Restaurant Industry Today & Tomorrow

As we look ahead to 2012, most industry observers believe that we will have to scratch and claw to achieve growth. Let’s make a resolution to change one thing we are doing in our business today, then set a measurable goal against it!

The restaurant industry continues to struggle in the face of the lagging economy, rising commodity prices, and reduced consumer confidence.  However, according to the National Restaurant Association, the industry is on target to record sales of $604 billion in 2011, a 3.6 percent increase compared to 2010’s revenue levels, though still below 2005-2006 levels. In contrast, Chicago-based market research firm Technomic projects the industry will realize a 0.6 percent decline in sales for 2011 (see previous post).

Technomic conducted a study of 500 consumers with many indicating a continued lack of confidence in financial recovery and an intention to limit or reduce restaurant spending in 2012.   So, as we look ahead to 2012, most industry observers believe that we will have to scratch and claw to achieve growth.  It remains a “take share” environment across the industry – foodservice taking from retail -distributors taking from other distributors, sales agencies taking from other agencies, manufacturers taking from manufacturers, and restaurants taking from restaurants.   Consolidation will continue.   Cost cutting without investment in more efficient technology will hinder results.  Those who continue to do “business as usual” will likely struggle and lose share.

Whatever your place in the foodservice market, if you are not the low-cost leader or a true innovator, then understanding the needs and wants of your customer base and adjusting accordingly will help you win.  Foodservice Rewards offers operators a way to get more when they purchase brands.  The program offers manufacturers an extremely efficient way to know their operator customers – not just the big ones.  Next year, Foodservice Rewards will be celebrating our 10th anniversary of delivering measurable results for our sponsors.  Many in our industry tend to hang on to “old ways” of doing things when we know they are neither effective nor measurable, but rather they keep us “busy”.    As we look to 2012, let’s all make a resolution to try something new and set a measurable goal against it!

 

What to expect in 2012?

The Foodservice market is projected to be flat. It’s a “steal share” environment for marketers, but Foodservice Rewards can help you differentiate…

Technomic recently published the 2011/2012 Foodservice Industry Projections.  As you might expect, foodservice industry “real growth” is projected to remain anemic. Nominal growth appears to be driven by menu price inflation.

So what does this mean to foodservice manufacturers who need to grow? 

At a recent IFMA Forecast and Outlook Seminar, Technomic presented two key ideas to compete in the current environment –  share growth and competitive differentiation.

How can Foodservice Rewards help?

Use Foodservice Rewards to differentiate from competition.  In aggregate, Foodservice Rewards members redeem about 400,000 codes per week. Members look for the yellow Foodservice Rewards label and would like to earn points on additional products (click link to our social community to read what members say… New Products in Foodservice Rewards). Foodservice Rewards provides a way to differentiate from competitors that aren’t part of the program, especially distributor label products.

Leverage Foodservice Rewards redemption data to profile “best customers” and grow share through targeted acquisition. Foodservice Rewards Sponsors gain visibility to operator purchasing behavior via code redemptions that are reported weekly. Sponsors have insight to the recency, frequency, and monetary value of purchases by operator –the building blocks of customer valuation. With this approach, Sponsors can profile their “best customers” and target more “like customers” from the thousands of Foodservice Rewards members that haven’t yet redeemed from them –and are likely buying from a competitor.

Time for a new approach?  Maybe it’s time review new ideas to drive growth during challenging times.

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Large Broadliners Improve, but Independent Operators decline

Signs of foodservice industry recovery, but reduced customer traffic went on too long for many independents…

According to ID Report, the nation’s 50 largest broadline distributors collectively broke the $100 billion mark in 2010, growing sales 5 percent over sales reported the previous year and performing well compared to foodservice as a whole in 2010 up only .7%.   The report goes on to state that none of the top 10 distributors were the largest gainers.

Related, NPD published their latest Spring Recount (April 2010 – March 2011) which showed that US units declined by 2% with 8,650 unit losses coming from independent restaurants.  The same report indicated that spending at restaurants grew by 2% in the year ending May 2011 though traffic counts were stable.

 

Foodservice Rewards Index to Market

Foodservice Rewards enjoys the support of over 100,000 active members in North Amercia. In some segments, over 75% of all units participate in the program…

Each year Technomic releases their market summary chart detailing projected growth and number of units for the many segments of foodservice.   The foodservice market is mature and programs like Foodservice Rewards help both operators and branded manufacturers grow their business.  The index to market chart shows Foodservice Rewards current penetration by unit against each segment-Impressive!

(Note – CHD data was used to determine 1-9 unit counts in the Restaurant & Bar segments)

 

FSR Onsite Segment Penetration 75%

FSR Onsite Segment Penetration at 75%

I was chatting with a potential sponsor and was surprised to hear their perception that Foodservice Rewards is skewed toward noncommercial/onsite operators.  In fact, only forty percent of the 120,000+ participants are in onsite segments.   However, in reviewing Foodservice Rewards participants by segment against Technomic’s annual forecast, it was impressive to see 75%  unit penetration within Business & Industry, Education and Hospitals.  These are the local leverage operators that drive distribution and sales volume through broadliners like Sysco and US Foodservice!

 

Distributors focus on private label to increase

Distributors focus on private label to increase according to this Technomic report

According to Technomic’s Distributor Intelligence Service, July 2009, distributors view their house brands as increasingly more important for future success and many are investing in more sophisticated brand building efforts.

The good news for manufacturers is that 72% of those surveyed indicated that “manufacturer specification” is the biggest obstacle to selling private label – here’s an excellent example of how Kraft uses targeted direct mail to drive those customer requests and unit-level compliance.

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