Future Retail &
Foodservice
Opportunities
James Degen
J. M. Degen & Company, Inc.
www.Degenconsulting.com
805-434-2400
Words of Wisdom

“So like Noah said--you’d better
wake up you don’t want to get
stuck in this zoo. Cause when he
leaves the dock he ain’t waiting
round for you. Be prepared to
change some too.”
 Boz
Scaggs--”Some Change”
J. M. Degen & Company, Inc.
Undercurrents Of
Change

Food At-Home
Working women
 Time to prepare
 Declining skills
 Decline of
“family meal”
 Expectations

J. M. Degen & Company, Inc.

Food Away-FromHome
Labor cost
 Labor
skill/availability
 Consistent
quality
 Safety
 Menu
differentiation
 Profitability

Declining Food
Expenditures
U. S. Share of Income Spent On Food
12.00%
11.50%
11.00%
10.50%
10.00%
11.2%
10.2%
10.1%
9.50%
10.1%
10.1%
9.00%
1990
2000
2001
J. M. Degen & Company, Inc.
2002
2003
Shift In Consumer
Food Expenditures
To Foodservice
Retail/Foodservice Sales Share
100%
80%
41%
50%
53%
55%
51%
47%
45%
60%
40%
59%
20%
0%
1980
1990
At Home
1995
Away From Home
J. M. Degen & Company, Inc.
2003
Food Marketing and
Consumption Have
Changed Forever
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Demographics
Wellness Culture
Search For Value
Value of Time
Channel Blurring
J. M. Degen & Company, Inc.
Demographic
Drill Down

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78MM Boomers enter new life
Stage--empty nest, retirement
73MM Gen Y’ers are becoming
adults driving new culture cohort
61% of population growth by 2014
due to immigration
34% of U. S. households will be
single person by 2010
J. M. Degen & Company, Inc.
Wellness Culture

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Obesity and related heart health and diabetes
concerns increasing--world-wide
In 2004 33% of U. S. Adults on a diet
37% of health club memberships held by
boomers
32% of Americans dieting for health reasons in
2001
71% of Americans believe that food & nutrition
play a great role in maintaining overall health
Increasing consumer interest in digestion/gut
health
Functional food category is estimated at $16+B
Fresh = Healthy
J. M. Degen & Company, Inc.
Search For Value


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According to FMI, price is the leading
reason for switching supermarkets (32%)
Households most likely to participate in
frequent shopper programs is $75K+
(35%)
39% of consumers shop at both WalMart Supercenters and traditional
supermarkets. In the South it is 92%
82% of consumers participate in at least
one frequent shopper program--93% of
consumers over $100K in income
J. M. Degen & Company, Inc.
Value of Time

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Convenience culture continues with
“time” the currency of 21st century
46% feel more stressed Vs 5 years ago
46% don’t have enough time in the day-53% of boomers
1/5 of all meals eaten in a car
Food prepared away from home
continues to grow
Disappearance of traditional meal leads
to more snack meals--4-6 meals/snacks
per day
J. M. Degen & Company, Inc.
Channel Blurring

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Traditional retail food channels blurring
into multiple retail channels offering food
Traditional foodservice channels
following similar patterns particularly
snack meals
Food becoming a traffic building tactic
due to purchase frequency
Value-priced food appeals to valueconscious consumers
J. M. Degen & Company, Inc.
Non-Traditional
Channels Impact
Retail Food
Purchases
Wal-Mart--U.S. food/beverage sales $67.6B

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
(2003)
 Supercenters
 Sam’s Clubs
 Neighborhood Market Stores
Membership Clubs
Dollar Stores/Extreme Value Retailers
Limited Assortment Stores
Convenience Retailers
Result: Supermarkets given up competing for
center-store sales
J. M. Degen & Company, Inc.
Supermarket’s
Decline In Relative
Food Retailing
Importance
U. S. Food & Beverage Sales Share 2004 Grocery Stores
2.5%
C-Stores
2.9%
2.8%
Drug Stores
8.1%
6.7%
Membership Clubs
2.4%
Supercenters
7.7%
66.9%
Discount Stores
Spec. WholesaleRetailers
All others
J. M. Degen & Company, Inc.
Retail Food Channel
Growth Rates
J. M. Degen & Company, Inc.
Foodservice Is
Defined By Chains

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Restaurants account for 63.6% of all
foodservice industry retail sales.
Top 100 chains account for 96.3% of all
restaurant sales
96.3% of hamburger restaurant sales
 91.3% of all family steak restaurant sales
 83.4% of chicken restaurant sales
 57.6% of other sandwich restaurant sales
 50.7% of pizza restaurant sales

J. M. Degen & Company, Inc.
“The most frequently
used culinary utensil is
the window control of a
car.”--Harry Balzer, NPD
Customer Eating Place Traffic
2002
On-Premise
42%
Off-Premise
58%
J. M. Degen & Company, Inc.
Retail & Foodservice
Opportunities

New retail and foodservice products are
going to have to deliver against these
changes in consumer definition, behavior
and motivation
J. M. Degen & Company, Inc.
Retail & Foodservice
Opportunities
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Foodservice or food “prepared away from home”
an opportunity for companies not already
participating
Members of Gen-Y eat out on average 24 times
per month--almost once per day (Technomic)
51% of Gen-Y ate restaurant-prepared food
growing up “sometimes” or “more often”
compared with 12% of their baby-boom parents
(Technomic)
“These (Gen-Y) are consumers of bagged lettuce
and (healthful)prepackaged meals” (FMI)
“BATH restaurants (Better Alternative to Home),
i.e., simple ethnic establishments” (Tim Zagat)
J. M. Degen & Company, Inc.
Rise of Culinology
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With most consumers growing up on eating out,
food quality expectations and experiences are
high
The research chef has joined with the food
scientist to create the culinary linkage between
the supermarket, foodservice and food
processing industries called Culinology
Consumer and foodservice operator demand for
nutritionally improved, convenient to prepare
foods with acceptable sensory characteristics
has created unique challenges for food scientists
and research chefs.
Prepared foods must replicate scratch-made
quality in flavor, aroma and authenticity
J. M. Degen & Company, Inc.
Retail & Foodservice
Opportunities

Food Movements
 Organic foods
 “Free range” meats/poultry
 Artisan foods
 Vegetarian
 Slow foods
 “Locally grown”
 Pedigreed/heirloom foods
J. M. Degen & Company, Inc.
Retail & Foodservice
Opportunities

Next Big Food Wave--Pan-Asian
 Consumers seeking more variety and new
tastes
 Bigger and more diverse than Latin
 Beyond food to the importation of culture
 Asian foods deliver against many consumer
food demands
 Healthy
 Craftsmanship from complex recipes
 Exotic
 Fresh perceptions
J. M. Degen & Company, Inc.
Retail & Foodservice
Opportunities
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The “G” word replaces the “C” word
Low-carb trend (always a U.S. phenomenon)
fades (Mintel)
Other parts of the world look to low glycemic
Reduces food intake decisions to a number
Can be difficult to understand but can be
simplified for consumers
J. M. Degen & Company, Inc.
International
Food Labelling Program

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Registered trademark in
Australia/USA/UK
Foods must be GI tested by
accredited laboratory
Must meet nutritional criteria
(eg saturated fat, salt)
J. M. Degen & Company, Inc.
Retail & Foodservice
Opportunities

Recap
 Less money spent on food
 Price motivation to purchase on deal and at
non-traditional channels
 Food prepared away from home including
foodservice and “restaurant quality” prepared
foods
 Diminishing consumer cooking skills and
limited time to cook
 More snacking and smaller portions
 Foods that travel including dashboard dining
and “Desk-fast”
J. M. Degen & Company, Inc.
Retail & Foodservice
Opportunities

Recap (Continued)
 Weight control foods including the trend
towards glycemic testing/labeling, nutrientdense foods, etc.
 Food as medication including Pharmafoods
directed at heart health, quality of life
improvement, pre/probiotics, etc.
 Shift from Western European cuisine to ethnic
alternatives including Pan-Asian
 Rise of Culinology
 Demand for “fresh” ingredients that implies
healthy
J. M. Degen & Company, Inc.
Retail & Foodservice
Opportunities

SUPER TRENDS
 Cleaner labels
 Fewer ingredients
 Recognized ingredients
 Natural and organic ingredients
 Nutritional label claims
 Natural label claims
 Big Flavor
 Higher consumer expectations
 Ethnic flavors including regional ethnic
flavors, Latin, Asian
 New flavors and flavor combinations
J. M. Degen & Company, Inc.
Retail & Foodservice
Opportunities

Meeting the challenges of clean labels and big
flavor, naturally
 Multi-functional commodities
 Fewer processed food ingredients
 Nutritional and functional improvements
 Flavor enhancement capabilities
 Flavor contributions
 Multiple ingredient forms
J. M. Degen & Company, Inc.
Retail & Foodservice
Opportunities
Dried Plums

Composition
Fiber
 Sorbitol
 Malic Acid
 No Sucrose
 Low Glycemic
Index
 Antioxidants

J. M. Degen & Company, Inc.

Benefit
Fat replacement
 Sugar
replacement
 Antimicrobial
agent
 Flavor
enhancement
 Preservation
 Natural color
 Extend shelf life

Retail &
Foodservice
Opportunities
Mushrooms

Composition
Low calories
 Glutamate
 Fat-free
 Sodium-free
 Sugar-free
 Selenium
 Low
Carbohydrates

J. M. Degen & Company, Inc.

Benefits
Consumer
satiety
 Flavor
enhancement
 Savory flavor
 Meat
replacer/vegetar
ian
 Increased value
perceptions

Retail & Foodservice
Opportunities
Almonds

Composition
High protein
 Low
carbohydrates
 Glutamate
 Fiber
 Vitamin E
 Low in
unsaturated fat

J. M. Degen & Company, Inc.

Benefits
Consumer satiety
 Flavor
enhancement
 Nutrient dense
 Crunchy texture
 Baked breading
alternative
 Protein replacer
 Increased value
perceptions

Retail & Foodservice
Opportunities

Dried Plums, Mushrooms, Almonds
demonstrate multi-functional ingredient
benefits
 Fresh perceptions
 Replace artificial ingredients
 Add nutritional improvements
 Eliminate duplicated ingredients
 Increase and enhance flavor and texture
characteristics
 Communicate favorable consumer
perceptions
J. M. Degen & Company, Inc.
Final Words of Wisdom

"As you discover changing times
you must have the strength to
endure. As you discover a
changing world you can't be
guessing, you must be for sure. In
these ever changing times.”
 Earth,
Wind & Fire
J. M. Degen & Company, Inc.
Future Retail &
Foodservice
Opportunities
James Degen
J. M. Degen & Company, Inc.
www.Degenconsulting.com
805-434-2400