Remember the old adage one step back then two forward. In order to understand what is occurring in the retail food landscape today sometimes its best if we take a look back. The shift in food retail consumers spending patterns or retail food consumer discontinuity started well before the economic down turn.
I hear regularly from clients that “our consumer is not doing what they have always done”. I have but one simple reply, your consumer is not the same as her/she was a year ago, five years ago nor will they be next year and neither should your brand be.
The confluence of increasing consumer knowledge about food via TV, the “food network”, and rapid restaurant industry growth, coupled with concept sameness, combined with the weak economy allowed trepidation too crept into restaurant executive planning meetings and board rooms across the industry in 2008 and seemly stay there.
In far too many restaurant companies the cry was for just wait it’s the economy not us all will be fine. That prevalence of mediocrity and complacency at the C-level was extremely naive. As an industry restaurateurs concern is and should be share of stomach; first by company, second by niche-market share, and third the restaurant industry overall at all times.
The economy is not the largest problem it is competition for share of stomach; specifically by the ready-2-eat prepared meal section of the grocery stores, Convenience stores, and Chain Drug stores. Under reported but significantly noted first in 2005 by Foodservice Solutions®. That was the first year that recorded a consumer increase in percent household spending for food in grocery stores and away from restaurants in 25 years.
The shift had been slow in coming but it has continued since 2005. That was the first such directional move in 25 years. That 25 year span can best be recalled as the golden age of chain restaurants, and marks a huge shift. The timing of this is important. Those were the boom years for the restaurant industry. During that period we witnessed double digit growth in new units with most tier one players year after year.
It is important to note that in the past 15 years the average grocery store has dropped or discontinued carrying 15,000 Sku’s (individual food ingredients) which is equal to two isles in a standard grocery store. They replaced them with less than 200 ready-2-eat and heat-N-eat fresh prepared food products. They created from those new ready-2-eat and heat-N-eat Sku’s a mix and match components that consumers bundled into customized family meals. Consumers now say most ready-2-eat components are restaurant quality. Those products are driving an increase in customer frequency and loyalty for Grocery stores, C-stores and Retail Drug store chains.
On top of that they have integrated the ready-2-eat and multi-daypart meal components food products foods into national advertising and weekly flyers. YES, an ilk equivalent to a restaurant meal bundled and priced very competitive with a focus on fresh better for you. Harris Teeter once described its remodeled stores salad bar and ready-2-eat foods as CASH COWS. Safeway stock is up sharply over the same period with the proven results from their ongoing remodel prepared food focused lifestyle stores. It must also be noted here that during that 25 year period while the US population was booming, grocery stores declined in number by 25,000 units while the restaurant industry grew by 200,000 plus outlets.
The grocery prepared food Industry leadership is being driven by European retailers. Three of specific note are Marks & Spencer, Morrison’s (M-Local) and Trader Joe’s with “tonight’s dinner” mostly refrigerated or quick chilled food components which blend their store brands with branded ingredients and simultaneously put their prepared meals on par with homemade. Today, Walgreens and Duane Reade both US retail drug stores are aggressively expanding into fresh ready-2-eat and heat-N-eat prepared food.
Walgreens initiative can best be called convenient meal participation. For the consumer it is interactive, participatory and inviting, providing “like” homemade touches via component bundling creating personal satisfaction. This as extremely compelling because Walgreens is an 81 Billion dollar company well financed and that makes this very competitive for the restaurant industry. This is not a fad but a trend that is now 27 years in the making. The trend began in 1985 with the food industry focus on Home Meal Replacement (HMR) and has progressed into a full-fledged battle for the consumer’s food dollar and share of stomach by all retail sectors.
The race for the consumer is transformational with more competitive points of distribution opening up all of the time. The traditional metrics for measuring success at chain restaurants is currently being challenged by the success of chains like; Buffalo Wild Wings, Chipotle, and Papa Murphy’s. These firms have carved out niche’s based on purpose, choice, convenience and price. Realism is reflected in the customer counts and continued sales numbers for these companies.
The economy is a focus now, however since 2005 clear indicators are now providing a picture of what is important and changing with consumer eating habits particularly HOW THEY EAT, WHEN THEY EAT, and WHY THEY EAT.
Most notable is the change in consumer vision and role of food: including social eating, eating economically, environmental eating and eating for personal benefit! Yes personal benefit, only in America do consumers go on diets to eat their way thin! Ok, ask yourself does that work? If no keep reading.
Recently three chains particularly have addressed these issues and seem to be having success; Domino’s, Starbucks and Cheesecake Factory. Each company has had a dramatic overhaul of menu and positioning are now recovering building new and additional loyal customers.
The restaurant industry has not proved as agile as the Grocery, C-store or Drug Store sectors when it comes to attracting new consumer while expanding fresh food offerings since 2005. The confluence of events may in fact force our industry to look at how we run our business. It will not however force us to stick to outdated metrics, methods or models. Yes, “times they are a changing”. The challenge is to recapture share of stomach.