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U.S. Foodservice Industry Overview
November 27th 2008
1
Topics
Foodservice v Retail Performance
Foodservice Segments
Foodservice Consumer Trends
2008
Outlook
2
1
Technomic Inc.
ü Source of presentation data
ü Leading US strategic consulting & research firm
ü Particular expertise in US foodservice
3
Foodservice Share of Industry Sales Grown*
Foodservice
$207B
45%
Retail
$258B
55%
1987 = $465B
*Retail
Foodservice
$350B
49%
Retail
$362B
51%
1997 = $712B
Foodservice
$541B
51%
Retail
$520B
49%
2007 = $1,060B
sales equivalent, excludes sales of alcoholic beverages
Source: Technomic
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2
Retail vs. Foodservice
Factor
Retail
Units
31,000
supermarkets
Segmentation
Syndicated Data
Some
Foodservice
Close to 1 million
18 major segments;
multiple subsegments
Nielsen, IRI
None
Private Label Share
15 - 20%
Around 35%
Product Selection
Consumer
Operator
Source: Technomic
5
Definitions
Segment
Definition
Limited Service (LSR)
No table service
Fast service orientation
“Buy before you eat” system
Quick Casual (QC)
Sub-segment of LSR
Freshly prepared, wholesome quality
Check average: $6-9
Table service
Full Service (FSR) Midscale Limited/no alcohol service
Check average: $6-10
FSR Casual Dining
Lunch, dinner focus
Table service. Full bar service
Check average: $10-25
FSR Fine Dining
Dinner emphasis, white tablecloth
Main Course $20+
Source: Technomic
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3
Leading LSR Growth Segments
Sales
$B
2007 Growth
15.6%
Beverage
Bakery
Café
Mexican
Sandwich
13.0%
6.3%
5.7%
Examples
$15.4
$4.1
$11.8
$6.9
7
Source: Technomic
Full Service Restaurants (FSR)
Establishments with a broad menu
Table, counter &/or booth and a waitstaff
Typically open for multiple dayparts, and often
serve beer, wine and liquor
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4
Casual Dining Dominates Full Service
2006 Sales: $193B*
* Includes alcohol
White
Tablecloth
$8B
4%
Casual Dining
$129B
67%
Midscale
$56B
29%
Source: Technomic
9
Leading FSR Segments
2007 Growth
Italian
Seafood
Mexican
Varied
Menu
4.0%
3.4%
1.5%
4.1%
Source: Technomic
Sales
$B
Examples
$14.8
$9.4
$6.4
Independents
Independents
$42.7
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5
Consumer Mega-Trends
and Operator Responses
6 Consumer Mega-Trends
Demographic
Behavioral
1. Multi-Generational
Demands
4. Convenience
2. The Minority Influence
5. Balance
3. Diverging Incomes
6. Customisation
Source: Technomic
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6
Younger Consumer Dynamics
Heavy users of LSR
Greater exposure to “ordering in” and “chain
restaurants” when growing up
Restaurants often viewed as “third place” location,
for socialising
Technology often incorporated into foodservice
experiences
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Older Consumer Dynamics
Higher per-capita expenditures on FAFH
More than just food important during the
restaurant experience
Consuming less “kid-friendly” foods
Increasing importance of healthier foods
More “traditional” tastes
Seek points and rewards (value emphasis)
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7
Minority Growth Significant
Hispanics: 18%
population by 2020
81% of the population
increase from 2000 to
2020 will be from
minority groups
% Population Growth
Through 2020
Asian
68%
Hispanic
68%
African
American
White
26%
5%
Source: U.S. Census Bureau
15
Half FAFH Spending Comes from Highest
Income Group
Share by Income Levels (000)
50%
34%
29%
24%
23%
14% 16%
10%
<$20
$20-49
Share of Households
Source: U.S. Census Bureau
$50-69
$70+
Share of FAFH Spending
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8
Value Has Multiple Meanings
Lower Income
Income
Lower
Groups
Groups
Higher
Higher Income
Income
Groups
Groups
Low Price
Price
Low
Dining
Dining
Experience
Experience
17
Operator Strategies:
Addressing Consumer Convenience Demands
More locations
Longer hours
Greater menu variety
(choice)
Ease of ordering,
pickup for takeout
Improved physical
aesthetics
Aware of time limits
Better employee
training
18
9
Balance
Consumers are constantly weighing the
advantages, disadvantages of conflicting
alternatives in their daily life
§ Work and family
§ Familiar vs.
adventurous foods
§ Health vs. indulgence
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Example: Enabling Balance
Operators increase the
“portability” of many
foods, allowing
customers to multi-task
§ Taco Bell introduces the
“Crunchwrap Supreme”
§ Product made for
maximum portability
§ Dashboard dining
20
10
Operator Strategies:
Addressing Health & Wellness
Operators focus on consumers’ health &
wellness “Hot Buttons”
§
§
§
§
§
§
§
Fresh
Fats
Organic
Natural
Functional foods
Nutrients/supplements
Choice
21
Operator Strategies:
Addressing Customisation Desires
Provide consumers with opportunities to put
“personal touches” on menu items
Employee training focusing on relating to
customers at the “individual” level
Increased emphasis on CRM (Customer
Relationship Management)
§ Local store marketing
§ E-marketing
§ Frequent diner/loyalty programs
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11
Changing Landscape
2008: What’s Happening?
LSR
FSR
Slowing unit expansion
Slow/no unit expansion
Focus on unit economics
Focus on unit economics
More lower-priced options
Menu price stabilisation
Snack occasion, breakfast, dinner
expansion
More bundling
Late night meals (4th meal)
Cross-segment competition
Promotions
Takeout
24
12
Outlook for 2009
Continue to be very challenging
Consumer anxiety slow to dissipate
Fast food / casual dining outlets doing best
Aggressive price promotions
Casualties?
25
Thank You
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