FAST FOOD INDUSTRY
IN THE U.S.
Meredith Drummond, Jess Krause, Sofia
Steinberger, & Tory Trippe
AGENDA
1.
2.
3.
4.
Introduction
Industry Analysis
Advertising Strategies
Analysis and Recommendations
WHY FAST FOOD?
• Study impacts of health awareness trends
• Change from “fast” and “low price” to higher quality food due
to consumer demands
• How fast food industry advertising has changed to adapt to
trends
INDUSTRY ANALYSIS
BACKGROUND: PRODUCTS & CONSUMERS
Industry Definition: Restaurants where quick service food products
are paid for before consumption.
Distribution Chain:
Consume
off Site
Delivery
Service
Restaurant
Direct to
Consumer
Consume
on Site
BACKGROUND: PRODUCTS & CONSUMERS
Product & Services Segmentation in the Fast Food Restaurant
Industry 2015
IBISWorld.com
Other, 7%
Mexican,
8%
Pizza & Pasta,
9%
Burgers,
42%
Chicken,
10%
Asian, 10%
Sandwiches,
14%
REVENUE
Revenue in the Fast Food Restaurant Industry 2006-2015
IBISWorld.com
210,000
Revenue ($ millions)
205,000
200,000
Dip due to
recession
195,000
190,000
185,000
180,000
175,000
170,000
Revenue Growth
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
1.6%
0.2%
2.6%
-0.4%
2.9%
1.3%
0.7%
0.8%
2.0%
1.4%
CONSUMER SPENDING
Consumer Spending in the Fast Food Industry 2006-2015
IBISWorld.com
Consumer Spending ($ billions)
11,500
11,000
10,500
Dip due to
recession
10,000
9,500
9,000
Consumer
Spending Growth
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
3.0%
2.2%
-0.4%
-1.6%
1.9%
2.3%
1.8%
2.4%
2.0%
2.6%
EMPLOYMENT
Employment in the Fast Food Restaurant Industry 2006-2015
IBISWorld.com
3,750,000
Employment (Units)
3,700,000
Dip due to
recession
3,650,000
3,600,000
3,550,000
3,500,000
3,450,000
3,400,000
Employment
Growth
2006
2007
2008
2009
2010
3.0%
0.6%
0.9%
-2.6%
-1.8%
2011
2.1%
2012
0.9%
2013
0.9%
2014
0.9%
2015
0.7%
CONCENTRATION
Industry concentration:
Low, increasing
Fast Food Marketshare
IBISWorld.com
McDonald's
17%
Number of firms in the
industry:
4,562
Yum!
Brand
s Inc
11%
Other
61%
Subway
7%
Four Firm Concentration
Ratio
Wendy's
Company
4%
36.2
Sources: IBISWorld.com, Hoovers Online
INDUSTRY COMPETITION
Degree of barriers to
entry:
low, increasing
Degree of rivalry:
high, increasing
Reasons for low barriers:
Franchising component
Wide array of food concepts
Primary means of
differentiation:
•
•
•
•
•
Price
Quality of food
Location/Convenience
Style of food
Service/Ambience
Source: IBISWorld.com
INDUSTRY PERFORMANCE
Description
2015 Outlook
Consumer
Spending
Total amount spent by
Americans on services and
new goods and net
purchases of used goods
Expected to increase
Healthy
Eating Index
Percentage of a
recommended diet that an
average American
consumes
Expected to slowly
increase
Nominal prices received by
farmers for US agricultural
products; indicator of
prices restaurants can
expect to pay
Expected to decrease
Level of confidence
consumers have in the
economy
Expected to increase
Agricultural
Price Index
Consumer
Confidence
Index
Less
Important
Impact
Relative
Importance
More
Important
INDUSTRY ORGANIZATION
Supply Chain:
Supplier
Supplier
Distributor
Restaurant
Consumer
Supplier
Source: Duke University
MAJOR PLAYERS
Company
Market Share
Strategies
Financial Performance for
2015 in United States
Focused on modernizing the format of
its stores
More aggressive push into breakfast
segment
Revenue expected to increase
3.7%
10.8%
Opens multi-branded restaurants in
high-traffic areas
Revenue expected to
decrease by 12.4%
6.7%
Shift to Five Dollar Footlong
promotion from “Eat Fresh” campaign
Revenue expected to increase
5.6%
4.4%
Strategic price increases
Shift in sales mix towards more
premium products
Revenue expected to increase
2%
17%
Source: IBISWorld.com
BACKGROUND: TECHNOLOGY
● Level of technology change: Medium
● Drivers: Reduce labor and food costs
● Types of technology:
○
○
○
○
Wireless technology ordering systems, mobile technology
Point-of-sale systems
Just-in-time scheduling
Social media
REGULATION AND ROLE OF GOVERNMENT
● Level of regulation: Medium, increasing
● Regulations around 4 main issues:
o
o
o
o
Food safety and standards
Labor relations
Smoking bans
Franchising laws
ADVERTISING STRATEGIES:
TV
ADVERTISING SPENDING BY BRAND IN THE
UNITED STATES IN 2013
Ad Spend by Restaurants in 2013
Statistica
$1,200
$1,000
$976
$ Millions
$800
$600
$514
$400
$327
$289
$257
$247
$176
$200
$121
$89
$30
$0
McDonald's
Subway
Taco Bell
Wendy's Burger King Pizza Hut Applebee's
Dunkin'
Donuts
Starbucks Chick-fil-A
MCDONALD’S STILL LEADS THE WAY IN
GLOBAL BRAND VALUE
2015 Value of Top 10 Fast Food Brands Worldwide
Statistica
Costa Coffee
$1,230
Panera Bread
$1,306
Taco Bell
$1,334
Tim Hortons
$2,542
Pizza Hut
$2,579
Chipotle
$3,147
KFC
$4,344
Starbucks
$11,115
Subway
$12,246
McDonald's
$22,040
$0
$5,000
$10,000
$15,000
$ Millions
$20,000
$25,000
A Closer Look at McDonald’s Brand Value
McDonald’s Global Brand Value
Statistica
$100,000
$90,000
$80,000
$70,000
$ Millions
$60,000
$50,000
$40,000
$30,000
$20,000
$10,000
$2006
2007
2008
2009
2010
2011
2012
2013
2014
BRAND LEADERS HAVE LOWEST AD TO
SALES RATIOS
%
Ad to Sales Ratios (%) 2007-2014
Source: MergentOnline
5.00
4.50
4.00
3.50
3.00
2.50
2.00
1.50
1.00
0.50
0.00
COSI Inc
Dominos
Pizza Inc.
Jack in the
Box, Inc.
Jubilee4 Gold McDonald's
Inc
Corp
Popeyes
Louisiana
Kitchen Inc
Potbelly Corp Sonic Corp.
Starbucks
Corp.
Wendy's Co Yum! Brands,
(The)
Inc.
Advertising % TR - 2014
Advertising % TR - 2013
Advertising % TR - 2012
Advertising % TR - 2011
Advertising % TR - 2010
Advertising % TR - 2009
Advertising % TR - 2008
Advertising % TR - 2007
AVERAGE AD-TO-SALES HAS DECREASED FROM 3.0*
IN 2007 TO 2.53 IN 2014 FOR THE INDUSTRY
2007 to 2014 Ad to Sales Industry
3.50
3.00
2.50
2.00
1.50
1.00
0.50
0.00
2007
2008
2009
2010
2011
2012
2013
2014
2014 Ad to Sales By Company
5
4.5
4
3.5
3
2.5
2
1.5
1
0.5
0
COSI Inc
Dominos Jack in the
Pizza Inc. Box, Inc.
* Excludes:Jubilee4 Gold
Jubilee4 McDonald's Popeyes
Gold Inc
Corp
Louisiana
Kitchen Inc
Potbelly
Corp
Sonic Corp. Starbucks Wendy's Co
Yum!
Corp.
(The)
Brands, Inc.
TELEVISION DOMINATES ADVERTISING
EXPENDITURE
2013 Advertising Spend in the food & beverage
industry in the US by medium
Statista
$25
$Million
$20
$15
$10
$5
$0
QUICK SERVICE RESTAURANTS REPRESENT
THE LARGEST ADVERTISERS IN FAST FOOD
SPACE
Total TV advertising expenditure
TV advertising data
$600.00
$545.78
$500.00
$ Millions
$400.00
$300.00
$200.00
$96.53
$100.00
$17.78
$-
Coffee & Donut Restaurants
Pizza Restaurants & Delivery Services
Quick Serve Restaurants
INDUSTRY LEADERS DOMINATE TV AD AIR TIME
Total seconds of TV advertising
TV advertising data
Total Number of Seconds (thousands)
60
50
40
30
20
10
0
Coffee & Donut
Restaurants
Quick Serve
Restaurants
Pizza Restaurants &
Delivery Services
•
McDonalds spends advertises for the most amount of time (36% of total TV Advertising time in fast food
category)
•
Yum! Brands, which owns Taco Bell, Pizza Hut and KFC is responsible for approximately 24% of fast food
TV advertising time
MORNING NEWS & OVERNIGHT AD SLOTS HAVE
THE HIGHEST FAST FOOD ADVERTING TRAFFIC
Proportion of TV advertising by daypart for fast food
categories
TV advertising data
0.2
Proportion of Ad Seconds
0.18
Coffee & Donut
Restaurants
0.16
0.14
0.12
Pizza
Restaurants &
Delivery
Services
0.1
0.08
0.06
Quick Serve
Restaurants
0.04
0.02
0
Morning
News
05:00 AM09:00 AM
Morning
09:00 AM12:00 PM
Daytime
12:00 PM03:00 PM
Early
Fringe
03:00 PM05:00 PM
Early
News
05:00 PM07:00 PM
Prime
Access
Prime
Time
Late News
Late
Fringe
Overnight
07:00 PM08:00 PM
08:00 PM11:00 PM
11:00 PM11:30 PM
11:30 PM01:00 AM
01:00 AM05:00 AM
•
Prime time is one of the top three most popular times for fast food advertisements as this is where
viewership is highest
•
The popularity of the overnight and morning news time slots are most likely due these slots being relatively
cheap as well as being relevant for breakfast food items
FAST FOOD COMPANIES ADVERTISE WHEN
CUSTOMERS WILL BE MOST RECEPTIVE TO THE
PRODUCTS
Total seconds of TV advertising by time of day
TV advertising data
Typical after
lunch time
Typical after
dinner time
Proportion of Advertisning Time
0.06
0.055
0.05
0.045
0.04
0.035
0.03
Quick Serve Restaurants
Pizza Restaurants & Delivery Services
Coffee & Donut Restaurants
•
Coffee and donut advertising spikes at after-meal times to incentivize impulse buys
•
Pizza Restaurants have an advertising spike at 4 PM and 11 PM to incentivize impulse & binge purchases
REALITY AND DRAMA ARE THE MOST POPULAR
PROGRAMS AMONG FAST FOOD ADVERTISERS
Total seconds of TV advertising by program type
TV advertising data
40000
35000
Total Seconds of Advertisements
30000
25000
27240
20000
24000
15000
18915
19455
17055
10000
7545
5000
5520
7950
3075
4140
4335
2055
0
Award Show
Comedy
Coffee & Donut Restaurants
Drama
Movie
News
Pizza Restaurants & Delivery Services
Reality
Sports
Quick Serve Restaurants
Other
SUBSECTIONS OF THE FAST FOOD MARKET
ALLOCATE THEIR TV AD SPEND DIFFERENTLY
BETWEEN PROGRAM TYPES
Proportion of TV advertising time per program type
TV advertising data
90%
Proportion of Advertising Time
80%
77%
70%
60%
50%
40%
30%
30%
23%
20%
21% 20%
16% 16%
14%
10%
10%
3%
0% 1%
1%
1%
4% 3%
8%
6% 6%
3%
0%
16% 16%
6%
0%
Award Show
Comedy
Coffee & Donut Restaurants
Drama
Movie
News
Pizza Restaurants & Delivery Services
Reality
Sports
Other
Quick Serve Restaurants
•
Coffee and donut restaurants advertise the most heavily in reality, which accounts for 77% of their total TV
adverting time
•
The entirety of this reality TV spike comes from Starbucks
MOST FAST FOOD CHAINS DIVERSIFY THEIR
ADVERTISING STRATEGY, BUT ADVERTISE ON
ONLY
ONE PROGRAM TYPE
Proportion of TV advertising by program type
% Number of Seconds of Advetisements
TV advertising data
100%
4%
6%
13%
90%
19%
14%
17%
16%
12%
17%
21%
9%
15%
22%
15%
70%
8%
17%
34%
60%
79%
88%
100%
28%
8%
3%
40%
8%
30%
26%
100%
100%
7%
3%
21%
17%
9%
100%
0%
Coffee & Donut
Restaurants
13%
100%
6%
4%
17%
3%
11%
14%
30%
40%
24%
5%
17%
13%
16%
News
Drama
31%
24%
16%
Reality
Movie
18%
17%
Other
Sports
6%
3%
26%
5%
14%
2%
4%
6%
4%
5%
26%
18%
11%
18%
2%
2%
43%
20%
23%
3%
33%
23%
22%
23%
23%
100%
8%
19%
18%
18%
35%
13%
27%
20%
10%
15%
19%
0%
80%
50%
16%
17%
21%
13%
11%
Comedy
Award Show
Quick Serve
Restaurants
Pizza Restaurants
& Delivery Services
•
Most brands advertise across several TV show types in order to diversify their audiences
•
Some brands choose to advertise on only one or two types of programs including Dunkin Donuts, Hardees
and Jimmy John’s
NBC IS THE TOP NETWORK FOR FAST FOOD
ADVERTISERS
Proportion of TV advertising spending network
TV advertising data
$200
$180
$160
$140
$120
$ Millions
Pizza Hut
Papa Johns
Little Caesars
Dominos
Zaxbys
Wendys
Taco Bell
Subway
Sonic
Popeyes
McDonalds
KFC
Jimmy Johns
Hardees
Dairy Queen
Chick-Fil-A
Carls Jr
Burger King
Arbys
Starbucks
Dunkin Donuts
$100
$80
$60
$40
$20
$NBC
FOX
CBS
ABC
CW
Network
# of Viewers
5.804 mil
3.155 mil
8.089 mil
6.434 mil
1.414 mil
Median Age
49.3
46.2
55.6
52.3
47.1
# Adults 18-49
1.3 mil
0.9 mil
1.3 mil
1.4 mil
0.5
Median HH
$55,00
$49,300
$43,500
$47,200
$40,600
MOST FAST FOOD BRANDS ADVERTISE
PRIMARILY WITH ONE OR TWO NETWORKS
Proportion of TV advertising network
TV advertising data
100%
10%
17%
Portion of Advertising Time
90%
16%
20%
14%
16%
22%
24%
31%
80%
20%
41%
17%
23%
70%
63%
60%
50%
26%
43%
32%
16%
83%
100%
100%
100%
16%
100%
40%
23%
100%
3%
33%
25%
25%
68%
3%
23%
15%
38%
32%
25%
15%
13%
16%
0%
Quick Serve
Restaurants
23%
27%
22%
18%
12%
FOX
CW
43%
27%
47%
20%
8%
24%
34%
Other
NBC
38%
30%
Coffee & Donut
Restaurants
63%
10%
5%
23%
25%
42%
100%
10%
18%
63%
CBS
ABC
12%
6%
Pizza Restaurants
& Delivery Services
•
Within the fast food space, generally the smaller brands advertise with fewer networks while larger brands
such as McDonalds advertise on many. This is likely because there are network effects due to memory
jamming.
•
In general pizza restaurants advertise on a variety of networks despite being on the whole smaller brands
TV INSIGHTS
WHEN:
• Advertise Morning News, Overnight, Prime Time
• Coffee chains advertise after mealtime to create impulse buys
WHERE:
• Reality & Drama Shows
• Advertise on genres that match targeted audience
• Product Placement
WHO:
• Brands use network demographics with high viewership in their target
audience (i.e. Spanish Language)
WHY:
• Drive impulse buys & brand recall
ADVERTISING STRATEGIES:
HEALTH & OBESITY
FAST FOOD AND ADVERTISING TO CHILDREN
What we know:
• There is a correlation between exposure to fast food advertising and
children’s food consumption/body weight
• Exposure to fast food television ads has been associated with a 1.1% rise in
children’s consumption of fast food
ADVERTISING TO CHILDREN STRATEGIES
•In 2012, McDonald’s advertised 16% more to
children than teenagers and 8% more to
children than adults
•Ads for healthy kids meals only account for
25% of fast food TV ads for children
•Several Fast Food companies offer
advergame apps
•Advertising for non-kids’ meals on children’s
network (i.e. Subway)
ADVERTISING TO CHILDREN, BY
PRODUCT
Children's food and beverage advertising consumption in U.S. 2013
Statista
1800
1673
Advertisements Viewed
1600
1400
1200
1121
1000
846
800
600
400
773
697
529
580
536
388
303
281
331
281
221
200
176
162
160
206
81 98
0
Advertisements Viewed
2-11 Years
12-17 Years
142
70
38 34
32 36
INCREASE IN ADVERTISING TO MINIORITIES
•
Advertising targeted at black youth contains 60% more
calories and sodium compared to white peers
•
In 2012, black youth saw twice as many ads for Starbucks
and Popeyes than their white peers
•
Combined advertising spending on Spanish-language TV by
all fast food restaurants increased 8% from 2009 to 2012
US CONSUMERS FEEL THAT FAST FOOD ADS ARE
RELATIVELY TRUSTWORTHY ADS
Which advertisements do you feel are the most
trustworthy?
Statista
Pharmaceutical products
Food products (other than health foods)
Household electronics and appliances
Cars
Consumer electronics
Fast food restaurants
Clothing stores
Casual dining restaurants other the fast food (e.g., Applebees,
Olive Garden etc.)
Not applicable - I don't think any of them are trustworthy
0%
5%
10%
15%
20%
% Trustworthy
25%
30%
35%
OBESITY AND FAST FOOD AVAILABILITY
Most Obese States
Highest Fast Food Per Capita States
1. South Carolina
2. Mississippi
3. Ohio
4. Louisiana
5. Nebraska
6. Texas
7. Indiana
8. Iowa
9. Tennessee
10.Wyoming
11.Kansas
12.Arkansas
13.Oklahoma
14.Kentucky
HEALTH SECTION INSIGHTS & IMPLICATIONS
• Advertising fast food to children manipulates the perception of what is
healthy to both children and parents
• Fast food advertisers are specifically targeting minority groups:
• Minorities are seeing more fast food advertisements
• The content contains more calories
• This will lead to a more obese minority population
RECOMMENDATIONS
RECOMMENDATIONS
Investment Strategy
• Market Leader (McDonald’s) is decreasing in brand value: look
to other firms that are capitalizing on consumer’s changing
preferences
• Subway exceeds McDonald’s in # of stores (US) & annual
growth rate
• Highest growth sector lies with fast casual
Advertising Strategy
• Adapt to consumer’s shift in preferences
• Focus on quality food & experience
• Continue to capitalize on impulse buys depending on target
market
THANK YOU