When Zane Caplansky opened his first pop-up restaurant in Toronto in 2008, his goal was to do for deli what Starbucks has done for coffee. “I noticed the deli industry was disappearing in the city and saw an opening,” says Caplansky, whose great-grandmother used to make corned-beef sandwiches for the workers in the Spadina and Richmond garment district in Toronto. “We caught the imagination of the city, customers and investors, so we opened up on College Street (in Toronto) in 2009. I’m carrying on a tradition that’s been in my family for four generations.”
His timing couldn’t have be better, as Canadian consumers continued to gravitate toward sandwich options. In fact, according to Chicago-based Technomic Inc.’s 2016 Canadian Sandwich Consumer Trend Report, approximately 56 per cent of consumers eat deli sandwiches once a month or more — a three-per-cent increase over 2014. “On the independent level, we’ve seen a resurgence of the classic deli concept,” says Kristin Menas, associate editor, Canada & Adult Beverage at Technomic Inc. But while most people associate deli food with quaint mom-and-pop type operations, Menas says, in reality 68 per cent of diners typically purchase sandwiches from fast-food sandwich restaurants, compared to 31 per cent who frequent local independent sandwich shops.
And this, says Robert Carter of Toronto-based NPD Group, will be the traditional deli’s undoing. “The majority of the deli category are within the independent [restaurant] segment, which has been hit really hard in the last couple of years in terms of the number of unit closures,” says Carter, noting more independent Canadian restaurant units closed last year than ever before. “In order to be successful, restaurants need to expand beyond their core offerings — they can’t be known for one specific item — so the deli category is particularly challenged in this market.” Caplansky’s Deli is bucking the trend. “We just opened our first franchise at the beginning of May in Yorkville (in Toronto) and so far it’s been very successful. Now we’re looking at new locations and for franchisees across the country,” he says. Caplansky attributes the success of his brand to diners’ increased demand for transparency when it comes to their food. “People like to know where their food comes from,” he says. “Local is an important trend, as is handmade, homemade and authentic food. This is what we’re hearing from people. They want to know you can stand behind and explain all the details of the food they’re about to eat. They want to know the story behind the food — that kind of authenticity really does matter to people.” Between the restaurant, the catering business and the iconic blue food truck, Caplansky’s serves more than 10,000 people a week. “My business has been growing at an average of 22 per cent year-over-year for the past seven years. I’m really not feeling the sense of competition from the QSRs because what we do, we do so well.” For Doug Hibberd, owner of Sid’s Deli in Toronto and 30-year veteran of the deli industry, offering a niche menu is what makes his restaurant successful. “When people come in here, they want meat. Reubens are very big; and what I call a “Rachel”, which is like a Reuben, but uses pastrami instead of corned beef.”
FIGHTING FOR SANDWICH SHARE
As consumers clamour for healthier, leaner and increasingly plant-based menu choices, is there still a place for the traditional deli offerings?
“Only nine per cent of consumers say their favourite sandwich to eat away from home for lunch is a deli sandwich,” says Menas. “Comparatively, six per cent say deli sandwiches are their favourite type of sandwich to eat away from home for dinner. This is compared to other options such as burgers, subs/hoagies/heroes, chicken-breast sandwiches, wraps and breakfast sandwiches.”
Non-deli operators are now starting to steal share, with QSR and fast-casual chains eating into delis’ business and clientele. For example, Arby’s Canada now offers Reuben, Double Reuben and Double Montreal sandwiches — all made with Montreal smoked meat — and Montreal-based Presse Café has added a Montreal Wrap with smoked meat, sauerkraut and pickles in a rye tortilla to its menu.
“I don’t know if [traditional] deli food is perceived as being healthy,” says Carter. “The thing we know for sure is the innovation coming through a chain such as Tim Hortons — the number-1 sandwich player in Canada — where they’re doing a deli-style sandwich, even Subway with some of its deli-style subs — that is putting pressure on the independent delis.”
Caplansky says he’s not afraid of a little competition. “Competition’s great and I expect to compete and win,” he says. “When it comes down to it, if a customer is looking for a good homemade, handmade meal at an affordable price and it’s between me and McDonald’s, I bet I would win that customer.”
He says his customers still crave a “nice fatty smoked-meat sandwich on fresh rye bread” and notes the deli classic is by far his best seller. “It’s my signature dish. You can’t beat a handmade, homemade, fresh brisket smoked-meat sandwich.”
In fact, he’s banking on it as he moves the business forward into the franchising world. A Caplansky’s franchise will cost approximately $150,000 to $200,000 and concepts include simple sandwich counters as well as sit-down restaurant units. In terms of expansion, Caplansky has his sights set on Vancouver and Calgary, as well as additional Canadian cities with populations of more than 150,000 people.
For Hibberd, increased competition inspired him to rework Sid’s menu to appeal to a wider range of customers, without sacrificing its deli roots. “We’re near a lot of competition,” he says. “Druxy’s is close, Subway is always close, so what we did is adjust our sandwiches to cater to [customer demand] for smaller, more affordable portions — now we do a four ounce, six ounce or eight-ounce sandwich.” His top sellers include corned beef and pastrami — on rye, of course.
To be considered a “good deli” and stay ahead of the competition, Hibberd says what you serve with the sandwich is as important as the sandwich itself. “One thing people do to rank [a deli] is check out the pop fridge. If you don’t have black-cherry [pop] or Vernors, then don’t even bother opening your doors.”
Hibberd also added soups to his menu and made them available for take-out, allowing customers to take a bit of deli home with them. “Matzah ball soup is, by far, the best seller. That has never changed in the deli industry — it’s the one constant. We’re also the only deli in Toronto that makes flavoured latkes. The best-sellers are the potato and leek latkes.”
This type of menu diversification, says Carter, is what delis need to survive, citing Pickle Barrel as an interesting case of how expanded offerings can impact sales. According to F&H’s 2016 Top 100 Report, Pickle Barrel recorded $61.5 million in sales in 2015, up from an estimated $51.5 million in 2014. “It was more of a traditional deli in the beginning but it recognized the need to expand beyond a core offering in order to stay relevant and grow,” he says.
In February, the iconic Druxy’s Famous Deli chain announced the acquisition of Williams Fresh Café, resulting in a portfolio of 70 delis, cafés and kiosks across Ontario. “For the past year, we evaluated options to break into the growing fast-casual restaurant segment,” says Peter Druxerman, Druxy’s vice-president of Marketing. He says the deal will see Druxy’s sandwiches added to the Williams menu and Williams’ hot beverages and desserts served at Druxy’s locations — allowing the brand to cross-promote across all dayparts.
“It’s not possible in the Canadian market to have a singular focus,” Carter adds. “The deli operators such as Caplansky’s, who do a good job and have a loyal following — that’s what it really comes down to. Can they get loyal customers and can they get them to come back more often because they can’t compete [with bigger chains] when it comes to getting new customers in the door and they can’t compete on price.”
Marketing is another advantage large chains have over independent delis, Carter notes, but Caplansky says you don’t need to have a large marketing team to effectively promote your brand. He uses social media as an alternative to an expensive advertising budget. “It levels the playing field for small independent operators who don’t have the same money or muscle the other big chain restaurants do. I can reach hundreds of thousands of people by using social media and it allows me to talk directly to the customers, which is great because if there is an issue, I can handle it directly and right away. People throw around the word “brand” and to me that means the customer’s experience with your company.”
According to Carter, the deli segment is just too narrow, too specialized, to survive long-term. “The lunch daypart is challenged, more people skip lunch than any other meal. The growth in the market is breakfast and that’s taking away from lunch daypart. Everyone is trying to get the lunch consumer and it’s putting huge pressure on the deli segment. If I was an independent deli operator, I’d be opening early and offering breakfast.”
Hibberd is more optimistic. “There aren’t many delis left, period. But, I watch New York City and have found the trends that happen there, two years later they happen in Toronto. Right now in NYC there are delis everywhere — I figure the trend will get here in the next 18 months.”
Volume 49, Number 6