THE COMPLETE GUIDE TO IN-STORE FOOD PRODUCTION

How to Build a Profitable Culinary Department in Your Supermarket

By Fedor Sokiryansky

FOREWORD: THE STRATEGIC IMPERATIVE

In the modern food retail landscape, the culinary department is no longer a nice-to-have amenity—it is a strategic necessity. The supermarket of tomorrow will not merely be a place to buy groceries; it will be a destination for freshly prepared, high-quality food. This transformation is driven by fundamental shifts in consumer behavior: the decline of home cooking, the rise of eating out, and the growing demand for convenience without compromising quality.

This guide is the culmination of decades of experience in food retail and commercial kitchen operations. It is designed for retailers, entrepreneurs, and operations managers who understand that the culinary department is not a cost center but a profit center—a powerful tool for differentiation, customer loyalty, and margin enhancement. Whether you are opening your first in-store kitchen or optimizing an existing operation, the principles within these pages will provide the strategic foundation you need.

Let us begin.

PART ONE: THE STRATEGIC FOUNDATION

Why Do We Open Our Own Production?

The decision to establish in-house food production is not a casual one. It requires significant investment, operational expertise, and strategic commitment. But when done correctly, the returns are substantial.

Strategic Objective	Why It Matters
Enhancing Supermarket Attractiveness	A culinary department transforms a grocery store into a destination. Customers come for the food, and they stay for the shopping.
Increasing Visit Frequency	Fresh, prepared food encourages customers to visit more often—sometimes daily—increasing overall store traffic and cross-selling opportunities.
Processing Short-Dated Products	Smart retailers use their culinary departments to process products approaching their expiration dates, turning potential waste into valuable, high-margin prepared food.
Competitive Positioning and Customer Acquisition	In a crowded market, a superior culinary offering is a powerful differentiator. It can attract customers who might otherwise shop elsewhere.
Increasing Share of High-Margin Items	Prepared food typically carries significantly higher margins than raw grocery items. A well-executed culinary department can dramatically improve overall store profitability.
Honoring Food Retail Traditions	The in-store bakery, the hot food counter, the salad bar—these are not gimmicks. They are the heart and soul of what it means to be a full-service food retailer.

Why Do Customers Buy from Culinary Departments?

Understanding customer motivation is the foundation of a successful culinary strategy. Why do consumers choose prepared food over cooking at home?

Customer Motivation	Insight
No Time/Energy/Desire to Cook at Home	The fundamental driver. Modern lifestyles are busy, and convenience is increasingly valued over the ritual of home cooking.
Alternative to Eating Out	Supermarket prepared food offers a middle ground between cooking at home and eating at a restaurant. It is typically more affordable and more convenient than dining out.
Gastronomic Motivation	Sometimes, the food is simply better than what the customer can make at home. Quality and taste matter.
Satisfying Immediate Hunger	The impulse purchase—a hot meal when you are hungry—is a powerful driver of sales.
Treats for Children and Adults	Prepared food is often purchased as a treat, a small indulgence that brightens the day.
Alcohol Accompaniment / Party Food	Customers often buy prepared food for social occasions.
Psycho-Emotional Impulse	Sometimes, it is simply an unplanned purchase driven by emotion.

The Challenges of Growth: Managerial "Growing Pains"

As retailers expand their culinary operations, they often encounter significant challenges. Understanding these challenges is the first step to overcoming them.

Challenge	Description
Operational Complexity	Running a kitchen is fundamentally different from running a grocery store. It requires specialized skills, different supply chains, and more complex labor management.
Quality Consistency	Maintaining consistent quality across multiple locations is extraordinarily difficult. It requires standardized recipes, rigorous training, and robust quality control systems.
Labor Management	Culinary operations are labor-intensive. Finding, training, and retaining skilled staff is a constant challenge.
Waste Management	Fresh food production inevitably generates waste. Managing this waste—and turning it into profit—is a key skill.
Regulatory Compliance	Food production is subject to extensive regulations. Navigating these regulations requires expertise and diligence.
Supply Chain Complexity	Fresh ingredients require more complex supply chains than dry grocery goods.
Capital Intensity	Commercial kitchens require significant capital investment.

PART TWO: THE PLANNING FRAMEWORK

Criteria for Assortment Planning

When planning your culinary assortment, you must consider several types of criteria. Neglecting any of these dimensions will lead to suboptimal results.

1. FINANCIAL-INVESTMENT CRITERION

Consideration	Insight
Investment Capacity	You must be prepared to invest a specific sum "X" in your own production.
Production Level and Investment	The level of production is directly proportional to the volume of investment.
ROI and Investment	The degree of satisfaction with results (ROI) is directly linked to the volume of investment.
Scalability Mindset	Many retailers are inclined to replicate successful results rather than optimize their production development strategy. This is a common but limiting approach.

Key Insight: The relationship between investment and returns in culinary operations is not linear. There is a minimum threshold of investment required to achieve profitability. Below this threshold, you are essentially wasting money.

2. SPATIAL CRITERION

Consideration	Insight
Using Existing Space	The most common approach: building production on available space.
The Danger of Non-Systematic Assortment	When space dictates assortment, the result is often a non-systematic, unfocused product offering.
Absence of a Development Strategy	Without strategic planning, the lack of space becomes an excuse for stagnation.

Key Insight: Your production should be designed from the needs of your customers, not from the constraints of your available space. If you start with space, you will never achieve excellence. If you start with customer needs, you will find the space.

3. MARKET CRITERION

Consideration	Insight
Copying Successful Formats	The lazy approach: simply copying what works elsewhere.
Copying Strategies Without Adaptation	Strategies that work in one market may fail in another due to regional differences.
Copying Pricing Strategy	Pricing must reflect local costs and competitive dynamics.
Copying Assortment	Assortment must be tailored to local tastes and preferences.
Hiring Competitors' Staff	Hiring away competitors' staff is a common but risky strategy.
Success Only with Good Locations	If your success depends entirely on location, you have not built a sustainable business.

Key Insight: Copying is a recipe for mediocrity. Sustainable success requires originality, adaptation, and a deep understanding of your specific market.

4. STRATEGIC CRITERION (POSITIONING)

Consideration	Insight
Systematic Approach to Assortment	Assortment must be designed strategically, not haphazardly.
Systematic Approach to Pricing	Pricing must be strategic, not reactive.
Designing Production from Needs	Production must be designed from customer needs, not from available space and investment.
Resource Conservation	Efficiency in energy, water, and materials is not just good for the environment—it is good for the bottom line.
Innovation	Automation, ergonomics, cost reduction, and minimal staffing are essential for long-term success.
Market Formation and Demand Management	The most successful retailers do not just respond to demand—they shape it.

What Do We Plan to Earn From?

Strategy	Description
Competitive Substitution	Replacing competitors' products with your own, higher-margin versions.
Positioning (Discount) Strategy	Using prepared food to position your store as a value leader.
Cross-Margin Category Pricing Strategy	Balancing margins across categories to optimize overall profitability.
Location and Foot Traffic Strategy	Leveraging prime locations to drive prepared food sales.
Margin Enhancement Strategy	Systematically increasing margins through operational excellence.

PART THREE: RETAIL FORMATS AND THEIR CULINARY OFFERINGS

Understanding the Retail Landscape

The culinary offerings of a supermarket are not determined by whim—they are determined by the store's format, its location, its target customer, and its competitive positioning. There is no one-size-fits-all approach. The key is to align your culinary assortment with the strategic purpose of your store.

SUPERMARKETS

Characteristic	Description
Trading Area	600 to 2,000 square meters
Assortment Size	4,000 to 20,000 items (typically 10,000-15,000, 80% food products)
Service Quality	High
Margin	Approximately 30%
Target Customer	Middle segment
Average Check	€7-10
Location	Residential areas, densely populated urban territories
Typical Examples	Major national and international supermarket chains
Reason for Visit	Daily necessities: perishables from dairy to deli, oils, groceries, beverages, baked goods
Visit Motivation	Search for specific brands, culinary products, loyalty programs, quality goods
Culinary Assortment	Up to 350 premium quality items at mid-to-high prices

Strategic Insight for Supermarkets:

Element	Strategy
Focus	Quality over quantity. Your culinary assortment should differentiate you from competitors.
Pricing	Mid-to-high pricing signals quality and supports the premium positioning of the store.
Breadth	Up to 350 items allows for a comprehensive offering without overwhelming operations.

HYPERMARKETS

Characteristic	Description
Trading Area	5,000 to 20,000 square meters
Assortment Size	30,000 to 60,000 items (60-65% food products)
Service Quality	Lower—customer is self-directed
Margin	Lower
Target Customer	Value-conscious shoppers
Location	Periphery
Reason for Visit	Daily necessities for several days, a week, or even a month
Visit Motivation	Price, response to promotional offers
Culinary Assortment	Up to 700 items of low-to-medium quality at low prices

Strategic Insight for Hypermarkets:

Element	Strategy
Focus	Volume over quality. Your culinary assortment should support the value positioning of the store.
Pricing	Low prices signal value and drive high volume sales.
Breadth	Up to 700 items allows for a comprehensive offering that serves the broad customer base.

CASH & CARRY

Characteristic	Description
Culinary Offering	Generally absent. Exceptions exist (e.g., Lenta), but these are rare.
Recommendation	Do not create a culinary department. Focus on private label and contract manufacturing.

Strategic Insight for Cash & Carry:

Element	Strategy
Focus	Private label and contract manufacturing, not in-store production.
Rationale	The Cash & Carry model is based on volume and low prices. In-store culinary production is not aligned with this model.

DISCOUNTERS (Hard and Soft)

Characteristic	Description
Trading Area	400 to 1,000 square meters
Assortment Size	1,000 to 3,000 items (best-sellers only)
Service Quality	Lower
Margin	10-15%
Target Customer	Bottom/mass segment; price is the decisive factor
Average Check	€2-5
Location	Semi-peripheral and peripheral urban zones
Reason for Visit	Daily necessities for one or several days
Visit Motivation	Price, proximity to home
Culinary Assortment	Outsourced items; occasionally private label. Low price category. In-house production is not practiced.

Strategic Insight for Discounters:

Element	Strategy
Focus	Cost minimization. In-house production is a poor fit for this model.
Approach	Outsourced or private label products at the lowest possible price.

NEIGHBORHOOD STORES

Characteristic	Description
Trading Area	50 to 400 square meters
Service	Convenient hours (often 24/7); location is within walking distance
Location	Within 400-800 meters of customers; accessible within 10 minutes
Target	2,000-3,000 families making purchases 2-7 times per week
Assortment Size	4,000 to 7,000 items (predominantly food)
Pricing	Mid-range; relatively high margin
Average Check	€4-5
Reason for Visit	Daily necessities; "filler" purchases
Visit Motivation	Proximity to home, moderate price
Culinary Assortment	100% pre-packaged products from an outsourcer or from a central production facility

Strategic Insight for Neighborhood Stores:

Element	Strategy
Focus	Convenience and filling household gaps.
Approach	Pre-packaged products that are easy to display, purchase, and consume.

PREMIUM AND SUPER-PREMIUM GASTRONOMES

Characteristic	Description
Trading Area	500 to 1,000 square meters (comparable to small supermarket)
Target Customer	Affluent consumers
Pricing	40-50% above average (some items accessible to mid-income customers)
Assortment Size	6,000 to 8,000 items (focus on quality)
Location	Central areas or near elite residential developments
Reason for Visit	Daily necessities
Visit Motivation	Unique brands, premium quality, wide assortment of premium products
Culinary Assortment	From 400 items, dominated by delicatessen items

Format	Margin	Average Check	Focus
Gastronomic Boutique	50-200%	€40-50	Exclusive, unique products
Premium Supermarket	High, but more democratic	€20-25	Wide, high-quality assortment

Strategic Insight for Premium Gastronomes:

Element	Strategy
Focus	Exclusivity and exceptional quality.
Approach	Your culinary offering must justify the premium price. This requires exceptional ingredients, unique recipes, and outstanding presentation.

PART FOUR: CONCLUSIONS AND BEST PRACTICES

Conclusions by Format

PRINCIPLE 1: ALIGN ASSORTMENT WITH REASON AND MOTIVATION FOR VISIT

Element	Example
Reason for Visit	Bread from the in-store bakery
Motivation for Visit	Curd cheese bun (unique recipe and quality)
Correlation	80% of assortment serves the reason for visit; 20% stimulates the motivation to visit

Key Insight: The bulk of your culinary assortment should serve the primary reason why customers visit your store. The remaining 20% should be designed to enhance the overall experience and encourage repeat visits.

PRINCIPLE 2: ALIGN ASSORTMENT WITH FORMAT AND SPACE

Element	Insight
Assortment Structure and Volume	Depend on the store format and its available trading/production space
Breadth vs. Depth	The balance between variety and depth must be calibrated to the format

Key Insight: Hypermarkets require broad assortments; neighborhood stores require focused assortments. Trying to do the opposite is a recipe for operational inefficiency and poor customer experience.

PRINCIPLE 3: ALIGN ASSORTMENT WITH AVERAGE CHECK AND THROUGHPUT

Element	Insight
Assortment	Depends on the average check and PPH (Person-Per-Hour) throughput of the store

Key Insight: A high-volume, low-check store cannot support a premium culinary operation. And a high-check store cannot thrive with a low-quality culinary offering.

PRINCIPLE 4: ALIGN ASSORTMENT WITH NETWORK DEVELOPMENT STRATEGY

Element	Insight
Assortment	Depends on the network development strategy

Key Insight: Your culinary offering must be scalable. If your network will expand to 50 locations, your culinary model must support this growth.

PRINCIPLE 5: ALIGN ASSORTMENT WITH CENTRALIZED PRODUCTION CAPACITY

Element	Insight
Assortment	Depends on the availability of a factory-kitchen or central preparation facilities

Key Insight: Centralized production is the key to scale, consistency, and cost efficiency. If you are planning a network, you must plan for central production.

PRINCIPLE 6: ALIGN ASSORTMENT WITH LABOR COSTS AND OPERATING COSTS

Element	Insight
Assortment	Depends on regional labor costs and other fixed and variable costs

Key Insight: Labor costs vary dramatically by region. A labor-intensive assortment that works in a low-cost region may be uneconomical in a high-cost region.

Criteria for Assortment Selection

When making specific decisions about your culinary assortment, you must evaluate each item against a rigorous set of criteria.

CRITERION 1: RELEVANCE AND POPULARITY

Question	Consideration
Is this product relevant and popular among the local population?	It must be "understandable" and desired by your target customers.

Key Insight: Do not try to force unfamiliar products on your customers. Work with what is known and loved, and then innovate from a position of strength.

CRITERION 2: PLANNED MARGIN COEFFICIENT

Question	Consideration
What is the planned margin coefficient for this product?	Price, cost, and margin must be aligned with the store's strategic positioning.

Key Insight: Know your margins. Every item should contribute to your overall financial objectives.

CRITERION 3: MAXIMUM TECHNOLOGICAL EFFICIENCY

Question	Consideration
Is this product as technologically efficient as possible?	You must minimize the labor and equipment required to produce each item.

Key Insight: Complexity is the enemy of profitability. Simplify your production processes wherever possible.

CRITERION 4: MAXIMUM OUTPUT PER LABOR HOUR

Question	Consideration
What is the maximum output per worker per hour for this product?	You must maximize productivity.

Key Insight: Labor is typically your largest operating cost. Your products must be designed for efficient production.

CRITERION 5: STORAGE TECHNOLOGY

Question	Consideration
What is the storage technology for the semi-finished product?	4 days to 6 months of shelf life (vacuum, modified atmosphere, or freezing)

Key Insight: Longer shelf life equals less waste and greater flexibility in production scheduling.

CRITERION 6: PIECE-RATE PAYMENT FEASIBILITY

Question	Consideration
Is it possible to implement piece-rate payment for this product?	Paying by the kilogram or by the item creates alignment between productivity and compensation.

Key Insight: When workers are paid by output, they are motivated to be efficient.

CRITERION 7: ENERGY EFFICIENCY

Question	Consideration
Is the production process energy-efficient?	Energy savings are a direct contribution to profitability.

Key Insight: Assess the energy consumption of every step of your production process.

CRITERION 8: ALIGNMENT WITH THROUGHPUT

Question	Consideration
Is the maximum production volume aligned with the store's PPH throughput?	You must not overproduce or underproduce relative to demand.

Key Insight: Production must be precisely matched to consumer demand. Any mismatch results in waste or lost sales.

CRITERION 9: INGREDIENT CONVERSION

Question	Consideration
How can you convert waste into valuable products?	For example, stale bread becomes breadcrumbs; breadcrumbs become breading for other products.

Key Insight: Waste is not inevitable—it is a failure of imagination. Ingenious conversion strategies can turn waste into profit.

CRITERION 10: RAW MATERIAL MATRIX RATIO

Question	Consideration
What is the raw material matrix ratio for this product?	It must be at least 3.

Key Insight: A raw material matrix ratio of at least 3 means that every euro of raw material cost generates at least 3 euros of retail value. This is the foundation of a profitable culinary operation.

PART FIVE: THE FUTURE OF IN-STORE FOOD PRODUCTION

Emerging Trends and Strategic Imperatives

TREND 1: THE RISE OF THE FOOD DESTINATION

The supermarket is evolving from a place to buy groceries to a place to eat. The culinary department is becoming the primary reason customers choose one store over another. This trend will only accelerate as consumers increasingly value convenience and quality.

TREND 2: THE INTEGRATION OF TECHNOLOGY

Technology	Application
Automation	Reducing labor costs and improving consistency
Ergonomics	Improving worker efficiency and reducing injury
Data Analytics	Optimizing production based on real-time demand data
Online Ordering	Expanding your market through delivery and click-and-collect

TREND 3: THE FOCUS ON SUSTAINABILITY

Approach	Benefit
Waste Reduction	Reducing waste saves money and improves environmental impact
Local Sourcing	Reduces transport costs and supports local communities
Energy Efficiency	Reduces operating costs and environmental impact

TREND 4: THE PERSONALIZATION OF FOOD

Approach	Benefit
Customized Meals	Meeting the demand for personalized, made-to-order food
Dietary Specifics	Catering to gluten-free, vegan, and other dietary preferences

FINAL WORD: THE ART OF RETAIL CUISINE

The culinary department is not a cost center—it is a profit center. It is not a necessary evil—it is a strategic asset. And it is not just about food—it is about building a relationship with your customers that goes beyond the transaction.

To succeed in in-store food production, you must be systematic, strategic, and relentless in your pursuit of excellence.

THE FIVE PRINCIPLES OF SUCCESS:

Principle	Action
Strategy First	Design your culinary operation from your strategy, not from your constraints.
Quality Always	Never compromise on quality. It is the foundation of customer loyalty.
Efficiency Forever	Continuously optimize your operations to reduce costs and improve margins.
Data-Driven	Use data to guide your decisions, not intuition or tradition.
Customer-Centric	Always design your offerings around what your customers want and need.

Remember:

• Customers buy prepared food because it is convenient, not because it is better. Your job is to make it both convenient and excellent.

• Margins in prepared food are significantly higher than in raw groceries. This is where you build your profitability.

• Consistency is the hallmark of a professional operation. Customers should get the same excellent product every time.

• Waste is the enemy of profitability. Systematically eliminate it.

• Innovation is essential. The market is constantly evolving, and so must you.

"The culinary department is not just about food—it is about building a relationship with your customers that goes beyond the transaction."

— Fedor Sokiryansky