Winning in a Slow Growth Market - John · PDF fileThe NPD Group, Inc. | Proprietary and confidential Document classification: Internal Only 4 The State of Today’s Foodservice onsumer

Copyright 2016. The NPD Group, Inc. All Rights Reserved. This presentation is proprietary and confidential and may not be disclosed in any manner, in whole or in part, to any third party without the express written consent of NPD.

Presented by Warren Solochek President, Foodservice: The NPD Group, Inc.

Winning in a Slow Growth Market

March 2017

Market Vision 2017

The NPD Group, Inc. | Proprietary and confidential Document classification: Internal Only

2

Influencers along the path to consumption

The State of Today’s Foodservice Consumer

Emerging Trends Influencing Consumption

Proven Ways to Win in Today’s Market

1

2

3


3

Americans are eating more meals in the home and fewer away from home. WHY?

Source: The NPD Group/National Eating Trends®, years ending August and CREST®, years ending September

In-Home vs. Away-from-Home Meals Annual Meals Per Capita

100

150

200

250

300

350

400

450

500

700

750

800

850

900

950

1000

1050

1100

1150

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Eaten & Prepared In-Home

Prepared Away From Home


4

The State of Today’s Foodservice Consumer


5

Consumer Spending Remains Lackluster

$1.9 Trillion tracked at NPD

+.5% gain Yr End December 2016 vs. Yr Ago

Food at home is getting cheaper!

-2.2% In home

+2.3% Away from home

Unemployment at 4.7% Work Participation Rate Declining Wage Increases #1 Issue Among Operators


Source: Bureau of Labor Statistics; Data through Q2 2016; Graph shows quarterly % change versus year ago

There is a clear relationship between restaurant traffic and the gap between away from home and at home food inflation

6

Food Inflation & Restaurant Traffic

3.1% 2.7% 1.8%

-1.9%

2.2%

-0.9%

-4%

-2%

0%

2%

4%

6%

8%Away from HomeAt HomeRestaurant Traffic PCYA

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016


$52,684 $57,909

$56,516

2015 Median HH Inc.

1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014

Real median HH income – constant 2015$

$57,423

7

Median household income grew 5.2% in 2015

First significant year over year growth, but still has not reached 1998 peak

Source: US Census Bureau


Source: Kaiser Foundations/HRET survey; BLS

0%

20%

40%

60%

80%

2010 2011 2012 2013 2014 2015 2016

% change from 2010

Overall Inflation Workers Earnings

Single Coverage Deductibles, All Workers

Single Coverage Premiums

8

Healthcare continues to erode disposable income


9

The shrinking middle class is part of the new economic norm Declining or stagnant wages coupled with a growing income gap over the past 15 years has resulted in many families slipping out of the middle class.

Source: U.S. Census Bureau


10

The #1 Issue Facing Every Employer Today?


11

The #1 Issue Facing Every Employer Today: Increases in Minimum Wage


MA 23.6% RI 19.2%

MD 16.4%

VT 9.7%

CT 10.1%

MN 12.5%

NY 12.3%

AR 10.1%

NE 22.8%

AK 24.3%

HI 16.6%

WV 19.7%

CA 11.1%

MI 4.3%

DC 20.0%

55% of the

US population lives in these states

AZ 1.9%

CO 2.9%

DE 6.5%

FL 1.5%

MO 2.0%

MT 1.9%

NJ 1.6% OH 1.9%

OR 1.6% SD

17.2%

WA 1.6%

12

Minimum wage increases 2015 and 2016 Good for the consumer – additional challenge for many Retailers

Source: U.S. Department of Labor *This includes both Actual and Proposed


13

The labor force participation rate is more than three percentage points lower than pre-recession Although the rate has stabilized versus last year, 16 million fewer people are seeking employment.

Source: Bureau of Labor Statistic, Seasonally Adjusted Annual Rate in Februarys

66.1% 66.3% 66.0% 65.8%

64.9% 64.1% 63.8%

63.4% 63.0% 62.8% 62.9%

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Labor Force Participation Rate


14

The increase in households with persons of retirement age likely affects labor force participation Almost 6.5 million more households in 2015 included someone 65 or older compared to 2006

Source: Bureau of Labor Statistic, Seasonally Adjusted Annual Rate in February. US Census Bureau

66.1% 66.3% 66.0% 65.8%

64.9%

64.1% 63.8% 63.4%

63.0% 62.8% 62.9%

0%

5%

10%

15%

20%

25%

30%

61%

62%

63%

64%

65%

66%

67%

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

HH

Age

65

+

Lab

or

Forc

e P

arti

cip

atio

n


15

The aging of America is also likely to prevent household income from rising

More than half of households

over age 65 are in the bottom 40% of income


16

Single person households are on the rise


17

Have operators adjusted their seating to account for this trend?

Source: The NPD CREST® YE Feb ‘16 vs ‘06

Parties of one now account for 39% of all restaurant visits, up 5 points vs. 10 years ago


18

The share of U.S. households with a child younger than 18 continues to decline. Who is your target customer?

Source: U.S. Census Bureau Population Data

71%

29%

Share of Households by Presence of Children <18

HH’s without Children

HH’s with Children


19

Hispanics will continue to have a large impact on culture and food

Source: U.S. Census 2012 National Projections

55.8 million

Hispanics in the U.S. as of 2014

Population growth 2000-2014 8X growth of non-Hispanic +58%

17.5% Of total U.S. population


20

The ‘typical’ American home is no longer composed of two white adults and their two kids. Change continues, have you been paying attention? Are you changing the way you do business?


21

Is anyone leaving the house anymore?


22

2010- 30% Workers Telecommute

2016- 37% Workers Telecommute

Is Anybody Eating Lunch Out Any More?


23

Macro drivers threaten main meals away from home.

1 More Lunches eaten at home over past 10 years.

2 Labor force participation is down vs. 10 years ago and more people work from home.

3 Restaurant orders for Lunch originating from work declining.

4 Consumers likely shopping from home more, which reduces number of opportunities to grab meals out of the house.


24

Technology Has Become A Differentiator


25

Digital impact on restaurants continues to grow

Source: The NPD Group / CREST

6.2%

7.2%

8.7%

0.8% 0.9% 1.2% 1.8% 2.1%

2.5%

YE Feb'11 YE Feb'12 YE Feb'13 YE Feb'14 YE Feb'15 YE Feb'16

Traffic Influenced by Internet / App (Consumer reported)

Traffic Ordered from Internet / App

% of Restaurant Traffic Influenced by Internet/App and Ordered from Internet/App

PCYA

+22%

+21%


26

Where are QSR meals eaten? Home is the #1 place we eat our Quick Service meals.

Source: The NPD Group/CREST®, years ending Feb

27

10

22

35

Total On Premises At Work In Car At Home

Distribution of QSR Visits by Where Eaten

2006 2016

Importance of Packaging


27

Delivery outside Pizza growing strongly Delivery increases driven by the youngest generations. They want it now!

Source: The NPD Group/CREST®, year ending December

2012 2016

462,907

602,482

2016 2012

Delivery Traffic (000), Excluding Pizza Who is Using Delivery?

+3O%

Gen Z 16% 25% Millennials 31 31 Gen X 28 22 Boomers 22 19 Silent Gen 3 3


28

Delivery visits outpacing traffic overall Delivery provides the ultimate convenience for diners and is winning visits at the expense of other service modes.

Source: The NPD Group/CREST® , year ending December 2015

+0.2%

+7%

Total

Delivery

Restaurant Traffic Percent Change 2016 vs. 2012

Delivery

Market = 1.7 Billion Visits


29

What you need to know about delivery:

Source: The NPD Group/CREST®, year ending December 2015

People like technology more than people. Digital

orders also earn higher scores on Pleasant Service, Fast Service & Made Me

Feel Valued.

Brings in a 63% higher ticket vs. average restaurant order…. before tip. Driven by larger parties & higher price per person.

Kids Rule! Parties with kids account for 46% of all delivery visits and drove 100% of the

delivery growth (vs. ‘12).

Digital Wins 41% of delivery visits are ordered through the internet or an app, up 75% vs `12. Consumers that order digitally are more satisfied with their visits. Top box overall satisfaction scores come in 7 points higher compared to phone orders.

$


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Visits that were paid for by a MOBILE APP now make up 2% of all QSR visits – a small but fast growing behavior

Distribution of Traffic by How Paid

30

2%

98%

Paid with Mobile Phone App

All Other Methods of PaymentRepresents… 515 MM Visits

+48% VS. YAG


31

Emerging Trends Influencing Consumption


0

5

10

15

20

25

30

35

40

205 207 208 208 206

198 197 195 193 191 190

32

Americans today feel differently about visiting restaurants

Source: The NPD Group’s Biweekly Food Safety Monitor & CREST CREST Data is YE March

Fast Food

Full Service

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Per Capita Restaurant Visits

The Recession The New Normal

Percent of Adults Saying They Plan to Use Restaurants “Less” in Next 30 Days


33

Younger adults have cut back the most on restaurants since the recession

Source: The NPD Group/CREST®, years ending Feb., except latest period

150

170

190

210

230

250

270

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Jun'15

Annual Meals Purchased at a Restaurant per Person

35-49 Year Olds

50+ Year Olds 18-34 Year Olds


34

Total Restaurant industry traffic has essentially been flat for the past 6 years

Source: CREST

61.3 61.7 61.6 61.8 62.2 61.9

2011 2012 2013 2014 2015 2016

Industry Traffic (Billions) – YE Dec


35

Only QSR has seen any growth in the past 5 years

Share of Traffic YE Dec'16) Source: CREST

10%

80%

9% -3% -3% -3% -3% -2%

1% 0% 1% 1% 0%

-1% -2% -1% -2% -3%

QSR ( )

Midscale ( )

Casual Dining ( )

Fine Dining/ Upscale Hotel ( )

2% 2% 1% -3% 0% 1%

YE Dec'12 YE Dec'13 YE Dec'14 YE Dec'15 YE Dec'16

% Change vs. Year Ago


36

Top reasons mentioned for visiting less

Source: The NPD Group/Checkout TrackingSM Re-contact Survey, September 2016

59%

26% 48%

39% 27%

Cut down on spending overall

Cooking at home to eat healthier

Restaurants prices too high

Brown bagging more

Restaurants are a bad value

63% Cheaper to eat at home

Customers continue to manage their overall spend as the top reasons for visiting restaurants less are still centered around costs.

Restaurant Decliners: % buyers agreed with statement


BLURRING THE LINES Emerging segments are changing how and

where we source meals


38

Enter “Fast Casual” restaurants that consumers find extremely appealing – even with unit expansion, these concepts are experiencing real demand growth “Fast Casual” concepts’ traffic growth comes at the expense of “stealing” visits from other concepts.

Source: The NPD Group/CREST®, years ending June

2.7% 3.0% 3.2% 3.4%

3.7% 3.9% 4.2%

4.5% 4.8%

5.2% 5.3%

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Fast Casual Share of All Restaurant Meals


39

Fast Casual remains the middle player in cost Fast Casual is faster and cheaper than Casual Dining. Who do you think they hurt, Fast Food or CDRs?

Quick service excludes fast casual Source: The NPD Group/CREST®

$5.89

$7.79

$9.52

$12.51

$6.58 $8.06

$11.60

$15.55

$0.00

$2.00

$4.00

$6.00

$8.00

$10.00

$12.00

$14.00

$16.00

$18.00

Traditional QSR Fast Casual Midscale Casual Dining

Average Eater Check Year Ending February 2015

Lunch Dinner


40

A growing source for prepared meals has been RETAIL outlets – those offering convenient meal solutions These are meals bought for immediate consumption at supermarkets, C-stores, mass merchants.

Source: The NPD Group/CREST®, years ending June

12.1% 12.2% 12.4%

12.6% 12.8%

13.0% 13.1% 13.1% 13.3%

13.5% 13.6%

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Retail Share of All Restaurant Meals


Restaurant-quality fresh prepared foods

Chef-driven menus

In-store enjoyment options, from café seating to table service

Service levels inspired by the hospitality industry

Keeping pace with tastes & trends

2.4B visits

$10B

Source: The NPD Group/CREST®, year ending December 2015

41

Introducing The “Grocerant”


42

Several supermarket chains setting a high bar for prepared foods. The list is growing.

Grocery shoppers opt for supermarket prepared foods for the convenience (44%), price (34%), ease vs. restaurants (34%) and taste (31%) – FMI


Price Driven

Healthy/Light Meal

Food Variety/Quality

43

Top motivations by visit share (%) Grocery competes most closely with Fast Casual.

Source: The NPD Group/CREST

Traditional QSR Grocery Stores Fast Casual

Food Variety/Quality

Healthy/Light Meal

Price Driven

Price Driven

Treating Myself

Someone Else Chose


44

Food forward C-stores are also growing

Two types of C-Stores

– Traditional C-Stores

• Gasoline dependent

• Minimal foodservice capability

– Food Forward C-Stores

• Diverse and sophisticated merchandise mix

• Engaged in multiple foodservice occasions

35% of traffic Morning Meal

45% of traffic P.M. Snack

% of total traffic at Food Forward and Traditional C-Stores

Source: The NPD Group/CREST®, YE Sep’16


45

C-Store traffic growth has far outpaced the restaurant industry as a whole Traffic Percent Change vs. Year Ago

-1.0%

0.0%

1.0%

2.0%

3.0%

4.0%

2013 2014 2015 2016

Total Restaurant Industry C-stores

Source: The NPD Group/CREST, YE Sep


46

Home food delivery another trend competing with foodservice – led by Amazon

Source: BloombergBusinessWeek, March 17, 2016

“Amazon will be a top-10 player in the approximately $795 billion U.S. food and beverage grocery market by 2019.” -analysts at Cowen & Company LLC, led by John Blackledge


47

3%

20%

40%

37% Have tried

Interested in trying

Not interested in trying

Percent of adults 18+ past 12 months trial of a meal kit delivery service

= 8.3 MM adults

Meal kit delivery services may be poised to redefine how consumers solve for meals, but trial of these services is still low.

http://www.google.com/url?sa=i&rct=j&q=&esrc=s&source=images&cd=&ved=0ahUKEwju2-SjoPXMAhVOQFIKHaxhCtAQjRwIBw&url=http://www.chefd.com/pages/terms-of-service&psig=AFQjCNHiFse2hDCLrP6puqQW2ZoegMeZEg&ust=1464266584768289

https://www.google.com/url?sa=i&rct=j&q=&esrc=s&source=images&cd=&cad=rja&uact=8&ved=0ahUKEwjVgJ7PoPXMAhVGLVIKHTp7C2MQjRwIBw&url=https://www.hellofresh.com/&psig=AFQjCNGIkGdwE_35dP-WRjKZvwUXGY5ikA&ust=1464266684738140

http://www.google.com/url?sa=i&rct=j&q=&esrc=s&source=images&cd=&cad=rja&uact=8&ved=0ahUKEwjl1dvKofXMAhVUK1IKHbTgDJEQjRwIBw&url=http://thetable.homechef.com/1024x768_landscape/&bvm=bv.122676328,d.aXo&psig=AFQjCNFHKJy2hTnyyuInOVWpkdvu1Eicbg&ust=1464266916335782

http://www.google.com/url?sa=i&rct=j&q=&esrc=s&source=images&cd=&cad=rja&uact=8&ved=0ahUKEwi217-8oPXMAhVHTFIKHapcDxEQjRwIBw&url=http://borntocoupon.com/shop/plated/&psig=AFQjCNEPNCX6SaLuOA_T6g8A34q7oSUMBw&ust=1464266645377239

https://www.google.com/url?sa=i&rct=j&q=&esrc=s&source=images&cd=&cad=rja&uact=8&ved=0ahUKEwiIqo7poPXMAhVWeFIKHQ1SA0MQjRwIBw&url=https://invertedsneakers.wordpress.com/2016/01/21/review-blue-apron/&psig=AFQjCNFTN9gboEj_mKQYbOJAcBDzeV4-Dw&ust=1464266739130643

https://www.google.com/url?sa=i&rct=j&q=&esrc=s&source=images&cd=&cad=rja&uact=8&ved=0ahUKEwjr8Nrno_XMAhUUT1IKHS7UC-MQjRwIBw&url=https://www.specialtyfood.com/news/article/purple-carrot-addresses-customer-concerns/&bvm=bv.122676328,d.aXo&psig=AFQjCNHDh_5nbJVwoF7wsxhgDOszIbP83A&ust=1464267487364560

http://www.google.com/url?sa=i&rct=j&q=&esrc=s&source=images&cd=&cad=rja&uact=8&ved=0ahUKEwjf7NKVovXMAhUiGlIKHTCCBbAQjRwIBw&url=http://www.prnewswire.com/news-releases/green-chef-expands-to-deliver-certified-organic-meal-kits-nationwide-300204263.html&bvm=bv.122676328,d.aXo&psig=AFQjCNGAijBgGRqHS5GD8eK-XImHE4zNGQ&ust=1464267080259449


48

Alternative sources for the in-home meal are gaining momentum. These tend to be underrepresented in retail measurement.

-4

1

6

11

16

Online Grocery Retailer Online Grocery Delivery Service Online Meal Kit Delivery Service

Shar

e o

f In

div

idu

als

2015 2016

Source: The NPD Group/NET®, years ending February


49

We continue to eat more meals in the home because its easier to eat more meals at home

Source: The NPD Group/National Eating Trends®, years ending August and CREST®, years ending September

In-Home vs. Away-from-Home Meals Annual Meals Per Capita

100

150

200

250

300

350

400

450

500

700

750

800

850

900

950

1000

1050

1100

1150

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Eaten & Prepared In-Home

Prepared Away From Home


50

Back to Nature


51

Purity is the new mantra Consumers increasingly seek purity in their foods and beverages and are employing different tactics to achieve this goal.

Source: The NPD Group/National Eating Trends® Nutrition Survey, years ending Feb.

ORGANIC

GMO-Free 0

5

10

15

20

25

30

35

40

00 01 02 03 04 05 06 07 08 09 10 11 12 13 14

% Who Completely Agree With “A Person Should Be Very Cautious In Serving Foods With ...”

Additives Preservatives

ALL NATURAL


52

Fresh foods trends by age group Fresh foods are gaining momentum. The shift to fresh, natural, and authentic eating is being led by adults under 35.

Source: The NPD Group/National Eating Trends®; 2 years ending May/The Future of Eating Report 2014 *2013 vs 2018

400

450

500

550

600

650

700

750

800

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

55+

35-54 18-24 25-34

FRESH is forecasted to grow 8% among MILLENNIALS (vs. 6% for Total Pop.)*

Annual Eatings Per Capita

+8%


53

Organic foods and beverages have shown resilience following the twenty-first century recession

Any usage. Includes base dish, additive, or ingredient Source: The NPD Group/National Eating Trends®, 2 years ending May

25

30

35

40

45

50

2007 2008 2009 2010 2011 2012 2013 2014

Annual Eatings Per Capita of Organic Foods & Beverages

Total Individuals


54

Forecasts show Millennials and Generation Z will continue the growth of organic food & beverages Interest drops off dramatically after Gen Z and Millennials. Economic pressures, plus the idea that “it’s too late for me” may contribute to reduced interest among older generations.

Source: The NPD Group/National Eating Trends® and Future of Eating 2014, updated May 2015

Organic Label Forecast by Generation % Change Projected Annual Eatings F2019 vs. 2014

14

11

20

-11

-22

-42 Older Boomers Younger Boomers Generation X Millennials (24-37) Gen Z (0-23) Total Population


55

39% of Americans consume foods or beverages with an “all natural” or “natural ingredients” special label in an average week

Source: The NPD Group/National Eating Trends®, 2 years ending Feb. 2015 [excl. SON ’14]

39

22 19 17 16 16 15 14

All Natural orNatural Ingrednts

Low Fat or ReducedFat

Organic or Madewith Orgnc Ingr

Made with WholeGrains

100% Whole Grain High Fiber,AddedFiber

Light, Lite, or Diet Reduced or LowCalorie

Special Food/Beverage Labels Percent of individuals consuming at least once in a one-week period


56

Dinner Opportunities for Restaurants


57

Dinner from a consumer perspective

Source: The NPD Group /International Food & Beverage Habits Study 2013

Meal least likely to skip

Most likely to be a “social” vs. “solo” occasion

Most complex meal of the day

Consumers spend the most time and money on this meal

“Is when all the family is together”

“It’s when I have the most time to eat”

Consumer Behaviors

“It’s usually my most substantial meal”

“Finally get to sit down and relax and eat”

“It is the most filling and well rounded meal”

Consumer Attitudes


58

Where to get Dinner Nearly half of all decisions on where to get Dinner are made that day. The closer to Dinner time the decision is made, the more likely we are to choose a restaurant.

Source: The NPD Group /Eat In or Out? What Drives Dinner Choices Custom Study 2016

51% 49%

decide right before dinner

18%


16% 21%

14% 17% 14% 18%

More than a weekbefore

During the week The day before In the morningthat day

In the afternoonthat day

Right beforedinner time

59

WHERE To get Dinner – Home and Away There are two different kinds of consumers: those who plan where to get their Dinners well in advance and those who make their decision the day of.

Source: The NPD Group / Eat In or Out? What Drives Dinner Choices Custom Study 2016

Planners Up for Grabs


60

Dinner decision process The full range of considerations, influences and order of decision making becomes complex.

Source: The NPD Group /Dinner MealScape Study

What Time

available Where to get

it Cost

Preferences of others


Where to get it

Time available


Dinner

Decided 1st

Decided 2nd


61

Dinners won by Restaurants The closer to Dinner time the decision is made, the more likely a restaurant is chosen.

10%

11% 24%

31%

Before the day

In the morning that day

In the afternoon that day

Right before dinner time

38% on

Weekends

Source: The NPD Group / Eat In or Out? What Drives Dinner Choices Custom Study 2016


62

Size of the Prize

Since 2007, Restaurants lost 7.5 dinner meals per capita to home prepared meals

$3 Billion If restaurants can

steal 1 dinner meal per capita back from home prepared meals...

It would equate to roughly


63

Proven Ways to Win in Today’s Market


64

What do today’s winners have in common?

Among the 10 fastest growing chains – 8 have traffic growth that outpaces unit growth*

Traffic growth ranges from 12% to 18%

Multiple formats and menu categories are represented

3 common themes emerge

* Jimmy John’s, Firehouse Subs, Culvers, Noodle & Co., Zaxby’s, Domino’s, Chic-fil-a, Panda Express


65

#1 - Create a winning experience

159 130 119

Quality of Food Had a Special Taste/Craving I Like It There

Reasons for Visit - Growth Chain Index

119 117 117 115

Fast, Efficient Service Atmosphere / Ambiance Cleanliness of Restaurant Quality Of food and bev

Top Box Satisfaction - Growth Chain Index


66

#2 - Embrace the family

Reason for Visit- Kids Like it

Top Box Satisfaction-Friendly Environment

for Kids

Party Includes Kids

156 130 127

Top Performing Chain Index


67

#3 - Leverage technology to get in the home

6X More likely to order via Internet and Mobile App

2X More likely to choose chain for availability of delivery or drive thru

Growth chains are winning at Lunch and Dinner (The largest occasions)

575

Visit Profile- Growth Chain Index

153

Delivery

Home Eaten at


68

Key Takeaways

Changes in today‘s society drive trends in the restaurant market.

The ‘same old, same old’ will not make it going forward

Unlike other retail verticals, restaurants have the upper hand. Not everyone needs a wearable fitness device, but everyone needs to eat. How do we as an industry make restaurants the better choice?

Technology is no longer a nice-to-have component

of consumer interaction, it’s a must-have.

Convenience and price are now complemented by what consumers EXPECT: Great Food, Variety and Customization, and a better experience

At the end of the day, consumers attitudes and behaviors are evolving for a variety of reasons. Those operators who get it right in the consumer’s mindset are winning


Thank you Thank you

69

Documents

Winning in a Slow Growth Market - John · PDF fileThe NPD Group, Inc. | Proprietary and confidential Document classification: Internal Only 4 The State of Today’s Foodservice onsumer