Lane Cardwell

Trends and Directions

I am returning from Chicago, after attending the Technomic 7th Annual Trends and Directions Conference.  The attendance was at, or near, record levels as industry CEO's and marketing officers attempted to gain clarity on the current consumer mindset, as well as greater details on the trends that affect us all. The one day conference was a tour de force of the restaurant business environment, commodity trends, strategies and forecasts for the limited service and full service segments, takeout and catering trends, economic outlook, research on consumer price sensitivities and strategies, generational shift trends, and online marketing best practices. I have a cold towel on my forehead to try and reduce brain swelling.

Technomic is a perennial source for most companies in our industry trying to understand the macro-trends that shape our futures. This conference, however, brings it all together in a way that makes you realize that mastering our industry requires knowledge across many disciplines. And yet, it always comes down to breathing life into facts and figures with strategies and tactics that fit our own businesses. A room full of executives will be returning to their offices with a lot of ideas, and one thought on their minds.  "Now what do I do?"

I won't attempt to try and distill one day's worth of presentations into a few paragraphs. But I will give you a laundry list of the headlines of various slides that were presented. I believe that it will give you a good feel for the current state of the industry and the issues that we all are dealing with.

Industry Status and Outlook

• Top 500 chains drove 2007 restaurant growth
• Segment growth down significantly in 2007
• Unit growth down in 2007
• 2008 restaurant same store sales still sliding
• Disposable personal income decelerating
• Consumer confidence sags (at 16 year low)
• Job market down from highs
• Food inflation increases
• Gas prices having major impact
• Consumers scaling back restaurant visits and spending
• Rebate checks unlikely to benefit restaurants
• Consumers do not expect improvement soon
• Operators express less optimism
• Majority say business is flat or declining
• Economic lift expected in 2nd half 2008, but not much
• Supermarkets benefit from consumers trading down from restaurants
• Value-oriented segments benefit from trade down impact
• Consumers to spend less on extras

Full Service Segment Implications and Recommendations

• Three-course and combo meals give consumers greater value
• Healthy foods finding their niche
• Customer awareness of local product sourcing on the rise
• Seasonal offerings keep your entire menu fresh
• Authentic flavors invite experimentation
• Customer-friendly marketing programs make a difference
• Globalization of consumer knowledge is influencing food preferences
• Signature drink menus complement and enhance adult beverage programs
• Small plate trend growing in popularity

Limited Service Segment Implications and Recommendations

• Global flavors are influencing taste palates
• Regional preferences require localized response
• Fresh translates to healthy
• Fast casual segment continues to grow and develop
• Social responsibility viewed as a positive
• Seasonal offerings keep your menu fresh
• Authentic flavors invite experimentation
• Healthy alternatives make a difference

Consumer Price Sensitivity

• As check average increases, consumers more likely to cut back
• Reduced visit frequency the preferred method of saving money at full service restaurants
• Many QSR's offer a more compelling value proposition
• Declining economic conditions create greater demand for takeout
• Don't ignore impact from grocery store meals
• Multiple consumer responses exist when concepts raise menu prices
  -Continue same frequency, pay more
  -Order less expensive items, visit the same concept
  -Use takeout to reduce check average impact
  -Cut back on number of visits, or shift to different concept
• Specific menu items possess varying price tolerance ranges
• All menu price elasticities are not created equal
• The degree to which the consumer cannot personally duplicate or substitute an item will impact elasticity
• Other components of value (atmosphere, service, etc.) affect menu price sensitivity

These are merely the headlines from some of the many slides that were presented through the day. The take away message was that these are challenging times, the likes of which we have not seen since the late '70's and early '80's. Our customers are being challenged economically on many fronts.
 
Gasoline prices are a weekly reminder that these are not normal times.  For the average driver, who logs 15,000 miles per year, the increase in the cost of gas compared with last summer is $20 per week. That is $1,000 per year per driver in the household.  For most families, this money must come from somewhere else. Our industry is wrestling with the realization that some of this money is coming from sales that we would otherwise be getting. Value, perceived or otherwise, is the name of the game right now. When you boil it all down, we cannot change the trends, but we can change our direction.
 

Posted by Lane Cardwell on June 26, 2008 | Comments (5)