the qsr crawl 1
TRANSCRIPT
QSR Crawl 2008
A Review of the QSR MarketplacePrepared by Dr Pepper Snapple Group
July 2008
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Report Definition
The following report is a review of the QSR marketplace and
key QSR Accounts with a detailed focus of the beverage
category
Methodology: All information included in Report is public
information. Report sourced from the following:
– Industry Reports
–CREST
–Competitive Shop/Observations
–Annual Reports
–QSR websites
–Press Releases
–Advertising
–DPSG Subject Matter Experts
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Table of Contents
QSR Marketplace Situation
QSRs “In The News”
QSR Assessment Overview
–Jack in the Box
–Sonic
–Whataburger
–Chick fil A
–Burger King
–McDonald’s
–Wendy’s
–Taco Bell
–Subway
Conclusion: The Five Strategies To Drive Beverage
Incidence
Appendix
QSR MARKETPLACE
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While the QSR market growth rate has slowed somewhat, sales are still on
the increase despite lean financial times.
Mintel expects QSRs to fare better than the restaurant industry overall in
the coming years, as a wide variety of menu options at budget prices keep
customers engaged.
QSRs holding on despite (and because of)
the U.S. economy
Source: Mintel
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…but are heading abroad
Many companies are
“packing up their
brand” and heading
overseas, where
once poor nations
are prospering, and
there is a love of
American brands
and a dearth of
dining options.
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The rising costs of food and gas
Gas prices are currently up 18.5%
from where they were last year.
Between March 2007 and March
2008 inflation rose by
4.0%
due to a
17.0%
increase in energy costs and a
4.4%
jump in food costs.
Source: USIEA/Mintel
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A Burger King franchisee,
,
has alleged in legal action
that a 99-cent menu it was
forced to carry between 2002
and 2004 led to a
that forced the closing of
three units.
The mighty value meal
Some McDonald’s Dollar Menu boards now
read “Dollar Menu & More” and include
recently raised prices on items such as the
Double Cheeseburger, which, for instance, is
now
$1.29 in downtown Chicago and
$1.99 in Manhattan.
Source: Mintel
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Waking up to breakfast
» McDonald’s has led the pack,
introducing a premium blend
coffee, followed by a limited test for
its new espresso-based mochas,
lattes, and cappuccinos and is now
launching a rollout of espresso bars
throughout its U.S. system.
– Sales of breakfast sandwiches, hash browns,
and coffee are said to have risen far more
than sales of lunch and dinner items during
2006-07.
Source: Mintel
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Location is essential
Close to nine in ten (87%) fast food patrons at
least sometimes choose a quick-service restaurant
on the grounds that it is the closest to where they
happen to be standing at a given moment.
Proximity determines the selection of a restaurant
even more often than attractive pricing does. This
can be particularly true as gas prices skyrocket
and customers become less willing to literally
“drive the extra mile.”
Source: Mintel/Greenfield Online
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Health and quality are undeniable
» Beyond the diet factor,
consumers are increasingly
concerned with the quality of
the food they eat and the
integrity of the food supply.
The challenge for the
industry comes down to
sourcing better-quality
ingredients, which can be
costly.
Source: Mintel
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61% of respondents who have ordered from
a fast casual restaurant at least three times
in the past month say that food from fast
casual restaurants is healthier than food
from fast food restaurants.
» The smoothie market has
caught fire with sales
increasing 139% between 2002
and 2007, driven primarily by
young adults and Hispanics
(coincidentally the same core
consumers as QSRs).
Competition lurks
Competition is heartiest from the fast casual segment that has positioned
itself as the growth leader within the restaurant industry, driven largely by
the perception of higher quality and freshness.
Source: Mintel
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Burger restaurants are increasingly “diversifying their portfolios” and adding the likes of chicken and breakfast—gourmet
coffee, snacks, and the double cheeseburger have kept the factions warring.
The chicken segment has been facing strong competition as other segments add a wider array of chicken to their menus.
While value menu items are scarce, this segment has a corner on the family meal market.
The sandwich segment has a positioning as a healthier alternative to burgers. The magic number seems to be $5, and $5
specials are a cornerstone of promotional efforts.
Positioning against the burger and chicken chains is foremost. Taco Bell is leading the segment to success with a wide
range of trendy initiatives, while Del Taco is expanding rapidly. Value menus are evident across the segment.
We see efforts to angle as an alternative to burger restaurants, and a healthier alternative.
Source: Mintel
The five segments, increasingly blurring
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McDonald’s leads the way
McDonald’s is
a clear
industry
leader,
favored by
adults and
kids alike. The
company has
proven that an
economic
downturn
does not have
to be a death
sentence for
sales.
Source: Mintel/Simmons NCS
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Key demographics supported by consumer
surveys
Black parental assessment
reflects the findings on the
QSR “super fan,” with a
full 81% saying their kids
love fast food.
Source: Mintel/Greenfield Online
QSRS “IN THE NEWS”
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2008 QSRs In The News
Jack introduces Iced Coffee
Kona Coffee Shake
Jack introduces Real Fruit Smoothies
Cherry Chip Bliss Shake
Sonic launches premium coffee drinks•Java Chillers: A shot of espresso blended with vanilla soft serve and a choice of caramel, mocha or
hazelnut, topped with a dollop of whipped topping and finished with a drizzle of a flavor of choice.
•Lattes: The hot latte is blended with Sonic's Premium Roast coffee with a choice of mocha, caramel
or hazelnut or any combination of the three. The iced latte is poured over ice and blended with a shot
of espresso and a choice of mocha, caramel or hazelnut and topped with a dollop of whipped topping.
•Premium Roast Coffee: A new European dark-roast coffee blend.
Sonic Boom: An additional shot of espresso that can be added to any of the premium coffee drinks or
Sonic beverages.
“It’s Linner Time”
•Chick-fil-A's new "It's Linner Time" campaign encourages customers to visit their nearest Chick-fil-A
for a "Linner," the 2 p.m. to 5 p.m. period between lunch and dinner when snack cravings hit. Chick-fil-
A's new Coffee Caramel hand-spun milkshake is the focus in the campaign
Chick-fil-A and Dr Pepper ask people to dress like a cow for a free meal.
•Cow Appreciation Day, part of a four-year marketing effort at Chick-fil-A, asks consumers to dress like
the spotted bovine to receive a free meal
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2008 QSRs In The News (continued)
Breakfast Burger
•"Americans' tastes are changing at breakfast," said Brad Haley, Carl's marketing chief. "More and more
people are now eating traditional lunchtime favorites at breakfast. Even soft drink sales are starting to rival
coffee as the most-consumed beverage in the morning."
CKE & CSAB Ink New Beverage Deal•today announced a multi-year year fountain beverage sales agreement with Cadbury Schweppes Americas
Beverages (CSAB). Under the terms of the new contract, CSAB will have two fountain brands available in all
U.S. Carl's Jr. and Hardee's restaurants, including Dr Pepper(R) and either Diet Dr Pepper(R) or Squirt(R),
depending on location. Currently, CSAB has two fountain brands at Carl's Jr.; the new agreement adds a
second fountain brand in Hardee's more than 1,700 U.S. restaurants. "Dr Pepper has been a part of our
business since Carl's Jr. founder, Carl Karcher, sold it from his first hot dog cart in 1941," said Andrew
Puzder, president and CEO of CKE Restaurants. "We are pleased to continue working with CSAB to explore
opportunities that mutually grow our brands and bring value to our consumers."
BK Adds Summertime Sweets•Burger King restaurants have announced the addition of several summertime treats: The Oreo BK Sundae
Shake, Butterfinger Pie, Icee Floats and Mocha BK Joe Iced Coffee.
BK Partners with Nestle To Carry Pure Life
NEW FRUTISTA FREEZE™ PERFECT COMPLEMENT TO A LONG, HOT
• served in a 16 oz clear cup and comes with a signature Taco Bell purple spoon-straw. With one sip of these
delectable frozen concoctions, it will feel like you were magically transported to a sandy beach in the tropics.
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2008 QSRs In The News (continued)
Wendy’s expands breakfast menu•…of a proprietary blend of Folgers Gourmet Selections coffee, Wendy's menu also will boast several
signature items as both a la carte and combo meal options.
Frosty•Frosty Shakes are the latest extension of Wendy's iconic Frosty frozen dessert. Frostys were introduced on
Wendy's Day 1 in 1969, one of the five original items on the menu. There was only one flavor of Frosty —
chocolate.
McDonald’s Beverage Destination – “we want to move from beverages as an
accompaniment to being a beverage destination”
•Premium to Specialty – Premium Roast Coffee – introduced “coffee customization” – employees add sugar
and cream to the coffee and customer doesn’t have to stop
•McCafe Specialty Coffee drinks
•Beverage-ready – coffee bar expansion requires investment upwards of $100K
•But the new specialty coffees aren’t targeting one specific consumer, he adds. While the drip coffee tends to
lean toward older consumers and males, the specialty coffee drinks attract more females. Iced drinks overall
skew to younger customers. Currently, McDonald’s top-selling specialty coffee drink is the Iced Mocha.
“When we finish our whole effort, we are going to be offering smoothies, which plays to moms and younger
kids because of the fruit-based nature of it and their nutritional benefits,” Betts says.
•Along with testing bottled beverage offerings, McDonald’s is testing new selections in its fountain line. “They
have to complement each other,” Betts says.
•Testing McCafe Real Fruit Smoothies in parts of Michigan, in Louisville, and in Bakersfield, Calif. Flavors are
strawberry banana and wild berry banana.
QSR ASSESSMENT OVERVIEW
SOURCE: NPD Crest y/e April
based on Drive Thru #s with exception of Subway
which is based on Carry Out #s
Italics = sample size is based on 35 - 200
transactions
= sample size is based on 35 or less
transactions
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QSR Summary
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QSR Summary of Findings
Beverage incidence is flat
•Growth categories are coffee and smoothies
The Ultimate Drink Stop
•Happy Hours every day from 2-4; beverages ½ off
•Leads the analyzed group in overall total beverage incidence at 87.7
•Leader in Shakes and Slushy categories
Heavy Beverage POS presence at restaurants
Ranks 3rd out in total beverage incidence out of QSRs analyzed
•Incidence driven by CSDs, Tea, and Lemonade categories
Heavy Beverage POS presence at restaurants
High Combo Meal Sales
Beverage incidence is growing
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QSR Summary
Highly publicized beverage strategy plan
•Year over year growth of 2.8 in Total Beverages
•Growth driven by Tea and Coffee categories
•Lead the pack in coffee incidence
Added flavor extensions to the highly popular Frost line
Expanding beverage category by introducing Fruitistas; historically only
carried CSDs
Heavy Value Menu play at account
Plays up the “healthy” alternative to traditional QSR
Merchandise variety offerings my showing different bottles and ftn
product with food items
Heavy suggestive sell: “Do you want chips and a drink with that?”
Heavy Beverage POS
High Combo Meal Sales
Leading growth year over year at 3.4 points for total beverage incidence
•Incidence driven by Regular and Diet CSDs (Pepper 1.8 growth)
SO HOW DO I SELL MORE
BEVERAGES?
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1. Stated Beverage Strategy – Develop a strategy
specific to focusing on beverages
2. Merchandising and Suggestive Selling – It works!
3. Variety – Consumers are demanding move beverage
options. (Technomic Study shows that 29% of consumers will not purchase a beverage if restaurant does not have
what they want.
4. Value – Ensure the right price/value relationship. This
does not have to be discount driven.
5. Combo Meals – Sell more combos. Sell more Drinks.
The Five Strategies
To Drive Beverage Incidence
APPENDIX
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UNCOVERING INSIGHTS THROUGH
DATA ANALYSIS
SOURCE: NPD Crest y/e April
based on Drive Thru #s with exception of Subway
which is based on Carry Out #s
Italics = sample size is based on 35 - 200
transactions
= sample size is based on 35 or less
transactions
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Uncovering The Insights Through Data Analysis
McDonald’s leads the competitive set with the highest BI at
75.8
– WHY: In recent news, McD’s publically came out and stated they were
putting a strategic focus around beverages
• Compared to other QSRs, the have the most variety of beverages
meeting the consumers'’ need for choice
Burger King’s BI is high at 66.2
– Why: Based on competitive shops, they merchandise beverages more so
than other QSRs
Chick-fil-a also has a high BI
– WHY: Not only do they have an high incidence of combo meal sales
(includes a beverage), but they also outpace the competition with increased
traffic dining in where a consumer is more likely to purchase a beverage
Taco Bell lags the competition in incidence of beverages
– WHY: Looking at the Meal Type category, they have the highest incidence of
“None of the Above” which is consumers order a la carte aka simply buying in
bulk their value priced menu items leaving off the beverage29
COMPETITIVE SHOPS PICTURES
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Whataburger:
• Highest incidence of
beverages with
transactions
• Most traffic goes
through Drive Thru
• 60% Combo Meals
• Voted “Top Menu
Board Appearance” QSRMagazine.com 2009
It’s a QSR Crawl…
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Sonic:
•“The Ultimate Drink Stop”
-168,894 possible drink
combinations
•Happy Hours – ½ price
drinks daily
•Sonic Ice – have a
Facebook page for Sonic
ice fans
It’s a QSR Crawl…
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McDonald’s:
•“McDonald’s drink strategy to
add 5% to earnings growth”–
Financial Post ’08
- Merchandise Beverages
•Traffic Drivers
- Premium Coffee and Sweet Tea
driving beverage incidence
- “Dollar Menu” traffic driving
It’s a QSR Crawl…
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Burger King:
• High combo meal %
compared to competition at
44%
-Utilize Preview Boards to only
merchandise combos
• Merchandise beverages
• Consumer Promotions tied
to beverages
It’s a QSR Crawl…