foodservice fundamentals fast track: introduction to the foodservice industry
DESCRIPTION
October 2012 IFMA Foodservice Fundamentals PresentationTRANSCRIPT
October 2012
Introduction to the
Foodservice Industry
1
• Leading foodservice industry organization
• IFMA partner on F&O, seminars, pubs
• Proprietary, multi-client consulting and research firm
• Food industry publications
Technomic, Inc.
2
Sample of Technomic Clients
3
Today’s Agenda
Overview of foodservice industry
Foodservice segment size/growth
Review of trends/issues
Provide answers to your questions
1
2
3
4
4
The Foodservice Business System
Operators
• QSR
• FSR
• Beyond Restaurants
• Hotels, Retail, Other
Distributors
• Broad-line
• Systems
• Club/CNC
• Specialty
Manufacturers
• Food
• Non Food
• FS Only
• Multi-Channel
Industry
• GPOs
• Re-distributors
• Consultants, Media, etc.
• Brokers, software, etc.
Consumers
• Generational
• Ethnic
• Healthy, Value
• Other
5
Critical Sources forFoodservice Outlook
Forecasting
FoodserviceOperators
Distributors
Manufacturers
6
Client Logo
Foodservice Industry Overview
Foodservice Is Defined as.. .
Establishments that prepare and generally serve food, meals,snacks and beverages away from home
8
9
Retail vs. Foodservice
Criteria Retail Foodservice
Units 50,000 1,032,373
Segmentation Little19 major segments;
multiple subsegments
Syndicated Data Nielsen, IRI None
Private Label Penetration Medium High
Product Selector Consumer Operator
Value Chain Example:Retail vs. Foodservice
Retail Foodservice
$1.00 $1.00$1.00
$1.05
$1.00
$1.15
$3.50$1.30
ManufacturerShipments
DistributorSales
Retailer Sells/Consumer Pays
10
• Manufacturer shipments – valueof manufacturer sales todistributors – $152B
• Operator purchases – value ofdistributor sales includingdistributor margins – $175B
• Retail Sales Equivalent (RSE) –value of operator sales includingoperator margins – $529B
Foodservice Product Value Chain* –2010
*Food and nonalcoholic beverages only 11
Foodservice a Signif icant Shareof Total Food Industry Sales
2000 = $791B1990 = $566B 2011 = $1,179B
Foodservice Retail
$314B55%
$252B45%
$397B50%
$394B50%
$636B54%
$542B46%
12
Signif icant Opportunity Sti l l Existsfor Further Foodservice Growth
54%46%
76%
24%
*Retail sales equivalentSource: Technomic; NPD FoodWorld
Share of RSE* Share of Meals
Foodservice Retail
13
Two most critical indicators forfoodservice health:
• Disposable PersonalIncome (DPI)
• Unemployment
Other important measures:• Economic Growth (GDP)
• Inflation
Macro-Economy: Critical Indicators
14
15
Economic News a Combinationof Positives, Negatives
Positives Negatives
• Tax cut extension • Rising commodity costs
• Low interest rates • Europe financial instability
• Weak dollar helping exports • State/local budget shortfalls
• Some increase in consumerspending
• Major natural disasters
• Economy is adding jobs • High unemployment,underemployment
• Disposable personal incomeis growing
• Continued tight credit gripfor most
• GDP slowly improving
GDP Improving (Barely)
Source: Bureau of Economic Analysis
Quarterly % Change – Real vs. Prior Period
-10%
-8%
-6%
-4%
-2%
0%
2%
4%
6%
8%
Q1
'03
Q3
'03
Q1
'04
Q3
'04
Q1
'05
Q3
'05
Q1
'06
Q3
'06
Q1
'07
Q3
'07
1Q
'08
3Q
'08
1Q
'09
3Q
'09
1Q
'10
3Q
'10
1Q
'11
3Q
'11
1Q
'12
Q42008-6.8%
Q120065.4%
Q2 20121.7%
16
DPI Generally Flat
Source: Bureau of Economic Analysis
% Real Change vs. Prior Year
-3%
-2%
-1%
0%
1%
2%
3%
4%
5%
Jan
'05
May
Sep
Jan
'06
May
Sep
Jan
'07
May
Sep
Jan
'08
May
Sep
Jan
'09
May
Sep
Jan
'10
May
Sep
Jan
'11
May
Sep
Jan
'12
May
Aug20074.1% Dec
2009-2.9%
Aug 20124.1%
17
Unemployment Remains the KeyChallenge to Faster Industry Growth
Source: Bureau of Labor Statistics
Unemployment andUnderemployment
Unemployment4.6%
8.1%
8.3%
14.7%
0%
2%
4%
6%
8%
10%
12%
14%
16%
18%
20%
Jan'07
May Sep Jan'08
May Sep Jan'09
May Sep Jan'10
May Sep Jan'11
May Sep Jan'12
May
18
Job Openings and UnemploymentDisconnect
Source: Bureau of Labor Statistics
JobOpenings
Pe
rso
ns
(Th
ou
san
ds)
UnemploymentLevel
0
2000
4000
6000
8000
10000
12000
14000
16000
2000 2006 2011
19
Jobs Picture and FoodserviceSpending
• People with jobs areexperiencing more stability
• Hiring for college grads isimproving
• More discouraged workersreturning to search
• Government sector is anegative exception
• 20% of the economy remainsunemployed, underemployed,or discouraged
• Acute problems for urban poor,especially in coastal areas
• Long-term unemployed andvets are stigmatized in themarket
Government Accounting Office, Congressional Budget Office, BLS 20
Food Inflation Resulting in Higher,Menu & Grocery Prices – U.S.
% Change vs. Year Ago
Source: Bureau of Labor Statistics
PPI Food2.2%
CPI FAH1.5%
CPI FAFH2.8%
-5%-4%-3%-2%-1%0%1%2%3%4%5%6%7%8%9%
10%
Jan
'10
Mar
May Ju
l
Sep
No
v
Jan
'11
Mar
May Ju
l
Sep
No
v
Jan
'12
Mar
May Ju
l
21
Both LSR and CDR Chains in PositiveSame-Store Sales Territory
Source: Public Company Reports, Technomic
% Same Store SalesChange vs. Previous Year
4.6%
1.4%
-8%
-6%
-4%
-2%
0%
2%
4%
6%
Q1'07 Q1'08 Q1'09 Q1'10 Q1'11 Q1'12
LSR
CDR
22
23
Heavy Restaurant Usage TrendBarometer Pointing Up
17%
29% 28%
34%
8%
13%11% 11%
March '11 Sept. '11 Jan. '12 March '12
LSR FSR
Source: Technomic Amex Market Brief April 2012
Heavy Restaurant UsageTwo Times a Week or More
1.9%
-1.3%
2.5%
2.5%
3.0%
2.5%
LSR
FSR
2012 LSR, FSR Growth RatesAdjusted
Nominal Change
Source: Technomic
Real Change
2010 2011 (P) 2012 (F)
24
0.6%
0.0%
0.5%
-2.5%
0.0%
0.0%
Revised 2012 & First Look at 2013
Strongest industry growth since 2007 But still lower than 2003-2007 Real CAGR (2.8%)Key Insights
2.5%
3.9%
1.5%
CPI-FAFH
Nominal Growth
Real Growth
2.5%
4.3%
1.8%
CPI-FAFH
Nominal Growth
Real Growth
2012 (P) 2013 (F)
(P) = Preliminary(F)= ForecastSource: Technomic 25
0.5%
1.1%
0.7%
2.5%
2.6%
2.5%
2.8%
2.9%
2.8%
Restaurants
Beyond Restaurants
Total Foodservice
Foodservice Returning to RealGrowth
Nominal Change
Source: Technomic
-0.8%
0.0%
0.3%
-0.2%
0.3%
0.5%
-0.6%
0.1%
0.3%
Real Change
2010 2011 (P) 2012 (F)
First real industry “growth” since 2007.Key Implication
26
Quiz Time:Foodservice Industry Overview
27
Client Logo
Operator Segment Review
Foodservice Segmentation 2010
Source: Technomic
Share of Operator Purchases
Restaurants57%
Healthcare6%
Other4%
B&I3%
Vending5%
Education8%
Leisure8%
Retailers9%
29
Restaurants & Bars SegmentIncludes.. .
Restaurants& Bars
Traditional
Bars &Taverns
Cafeterias& Buffets
LimitedService
MidscaleCasualDining
FullService
FineDining
QuickCasual
Restaurants& Bars
Traditional
Bars &Taverns
Cafeterias& Buffets
MidscaleCasualDining
FullService
FineDining
30
Segments Definitions
Limited Service(LSR)
• No table service• Fast service orientation• “Buy before you eat” system
Quick Casual (QC)• Subsegment of LSR• Freshly prepared, wholesome quality• Check average: $6-9
Full ServiceMidscale (FSR)
• Table service• Limited alcohol service• Check average: $6-10
FSR Casual Dining
• Lunch, dinner focus• Table service• Full bar service• Check average: $10-25
FSR Fine Dining• Dinner emphasis• Entrée over $20
Definitions
31
Beyond Restaurants Segments
*OCS = Office Coffee Service
Segments Definitions
Business& Industry
Includes employee feeding in offices, factories, andplants. To a large extent this service is handled bycontract feeding companies such as Aramark, Sodexo& Compass
Vending/OCS*
Defined as all food and beverage products soldthrough automatic vending machines, regardless oftheir location. Not included are other vended productssuch as cigarettes, cigars, bulk vending, and othernonfood items.
Retail Hosts
Retail stores that host foodservice, includingsupermarkets, convenience stores and other retailerssuch as general merchandise stores and departmentstores. Does not include foodservice within the storemanaged by an outside restaurant company.
32
Beyond Restaurants Segments
Segments Definitions
EducationCollege & University
Includes all full-time and part-timecolleges/universities (public and private two-yearand four-year colleges and junior collegeprograms.) The key foodservice areas are: Boardcontracts in dormitories, Cafeterias, Snack shopsand Special function services
EducationPrimary Schools
Encompasses all public and private primary andsecondary school feeding. Total consumption isbased on school purchases and governmentcontributions, which together compose the totaldollar value of food. The key components areLunch participation, Breakfast participation, Milkprograms, and la carte feedings
Travel & Leisure
The recreation segment includes foodservice foodand nonalcoholic beverages sales only in variousestablishments and locations where activities areconsidered recreational in nature.
33
Typical Restaurant Structure
34
Accounting for Non-traditionalLocations
35
Independent restaurateurs may operate more than onelocation.
• Technomic, Inc., defines independent restaurants as those withone to nine units, and chains as those with10 or more.
According to the National Restaurant Association, morethan 7 out of 10 of the nation’s “eating and drinking
places” are single-unit independent operations.
A Note on Independents
36
Lots of independents and Small Chains don’t equal sellingpower of the Top 500 Chains.
The Restaurant Landscape – 2010
64.8%
35.2%
Sales
Independents & Small Chains
37.0%
63.0%
Units
Top 500
37
38
Leading Independent Restaurants Ranked
by Food & Beverage Sa les
Rank Restaurant/City Check Average 2009 Sales
1.Tao Restaurant & Nightclub – LasVegas
$70.00 $59.2
2. Joe’s Stone Crab - Miami Beach 68.00 26.3
3. Smith & Wollensky - New York City 84.50 25.0
4. Old Ebbitt Grill - Washington, D.C. 24.00 24.5
5. Carmine’s – New York City 30.00 24.0
6. Lavo Italian Restaurant – Las Vegas 60.00 22.0
7. Tao Asian Bistro - New York City 74.00 20.7
8. Buddakan – New York City 49.00 20.0
9. Gibson’s Bar Steakhouse - Chicago 62.33 19.9
2010 Projected Sales – $66.0MM• Restaurant - $28.0
• Club - $28.0
• Pool - $10.0
Statistics• 57 cooks, 8 chefs, 26 servers,
and 10 Hostesses
• 1,400 pp on a weekend
• Check average: $70.00
• Meals served: 590,990
• 75% of revenue from salesof alcohol
39
Tao Las Vegas
Miso Glazed Chilean Sea Basswith Wok Vegetables $36.00
Tao-Tini$13.00
Operator Business SituationSlowly Improving
37%
22%
25%31%
43%
26%
45%
21%
49%
17%
Increased Decreased
Operator Sales/Revenue Situation for First 4 Months*
20082008 20092009 20102010 20112011 20122012
40
Operators Have Concerns Butthe Mood is Brightening
*Top 2 Box on 1 to 5 scale where 5 = “extremely concerned” and 1 = “not concerned at all”Source: 2010 & 2011 F&O Operator Surveys
71%65%
57% 61%71%
Rising FoodCosts
IncreasingProfits
Ability toGrow Sales
EmployeeRetention
Rising FuelCosts
-14 -11 -17 -12 -1
41
Prime Cost: The Most ImportantOperator Metric
31.9% 32.2% 31.8% 31.9%
29.4% 33.7% 33.2% 33.7%
61.3%65.9% 65.0% 65.6%
LSR FSR <$15 FSR $15 to $12.99 FSR $25.00+
Food Cost Labor Cost Prime Cost
42
113%
89%83% 79%
71% 71% 67%55%
LSR FSR <$15 FSR $15 to $12.99 FSR $25.00+
2007 2010
Hourly Labor Turnovera Headache But Getting Better
LSR = Limited Service Restaurants FSR = Full Service Restaurants *Average checkSource: NRA 2007 & 2010 Industry Operations Reports
Annual Turnover RateHourly Employees
43
“For as long as most people can remember, food has been gettingcheaper and farming has been in decline. In 1974-2005 food prices on
world markets fell by three-quarters in real terms. Food today is socheap that the West is battling gluttony even as it scrapes piles of half-
eaten leftovers into the bin.
“That is why this year's price rise has been so extraordinary. TheEconomist's food-price index is higher today than at any time since itwas created in 1845 . Even in real terms, prices have jumped by 75%
since 2005.”
The End of Cheap Food:The Economist – December 6, 2007
44
Food commodity prices since January 1980:Reversal of a 22-year downward trend
75
125
175
225
19
80
M1
19
82
M1
19
84
M1
19
86
M1
19
88
M1
19
90
M1
19
92
M1
19
94
M1
19
96
M1
19
98
M1
20
00
M1
20
02
M1
20
04
M1
20
06
M1
20
08
M1
20
10
M1
20
12
M1
Index: January 2002 = 100
Source: International Monetary Fund:International Financial Statistics
Down 1/3 in 22 years
Doubled in 10 years
45
150
200
250
300
350
May10
Jul10
Oct10
Jan11
Apr11
Jul11
Oct11
Jan12
Index: January 2002 = 100
Primary factors affect ing crop prices 1
( June 2010 – Jan 2012)
Strong LDC economic growth.Rising oil price. U.S. $ depreciates
Russiawheat
export ban
EU suspendsbarley & feed wheat
import levies
Importersaggressively
buying
Reductions in estimated global ending grain stocks
Argentina drought
China dryness
U.S. HRW drought
Canada & NW Europe:rain damageswheat crop
Aust. raindamages
wheat crop
Russia drought
E. Africa drought
Russia stops grainimport
duty
U.S. cornyields drop
(high temps)
Mexicofreeze
Argentine& Brazildrought
14-crop monthly price index: Wheat, rice, corn, & soybean prices; based on IMFprice and trade share data.
Russia endsexport ban
U.S. $ appreciates
Favorable weatherIn Europe & FSU
Higher estimated global grain stocks
46
Even Top 500 Chains Are NotImmune to Rising Commodity Costs
Jack in the Box Chili’s IHOP
Red Robin Texas Roadhouse Taco Bell
+5.0% +4.0% +5.0%
+5.5% +4.9% +7.0%
47
More Operators TakingPrice Increases
35%44% 47%
2010 2011 2012
Have Taken Price Increase inFirst 3 Months of Year
Will Take Price Increasein Next 6 Months
28%34% 37%
2010 2011 2012
48
Operators Need to Focus More Intensely onOther Value Drivers for Balance
Value
Service
Convenience
Atmosphere
Quality
Low Prices/Deals are NotSustainable Competitive Advantage
Price
49
50
The Drive for Value:Meeting Consumer Expectations
VariedMenu Strategies
Uppingtheir Game
On-LineCoupons
Major Strategies
• Remaining competitive
• Delivering more
• Responding to core needs, priorities
Points ofDifferentiation
Lifestyle
Operator’s Employing VariedValue Strategies
Tiered PricingEverydayLow Price Extras Relative Pricing
$2 $4 $6 $8Value Menu
$10.00 Large Pizzaup to 3 Toppings
Free Sides withPremiumSandwich
$5.00 Footlong
51
Upping Their Game:Domino’s “Oh Yes We Did”
Before After
52
Online Coupons Have Had MajorImpact
53
• Launched 2008; fastestcompany to $1B ever.
• Negotiates deep discounts andthen splits revenue withvendor.
• 38.0mm customers
• User:
– 18-34 years old (68%)
– College educated (50%)
– Single (49%)
– Woman (77%)
– $110K+ (29%)
About Groupon
Yes22%
No78%
Have Used Online Coupon
54
• 42% of Restaurants reported thatGroupon promotions were“unprofitable”
– Customers were deal makers.
– Poor tippers.
– Not repeat customers.
– Barrage of customersoverwhelms restaurant.
– Cannibalize sales and take spacefrom full paying guests.
– Lowers check average.
Groupon May Not Be Answerfor All Restaurants
“How Effective Are Groupon Promotions For Businesses?”, Rice University, 9/2010 55
56
Points of Differentiation: MenuInnovation
Chipotle Wing Stop Noodles & Company
Pei Wei Daphne’s Einstein Bros.
• McDonalds $5BB Makeover
– Remodels: 2,500 units
– Rebuilds: 6,100 units
Goal: boost average annual sales at each renovatedrestaurant from $2.3 million to $3.1 million during thenext four to five years (34.7%)
Points of Differentiation –Concept Rebuilding and Remodeling
57
• Flex Casual Asian
• Design more efficientlyservices guests
• Footprint reduced from3,000 to 2,500 sq. ft.
• Upfront cost reduced by$50,000
• Off-premise revenue hasgrown to more than 40% ofsystem-wide sales
• Monthly overhead expectedto decrease $2K
Points of Differentiation:Concept Re-Innovation
58
Points of Differentiation:Hey Bartender!
59
Social Media Rewards Loyalty
Free chips and salsa for checking invia FourSquare
New sushi roll for FourSquare“Swarm Party”
Coupons, customer engagementyield 10 million fans on Facebook
Discounts to “Tweet while you eat”
60
• 2.1 million pounds ofwaste paper saved
• 7.5 million gallons ofwater saved
• 4.4 million kilowatts ofenergy saved
• 3,194 cubic yards oflandfill space saved
Aligning with Lifestyle Needs:Eco-Friendly
St. Petersburg – Worm Bin
61
62
Guests Will Pay More for Mealsthat Match Their Lifestyle
“Makes me more willing to purchase and am willing to pay…”
Technomic College and University Report
23%
25%
25%
8%
7%
8%
Fair Trade
Locally Sourced
Sustainable
Slightly More For (Up to 5% Increase)
Significantly More For (More Than a 5% Increase)
Quiz Time:Segment Review
63
Client Logo
Break
Client Logo
Consumer Mind Sets andOperator Responses
66
Consumer Mindset Trends HaveImpact on Foodservice
Multi-Generational Demands
Ethnic Influence
Value Orientation
Health & Wellness
Customization
1
2
3
4
5
Client Logo
1. Multi-Generational Demands
Post - Millennials( < Age 14 )
19%
Millennials( Age 14 - 31 )
25%
Generation X(Age 32 - 42 )
16%
Baby Boomers(Age 43-62 )
25%
Swing(Age 63-75)
9%
World War II( > Age 75 )
6%
Who We Are:Meet Your Neighbors
Generation
68
Generation Gap: Food at Home vs.Food Away-from-Home
39%
44%
40%
33%
“I eat out morefrequently than Iprepare my ownfood at home.”
All Millennials Gen X Boomers
Base: 1,501 respondents ages 16 to 62Scale: Top 2 Box rating on scale from 1-6 where 6 = agree completelyand 1 = disagree completely 69
< Age 3524%
35 - 4423%
45 - 5424%
55 - 6416%
65 - 748%
Age 75+5%
Generational Top Restaurant Spenders
Restaurant Spending Share by Householder Age
Source: Bureau of Labor Statistics Consumer Expenditure Survey 70
Generation Gap: Atmosphere
Sit-down, Full Service Chain(Chili’s, Outback Steakhouse, Red Lobster, etc.)
• To relatively quiet 68% 56% 71% 80%
• To be lively with conversations fromother diners in the background
32 44 29 20
BoomersGen XMillennialsAll
71
• Low sodium
• Low fat
• Low calories
• Low carb
• Portioncontrol
Generation Gap: Health & Wellness
• Fresh
• Organic
• Local
• Natural
• Sustainable
72
Preferences for Natural andOrganic Skew Younger
“Which of the following do you do on a regular basis?”
14%
18%
8%
13%
8%
14%
Eat Foods thatare Organic
Eat Foods that Are Considered All-Natural
Millennials Gen X Boomers
Base: 1,501 consumer respondents Scale: Top 2 Box – 5/6 rating on a 6-point scaleSource: Technomic, Generational Consumer Trend Report (2008) 73
Operator Strategies: AddressingMature Consumers’ Demands
Early Bird Special
Senior Discounts
28 Vegetables
“55 Menu”
Senior Loyalty Program
Senior Club Card
Weekly Drawings to WinFree Meal
“Diet Smart Choice” @Specialty Salad Bars
Source: Technomic; ID Magazine 74
Operator Strategies: AddressingYoung Consumers’ Demands
75
• Surpassed $1 billion in digital sales (US)
• Digital sales account for over 30% of overall sales
• iPhone and Android apps downloaded more than 3mm times
• Mobile ordering sales account for 8% of sales.
Smart Phone Ordering Changingthe Landscape
76
Tweets To Eats
77
Location: Los Angeles, CANumber of trucks: 4Web: www.kogibbq.comhttp://twitter.com/kogibbqTwitter Followers: 63,366Facebook Fans: 10,539
Kogi BBQ
Korean Fusion• Kimchi Pastrami Melt• Black Jack Quesadilla• Korean Short Rib Tacos• Tofu Tacos• Chocolate Tres Leches• Spicy BBQ Chicken Tacos• Burritos
78
Welcome to the Mainstream
79
Client Logo
2. Ethnic Influence
18%population by 2020
• 81% of the populationincrease from 2000 to 2020will be from minoritygroups
Ethnic Growth Signif icant
% Population Growth Through 2020
5.0%
26.4%
67.8%
68.4%
White
African American
Hispanic
Asian
Source: U.S. Census Bureau 81
56%
44%
27%
31%
47%
56%
60%
67%
39%
31%
8%
7%
29%
41%
20%
21%
Cost of Food
Receiving Value
Menu Items that Appeal to Kids
Kid Friendly Promotions
Promotions
Beverages With Natural Flavors
Healthy Kids Menu Items
Cost of Beverages
Non-Hispanic Hispanic
Importance of LSR AttributesVaries by Group
82
• Fine Dining
• Ethnic andIndependentRestaurants
• Specialty FoodPublications
• Sur La Table
• Food Network
• ChainRestaurants
• Williams-Sonoma
• MainstreamMagazines
• QSR Menus
• MainstreamGrocery
Ethnic Influence:Anatomy of a Trend
5 Stages of a Trend – Chipotle
1 2 3 4 5
83
Operator Strategies:Addressing the Minority Influence
84
Client Logo
3. Value Orientation
Across Income Groups, ManyConsumers Have Felt a Direct Impact
Yes70%
No30%
“Has the economy had a directimpact on you?" “Yes” by Income
74%
71%
70%
59%
66%
<$35,000
$35,000-$59,999
$60,000-$99,999
$100,000-$149,999
$150,000+
86
• Absolute Cost
• RelativeExpenditures
• Combo’s &Bundling
• BOGO
• Ladder
Operators Util ize Variety ofPricing Strategies
FSR
LSR
87
Dealing Not Necessari ly a BadThing for Operators
“How does the fact that a restaurant offers a deal ordiscount influence your opinion of…?”
46%
52%
2%
Overall
Improves It No Change Lessens It
30%
69%
1%
Quality of Food
47%
50%
3%
Value of Restaurant
88
Menu Mix Strategies –Focus on Higher Margin Products
July 2010July 2011 June 2008
November2010
June 2008 November2009
89
Alternative Protein Strategies:More Poultry on the Menu
Chain
• Chicken Selects• Chicken Snack Wraps• Chicken McBites• Chicken Wings (in test)
• Chicken Parmesan Sandwich• Italian Basil Chicken Sandwich & Wrap• Popcorn Chicken• Garden Salad Wrap with Crispy or Grilled Chicken
• Turkey Roaster• Turkey n’ Cheddar Roaster• Grand Turkey Club Roaster
90
Operator Strategies: Cheap Chic
91
Client Logo
4. Health & Wellness
"Food is an important part of a balanced diet."-Fran Leibowitz, author/actress
“Life expectancy would grow by leaps andbounds if green vegetables smelled asgood as bacon.”-Doug Larson, columnist, Green Bay Press-Gazette
“If I'd known I was going to live so long, I'dhave taken better care of myself.”
-Leon Eldred
Food for Thought
93
Portion Distortion
Then Now
94
Majority of Diners Sti l l Optfor Less Healthy Meals
Ordered a meal Iconsider to be
healthy42%
Ordered a meal Ido not consider to
be healthy58%
“Thinking about the last 10 times you purchased food from arestaurant, how many times would you say that you ordered a meal
that you consider to be healthy?”
Base: 1,500 consumers aged 18+ 95
73%
73%
72%
72%
71%
71%
69%
68%
65%
64%
All-natural
Preservative-free
Hormone-free
Steroid-free
Certified organic
Having no artifical sweeteners
Organic
Unprocessed
Natural
Antibiotic-free
What’s Healthy? It’s All in How YouSay It
Base: Approximately 500 consumers aged 18+; base varies slightly as attributes wererandomly rotated. Consumers indicated their opinion on a scale of 1–5 where 5 = muchmore healthy and 1 = much less healthy 96
Freshness Strongly Linked to Health
Base: Approximately 500 consumers aged 18+; base varies slightly as attributes wererandomly rotated. Consumers indicated their opinion on a scale of 1–5 where 5 = muchmore healthy and 1 = much less healthy
70%
41%
38%
35%
34%
32%
30%
29%
25%
24%
Fresh
Real
Seasonal
Homemade
Made from scratch
Premium
Housemade
Authentic
Homestyle
Artisan
97
19%
18%
16%
10%
29%
27%
27%
17%
Local
Organic
Natural
Sustainable
Very good understanding
Good understanding
Guests Not So Sure What Goesinto a Healthy Halo
Base: 1,500 consumers aged 18+ 98
31%
10%
27%
18%
27%
17%
22%
22%
50 miles
100 miles
The city/community
The state
Perceived restaurant/retailer defintion Consumer definition
Local Means Close to HomeLocal Items Are Sourced Within…
Base: 1,500 consumers aged 18+ 99
Never Eat Anything Bigger thanYour Head
Aussie Cheese FriesAussie Fries topped withmelted Monterey Jack,Cheddar, bits of fresh
chopped bacon and servedwith a spicy ranch dressing.
Calories = 2,900Fat Grams = 182
Carbohydrate Grams = 240
100
Outback Steakhouse’s AussieCheese Fries Same as…
67 Slices of Bacon
4 Baskin RobbinsBanana Royale Sundaes
5 Big Macs
101
This is Why You’re Fat
102
Consumers Surprised by CalorieCounts; Higher than Expected
“Have you been surprisedby the calorie counts?”
Base: Have read calorie information = 161“Are they higher than expected?”Base: Surprised by calorie content = 136
Yes82% No
18%
Yes70%
No30%
103
Consumers Think the Information HasMade Some Impact on Their Ordering
“How much of an impact has nutrition information onmenus impacted your ordering behavior?”
30%
43%
15%12%
A great deal Somewhat Not really Not at All
Base: Have visited restaurants that post calories = 192 104
Calories Per Dollar
105
Operator Strategies: Menu Clues
106
Operator Strategies: What’s in aName?
107
• Alarming child obesity statistics driving legislativeand operator initiatives.
• What does it mean to customers and operators?
The Next Battlefield: Kids’ Meals
108
Client Logo
5. Customization: Have It Your Way
The Importance of Choice
“How important is it to beable to customize your meal
at the following types ofLSR’s?
Base: 1,501 consumer respondentsScale: Top 2 Box – 5/6 rating on a 6-point scale
82%
61% 59% 57% 53% 48%
San
dw
ich
Bu
rger
Mex
ican
Bak
ery
Caf
é
Ch
icke
n
Asi
an/N
oo
dle
78% 78%71% 71% 68% 63%
56%
Var
ied
Men
u
Stea
k
Fam
ily
Ital
ian
Seaf
oo
d
Mex
ican
Asi
an
“How important is it to beable to customize your meal
at the following types ofFSR’s?
110
The New “31 Flavors”
“A Few Things, Thousands of Ways”
111
Operator Strategies: AddressingCustomization Desires
112
The Next Chipotle?
113
Client Logo
Foodservice Distributor Environment
Foodservice Distributor Landscape
2010 Foodservice Distributor SalesTotal = $201 Billion
2010 Number of Distributors
*U.S. only
Broadline2,50015%
Specialists11,000
67%
Nonfoods3,00018%
Top 10Broadliners
42%
All OtherDistributors
38%
Club Stores/CNC8%
SystemsDistributors
12%
115
Primary Business
Broadline Systems Club/CNC
1. Sysco
2. US Foodservice
3. PFG
4. Gordon
5. McLane
6. Restaurant Depot
7. Costco
8. Reinhart
9. Martin Brower
10. MBM
The Top 10 Companies ReflectMultiple Types of Distributors
116
• Canned, frozen, equipment,supplies, tabletop, disposables(400-500 suppliers)
• 2,000-4,000 customers
• 8,000+ SKUs on hand
• Negotiated pricing withindependents, small chains
• Cost-plus pricing with largechains
• Power Distributor >$150MM*in sales
• Billionaire Club Distributor >$1Bin sales
Broadline Distributors
117
Top Power Broadline Distributors
2005 Sales($B)
2007 Sales($B)
2010 Sales($B)
1. Sysco* $31.4 $36.4 $38.4
2. U.S. Foodservice 18.5 20.0 18.8
3. Performance Food Group 5.7 6.3 10.3
4. Gordon Food Service* 3.7 6.0 7.7
5. Reinhardt 2.1 3.1 4.5
6. Maines Paper 2.0 2.4 3.0
7. Food Services of America 2.0 2.6 2.6
8. Ben E. Keith 1.3 1.7 2.1
9. Shamrock 1.3 1.7 1.9
Total $69.1 $80.2 $89.3
*Includes sales in Canada 118
Power Distributors – 2005 vs. 2010
2005 2010 Change
Companies 31 34 +3
Total Sales($MM)
$74,800 $95,000 +$20,200
Sales/Company 2,412 2,617 +$205
DCs 387 464 +77
DSRs 20,500 20,000 -500
119
• USF is the second largest national broadline distributor in the UnitedStates
• 65 Distribution Centers and 14 Processing facilities
• Infrastructure
– ~250,000 customers
– ~27,500 employees
– ~4,700 sales associates
– ~300,000 SKUs
– ~35,000 Private Label
– ~6,000 suppliers
– ~6,000 trucks
• Serves three primary customer segments
– Street (independent restaurants)
– National Accounts (hospitals, schools, etc.)
– National Chain Restaurants
Anatomy of a Top 10 Distributor
Broadline locations
North Star locations
120
• More contract business with lowermargins
• Losing street customers to clubs,depots, CNC
• Less street pricing power than in thepast
• GPOs a battle for “operator control”
• Distributor brands advantage
• Focus on operating cost reduction
Evolving Distributor Realit ies
121
• Represent 20% of industrypurchasing
• Very strong healthcare penetration
• More involvement in othersegments
• Manufacturer issues: extendibility,double dipping, no volumeguarantee
• Distributor issues: loss of operator“control,”margin erosion
GPOs Increasing asan Industry Factor
122
GPO
2009 FSPurchases
($000) Segment Focus
Foodbuy(Compass)
$2,400,000Multi-Unit
FoodserviceOperators
Entegra(Sodexho)
2,000,000 Hospitality
Avendra 2,000,000 Travel & Leisure
Premier 1,500,000 Healthcare
Dining Alliance 1,000,000Multi-Unit
FoodserviceOperators
Top 5 GPOs
123
GPO Penetration of IndependentsHas Stirred Distributors
SegmentTotal Segment GPOPurchases ($MM)
% of Total RelevantSegment Purchases
K-12 $2,595 28%
Colleges 1,845 29
Hotels 3,337 36
Street Restaurant 3,055 6
Business & Industry 770 10
Hospitals 4,030 89
Nursing Homes 2,170 61
Recreation 2,216 34
Total $20,020 21%
Total Purchases Made through GPOs
Source: 2009 Technomic GPO Study
“In terms of non-specialized GPO’s, I would describe them aspariahs. They don’t add a lot of value. They simply disrupt
the profit potential in the marketplace.”
124
Contract Share of Business IsQuite High and Growing
62%Contract
Independents
Top 500 Chains
Other Contract/Chain
GPOs
FSMs
Total Purchases = $201B
37%
35%
10%
10%
10%
125
Concern: Customer/Margin MixAre Critical to Profitabil ity
2010 (E) Share of…
(E) = Technomic estimate
37%
65%
63%
35%
Sales Profit
Street Contract
Street Sales Shoulderthe Profit Load
126
History of Distributor Brands
2007
1997
• Distributor labels
• Lower cost
• Questionablequality
• Distributor brands
• Better value
• Good quality
• An alternative tomanufacturer brands
2012
127
Brand Structure – DistributorBrands
Price
Qu
alit
y
128
DB’s a Key to Future Success
Manufacturer$117B59%
Distributor$37B18%
Operator $47B23%
2010 Total Distributor Sales(Operator Purchases) = $201B
by Brand Type
Importance of DB’s toFuture Success
Not VeryImportant
18%
Important23%
VeryImportant
24%
ExtremelyImportant
35%
Source: Technomic Distributor Intelligence Service Issue #68 (6/11) 129
Despites Profitabil ity, Challengesto DB Growth Exist
$2.30
$1.10
($0.35)
DistributorBrands
ManufacturerBrands
OperatorBrands
Distributor Profit/Case*Average = $1.30
*Based on case value of $26.50Source: Technomic
Obstacles to Selling DB’s
53%40% 40%
Mfg. BrandsSpecified
Sales RepResistance
Lack ofCustomer
Acceptance
130
Volume Growth Will Come fromOperator and Distributor Brands
*In constant 2010 dollars
Operator Purchases($B*)
Brand Type 2010 2015Change
($B)
Manufacturer $117 $115 -$2
Operator 47 53 +5
Distributor 37 39 +2
Total $201 $206 +5
131
• Educator, territorymanager, sales generator
• Handle 50-60 customers
• Distributors believe DSRspay big dividends
• Not looking to reducenumbers
• New skills – operator foodcost management
• Talent upgrades
Distributor Sales Rep (DSR) Landscape
“Our customers, even the newgeneration, want to see DSRs”
Agree60%
Disagree40%
“I am more loyal to my DSRthan I am to his/her company.”
132
There has been no major shift over the recent past
133
How Distributor Sales RepsSpend Their Time
*Includes admin, scheduling, etc.Source: Distributor Intelligence Service
% of Time
Average = 25 minutes
TakingOrders
32%
HelpingCustomers
21%
Traveling19%
Other*28%
• Buying Groups
• Systems Distributors
• Specialty distributors
– Product (meat, dairy,equipment)
– Segment (vending, airlines)
• Warehouse clubs
• Cash-n-carry
• Direct-store delivery (DSD)
Other Distribution Alternatives
134
• Affiliation for small/ medium-size distributors
• Provide buying clout –negotiation leverage
• Expanded marketing,strategy, support services
Distributor Buying Groups
135
• Serve the super chains
• Few customers
• Limited inventory
System Distributors
Source: Technomic; ID Magazine
Independent Chain OwnedChain OwnedBroadliner
OwnedBroadliner
Owned
• Lower overhead
• Cost-plus pricing with chains
• Ownership structures vary
136
“We see the club store segment as a greater threat tomarket share because of the growing ethnic restaurantsegment. They are very price sensitive. They don’t mind
running out to Restaurant Depot. They don’t consider thevalue that a broadliner provides.”
Club Stores Are Major Factor
137
• Quality merchandise
• Low prices
• No minimums
• Increased availability/quality ofperishables
• Package size
• Brand names and private label
• “See, touch, smell” before buying
Clubs/Cash-n-Carry Appeal toOperators
138
• Monies paid to distributors bymanufacturers tocarry/promote products
• Manufacturer trade funding =>75% of distributor operatingprofit
• Typical manufacturerspending level 16.2% ofsales
• Majority of Trade Spend is“Local Trade Spending”(58.5%)
A Primer on Trade Spending
88%
79%
75%
71%
Increases Volume
Increases AccountPenetration
Increases Profits
New Customers
Defining Success ofMarketing Programs
Source: Technomic Distributor Intelligence #58 (7/2010) 139
Distributor Trade Programs
92% 88%71%
SalesMeetings
Food ShowParticipation
Contests/Promotions
for DSR's
Top 3 Activities Included inMarketing Programs
Operator Food Show Likes
Source: Technomic Driving Change: Improving Local Trade Spending ROI.Common Interest Sponsorship (2009); Technomic Distributor IntelligenceService #58 (7/2010)
See NewProducts
56%
Other13%
Talking toReps3%
Networking3%
PurchaseDiscounts
7%
Samples8%
ServingIdeas10%
140
National and RegionalRedistributors
• Dot Foods • AlpineRedistribution
• Empire Beef
• FoodserviceCenter
• Honor Foods
• Reddy Raw
• RW Zant
• Twelve Baskets
• SYSCO RDCNetwork
• Golden Bay(Federated)
• Golbon
• Progressive GroupAlliance
• MBM
OpenDistribution
ClosedDistribution
National Regional
141
We have startedmapping our
strategy to roll outcategory
management13%
We do not haveany plans to
develop a CMP16%
We haveestablished aformal CMP
42%
We would like tohave a formal
CMP are not readyto start
29%
• Recognize value butslow to adopt
• Biggest Concerns
– CustomerRelationships (58%)
– Time Consuming(53%)
– Rank & FileCommitment (42%)
• Becoming a keyinitiative
– Sysco
– U.S. Foodservice
Finally, Category Management:What’s Happening?
Source: Technomic Distributor Intelligence Service Report #60 9/2010 142
Quiz Time: Distributors
143
Client Logo
Lunch
Client Logo
Beyond Restaurants
BeyondRestaurants
$77.8B43%
Rest. & Bars$101.8B
57%
BR Segments Represent LargeVolume Opportunities
2011 Total FoodservicePurchases = $179.6B*
2011 Beyond RestaurantsPurchases = $77.8B*
Retail Hosts$15.2B20.0%
Education$14.9B19.0%
Travel &Leisure$15.1B19.0%
Vending/OCS$9.4B12.0%
B&I$6.0B8.0%
Healthcare$10.1B13.0%
All Other$7.1B9.0%
*Excludes alcohol and non-foodsSource: Technomic 146
Issues & Outlook• Super Markets +4.0%
– Large FS footprint
– Value
– Variety
• C-Stores +1.5%
– Continued focus on beverage
– Hi fuel costs hurt
• Other +3.5%
– Club store growth
Retail Host Foodservice
Supermarkets$9.1B60%
C-Stores$3.7B24%
Other RetailHosts$2.5B16%
Total Retail Host OperatorsPurchases = $15.2B
Source: Technomic 147
C-Stores: Then & Now
148
Foodservice Leads In-Store Profits
68%
67%
54%
45%
Frozen DispensedBeverages
Cold DispensedBeverages
Hot DispensedBeverages
Prepared Foods
Source: CSNews Industry Report
Average Gross Margin Percent In-Store
51%
25%
Foodservice Merchandise
149
Meet “Bubba”
Heavy/Moderate Light/Infrequent
Gender Skews male Skews female
Age Skews young (<24) Skews older (45+)
Race Hispanic Caucasian
Education High school, some college College graduate
Income Less than $25K annually $50K-$75K
150
Not Your Daddy’s C-Store
Watauga, TX
151
Retail Host Foodservice All-Stars
Costco SheetzWegman’s
152
Issues & Outlook• Lodging +4.5%
– Meetings, catered events
– Upscale recovery
• Transportation +2.5%
– International departures
– Flat 2012
• Recreation +.4%
– Less discretionaries
Travel & Leisure Foodservice
Total Travel & Leisure OperatorPurchases = $15.1B
Recreation$4.7B31%
Lodging$8.5B55%
Transportation$1.9B13%
Source: Technomic 153
Travel & Leisure Foodservice All-Stars
Safeco FieldSeattle, WA
The SurreyNYC
Thai AirlinesEconomy Class
154
Issues & Outlook• K-12 +2.0%
– Diversified enrollment
– Nutrition legislation
– Parents
• College & University +4.5%
– College population increasing
– Growth in 2-year colleges
– Greater FSM, GPO focus
– More savvy diners
Education Foodservice
Total EducationPurchases = $14.9.6B
K-12Schools$8.8B59%
College/University
$5.8B41%
Source: Technomic 155
Education Foodservice All-Stars
Hokie Grill
West End Market
Virginia Tech University Greenview Upper Elementary School(South Euclid, OH)
156
Issues & Outlook• Senior Living +3.5%
– Here come the Boomers
– Housing crises
– Retirement income
• Hospitals +5.1%
– Upscaling, customer service focus
– Cash operations
• Long Term Care +.4%
– Severe budget shortages
– Delay of elderly entering nursinghomes
Healthcare Foodservice
Total HealthcarePurchases = $10.1B
Hospitals$4.2B43%
Long-TermCare
$3.2B32%
SeniorLiving$2.6B25%
Source: Technomic 157
Healthcare Foodservice All-Stars
Virtues Restaurant – SumaHealth Care (Akron, OH)
Vi Assisted &Independent Living
(San Diego, CA)
Hanna HealthCareCenter (Verona, PA)
158
Companies that operate and manage foodservice facilitieswithin/for other establishments (typically noncommercialestablishments) for purpose of making a profit
Foodservice Management Firms(FSMs)
159
FSMs Dominate Share of SeveralSegments
FSM Segment Share
81%
60%
38% 36%
19% 16% 15%
76%
58%
37% 35%
18% 15% 15%
B&I C/U Recreation Hospitals K-12 Senior Living Long-TermCare
2010 2007
Over 7,000 B&I units are FSM-run compared to lessthan 3,000 self-opsKey Insights
160
Organization U.S. Revenue (in millions)
1. Compass Group $9,200
2. ARAMARK 8,600
3. Sodexho 7,900
4. Delaware North 1,950
5. Centerplate 1,000
The Leading Players
¹/ North America revenueSource: Technomic/Foodservice Director 161
30%
26%
19%
19%
6%
Business & Industry Education Healthcare Recreation Other
Leading FSMs Have PrioritizedStruggling B&I Segment
41%
19%
16%
11%
13%
% of Revenue by Segment
34%
22%
20%
6%
18%
162
Compass Uses Multiple BrandsAcross Different Segments
HealthcareDining
HealthcareFacilities Education Vending
Sports &Entertainment
BusinessDining
163
• Corporate name usedacross all segments
• Emphasize overallfoodservice expertiseversussegment expertise
• Management believesthat future change insegment brandingstrategy would bereactive and negativelyreceived
Aramark and Sodexho Use SingleBrand Strategy Across Segments
164
• University of TampaStadium
• Center of Plate: BBQChicken, Pork, Beef andFish
• Sides: Smoked Macaroniand Cheese, VegetarianChili, Corn Bread, SweetPotato Fries
• Combos: $5.49 - $8.49
Sodexo’s Newest - SparBQ
165
Quiz Time: Beyond Restaurants
166
Client Logo
The Chains
Limited Service Segmentation
*QSR Specialty includes: Bagel, Barbecue, Chili, Other Ethnic, Seafood and snack**FCR Specialty includes: Barbecue, Italian, Other Ethnic and SaladSource: Technomic, Inc.; company reports
QSR71.4%
FCR28.6%
LSR Segmentation
$791
$653
$1,098
Total LSR
QSR
FCR
Median AUVComparison ($000)
17
13
9
9
9
6
5
5
Mexican
Bakery Café
Chicken
Hamburger
Other Sandwich
Specialty**
Asian
Pizza
FCR Composition
4028
2020
1616
109
766
4
PizzaOther SandwichFrozen Desserts
HamburgerCoffee & Other Beverage
Specialty*Chicken
Cafeteria/BuffetFamily Steak
DonutMexican
Asian
QSR Composition
Total QSR Chains: 182 Total FCR Chains: 73
168
Full Service Segmentation
*CDR Specialty includes: Other Ethnic and Other**MSR Specialty includes: HamburgerSource: Technomic, Inc.; company reports
CDR82.0%
MSR18.0%
Full-Service Segmentation
$2,725
$3,000
$1,475
Total FSR
CDR
MSR
Median AUVComparison ($000)
35
6
2
1
Family Style
BBQ
Italian
Specialty**
MSR Composition
86
33
23
20
18
11
7
3
Varied Menu
Steak
Italian
Mexican
Seafood
Asian
BBQ
Specialty*
CDR Composition
Total CDR Chains: 201 Total MSR Chains: 44
169
LSR Menu Segments
Source: Technomic 2012 Top 500 Report*Nominal ** Seafood, Italian, BBQ, Bagel
LSR Segment ‘11 Sales $B ‘11 Growth*
Hamburger $68.2 3.6%
Other Sandwich 18.6 4.7
Pizza 20.5 2.5
Coffee Café 17.1 6.6
Chicken 14.9 3.6
Mexican 12.6 4.1
Bakery Café 5.2 7.0
Frozen Dessert 5.1 -.1
Family Casual 4.7 -2.0
Asian/Noodle 2.6 5.5
Other** 4.3 1.9
170
FSR Menu Segments
FSR Segment ‘11 Sales $B ‘11 Growth*
Varied Menu $27.4 2.6%
Family Style 13.3 .9
Steak 8.7 5.1
Italian 7.1 2.2
Seafood 4.9 5.2
Mexican 2.0 .4
Asian Noodle 1.8 2.7
Other 2.2 3.5
Source: Technomic 2011 Top 500 Report*Nominal 171
2Q-11 3Q-11 4Q-11 1Q-12 2Q-12
8.0% 10.0% 9.0% 8.0% 7.0%
5.8 2.5 4.0 2.1 5.4
4.6 4.1 5.6 2.5 2.8
Same-Store Sales Change vs. Previous Year
Specialty LSR Players PerformingWell
172
*
2Q-11 3Q-11 4Q-11 1Q-12 2Q-12
10.0% 11.3% 11.1% 12.7% 8.0%
4.4 6.0 5.9 7.5 4.8
5.1 3.7 3.5 3.0 2.1
Same-Store Sales Change vs. Previous Year
*Franchised stores
Fast Casual Continues StrongShowing
173
6 of 10 Fastest-Growing Chains AreFCRs
1,150%
268
188
185
184
182%
159
145
131
101
Total % Growth(2005-2010)
Chains over $200MM in sales.Source: 2006-2011 Technomic Top 500 reports. 174
FCR Menus Imply Culinary Touch
Source: Technomic Menu Monitor.
• Mediterranean Veggie Sandwich ontomato basil with peppers, feta,cucumber, lettuce, tomatoes, red onionsand cilantro hummus.
• Teriyaki Charburger with grilledpineapple. 100% lean beef.
• Wild Salmon “Lite” Burrito. Noriseaweed, poblano brown rice, avocado,cucumber, cabbage, fat-free chili, sesameaioli, whole wheat tortilla.
Concept Menu Item
175
FCR Price Points Attractiveto Consumers
Meal Components FCR CDR* QSR
Boneless Buffalo WingsFriesSoft Drink
$10.58 $15.49 $9.87
½ lb. Bacon CheeseburgerFriesSoft Drink
$9.67 $14.35 $7.59
Chicken QuesadillaSoft Drink
$8.58 $14.35 $5.19
*Includes 15% tip.Source: Technomic MenuMonitor 176
FCR: The Bright Spot in theRestaurant Industry
2.5%
3.5%
14.4%
3.5%
-0.5%
1.4%
11.0%
1.1%
FSR
QSR
FCR
All Restaurants & Bars
10 Year CAGR 5 Year CAGR
Growth rates nominal.Source: Technomic
Growth to 2011
177
Chain 2Q ‘11 3Q ‘11 4Q ‘11 1Q ‘12 2Q ’12
- 2.0 - 3.0 6.0 5.0 4.0
4.8 3.0 6.8 2.0 1.7
- 0.1 4.9 1.8 0.5 5.1
0.3 - 6.3 - 3.6 - 4.2 - 2.4
Pizza on the Rise
178
Chain 2Q ‘11 3Q ‘11 4Q ‘11 1Q ‘12 2Q ‘12
4.5 4.4 7.1 8.9 3.6
2.3 0.7 4.2 0.7 3.2
3.9 - 0.5 0.1 3.5 2.8
3.2 3.1 5.3 4.2 2.8
9.6 2.5 1.8 6.1 2.6
Some Burger Chains Startingto Grow Again
179
• McDonald's sells more than75 hamburgers every second
• McDonald’s $32B in revenueexceeds the GPD of Ecuador.
• McDonald's is the world'slargest distributor of toys,with one included in 20% ofall sales
• The only place in the lower 48that is more than 100 milesfrom a McDonald's is a barrenplain in South Dakota (N45.45955 W 101.91356)
A Word About McDonald’s
180
Same-Store Sales Change vs. Previous Year
Casual Dining Chains ShowingSigns of Life
Chain 2Q ‘11 3Q ‘11 4Q ‘11 1Q ‘12 2Q ’12
3.5 - 0.4 0.8 1.0 0.5
2.1 1.7 1.4 4.6 2.2
2.7 4.2 5.9 7.2 5.5
- 0.1 - 4.1 - 4.2 - 5.0 - 4.6
181
Contemporary Casual Doing Better
Same-Store Sales Change vs. Previous Year
2Q-11 3Q-11 4Q-11 1Q-12 2Q-12
2.1% 0.8% 2.7% 2.4% 2.1%
5.7 3.5 2.8 3.9 1.9
9.1 10.6 7.8 8.7 2.3
182
Upscale Showing Renewed Vigor
Same-Store Sales Change vs. Previous Year
*
*Franchised stores
2Q-11 3Q-11 4Q-11 1Q-12 2Q-12
5.8% 2.6% 7.7% 3.7% 6.0%
8.2 5.1 n/a n/a n/a
7.9 7.0 5.7 5.7 2.8
9.9 10.1 na 5.4 3.0
183
This Just In…
Chain News
Taco Bell• First Meal" set to debut in about 750 locations in
10 states
Taco Bell
• Begins testing an expanded, more upmarketmenu that focuses on fresh ingredients -- thinkChipotle Mexican Grill on a budget
Wendy’s• Testing premium “Black Label” Burgers: Bacon
Portabella and Spicy Santa Fe @ $4.49
McDonald’s
• Twister Fries are only available in the Philippines,where many call the fast food chain "McDo." Butthe fries are only available for a limited time, themagazine reported, costing about $1.43 in U.S.dollars .
184
This Just In…
Chain News
Golden Corral• Proving not everyone is on the health bandwagon,
offers cotton candy on buffet.
Starbucks
• Will open its first tea-only store in October under theTazo brand. The shop will sell more than 80 varietiesof loose-leaf tea, pastries, baked goods and packagedchocolates.
McDonalds• Will be opening its first two vegetarian restaurants in
India in 2013.
DunkinBrands
• Will begin transitioning to cage-free eggs nationwidewhile requiring its pork suppliers to phase out pig-breeding cages called gestation crates as part of itscorporate social responsibility commitment.
185
Quiz Time: The Chains
186
Client Logo
Conclusions
• Consumers starting tospend again
• Most segments to grow ona real basis
• Momentum starting tobuild
• But recovery will be slow,not dramatic
• Niche, operatorprioritization still critical
Conclusions
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Today’s Elevator Speech
Necessary Actions
Traffic
Consumer frugality
New value definition
Addressing new legislation
Rising fuel and commodity prices
Work with operators on value offerings
R&D partnerships
Cut costs out of supply chain
Greater transparency
Longer term: business building
Challenges
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Thanks for Your Attention Today…Any Further Questions?
Mathew MandeltortSenior Consultant
312-506-3917
[email protected]:epicureancandidate.wordpress.com
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