too much fiscal sense.

Super Suppers kicks off the year by offering pizza as a new menu item. Is this giving in or a bold market strategy? Pizza can be had in every shopping venue you can think of, does MA really need to play this card? Considering burgers and pizza are the staple diets of the American consumer maybe they do. This might keep meal assembly on the minds of families, it may entice them to come in, it may be an offering that strikes a chord. In truth, it seems like a last ditch effort to try and keep from being shut out of homes completely. Hopefully it will work, but pizza has been on the menu for many independent stores for some time. For many it has worked well, but is it enough to keep a store and even an industry afloat? Empires have been built on pizza so it certainly generates revenue, but can MA use it to their advantage?

We have also seen a pretty big shift in “sessions” versus “pick-up”. In order to compete and to bring in customers you need to make the meals for them. Having customers come in to make the meals is fading away. They don’t want to do it and they’re not going to pay extra for you to make them. How do you keep this part of your business under control? Do you hire employees to help make the meals or do you handle it all alone? Can you sustain a 60 hour work week? And even though customers want you to make the meals now, in a month from now will they still go for it? Even owners who make meals for customers at no charge are having a hard time getting them in. Plus customers seem to want you to take the extra step and deliver the meals
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There have been some great ideas presented on things to try to keep things moving. Business drop off, smaller portions, the “Seniors” market and even marketing interns. So there are still things to try to bring in some business and depending on the area opportunities left to explore.

But to be honest I have to say that this year is starting off on much shakier ground than I had expected. The store closing are about where I thought they would be, in fact they’re a little lower than I would have guessed. Customers are hard to figure out but that’s nothing new. The rising foods costs, shaky economy and now the changes within Dream Dinners lead to me think things are much worse than they were a few months ago. Unfortunately I think things will slow down even faster than expected. Consumers will budget their money even more so than before and the trouble we saw last summer will probably start happening next month (March). People may splurge for Valentine’s Day but I don’t expect it will go beyond that. Every part of the food industry is seeing the effects of a slumping economy and growth is slow all over.

You can call me pessimistic or negative or a naysayer, but I’m just bringing to light some of the points we’ve already made. There were a lot of them and taken together it paints an interesting picture.

If you want to hear rosy stories about how everything’s going to be fine and there’s nothing to worry about go read Bert’s newsletter. Quite frankly, I see an iceberg ahead…

What does it take to get a customer back in?

I think this is one of the biggest challenges owners face right now. Have you tried something that worked really well? Do you have some thoughts or advice? Join in the discussion here:

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