August 20th, 2014
Walmart has struggled over the years to match the success of UK retailer Tesco in luring shoppers to private label. Consumers in the UK buy $58bn in store brands. This report by Mintel has some numbers if you’re interested.
Americans, by contrast, love their brands.
Now the Bentonville Behemoth is expanding a test of 50 PL products under the “Price First” label from 50 stores to 2,500.
With SNAP benefits down (the old “food stamps”), Walmart has seen its grocery division swoon a bit recently (US sales down 3% to $3.9bn). Its consumer is also feeling the effects of the Great Recession, and the slow recovery at the lower end of the economic ladder is hitting those consumers more so than upscale retailers. The company is investing in “small footprint” stores and e-commerce, both areas where competitors have outdone them.
August 19th, 2014
Given their preference for things digital, it’s not surprising that younger consumers like tablets and other devices that let them order electronically from their tables at restaurants.
According to a survey of over 6,100 individuals by Market Force Information Inc., 41% of the 18-24 segment were “very favorable” about such technology. Overall 38% of those surveyed liked the technology, 35% were not, and 26% had no opinion. The numbers shrank in favor of the changes as those surveyed increased in age: only 15% of those 55-64 were “very favorable, and just 10% of those 65 and older.
Table top ordering has been embraced by the casual dining segment, with chains like Applebee’s, Chili’s, Olive Garden and Buffalo Wild Wings either currently using or actively testing the technology.
Anything to cut labor costs, right?
The same survey gave The Cheesecake Factory the highest marks for providing “high quality food.” Maggiano’s Little Italy won best-in-class for Italian fare, while The Capital Grille won the steak race. Less well-know Pappadeaux Seafood Kitchen was tops for seafood, and Mimi’s Café the choice for breakfast.
In the overall category, Cracker Barrel was second, Red Robin Gourmet Burgers third, Ruby Tuesday and Buffalo Wild Wings tied for fourth, and Chili’s fifth.
For more details, click here.
August 18th, 2014
As reported here frequently, the news hasn’t been good lately at the Golden Arches.
McDonald’s reported same store sales were down 2.5% in July.
The plunge was the worst in over a decade according to Nation’s Restaurant News. Those were the global numbers. The 14,000 US stores saw business plummet 3.2%. Sales in Europe were up slightly (bucking a triple-dip recession there), but down a whopping 7.3% in the Asia/Pacific and Middle East/Africa sector.
All this despite McDonald’s sponsoring the World Cup in Brazil. The company says 10% of sales were in areas affected by the woes of Shanghai-based meat supplier Husi Food Co. Ltd. who has been accused of selling expired meat. While McDonald’s immediately dropped Husi, many of its China-based restaurants were apparently unable to find alternatives and had to suspend selling burgers and chicken nuggets.
August 11th, 2014
American Greek-style yogurt giant Chobani has run into a brick wall in the United Kingdom where its Supreme Court has refused to let the company appeal a January 2014 ruling that says only yogurt made in Greece can be called “Greek.”
The ruling reference a challenge brought by yogurt rival Fage against Chobani, who insists they don’t really care about the UK market. The company then insisted that UK consumers are sophisticated enough to realize that French fries don’t come from France.
Chobani is just the latest US food & beverage manufacturer to run afoul of Europe’s tighter regulations on descriptors and locations. After many years of selling “California” or “New York” champagne, the US has now agreed to abide by French laws regulating the Appellation d’origine contrôlée or “seal of local desingation.”Similarly only cheese made in the Parma region of Italy may now be labeled Parmesan.
August 7th, 2014
General Mills was mostly about cereals; now it’s pushing away from home to focus on convenience store sales.
This article in Food Business News shows just how far the company has come, including the figure that the company currently sells to over a million away-from-home locations. According to Bethany Quam, the new president of the Convenience Stores & Foodservice unit:
Food eaten away from home is a large market. It accounts for nearly half of all food expenditures and generates more than $0.5 trillion in sales in the U.S. today. And food service industry sales have been growing. Coming out of the recession of 2008, we have seen a steady increase in sales from food away from home, so this market provides a significant growth opportunity for General Mills and our brands.
Sales already have reached $875, which is only half of their retail segment, but has grown 4% annually during a market when many CPG companies are struggling to maintain sales levels.
In keeping with the company’s retail products, the away-from-home focus is on snacks, cereal, yogurt, frozen breakfast, biscuits and baking mixes. Some of the products are no-brainer extensions of retail products; for example, Yoplait ParfaitPro combinging Yoplait yogurt and Nature Valley granola to produce a kit for foodservice accounts for making yogurt parfaits. Given the importance of schools, the company has aggressively moved to add whole grains to its products, including heat & eat pancakes.
Other outlets include fast food operators: McDonald’s is now offering GoGurt yogurt-in-a-tube as an alternative to less-healthy snacks in its Happy Meals at 14,000 locations.
August 6th, 2014
According to global information tacking company NPD Group, U.S. consumers made around 61bn restaurant visits during the year ending May 2014.
The bad news it’s about the same number of trips that they’ve been making for the past few years, and still 1.4bn below the number before the recession.
Whether from solid forecasting or just predicting the obvious, NPD doesn’t see this trend changing anytime soon, with growth at US restaurants a sluggish 1% for the foreseeable future.
Some of the fall-off began before the recession, including a decline in traffic at mid-scale & family restaurants. But other declines such as lunch & dinner traffic seem to reflect changes in the way Americans eat out. Unfortunately for restaurants, lunch & dinner account for over 65% of their total business. Customers 25-49 are down a whopping 44 annual visits/person over the past three years. And even fast food burger places that once seemed bullet-proof have seen a 2% downturn in the previous year.
All is not doom & gloom: breakfast visits have been up for three straight years, including 5% in the most-recent annual measuring period. Breakfast is normally less-expensive and therefore more attractive to consumers cutting back or watching their spending. Deal-based meals were up 5% while non-deal visits were down 2%.
August 5th, 2014
Clarence Otis, the CEO and former chairman of Darden Restaurants, has announced July 28, 2014 that he’s stepping down.
The timing is close to Darden’s sale of Red Lobster unit to Golden Gate Capital, and follows pressure by dissident investor group Barrington Capital Group LP for Otis to step down. A March 26, 2014 letter by Barrington to Darden stated the group had lost their confidence Otis could lead the company and stem a cycle of deteriorating financial news.
Other investors praised the decision as “long overdue.”
While Otis had overseen Darden’s growth from nearly 1,400 restaurants with $5bn in annual sales to more than 2,200 restaurants with $8.7bn in annual sales by 2014, investors had complained about stagnant or declining profits. Instead of using the proceeds from the sale of Red Lobster to upgrade its operations, Darden will pacify the disgruntled with a $1.5bn share repurchase and debt retirement program.
Darden’s remaining brands include Olive Garden, LongHorn Steakhouse, Bahama Breeze, Seasons 52, The Capital Grille, Eddie V’s and Yard House.
August 4th, 2014
This article in Yahoo! Finance is just the latest to bash McDonald’s.
It seems “the bigger they are, the harder they fall,” at least when it comes to business journalists.
The article asks whether McDonald’s is basically finished as a leader in the fast food business despite $90bn in annual sales and 70MM visits daily to over 35,000 corporate locations around the world.
McDonald’s faces a whole world of problems. Some are systemic (creeping prices above the national average), some a function of the restaurant business (higher prices for foodstuffs), and holds up Chipotle as the ideal (McDonald’s must regret selling the smaller chain). Chipotle has been able to raise prices because its customers are willing to pay more for what they perceive as higher value; the Golden Arches’ customers want cheap.
At the same time, Forbes asks whether Yelp and social media are sending consumers to small, no-name restaurants instead of chains. In the past, consumers relied on brands to guide their dining choices, especially in unfamiliar settings. Now, a quick scan with a tablet or smartphone allows anyone to find out where others think the best food is. Not surprisingly, chain restaurants like Mickey D’s rarely get the nod on social media.
The big question is whether McDonald’s can adapt to the changing global fast food business. Focusing on the core menu and rolling out sophisticated digital strategies may or may not improve same-store numbers. Time will tell.
July 31st, 2014
The meat scandal in China that had Illinois-based OSI Group‘s China operations accused of selling adulterated meat, and which has dragged down McDonald’s, KFC and others, has led to sweeping changes.
OSI’s Shanghai plant has been accused by the Chinese government of mixing meat with expired dates with fresh meat to stretch profits. The plant has also been accused of falsifying records to cover up the practice. OSI’s president and COO, David McDonald, has announced the plant will become a direct component of the company’s corporate structure and no longer operate as a separate entity. A group of non-Chinese, outside managers has been dispatched to clean up the mess, including a thorough investigation of the plant’s operations and its compliance with industry practices in China.
McDonald has denied that he changed his last name because McDonald’s is OSI largest customer.
July 30th, 2014
Infographic Courtesy of Food Business News
Sports nutrition in the past was often a joke: energy bars, body-building supplements (sometimes with questionable safety) and energy drinks (also marred with some unfortunate safety lapses). At best it was a niche market for specialty companies like vitamin powerhouse General Nutrition.
But a series of acquisitions shows that segment is now on the radar of mainstream food & beverage companies. Post Holdings added the PowerBar brand to its stable, and now Hormel Foods is buying Muscle Milk. These products are mostly intended to enhance athletic performance or help bodybuilders gain muscle, but can their appearance (and extension) into more conventional products & outlets be far behind?
This article in Food Business News mentions how a recent survey from Innova says 40% of American consumers would pay more for nutritional products targeted to a specific benefit or activity, while 88% want products that increase energy, 84% want ones that burn fat, and half are looking for products that help them recover faster from a strenuous workout.
While vegan products are a novelty, interest in plant-based foods is rising among the affluent because of a belief they are high in anti-oxidants (the scientific jury is still out on whether anti-oxidants have any meaningful health advantage). Gluten-free and allergen-friendly claims are growing globally at nearly 25% of the new product introductions. Portability is key, with formats like gels, chews, bites, and shots. Some of the new items include the ultra-specialized (hydration tablets and shots of electrolytes & flavor to add to water). And segmentation is showing a growing group of nutrition products aimed at women.
Finally a clean label with minimal processing is gaining in the sports nutrition segment.