According to a Recent Study/Survey … Mid-October 2017 Edition

This edition of MRM’s popular “According to …” research roundup features exclusive LTO research from the experts at Sense360 as well as a slice of American’s pizza habits and the best cities for vegans and vegetarians.

LTO Strategy Spotlight: Krispy Kreme’s Solar Eclipse Chocolate Glazed Donut

A Sense360 report investigated the effects of a limited time offering on visitation by observing visit patterns both before and during the campaign and highlighting the differences between the two periods, specifically looking at Krispy Kreme’s Solar Eclipse Chocolate Glazed Donut. Krispy Kreme served special edition chocolate glazed doughnuts to coincide with the solar eclipse. The report looked at visit trends for that weekend (August 19-20,2017) and compared to the four previous weekends.

Some of the high-level takeaways that stood out:

• Very large share growth: 59 percent change from Benchmark period
• Dinner daypart saw the largest increase in traffic with a 129 percent increase
• Increase in visits from both New and Existing guests 
• Krispy Kreme saw the largest increase in visits from the Light guest category – which signifies the LTO was bringing in customers who weren’t typically regular customers of Krispy Kreme.

Measuring a brand’s LTO strategy and tactics in real-time is critical in obtaining a genuine view of if the strategy is working, if it has sustained effects, and if the brand is optimizing their tactics for the future, according to Sense360. They recently saw that Krispy Kreme’s Solar Eclipse LTO was particularly successful because it had a significant lift with both new and existing customers. Successful industry LTOs usually have a big impact on one of the customer types, but typically not both.

Signs of Improvement Emerge for Restaurant Sales

At first glance, results suggest 2017 third quarter performance was very disappointing for restaurant sales. Same-store sales declined -2.2 percent, a 1.2 percentage point drop from the second quarter. Restaurant same-store traffic fell -4.1 percent. Furthermore, the third quarter posted the second worst sales and traffic growth rates in over five years. The latest slump reignites fears that restaurant woes may be more severe than initially thought. These insights come from TDn2K™ data through The Restaurant Industry Snapshot™, based on weekly sales from nearly 30,000 restaurant units, 155+ brands and representing $68+ billion dollars in annual revenue. A deeper analysis reveals these latest results, though troubling, may not be as worrisome as they appear.

“On one hand, the last three months were plagued by significant events that are external to the industry, but nevertheless had considerable negative impact on restaurant sales,” commented Victor Fernandez, Executive Director of Insights and Knowledge for TDn2K. “Hurricanes Harvey and Irma affected millions of people in two of the country’s largest economies during the quarter. On the other hand, there were some signs of improvement throughout the quarter, especially when removing the effect of Texas and Florida on the national sales results.”

Same-store sales growth for September was -1.9 percent, a small improvement from the -2.1 percent reported for August (which was also negatively impacted due to hurricane Harvey and the pay-per-view boxing match at the end of the month). However, September’s results also show a more significant jump from July’s -2.7 percent sales growth. The effect of the storms on restaurant sales was huge for the areas they hit. Texas reported same-store sales growth of -5.1 percent during August and Florida -6.2 percent during September. National same-store sales growth numbers would improve by about 0.2 percentage points for the third quarter if these two states are excluded from the sales growth calculations. Additionally, by excluding Texas and Florida the data reveals a bigger improvement in sales performance throughout the quarter. Same-store sales growth would go from -2.8 percent in July to -1.8 percent in August, and would improve to -1.4 percent by September. “Clearly, sales are still declining year-over-year,” said Fernandez, “but the rate at which they are falling has been decelerating. The trend is for improving results throughout the quarter once some of the external factors are isolated.”

All industry segments experienced negative same-store sales growth in September. This is the second consecutive month that all segments have reported declining sales. The fine dining segment, which had been posting positive sales for most of the year has seen a decline since August. This segment, which has been hit particularly hard in Texas and Florida after the storms hit their coasts, was the weakest performing based on sales growth for the month. The best performing segments during September were family dining and upscale casual.

“The economy was hit by massive hurricanes in August and September. The chaos created also translated into volatile economic data,” explained Joel Naroff, President of Naroff Economic Advisors and TDn2K Economist. “For example, vehicle sales surged in September, largely due to the replacement of damaged vehicles. Consumer spending likely picked up, but not for the reasons we would hope for.” “Going forward, rebuilding efforts will also temporarily add to economic activity. Thus, third and fourth quarter growth will likely be good, but we could pay for it in the first part of 2018. Separating out the weather effects from trend economic growth, it appears that conditions have firmed a bit. That should be enough to trigger somewhat faster wage gains and spending, but don’t expect significant improvement in discretionary consumer purchases such as restaurants.”

According to TDn2K’s Q3 People Report Workforce Index™, operators continue to worry about finding enough qualified employees to staff their restaurants. Their expectation is that recruiting difficulties will continue in upcoming months. After plateauing for the last few months, turnover rates for both restaurant management and hourly employees increased again during August, surely a factor behind the growing concerns regarding restaurant staffing. This is not surprising given that the competition for available employees keeps rising as the labor market continues to tighten. The national unemployment rate dropped to 4.2 percent in September and is the lowest it’s been in almost seventeen years. “The correlation between unemployment and restaurant turnover, especially for hourly employees, has been well documented by People Report™,” stated Fernandez. “But regional factors also come into play. For example, Kentucky and Mississippi, which are among the states with the highest restaurant hourly turnover rates in the country, both have unemployment rates around 5.3 percent, well above the national number.” The battle for market share is fought at the local level. Service, value and lower turnover rates are key differentiators in today’s market. Brands that consistently deliver on these attributes are better positioned to deliver above-market performance.

Best Cities for Vegans and Vegetarians

With Nov. 1 being World Vegan Day and research showing that skipping meat can save the average person at least $750 per year, the personal-finance website WalletHub today released its report on 2017’s Best Cities for Vegans & Vegetarians.

To determine the best and cheapest places for following a plant-based diet, WalletHub’s analysts compared the 100 largest cities across 15 key indicators of vegan- and vegetarian-friendliness. The data set ranges from the share of restaurants serving meatless options to the cost of groceries for vegetarians to salad shops per capita.
 

 Best vs. Worst

• New York has the highest share of restaurants serving vegetarian options, 56.25 percent, which is 2.6 times higher than in Newark, New Jersey, the city with the lowest at 21.72 percent.
    
• Orlando, Florida, has the highest share of restaurants serving vegan options, 31.14 percent, which is 8.8 times higher than in Chicago, the city with the lowest at 3.52 percent.
    
• San Francisco has the most community-supported agriculture programs (per square root of population), 0.0139, which is 17.4 times more than in San Antonio, the city with the fewest at 0.0008.
    
• New York has the most salad shops (per square root of population), 0.2666, which is 33.7 times more than in Laredo, Texas, the city with the fewest at 0.0079.

To view the full report, click here.

 Off-Premise Trend’s Rapid Growth

Off-premise ordering is gaining real traction as more restaurants start adopting off-site, take-out services. One off-premise-tech company’s numbers directly show the trend’s rapid growth. In less than 18 months, SYNQ3 Restaurant Solutions processed more than a billion dollars in take-out orders for several top chains, including Red Robin Gourmet Burgers and Brews, Chipotle Mexican Grill, Noodles & Company, Famous Dave’s Barbeque, Portillo’s, McAlister’s Deli®, Hungry Howie’s Pizza and P.F. Chang’s China Bistro.

Using new technology and off-premise ordering specialists, SYNQ3 reached $2 billion in total restaurant sales processed, since their start in 2004, on August 28; and, they’re on track to service another half a billion by the end of the year. CEO Steve Bigari said it took 11 years for SYNQ3 to reach its first billion; they eclipsed the second billion in less than 18 months; and, with the current growth rate, they should reach the third billion by mid-2018. 

When discussing their sudden spike in business, Bigari said: “Off-premise sales are the primary source of revenue growth in the restaurant industry today and will continue to be in the future. Nearly 13 years ago, we recognized this trend and started SYNQ3 to meet the need that would soon overwhelm many restaurants; and now, everyone is seeing it,” Bigari said. SYNQ3 currently facilitates off-premise orders for nearly 7,000 restaurant locations nationwide, and multiple other major restaurant chains are preparing to launch these services in 2018.

Global Foodservice to Grow

According to the latest market study released by Technavio, the global foodservice market is expected to grow at a CAGR of almost five percent during the predicted period.

This research report titled ‘Global Foodservice Market 2017-2021’ provides an in-depth analysis of the market in terms of revenue and emerging market trends. This market research report also includes up to date analysis and forecasts for various market segments and all geographical regions.

The global foodservice market is growing rapidly because of various factors, including innovations and customization in menus, rising demand for healthy and nutritious meals in menus, growing demand for gluten-free food, increasing marketing campaigns, and rising number of foodservice outlets. Consumers are looking for more customized food options.

Technavio’s analysts categorize the global foodservice market into four major segments by foodservice system:

• Conventional foodservice system
• Centralized food service system
• Ready-prepared foodservice system
• Assembly serve foodservice system

The top three segments of the global foodservice market are discussed below

Global foodservice market by conventional foodservice system

In the conventional foodservice system, the basic ingredients are assembled, and the food is prepared on the premises. Depending on the nature of the food, the food is maintained in a heated or chilled state and served to consumers. This is generally observed in restaurants, schools, and cafeterias because consumers prefer freshly prepared food.

According to Akash Pandey, a lead food service research analyst from Technavio, “The conventional foodservice system is expected to have steady growth during the forecast period. The growth can be attributed to the prevalence of this type of foodservice system worldwide. The conventional foodservice system is driven by the high quality of food because it is prepared on the premises.”

Global foodservice market by centralized foodservice system

In the centralized foodservice system, the food production is centralized, and food is transported to kitchens that serve the food to consumers. This system is primarily used by airline caterers, large city schools, and franchised organizations that provide food to various outlets. The prepared food is stored frozen, chilled, or held heated.

“It is the best option for mass food production because of its benefits, such as low labor and food costs and economies of scale. Therefore, non-commercial foodservice outlets are implementing the centralized foodservice system. Packaging and temperature are two key criteria considered in the centralized foodservice system,” says Akash.

Global foodservice market by ready-prepared foodservice system

In the ready-prepared foodservice system, food is prepared on site and is kept chilled or frozen. The food is reheated when required and served to customers on site. In this type of foodservice system, food preparation can be scheduled at any time and can be completed at once. This foodservice system is mainly used in hospitals.

The ready-prepared foodservice system is expected to grow at a moderate rate during the forecast period. As the food is prepared at once, the labor requirement is less. Therefore, many non-commercial foodservice operators prefer the ready-prepared foodservice system.

The top vendors highlighted by Technavio’s research analysts in this report are:

• Aramark
• Compass Group North America
• Domino’s
• McDonald’s
• Restaurant Brands International
• Sodexo
• Starbucks
• Yum!Brands

Pizza is America’s Favorite Food

If you could only eat one food for the rest of your life, what would it be? The top choice among Americans? Pizza.

A new nationwide survey conducted by Harris Poll®* on behalf of California Pizza Kitchen (CPK), celebrates National Pizza Month this October by revealing a ton of fun facts about the king of American food: PIZZA. The survey, conducted online among 2,296 U.S. adults ages 18 and older, revealed that if Americans could only eat one food for the rest of their lives, the number one food they would choose is pizza (20 percent). Additionally, a whopping 83 percent of Americans would be willing to give something up for a year to have free pizza whenever they want for a year; among them, the top four items are: taxi/ride sharing services (54 percent), bacon (36 percent), coffee (33 percent) and social media (31 percent). “Pizza is our middle name – literally! So it goes without saying that pizza is our favorite food any time of the year, but this National Pizza Month, it’s wonderful to confirm officially what we’ve always known: how much Americans really love and adore pizza!” said G.J. Hart, CEO and Executive Chairman at CPK. “As the results show, pizza brings people together in so many ways – from date night to sports night, and it’s the food we gather around when catching up with friends and family.”

Additional highlights of the California Pizza Kitchen 2017 Pizza Survey include:

When it comes to sharing a slice with a celebrity, Americans are all about “The Rock.” People’s “Sexiest Man 2016,” Dwayne “The Rock” Johnson, is America’s top choice of celebrities to share a slice of pizza with (15 percent)**

Touchdown! A majority of Americans (54 percent) say pizza would be their go-to meal when watching sports

The Many Ways to Celebrate with Pizza: About 7 in 10 Americans (69 percent) say pizza would be their go-to meal when getting together with friends or family on a Friday night and roughly one quarter say it would be their go-to meal when celebrating a major accomplishment (26 percent) or for date night (23 percent)

One of Millennials’ Go-To’s for Date Night: 33 percent of Millennials (ages 18-35) say pizza would be their go-to meal for date night

Monthly Pizza Run: Americans typically spend $47.50, on average, per month on pizza – that’s $570 a year!

For a full list of survey findings,  click here.

Barriers to Healthy Living

SHS FoodThink’s latest white paper, “The Parent Trap: How Parental Time Constraints Prevent Healthy Lifestyles,” highlights the barriers and pressures to healthy living encountered by many parents. Key findings from SHS FoodThink’s paper offer further insight:

• 78 percent of parents agree it is important for the whole family to be together at mealtime.
• 57 percent of parents would eat healthier if it were more convenient.
• 52 percent of parents feel guilty when they don’t eat healthy.
• 37 percent of parents agree they are so busy that being active and eating healthy get put on the back burner. 

“Many parents feel they have to choose between time spent eating healthier and time spent living their lives,” said Christy Niebaum, SHS FoodThink researcher. “This struggle is an opportunity for food marketers to provide healthy solutions that are easy to prepare, inspiring parents to balance family life and health.” 

Interestingly, the research shows a lack of time isn’t the only obstacle many parents encounter – they also identify limited preparation knowledge and the taste of healthier foods as barriers to healthy eating. And while their desire for convenience often outweighs their commitment to health, fast fixes can prompt even more guilt – parents don’t want dinner to look or taste like they took the easy way out.

To download the white paper, including recommendations for retailers, restaurants and food manufacturers to better meet consumer needs, click here.

What Teens Want

Piper Jaffray Companies  completed its 34rd semi-annual Taking Stock With Teens research survey, which highlights spending trends and brand preferences amongst 6,100 teens across 44 U.S. states.

Since the project began in 2001, Piper Jaffray has surveyed more than 155,000 teens and collected nearly 40 million data points on teen spending in fashion, beauty and personal care, digital media, food, gaming and entertainment.

“For the first time in years, we’ve seen Nike share moderate as a preferred brand. Offsetting this weakness, we’ve seen an unexpected rise in trends like streetwear with Vans and Supreme gaining momentum. In addition, other brands such as adidas, Puma and New Balance has been capturing more mindshare as teens gravitate towards that 1990s retro look,” said Erinn Murphy, Piper Jaffray senior research analyst.

Fall 2017 Key Findings

Overall Spending Behavior

Overall teen spending moved down 4.4 percent year-over-year, while parent contribution to teen spend is 67 percent just below the long-term average of 68 percent.

Wallet shifts in fall 2017 include slight downtick for video games, slight uptick for clothing, and moderate downtick for food.

Food ticked down from 24 percent in spring 2017 to 22 percent in fall 2017, but remains larger than clothing at 20 percent.

Apparel

Athletic apparel is moderating somewhat led by Nike, but there is no slowdown in athletic footwear. Apparel brand preference is shifting towards streetwear with brands like Vans and Supreme.

Nike, Ralph Lauren, Steve Madden, UGG (Deckers), Fossil and Michael Kors saw the largest declines among major brands.

Technology Spending and Behavior

Snapchat is the preferred social media platform for 47 percent of teens using the platform – up 12 percent year-over-year.

82 percent of teens expect their next phone to be an iPhone, which is up from 81 percent in spring 2017, and more importantly, the highest we have ever seen in our survey.

Teens who expect >50 percent of their future video games to be digitally downloaded increased to 50 percent from 45 percent in spring 2017 and 37 percent from two years ago.

Streaming continues to gain teen video share as preference for linear TV declined 2 percent since last fall.

Only 35 percent of teens listen to Pandora radio versus 49 percent last year as on-demand services such as Spotify, YouTube and Apple Music continue to gain share.

23 percent of teens prefer to shop specialty retailers, which is down 3 percent year-over-year, while pure-play e-com tied its spring 2017 peak at 17 percent – up 2 percent year-over-year.

Teens increasingly prefer Amazon as their favorite website at 49 percent share – up 9 percent year-over-year.

The Evolution of the Beer Industry

While certain segments of the beer category demonstrated strong gains in 2016, the overall category decreased by 0.3 percent to end the year with 2.83 billion 2.25-gallon cases, according to the Beverage Information Group’s 2017 Beer Handbook.  Continued economic growth, employment gains, and evolving consumer preferences are contributing factors in the evolution of the beer industry.

The Imported beer segment enjoyed another year of strong volume performance, growing 6.7 percent to 454.4 million 2.25-gallon cases.  This continued success helped push the import’s market share to 16 percent in 2016.  The segment last peaked in 2007 when it reached 13.8 percent with 408.3 million 2.25-gallon cases before slipping each year until 2014, which began a string of years with positive sales gains.

The Craft beer segment grew 6.0 percent in 2016 to 300-million 2.25-gallon cases, the same growth rate as in the prior year.   Remarkedly it surpassed the 10 percent market share for the first time, reaching 10.4 percent up from 9.8 percent in 2015.  The craft explosion, however, is beginning to show signs that it’s losing steam.  As the numbers of Millennials continues to grow so does their penchant for experimentation across brands and categories.  On the upside for the craft segment is the growing number of regional and micro- breweries, topping 5,234 in 2016.  With so many new offerings hitting the marketplace, Millennials may still find crafts appealing.

Flavored Malt Beverages (FMBs) leveled off in 2016 after experiencing growth of 7.5 percent, 8.2 percent and 21 percent the last three years, respectively.  In 2016 FMBs accounted for 110 million 2.25-gallon cases, growing just 2.4 percent.  The reason for this slow down begins at the top.  Segment leader Bud Light Rita’s line had been growing at double and triple-digits since its introduction in 2012.  In 2015 that momentum suddenly halted to just 0.5 percent growth, with growth in 2016 of only 0.1 percent.  Still at 30.7 million 2.25-gallon cases, the brand is still a powerhouse and the segment leader.

The Super and Premium beer segments suffered in 2016 from the same problem as the Light beer segment: there’s a general malaise towards them for not being craft beer.  Overall, the segment lost 13.3 million 2.25-gallon cases in 2016, shrinking to finish the year with 385.8 million 2.25-gallon cases.  The super and premium segment commanded a 13.6 percent share of beer industry.

The Light beer segment is also under fire, slipping 2.6 percent in 2016, despite it being the largest segment in the industry with a whopping 44.5 percent market share.  The light segment sold 1.26 billion 2.25-gallon case in 2016, 33 million fewer cases than in 2015.  Among the 23 beers included in the 2017 Beer Handbook’s top light brands, only Michelob Ultra registered positive sales, finishing in 6th place with 70.8 million 2.25-gallon cases sold, an uptick of 18.4 percent over 2015.

The Popular beer segment continued its steady decline in recent years with only 6.5 percent of the overall beer market.  The segment was down 1.7 percent to 185.6 million 2.25-gallon cases.  The Malt Liquor and Ice segments were also down, roughly 4 percent verses 2015.