FOOD SERVICE
• Food service:
– Dispensing prepared meals and snacks
for on-premise immediate consumption
FOOD SERVICE
Value added by the food and fiber system, 2001
Value added to GDP
($ billion)
Share of GDP
(%)
Farming
73.8
0.7
Input industries
422.8
4.2
Manufacturing
Food processing
168.3
1.7
Nonfoods
47.1
0.5
Distribution
Transportation
41.3
0.4
Wholesaling and retailing
334.4
3.3
Food service
156.9
1.6
1,244.6
12.3
Total food and fiber system
FOOD SERVICE
• Food service
– Commercial establishments
• For-profit establishments that prepare, serve,
and sell meals and snacks to the public
– Noncommercial establishments
• Meals and snacks prepared and served as
support of the primary purpose of the
establishment
1
FOOD SERVICE
U.S. Foodservice Sales, 2000
Noncom m ercial
18%
$64 billion
$294 billion
Com m ercial
82%
FOOD SERVICE
• Commercial establishments
– Eating places
• Restaurants, lunchrooms, fast-food outlets, cafeterias
– Drinking places
• Bars, beer gardens, taverns, night clubs, saloons
– Lodging places
• Foodservice operations in hotels, motels, etc.
– Recreation/entertainment
• Foodservice operations in theaters, bowling alleys, race
tracks and stadiums, amusement parks, etc.
– Retail hosts
• Foodservice operations in retail stores, drugstores, etc.
FOOD SERVICE
U.S. Commercial Foodservice Sales, 2000
Recreation and
entertainm ent
Other
3%
4%
Lodging places
4%
Retail hosts
7%
Fast-food outlets
43%
Restaurants and
lunchroom s
39%
Total Commercial Foodservice Sales: $294 billion
2
FOOD SERVICE
• Noncommercial establishments
– Schools
– Colleges
– Hospitals
– Extended care facilities
– Plants and offices
– Correctional facilities
– Military installations
– Transportation
• Airplanes, cruise ships, trains
FOOD SERVICE
U.S. Non-Commercial Foodservice Sales, 2000
M i l it ar y
3%
V end i ng
3%
O t her
7%
C hi ld d ay car e
4%
Ho sp it al s
6%
Ed ucat i o n
39%
T r ansp o r t at io n
8%
Pl ant s & o f f i ce
b ui l d i ng s
9%
Ext end ed car e
f aci l it i es
10 %
C o r r ect i o nal f aci li t i es
11%
Total Commercial Foodservice Sales: $64 billion
FOOD SERVICE
• Trends:
– Increased share of consumer food expenditures
away from home vs. at home
Share of U.S. food expenditures for food at home and away from
home
Share of U.S. Food
Expenditures
70%
60%
50%
40%
At home
30%
Away from home
20%
10%
0%
1980
1985
1990
1995
2000
Year
3
FOOD SERVICE
• Trends:
– Increased share of consumer food
expenditures away from home vs. at home
• Workforce composition
• Higher income
– Smaller share of income spent on food
Food Expenditures as a
Share of Disposable Money
Income
Food expenditures as a share of disposable money income
18%
16%
14%
12%
10%
8%
6%
4%
2%
0%
1980
1985
1990
1995
2000
Year
FOOD SERVICE
• Trends:
– Increased share of consumer food
expenditures away from home vs. at
home
– Stable share of full-service restaurants,
increasing share of fast-food outlets,
decreasing share of all other foodservice
outlets
FOOD SERVICE
Share of away-from-home food expenditures by type of outlet
45%
40%
35%
30%
25%
20%
15%
10%
5%
0%
1980
Full-Service
Restaurants
Fast-Food Outlets
All other Foodservice
Establishments
1985
1990
1995
2000
Year
4
FOOD SERVICE
• Trends:
– Increased share of consumer food
expenditures away from home vs. at
home
– Stable share of full-service restaurants,
increasing share of fast-food outlets,
decreasing share of all other foodservice
outlets
– Increasing competition from nontraditional outlets
FOOD SERVICE
FOOD SERVICE
• Trends:
– Increased share of consumer food expenditures
away from home vs. at home
– Stable share of full-service restaurants,
increasing share of fast-food outlets, decreasing
share of all other foodservice outlets
– Increasing competition from non-traditional
outlets
– Mergers and acquisitions
• 452 mergers and acquisitions between 1998 and 2002
5
FOOD SERVICE
• Trends:
– Increased share of consumer food expenditures
away from home vs. at home
– Stable share of full-service restaurants,
increasing share of fast-food outlets, decreasing
share of all other foodservice outlets
– Increasing competition from non-traditional
outlets
– Mergers and acquisitions
– Concentration
FOOD SERVICE
Share of Full-Service
Restaurant Sales
Share of sales by largest 4, 8, and 20 U.S. full-service restaurant
firms
18%
16%
14%
12%
10%
8%
6%
4%
2%
0%
1997
Largest 4
Largest 8
Largest 20
1998
1999
2000
2001
2002
Year
FOOD SERVICE
Share of Fast-Food Sales
Share of sales by largest 4, 8, and 20 U.S. fast-food firms
20%
18%
16%
14%
12%
10%
8%
6%
4%
2%
0%
1997
Largest 4
Largest 8
Largest 20
1998
1999
2000
2001
2002
Year
6
FOOD SERVICE
The 25 Largest Chain Brands in the U.S., 2002
Rank
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
Chain
McDonald's
Burger King
Wendy's
Subway
Taco Bell
Pizza Hut
KFC
Applebee's
Starbucks
Dominos Pizza
Dunkin' Donuts
Arby's
Dairy Queen
Red Lobster
Outback Steakhouse
Jack in the Box
Sonic Drive-Ins
Chili's Grill & Bar
Denny's
T.G.I. Fridays
The Olive Garden
Papa John's
Hardee's
International House
of Pancakes
Cracker Barrel
Sales
($ billion)
20.31
8.30
6.82
5.20
5.18
5.10
4.86
3.18
2.94
2.92
2.70
2.70
2.48
2.30
2.27
2.25
2.24
2.16
2.13
2.05
1.92
1.75
1.70
1.45
1.43
Units
13,491
8,029
5,549
14,522
6,165
7,599
5,472
1,451
4,464
4,811
4,010
3,250
4,882
639
692
1,875
2,573
778
1,612
522
501
2,585
2,073
#1 sandwich
#1 pizza
#1 chicken
#1 dinner house rest.
#1 family restaurant
1,091
466
FOOD SERVICE
FOOD SERVICE
• Trends:
– Increased share of consumer food expenditures
away from home vs. at home
– Stable share of full-service restaurants,
increasing share of fast-food outlets, decreasing
share of all other foodservice outlets
– Increasing competition from non-traditional
outlets
– Mergers and acquisitions
– Concentration
– Globalization
7
FOOD SERVICE
FOOD SERVICE
FOOD SERVICE
• Trends:
– Increased share of consumer food expenditures
away from home vs. at home
– Stable share of full-service restaurants,
increasing share of fast-food outlets, decreasing
share of all other foodservice outlets
– Increasing competition from non-traditional
outlets
– Mergers and acquisitions
– Concentration
– Globalization
– Contract management in non-commercial food
service
8
FOOD SERVICE
• Contract management in noncommercial food service
– Self-operated noncommercial outlets
converting to contract management
– Contract management is highly
concentrated
• 3 companies control 40% of the U.S. market:
– Compass
– Sodexho
– Aramark
FOOD MARKETS
• Other trends in the food marketing
channel:
– Expansion of private labels
Share of private-label sales in the U.S.
Share of Private-Label
Sales
20%
15%
10%
5%
0%
1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000
Year
FOOD MARKETS
• Expansion of private labels
– Improving consumer perception of private
label
– Diminishing overall consumer brand
loyalty
– Focus on ‘value’ products avoiding
marketing costs associated with national
brands
– Increasing market power of retailers vs.
manufacturers
9
FOOD MARKETS
• Other trends in the food marketing
channel:
– Expansion of private labels
– Products with “new” attributes
FOOD MARKETS
• Products with “new” attributes
– Health, diet-oriented
– Natural
• Laura’s Lean http://www.laurasleanbeef.com/?source=goto
• Coleman’s Natural Meats http://www.colemanmeats.com/
– Organic
• http://www.ers.usda.gov/publications/agoutlook/apr2000/ao270d.pdf
– Welfare friendly
• Niman Ranch http://www.nimanranch.com/
– Farmer-friendly
• Good Natured Family Farms http://www.goodnatured.net/
– Environmentally-friendly
– Ethical
FOOD MARKETS
• Other trends in the food marketing
channel:
– Expansion of private labels
– Products with “new” attributes
– Food safety
10
FOOD MARKETS
• Food safety
– Food Processing's 2003 Manufacturing
Survey of thousands of industry
professionals:
• Food safety far outweighs any other concern
– Food safety was the most crucial issue for 50% of
respondents
– 64% of respondents said their company has either
established new food safety and sanitation initiatives or
is planning to do so
11