Restaurants are niching in value, health, new tastes, convenience, tech and brand authenticity. How well will you compete?
Grocerants aiming to wrest market share from neighborhood eateries need to lean in on six trends driving change in the industry today and in the near future. These capsules on each, explained by Chris Startt, Director of Foodservice Insights for Coca-Cola North America, in a recent webinar, could help grocerants refine their platforms to be more competitive.
Value Plus. Leverage the full spectrum of menus to enhance consumer value and drive profitable growth.
People are value-conscious while seeking premium. One in four restaurant meals are bought “on deal,” a rising trend the past five years, NPD data show. Technomic notes that 37% of consumers, and 46% of Millennials, seek out restaurant deals and promotions, up from two years ago.
“In QSRs, we see continued focus on four- and five-item bundles at prices at or below $5. That often includes beverages and desserts. And in the casual dining segment, endless appetizers and salads at $10,” said Mr. Startt.
The higher end of the value spectrum allows operators to unlock margins through premium tiers on menus, limited time offers, and specialty beverages. According to Datassential, 22% of consumers would pay more for LTOs than regular menu items, and 39% would be interested in value-priced LTOs. “Consumers tell us they want to participate in creating new LTOs, opening the opportunity for crowdsourcing,” said Mr. Startt. Examples: premium signature crafted sandwiches in QSRs, crabfest and summer catch seafood LTOs in casual dining, and beverages such as frozen lemonades in summer, pumpkin/maple lattes in autumn, and cold-brewed coffee.
Menu Engineering can simplify decision making for consumers, and cull slow sellers to reduce operating costs and complexities for restaurant staff. Some casual dining operators have right-sized their menus via 30%-40% cuts in what they offer.
Evolution of Healthy. Guests express interest in holistic health and demand more transparency.
Guests seek fresh, whole, simpler ingredients. Already 49% of consumers, and 58% of Millennials, believe it is important that they buy and consume foods and beverages made with ‘clean label’ ingredients. However, just 18% of consumers, and 30% of Millennials, can accurately define what “clean label” is, reported Datassential. “We’ve moved on from diet and low-carb to simpler ingredients this past decade. This means fresh, whole, less processed and with fewer additives, said Mr. Startt.
Consumers want to know more about food and beverage ingredient sourcing, how environmentally and ethically responsible it is, and how meals are prepared. Seven in ten consumers support calorie count labels. 60% say they’re likelier to buy cage-free or free-range meat. Open kitchens are transparent, showing food prep. One fast-salad concept shows the names of all its suppliers on menus and the walls of the eateries.
Dining guests want their choice of healthy or indulgent options – 40% of consumers say they’re likelier to visit a restaurant with healthy options than one without, even if they don’t order them, according to Technomic. They want to be able to indulge in manageable ways, for instance, smaller sizes of burgers or half-sandwiches, which help reduce calories and price. Half of consumers and nearly two-thirds of Millennials find plant-based proteins appealing, added Mr. Startt.
Flexibility & Discovery. Guests seek barrier-free dining, more control, and new flavor experiences.
Non-traditional eating occasions have grown to the point where 91% of consumers snack multiple times throughout the day, and 8% of them forgo meals in favor of all-day snacking, Hartman Group data show. Historic mealtimes have less traction. The restaurant response has been the availability of breakfast items all day and more frequent appearance of core breakfast items on menus, such as chicken with waffles and burgers topped by fried eggs. NPD reported a net gain of 1.6 billion morning meal/snack and PM snack visits since 2011 – at the expense of conventional lunch and dinner visits, which lost 1.4 billion visits in the same period. To win the PM snack visits, Happy Hour beverage specials, aggressive Dollar Menu pricing, and half-price desserts or frozen beverage specials are common.
Dining guests want choices, flexibility and control to customize their meals. Indeed, 72% of consumers expect restaurants to allow customization, said Technomic, which further noted that half of today’s 10 fastest-growing limited-service chains with sales under $200,000 are build-your-own pizza concepts. Bowl platforms are expanding in many types –for burritos, salads and grain-based bowls to Asian, seafood and nutrition bowls, according to Mr. Startt. These can add to menu complexity, however.
For 35% of consumers and 41% of Millennials, foods that are ‘new and interesting’ are important when deciding where to dine, according to Datassential. More than half of consumers say they’re eating a wider variety of ethnic cuisines than just two years ago, he added, noting “a wave of unique LTOs has put a new twist on the nostalgic with crave-worthy flavors and colors in seasonal beverages that can drive traffic.”
Hyper Convenience. Guests demand convenient meal solutions that fit their on-the-go lifestyles.
Time-crunched consumers seek simplicity and convenience. Advantage, grocerants, because their in-store locations enable people to eat and fuel their cars in the same places they shop. Indeed, 34% of Millennials want to see more restaurants inside grocery stores, Mintel research shows. Retail channels already account for 14% of all commercial meal and snack visits, and scooped up a net gain of 260 million incremental visits over the past five years, stated NPD. “Strengths of supermarket grocerants and food-forward convenience stores so far are in the Morning Meal and PM Snack dayparts, but we expect them to try to expand further into lunch and dinner,” said Mr. Startt. Retail initiatives range from grab-and-go to sandwich shops, tacquerias, fast-casual and casual restaurants, bars and tap rooms.
On-demand delivery represents just 3% of all commercial meal and snack visits. But delivery visits have grown at a 7% compound annual growth rate over the past five years, excluding the QSR Pizza segment, said NPD. While technology like chat bots and voice ordering make delivery even more convenient, it also poses a challenge for operators needing to “ensure the quality of the delivered meal is close to the restaurant experience,” explained Mr. Startt. The delivery trend is spawning a new concept of virtual restaurants called Ghost Restaurants, which are delivery-only concepts without physical outlets, he added.
Drive-thru and carry-out combine to account for 60% of total meal and snack visits. No surprise that 82% of consumers told NPD they regard convenience as “especially important.” Food-forward convenience stores and fast-casual restaurants are testing drive-thru. And to make carry-out easier, more operators dedicate curbside pickup spots and order/pickup areas inside the store, and even pizza porters to keep orders hot until they’re picked up.
Digitization. Technology is transforming restaurant operations and the end-to-end guest experience.
Social media is a powerful tool to build brands and visits. Because of it, guests can connect with a restaurant long before they enter it. 61% of guests say social media are where they find out about new restaurants to try - that’s second only to ‘our network of friends,’ show Toast data. Indeed, as of last June, Instagram had 223 million #food postings, and the most widely Instagrammed food was pizza.
Innovative approaches: crowdsource to create a new flavor or dish, or use early influencers to share photos of your food.
Technology is transforming the in-outlet experience for guests and playing an emerging role in back-of-house operations. “Operators see the potential of automating certain activities like ordering in the outlet to improve convenience and operational efficiencies. Kiosks are evolving, with new models using facial recognition to unlock our order history. With these kiosks, restaurants could shift workers to other differentiating high-touch hospitality roles, said Mr. Startt. Yet U.S. consumers are currently cool to the notion: just 20% prefer to use technology rather than interact with human staff; only 15% like the idea of robots delivering food, and only 10% like the idea of robots preparing food, according to the National Restaurant Association.
Analytics and insights will drive customer loyalty and operational efficiencies. Restaurateurs collect unprecedented amounts of data through point-of-sale, loyalty programs, mobile ordering apps, surveys and passive location pings. If used to uncover new marketing opportunities and understand guests, operators could more effectively target promotions for the highest ROI, recommend menu items based on ordering behaviors, shorten wait times, and improve food safety and equipment maintenance. 62% of restaurant operators expect “more loyal repeat customers” will be a top reason for higher food and beverage sales in the next year, said Datassential. Indeed, one in four consumers, and 30% of Millennials, participate in restaurant loyalty rewards programs, reported Technomic.
Brand Authenticity. Guests seek authentic experiences and brands.
Enhanced and unique experiences can differentiate grocerants. Consumers’ search for something new has inspired ‘Eatertainment’ – the growing number of enhanced bowling alleys, movie theaters, golf venues and social emporiums with foodservice that all compete with restaurants for meals. 35% of Millennials say a ‘cool/hip’ setting is important when deciding where to go and what to order, according to Datassential. Already, 26% of U.S. movie theatergoers have bought a full meal at a theater in the past six months, said Mintel. Food halls have soared – and 18% of consumers want more of them, noted Mr. Startt, adding: “These reclaim under-used real estate in central locations, and share overhead for multiple operators. Will more available retail space drive more development? Also, pop-up restaurants tap into the drivers of limited time only and the fear of missing out.”
Consumers reward brands that have a purpose. Think the environment, ethics, communities served, and employees. 46% of foodservice operators associate sustainability with ‘reducing waste or zero waste,’ says Datassential. “We see increasing examples of operators up-cycling foods and food byproducts they would have previously discarded – like produce pulp, stock and leaves – and using packaging that is recyclable, compostable, or made from post-consumer content,” Mr. Startt said.
Brands that convey a clear, consistent story - say, support of first responders and service-driven cultures - inspire nearly 9 in 10 consumers to reward them for their authenticity, states Cohn & Wolfe research. Half would recommend them. Almost half (49%) say it’s important that restaurants support local communities, found Technomic. The top reason people prefer locally sourced items is to support farms and food producers in the community.