As part of our mission to be the go-to resource for on-the-go restaurant industry professionals, Modern Restaurant Management magazine (MRM) offers highlights of recent research. This Mid-November edition features news of troubling sales trends, ways technology is used to enhance the guest experience and forecasts for 2017.
News for the restaurant industry was more of the same for the first month of the fourth quarter. Although year-over-year same-store sales and traffic growth improved slightly from the previous month, October’s results continued to fuel concerns for the restaurant industry as it struggles through its worst year since the end of the recession. This insight comes from data reported by TDn2K™ through The Restaurant Industry Snapshot™, based on weekly sales from nearly 26,000 restaurant units and 130+ brands, representing $65 billion dollars in annual revenue.
Same-store sales growth was -0.9 percent during October, which is the eighth consecutive month of declining sales. Since the beginning of the year, only February had positive sales; that month was aided by favorable weather comparisons.
Chain restaurants continue to struggle to attract guests. Same-store traffic growth was -3.4 percent in October, a small improvement of 0.2 percentage points compared with September’s results.
“Since the beginning of 2015, same-store traffic growth has trended down at an increasing rate,” said Victor Fernandez, Executive Director of Insights and Knowledge for TDn2K. “Traffic growth year-to-date has been -3.0 percent, a very troubling scenario compared with the -0.8 percent reported for all of 2015.”
One area that has seen relative stability in recent months has been the rate at which average guest checks have been increasing which, at 2.5 percent for October, remained virtually unchanged from the average growth rate experienced over the last six months.
“Economic activity is decent and may be accelerating,” commented Joel Naroff, President of Naroff Economic Advisors and TDn2K Economist. “The economy expanded in the third quarter by 2.9 percent, the strongest in two years. It is possible fourth quarter growth may exceed that. The October jobs reported provided the first clear indication that the tight labor markets are finally yielding higher wages. With household incomes growing faster, consumer spending should improve. The one caveat is that people are buying big-ticket items using credit and that is draining some spending from goods and services into debt payments. Still, restaurant sales, as measured by the government’s retail sales numbers, continue to outperform almost every other segment and there is no reason to think that will change. The election of Donald Trump will likely have little economic impact before next summer, but the probability that the federal minimum wage will be increased has diminished sharply.”
Despite restaurant sales growth rates slowing down overall, there are segments that are performing quite well. Quick service continues to be an area of strength. This segment was the best performing during the month, a position it has held for the past eight months. Only two other segments were able to post positive sales growth during October: upscale casual and family dining.
“During 2016, the three segments that are showing positive same-store sales growth so far are quick service, upscale casual and fine dining,” continued Fernandez. “Quick service, upscale casual and family dining represent opposite ends of the spectrum in terms of lowest and highest average guest checks. This suggests that consumers are favoring chain restaurants for inexpensive, convenience-driven and on-the-go dining (the vast majority of quick service sales are take-out). On the other end of the spectrum, higher-end, experience-based dining is also strong for chains. Mid-scale spending is where they are having the most trouble.”
Casual dining and particularly its bar and grill sub-segment continue to face significant headwinds and once again were the worst performing during October.
Regional Sales Results
Restaurant sales growth continues to be stronger in the western part of the country. Since March, California has been the best performing region based on sales growth and, along with the Western* region, was among the three regions that achieved positive sales growth during October. The other region was New England, with its first positive sales growth since May.
The rest of the country experienced negative sales in October. The worst performing regions were Texas, Florida and the Southwest**. Florida was affected by very soft results at the beginning of the month due to the hurricane. But, Texas and the Southwest have been suffering through a major slump since the effects of the energy sector’s downturn reached restaurants at the end of 2015.
The Restaurant Workforce
As restaurant sales growth continues to slow, so does job creation by restaurant companies. According to People Report™, a TDn2K company, chain restaurants added new jobs at a rate of 0.3 percent year-over-year during September. After growing at an average 3.8 percent during the first six months of the year, job creation has slowed considerably and, for the first time in over three years, has increased by less than 1.0 percent during the last two months.
A major concern and a source of rising costs for restaurants continues to be employee turnover. Both hourly employee and management turnover increased during September. Turnover has been trending up since 2010 and, particularly for restaurant managers, has reached levels surpassing anything reported for over ten years. In the current environment of falling restaurant sales, this is especially troubling since TDn2K research has continuously shown a relationship between management turnover and a brand’s sales and traffic results.
Staffing and retention difficulties are expected to continue throughout the rest of the year, adding to the restaurant sales and traffic woes as we close 2016.
Personalizing the Guest Experience
OpenTable released diner review and guest note data and diner survey findings that show which personalized touches matter most to guests and what restaurants can do to earn higher ratings and keep guests coming back.
OpenTable reviews data showed the impact a personalized approach to hospitality had on a restaurant’s overall guest rating. The data showed the average rating of restaurants who use the OpenTable Guest Notes feature, which is used to help record guests’ preferences and requests, is 4.6 - which is higher than those that don’t use the feature. The data also showed that the more frequently the restaurant used the feature, the higher its overall rating is.
A survey of OpenTable diners found that complimentary extras (69 percent) and preferred seating preference (65 percent) would increase customer loyalty, and that table preferences, such as booth, window and specific table requests (67 percent), are the most important thing for restaurants to know about them prior to their arrival. However, fifty-three percent of those diners looking for a more personalized experience have not made requests about table, seat or dietary preference before arriving. Of those that did make a request, a review of OpenTable ‘special request’ data showed that diners most frequently cite celebratory events such as anniversaries and birthdays and commonly make requests for high chairs, gluten free menus and romantic or quiet tables. OpenTable data also revealed that diners in Hawaii make the most requests when booking a reservation, followed by Arizona, West Virginia, Nevada and Mississippi.
The “Cheers Effect” was also alive and well with the second and third most important things diners indicating they want restaurants to know and remember being their name (65 percent) and favorite drink (50 percent), respectively. In an overwhelming nod toward wanting a more tailored experience, ninety-five percent of diners said that they would be more inclined to frequent a restaurant if it provided a more personalized experience that caters to their preferences.
“Diners don’t often think about how the magic happens behind the scenes at restaurants,” said Amanda Botelho, Marketing Director, Restaurant Industry Relations at OpenTable. “It used to be that the maître d' catalogued guest preferences and habits on note cards or in their impressive memory banks, but it’s now technology that is playing a key role in helping restaurants deliver next-level hospitality for guests and is making them feel like VIPs, whether they are visiting from out of town or are local regulars. This level of service can have a lasting, positive effect for diners, prompting frequent returns and word of mouth recommendations and reviews on- and off-line, while at the same time eliminating the risk of inconsistent service due to front of house staff turnover.”
“Our approach to hospitality is highly studied and cultivated through the relationships we have developed with our guests over the years. It is practiced constantly and ultimately intended to be as personal as possible,” said Eamon Rockey, General Manager of Betony in NYC. “Whether a person joins us from across the city or across the country, throughout their meal we discover special occasions being celebrated, what brings them in to dine with us, and if they’re visiting New York, what they did earlier in the day, and perhaps even what is planned for the rest of the trip. All of this plays into the way we curate their dining experience.”
OpenTable's Diner Survey was conducted online from July 21to August 15. The survey garnered more than 3,000 responses from across the U.S.
Lower Food Costs Forecasted
The trend of favorable costs for the commodities restaurants buy is expected to extend into 2017, with beef prices forecast to decline for a second year in a row and costs of many others to remain near current levels, according to the annual purchasing forecast by supply chain management firm SpenDifference.
Beef, pork and poultry costs are projected to stay at “great levels” next year, while corn, which drives all other commodity prices, is forecast to remain below $4 a bushel, said DeWayne Dove, vice president of Supply Chain. However, soy oil and cheese costs are expected to rise.
“With restaurants facing higher labor and healthcare costs in 2017 – and expectations for continued slow traffic – now is the time to take full advantage of low commodity costs,” Dove said. “Analyze your needs and secure short- or long-term positions accordingly.”
Declining food prices will benefit both operators and diners, he added. “These lower costs will allow restaurants to improve their margins, if they use smart sourcing strategies,” he said. “Meanwhile, guests are likely to see more beef and other protein items on menus at competitive prices.”
Although all signs point to continued favorable food costs for restaurants, Dove noted that unpredictable global events, such as storms and livestock disease outbreaks can quickly alter commodity markets.
Beef: Overall costs are expected to drop by double digits in 2017, with ingredients for ground beef forecast to decline between 7 and 8 percent in 2017. Some cuts are forecast to drop 10 to 15 percent.
Pork: Average cost could drop modestly. Pork bellies are forecast to decrease slightly, but pork used for sausages is expected to see a modest increase. Pork production is forecast to rise 2.4 percent next year. Domestic supplies could fall, however, if producers increase exports.
Chicken: Boneless breast, coming off a nearly six percent drop in price for 2016, could decrease another one percent next year. Dark-meat leg quarters are forecast to rise 7 percent in cost due to an increase in exports.
Turkey: Flocks have recovered from the avian flu outbreak in 2015. Production has increased, and overall costs are forecast to drop 20 percent.
Wheat: The cost per bushel is projected to rise five to seven percent, but it’s coming off record low prices the last two years.
Soy oil: Costs are forecast to increase 20 percent, based on demand and lack of supply.
Dairy: Butter is projected to drop in cost by six percent as a result of increased production, while cheese costs are forecast to rise eight percent.
Fast Casual Expected to Grow
According to the latest market study released by Technavio, the fast casual restaurant market in the U.S. is expected to reach $66.87 billion by 2020, growing at a CAGR of more than 10 percent.
Millennials, those aged between 20-35 are the target consumers for the fast casual restaurants market in the U.S.
Millennials, those aged between 20 and 35 years, are the target consumers for the fast casual restaurants market in the U.S. For instance, in 2015, it was estimated that around 33 percent of the millennials in the U.S. use social media, online advertising, and online ratings to gain information about the food available in fast casual restaurants. Furthermore, as today's consumers face a time crunch, many consumers prefer to eat in fast casual restaurants during work hours. In terms of employment scenario, 68 percent of people aged between 15 and 64 in the US had a paid job in 2015, and out of which, around 73 percent of men had a paid job in comparison to 63 percent of women. This has reduced the time spent cooking at home and increased the visits to fast causal restaurants. This has encouraged people to increase their spending on eating out, leading to the increase in demand for foodservice establishments.
North American foods will continue to dominate the market in the US and is likely to occupy a total share of around 56 percent, growing at a CAGR of more than 10 percent by 2020.
According to various research studies, around 33 percent of children and teenagers in the US have sandwiches, burgers, or other quick serve foods on a daily basis. About 12 percent of them obtain 50 percent of their daily diet requirements from these foods. Therefore, fast casual restaurants in the US are including many healthy meal options in their menu to cater to the daily nutritional requirements of children and teenagers. For example, Muscle Maker Grill Nation uses United States Department of Agriculture (USDA)-certified grass-fed beef, all-natural lean chicken, and fresh fruits and vegetables as ingredients for preparing sandwiches, pasta, and other food items.
According to Arushi Thakur, an industry expert in food from Technavio, “The demand for fresh and healthy salads among millennials is also rising. For instance, Sweetgreen, a fast casual restaurant chain with over 30 outlets, focuses on seasonal and innovative salads made with locally sourced ingredients for its health-conscious consumers.”
The market penetration of breakfast sandwiches, egg dishes, pancakes, waffles, and French toast for breakfast at fast casual restaurants is expect to rise during the forecast period. As per the research studies in 2014, consumers in the US on an average eat eight breakfast meals per capita per year at restaurants. For instance, Shake Shack is now serving breakfast dishes at the JFK Airport, Washington D.C.’s Union Station, and NYC’s Grand Central Terminal Shacks.
Italian food is the second highest segment in the market in the US and is likely to occupy a total share of over 16 percent, growing at a CAGR of almost 11 percent by 2020.
The growing demand for customization in pizza and rising consumer preference for fast casual pizza are key driving factors for market growth in this region. Customization is a key element that numerous consumers in the US look for, especially millennials. For example, pizza restaurants like PizzaRev serve custom-crafted personal-sized pizza to customers with any toppings for one price. Also, pizza fast casual chains are emphasizing the benefits of using locally-sourced fresh ingredients, hormone-free meat, minimally-processed food ingredients, and fresh herbs in the preparation of pizza served in their outlets.
“A consumer's average pizza occasions per month in the US was four in 2015. Pizza fast casual restaurants with gluten-free offerings in their menu are gaining popularity in the US. PizzaRev, MOD Pizza, and several other players offer gluten-free crust pizza in the US,” says Arushi.
Mexican food is the fastest growing segment in the market in the US and is likely to occupy a total share of above 15 percent, growing at a CAGR of almost 11 percent by 2020.
The rising popularity for Tex-Mex cuisine in the fast casual restaurants is the main impetus for market growth. Burritos, salsa, tacos, fajitas, and nachos are extremely popular food served in fast casual restaurants in the US. For example, Chipotle Mexican Grill offers wide variety of burritos and tacos. Its crispy corn and soft flour tacos are favorite among the fast casual customers in the US.
The demand for breakfast tacos and burritos is also expected to increase during the forecast period. For example, Qdoba Mexican Grill, a fast casual Mexican style restaurant, offers breakfast burritos at some locations in the US.
The top vendors highlighted by Technavio’s research analysts in this report are:
- Chipotle Mexican Grill
- Firehouse Restaurant
- Five Guys
- Panda Express
- Panera Bread
POS Growth in Europe
Technavio analysts forecast the point of sale (POS) terminal market in Europe to grow at a CAGR of more than 6 percent during the forecast period, according to their latest report.
The research study covers the present scenario and growth prospects of the POS terminal market in Europe for 2016-2020. To calculate the market size, the report considers revenue generated from the sale of POS terminals, transaction fees, and other fees such as monthly fees charged by vendors in Europe.
The POS terminal market in Europe is driven by the small and medium enterprises segment and the replacement of non-Europay, MasterCard, and Visa (non-EMV) POS terminals with EMV POS terminals by the existing end-users. As of 2015, almost 66 percent of POS terminals were used at fixed terminals, which will decline to nearly 57 percent by 2020 due to the increasing demand for mobile POS terminals.
Vendors are strategizing on targeting micro, small, and medium enterprises (MSMEs) to increase sales. A number of MSMEs still use cash as a mode of the payment transaction. Such MSMEs cite multiple banking procedures, the complexity of POS terminals, and multiple fees charged by banks as reasons for not incorporating POS terminals. However, with increasing penetration of payment cards, merchants are forced to adopt POS terminals to serve their customers better.
Increasing card transactions
“The increase in the use of credit and debit cards for payment transactions by consumers is encouraging the vendors to adopt payment mechanisms involving cards. In addition, consumers are expected to use cards and digital money as a mode of payment more often than cash. This encourages mobile card readers to invest in the technology and market, with the assurance that merchants and consumers will process payments through card transactions,” said Sunil Kumar Singh, a lead computing devices research analyst at Technavio.
Different instances of financial fraud have forced countries to set stringent regulations with respect to security standards. Regulatory bodies have imposed a rule for the recertification of electronic payment systems deployed by retailers and merchants. In Europe, the EMV liability shift rule, which was implemented during 2005-2006, mandates that the issuers and merchants should adopt EMV technology standards, failing which they will be liable to fraud charges in the case of any fraudulent transaction.
The certification of electronic systems employed by retailers, which connect to payment networks, should be obtained from card associations, financial institutions, and payment processors. “Compliance and certification have to meet the terms set by government and telecom companies. This requires the majority of retailers to change their existing POS systems to new POS systems that will help them comply with these terms. As a result, the market is seeing an increase in chip and PIN and NFC transactions, which are more secure than magnetic stripe transactions,” said Sunil.
The growing adoption of mobile devices and smartphones and rising popularity of mobile commerce are driving the growth of the e-commerce market. The market has more than 50 percent of online shoppers globally. They either use smartphones or tablets for shopping. While many companies are making digital sales, some are completely replacing their physical stores with the digital sales channel. The need to remain competitive, penetrate unfamiliar markets, meet increasing demands from customers, and respond to changing customer needs and business scenarios are some of the factors responsible for the rise in e-commerce websites.
Six Key Food and Drink Trends
Mintel identified the six key trends set to impact the global food and drink market in 2017. The coming year will be a year of extremes, from “ancient” products including grains, recipes, practices and traditions to the use of technology to create more and better tasting plant-enhanced foods.
Expect to see a rise in both “slow” and “fast” claims, as well as more products designed to help people unwind before bedtime, sleep better and restore the body while they rest. Opportunities will exist for more products to leverage the reputation of the tea category and use chamomile, lavender and other herbs in formulations as a way to achieve a sense of calm before bedtime. There will also be a valid excuse for nighttime chocolate indulgence. In 2017 and beyond, expect to see more of the unexpected, including fruit snacks made with "ugly" fruit and mayonnaise made with the liquid from draining chickpeas, which has been dubbed "aquafaba."
Looking ahead to 2017, Mintel’s Global Food and Drink Analyst Jenny Zegler discusses the top food and drink trends – highlighting both ingredient and food and drink product trends – set to make an impact on global markets.
In Tradition We Trust
Consumers seek comfort from modernized updates of age-old formulations, flavors and formats.
People are seeking the safety of products that are recognizable rather than revolutionary. The trust in the familiar emphasizes the opportunity for manufacturers to look to the past as a dependable source of inspiration, such as “ancient” product claims, including ancient grains, as well as ancient recipes, practices and traditions. Potential also exists for innovations that use the familiar as a base for something that’s new, but recognizable, such as cold brew coffee.
Power to the Plants
The preference for natural, simple and flexible diets will drive further expansion of vegetarian, vegan and other plant-focused formulations.
In 2017, the food and drink industry will welcome more products that emphasize plants as key ingredients. More packaged products and recipes for home cooking will leverage fruits, vegetables, nuts, seeds, grains, botanicals and other plants as a way to align with consumers’ nearly omnipresent health and wellness priorities. Technology will play a part and already we have seen one company use artificial intelligence to develop plant-based alternatives to animal products, including milk, mayonnaise, yogurt and cheese.
The focus of sustainability zeros in on eliminating food waste.
More retailers, restaurants and philanthropic organizations are addressing the sheer amount of food and drink that is wasted around the world, which is changing consumer perceptions. In 2017, the stigma associated with imperfect produce will begin to fade, more products will make use of ingredients that would have otherwise gone to waste, such as fruit snacks made from “ugly” fruit and mayonnaise made from the liquid from packaged chickpeas, and food waste will be repurposed in new ways, such as power sources.
Time is of the Essence
The time investments required for products and meals will become as influential as nutrition or ingredient claims.
Time is an increasingly precious resource and our multitasking lifestyles are propelling a need for shortcut solutions that are still fresh, nutritious and customizable and already we have seen so-called “biohacking” food and drink that offers complete nutrition in convenient formats. In 2017, the time spent on – or saved by – a food or drink product will become a clear selling point, inspiring more products to directly communicate how long they will take to receive, prepare or consume.
The Night Shift
Evening is tapped as a new occasion for functional food and drink formulations.
The increasingly hectic pace of modern life is creating a market for food and drink that helps people of all ages calm down before bedtime, sleep better and restore the body while they rest. Products can leverage the reputation of the tea category and use chamomile, lavender and other herbs as a way to achieve a sense calm before bedtime, while chocolate could be positioned as a way to wind down after a stressful day. Ahead, there is potential for more evening-focused innovations formulated for relaxation, satiety and, taking a cue from the beauty industry, food and drink that provide functional benefits while the consumer sleeps.
Balancing the Scales: Health for Everyone
Inequality is not just a political or philanthropic issue — it also will resonate more with the food and drink industry. Many lower-income consumers want to improve their diets, but the access to — and the cost of — healthy food and drink is often an impediment. More campaigns and innovations are to be expected that will make it easier for lower-income consumers to fulfill their healthy ambitions, including apps to help people make use of ingredients that are on sale and, in a tie-in with Mintel’s 2017 Global Food & Drink Trend Waste Not, a value-priced box of "ugly" vegetables.
"This year’s trends are grounded in current consumer demands for healthy, convenient and trustworthy food and drink. Across the world, manufacturers and retailers have opportunities to provide more people with food and drink that is recognizable, saves time and contains servings of beneficial fruits, vegetables and other plants. In addition, Mintel has identified exciting new opportunities for functional food and drink designed for evening consumption, progressive solutions for food waste and affordable healthy food for low-income consumers. Opportunities abound for companies around the world to capitalize on these trends, helping them develop in new regions and more categories throughout the course of the next year and into the future,” said Jenny Zegler, Global Food and Drink Analyst at Mintel.
Consumers Demand Healthy Offerings
As consumers are becoming increasingly health conscious about their lifestyles and diets, food manufacturers and restaurants have had to quickly adapt by expanding product offerings to increase their customer base, while also strengthening existing customer loyalty. Technavio has recently published three research reports which highlight markets that are seeing increased revenue directly driven from healthy conscious consumers.
Pizza lovers are opting for choices that have new ingredients and bold flavors as the demand for innovative and exotic flavored pizza is popular among millennials. In addition, customers are looking for alternatives to customize their pizza based on calorie intake per day. Companies such as Pizza Hut cater to this audience by offering nutrition calculators that provide customers options to create their own pizza by choosing crust type, toppings, sauce, and crust size based on their requirements, while at the same time displaying the total calorie intake for customers.
The global pizza market is also expanding meat-free and dairy-free alternatives in their menus. There were approximately 35-40 chains in the US and Canada in 2015 which offered vegan pizzas, one of the largest vegan-friendly chains being Mellow Mushroom which has over 150 locations throughout the United States.
Technavio’s lead food and beverage analysts expect the fast casual restaurants market in the US to grow at a CAGR of more than 10 percent during the forecast period, driven by growing health-consciousness among consumers. Restaurants are introducing healthier meal options in their menus which contain unique, high-quality food ingredients to help customers reduce their calorie intake.
Restaurants such as Pie Five Pizza, Chipotle Mexican Grill, and Smashburger offer fresh salads in their menu, containing fresh vegetables, while PizzaRev, Panera Bread, and Biaggi's Ristorante Italiano offer gluten-free food on their menus due to the growing awareness of celiac disease.
Consumers are becoming more attentive about their snacking habits and are increasingly adopting healthy snacking foods such as extruded snacks because of their metabolic benefits. Healthy snacking is also a complement to weight-loss plans, as these snack foods provide essential vitamins and nutrients.
Social Media Impact
NetWaiter’s Social Widget has demonstrated a significant benefit to restaurants by attracting and informing local customers about the latest and greatest from their favorite local restaurants.
NetWaiter analyzed restaurants within its network that use the integrated Social Widget — a one-of-a-kind marketing tool for restaurants not offered anywhere else — and clear benefits stood out for restaurants that post regular updates using the tool.
“When we first saw the numbers we almost didn’t believe them,” said Senior Director of NetWaiter, Jared Shimoff. “We controlled for a variety of variables and only measured results on days when a restaurant was open. The results still stunned us, and any time you can deliver measurable results, it’s exciting. We’re thrilled to see the clear value it provides restaurants using our network.”
On average, visits to a restaurant’s site increased 23.3 percent on days when a restaurant made a post using their Social Widget, compared to days when they did not make a post.
For restaurants using NetWaiter’s premium services, which include online ordering, the number of orders and the volume of sales increased significantly. The number of online orders at a restaurant increased 76.4 percent on days when at least one post was made using NetWaiter’s Social Widget. Online sales were also found to be 84.1 percent higher during days restaurants made at least one post.
NetWaiter’s Social Widget is available for free to all restaurants on the NetWaiter network, which includes more than 300,000 restaurants across the United States.
To learn more, click here.
Millennials Influence Packaging
This year's 2016 Trends Report from the Foodservice Packaging Institute revealed key industry shifts that focused on industry changes being driven by the generational influence of millennials.
"Each year our Trends Report searches for common threads found throughout the entire foodservice packaging value chain. This year more than ever, it’s hard to deny the influence of the millennial generation on the foodservice packaging industry," said Lynn Dyer, FPI’s president. "As such a large, influential piece of the population, the opinions and ideals of millennials are a defining factor, leaving an impression on the industry."
Millennials desire food that is increasingly convenient and less time-intensive. Responses this year showed an uptick in the grab-and-go sector. Ordering online, through mobile applications or via automated in-store ordering stations is increasingly popular, partially due to millennials' "text rather than talk" preference. Meal delivery programs are gaining traction, too, requiring new and innovative foodservice packaging.
Changes in preparation and distribution of meals are driving other trends, such as an increased interest in tamper-evident packaging and food safety. Tamper-evident packaging offers a visible solution for foodservice operators and their customers concerned about the integrity of their foods and beverages.
This year's report also highlights the fact that "environmentally-friendly," "sustainable," "recyclable" and "compostable" packaging are moving beyond trendy to now being a regular part of doing business. "Light-weighting" and mineral filler usage is gaining interest, which can help both environmental and economic goals of companies and consumers alike.
Another key industry shift revealed in the survey is the common concerns addressed across multiple industry segments. Foodservice packaging sectors are communicating more with each other, thus paying more attention to the similar links, challenges and opportunities in the entire supply chain.
"The increasing communication and collaboration between the supply chain partners will result in the continued evolution of the foodservice packaging industry to better support the needs of foodservice operators and their customers no matter who they are today and in the future," Dyer said.
Now in its eighth year, the Trends Report is FPI’s response to dozens of requests received throughout the year from media, analysts, conference organizers and others about the latest industry happenings. The FPI survey, sent to members in September, collects opinions from companies throughout the foodservice packaging supply chain, including raw material and machinery suppliers, packaging manufacturers, distributors and operators. The first section compiles direct comments and insights by industry players. The second section provides high-level trends in the foodservice packaging industry based on FPI staff analysis of member submissions, as well as FPI's general industry observations and newsletter entries.
Food Safety Testing Grows
According to a new research report by Global Market Insights, Inc., stringent regulatory compliances from FDA and REACH owing to growing food borne diseases outbreaks are driving global food safety testing market size growth. Food supply trade globalization is among the key major factor increasing the cross-contamination level and hence fuelling industry growth.
Growing consumer awareness and testing industry expansion due to increasing gastrointestinal disorder and toxicity cases will fuel Germany food safety testing market growth. Europe was already valued at over 2.5 billion in 2015. EU centralized health safety legislation to focus to reduce the overlapping inspections and introduced consistent, targeted, and clear enforcement will stimulate regional demand.
Changing consumer lifestyle and taste preferences for international cuisines are encouraging food supply chain recognition and improvement. International trade dependency on certification and safety tests are key factors fueling industry growth.
Salmonella, campylobacter, E. Coli, Listeria are major reported pathogens for disease outbreaks. Pathogens market was more than 6 billion in 2015. Modification in consumer diet and agricultural manufacturing practices are key factors responsible for pathogen evolution.
Growing concerns from ready to eat meals, bakery, infant diet, dried processed products, canned and preserved products to implement quality measures should drive processed industry growth. High cost associated with diverse diagnostic techniques due different product composition would impact food safety testing price trend.
Halal Products Growth
The global halal products market has expanded at a promising pace in the past few years and is expected to embark upon a path of exponential growth in the next few years as well. Rising global population of the Muslim community and rising disposable incomes across some of the world's prominent Islamic countries are expected to be the key drivers of the market. However, the market is expected to bear the brunt of the lack of transparency with respect to the use of ingredients for the pharmaceutical and personal care products and the absence of a globally uniform halal standard.
Transparency Market Research estimates that the global halal products market, which was valued at $2.70 trillion in 2015, will rise to $10.51 trillion by 2024, exhibiting a CAGR of 16.2 percent from 2016 to 2024.
Rising Global Muslim Population Key to Market Growth
Being the prime consumer of halal products, the rising population of the Muslim community across the globe is one of the most prominent drivers of the global market for halal products. Studies estimate that by 2030, nearly 26 percent of the world's population will be accounted by Muslims, which is a vast rise from the 19.9 percent in 1990. Moreover, the rising disposable income of Islamic countries, chiefly owing to the rapid growth of the Islamic economies in Middle East and South East Asia, is also expected to contribute to the market growth in the next few years. In addition to this, the consumption of halal products by other communities is also on the rise, which is expected to further fuel the global demand for halal products.
The market is also embarking upon a promising growth path owing to rising urbanization and the resultant improvement seen in the retail sector in the past few years across many key markets. Earlier, the halal food market was highly unorganized. The present-day halal products market, on the other hand, features a highly organized retail structure with the presence of a large number of retail outlets selling a vast variety of halal products. Moreover, the high degree of globalization of the halal market and multilateral trade agreements have boosted the trade flow of halal products.
Lack of Globally Uniform Standards to Hinder Market Growth
There exists a clear distinction between halal products and haram products, with the latter denoting food or daily use items unacceptable for use according to Islamic (sharia) law. Nevertheless, the difference in Islamic regulatory bodies across different countries leads to varying definitions of halal products across the globe. Hence the products accepted by the Halal Certification Board of a particular country may not be accepted in another country.
For instance Non Alcoholic Beer was accepted by the Halal certification board in the ASEAN economies. However it was rejected by their counterparts in the GCC, thus creating chaos among the manufacturers and consumers. Such lack of a global halal certification board is projected to be a significant restraint for the market in the next few years. Such lack of a regulatory body capable of monitoring all the processes involved on the production and marketing of halal products is expected be a key restrain for the global halal pharmaceutical and halal personal care market in the near future.
Estimated at 131,000 outlets, the U.S. coffee shop market shows significant growth in 2016. The branded coffee shop chain segment increased by 3.1 percent in outlets and 7.4 percent in revenue over the past year to reach $41 billion. The market is set to reach $85 billion by 2025.
The Project Café 2017 USA report from Allegra World Coffee Portal (WCP), reveals the growth is driven by the coffee-focused chain segment (e.g. Starbucks Coffee Company, Dunkin Donuts, Tim Hortons). This segment records an impressive 8.2 percent revenue growth to reach $29 billion across 26,784 chain outlets. The top 3 chain outlets account for a 65 percent share of the entire branded coffee shop chain segment with market leader Starbucks operating 12,938 outlets, and Dunkin Donuts and Tim Hortons operating 8,573 and 658 outlets respectively.
While branded coffee shop chains account for 25 percent of the total market, the artisan coffee culture has been the key influencer in shaping the evolving landscape. The growth in boutique chains such as La Colombe, Blue Bottle and Bluestone Lane and the recent acquisition of small-sized artisan chains Stumptown and Intelligentsia signals a new era of competition.
With the rise of an espresso-based coffee culture and increased consumer expectations for quality and experience, Allegra WCP observes higher quality coffee standards across the market. As a result, even fast food chains such as McDonalds now offer a full range of espresso-based beverages.
U.S. coffee drinkers consume 23 cups of coffee a week in various locations. Regular coffee shop visitors consume four cups of coffee per week in coffee shops on average.
With the emergence of the rapidly expanding artisan scene, a growing number of Americans are becoming coffee connoisseurs demanding greater quality coffee wherever they are. 55 percent of the 5,000+ consumers surveyed by Allegra WCP state they would be willing to spend more for higher quality coffee in coffee shops, giving an average price ceiling of $3.18 per beverage. Millennials are the driving force in the increase of espresso-based beverage consumption and are much more likely to order cappuccino (19 percent) than a filter coffee (8 percent).
The report identifies that 66 percent of consumers regularly purchase food in coffee shops and that the breakfast trade is particularly important for coffee operators. 34 percent of consumers visit coffee shops in the early morning and 30 percent mid-morning. As consumers increasingly turn to coffee shops for out of home food options, the market boundaries are blurring and so a compelling food offer is critical, a trend that the more successful chains are already responding to.
Future Market Growth
The U.S. branded coffee chain segment is forecast to exceed $59 billion revenue across more than 39,600 outlets by 2021. Allegra WCP predicts the branded coffee chain market will exceed 45,000 outlets and revenue of $85 billion by 2025, with 3.3 percent predicted annual outlet growth.
Close to Home
Proximity is an important influence in consumer decisions on everyday purchases, according to the results of a national survey by engagement and rewards company Access Development.
In the survey, 93.2 percent of respondents said they typically travel less than 20 minutes to buy groceries, clothing, gas, and other routine transactions, while 87 percent said they won’t travel beyond 15 minutes for such purchases. For purchases that consumers make at least once per week, the distance they’re willing to travel shrinks even further to ten minutes.
“The Impact of Retail Proximity on Consumer Purchases” survey was compiled from over 2,000 responses from a national pool of consumers.
The survey findings confirm, and even go beyond, the oft-cited statistic that over 80 percent of discretionary spending occurs within 20 miles of home. While that adage makes sense - 92 percent of discretionary spending still occurs in-store, according to the Census Bureau - Access’ findings show that even 20 miles may be too far to travel for most people.
The survey shows that the more frequent the purchase, the less distance consumers are willing to travel for it. Respondents said they typically travel 6.01 minutes from home for gas, 8.03 for groceries, and 8.5 for fast food. Conversely, they’ll travel 19.87 minutes away for clothing and shoes, 17.04 for movies, and 14.17 for auto service.
“The conventional wisdom is that most spending occurs close to home, but there haven’t been many studies completed around just how far people are willing to travel to meet everyday needs,” says Andrew Graft, Access Development’s vice president of corporate marketing. “What this survey shows is that, for most purchases, the local, in-store experience is still very important to consumers. These local merchants have a narrow but profitable sphere they can focus their efforts on, while online and national brands have a major engagement opportunity in helping consumers save on these frequent transactions.”
Among other key findings from the survey are:
- 92 percent of urban residents travel less than 15 minutes for routine purchases.
- Conversely, 70.3 percent of rural residents travel more than 20 minutes for their regular purchases.
- When asked to exclude proximity as a factor, the top influences on consumer purchasing decisions were product quality and price, each cited by 32 percent of respondents.
- Just six percent named brand reputation as a primary influence, while seven percent said they were influenced by customer service.
Bakery Growth Expected
Technavio analysts forecast the global bakery market to grow at a CAGR of more than six percent during the forecast period, according to their latest report.
The research study covers the present scenario and growth prospects of the global bakery market for 2016-2020. The report segments the market into the following four categories which are breads and rolls, cakes and pastries, cookies and others. The report also presents the competitor landscape and brand offerings of the key retailers.
According to Manjunath Reddy, a lead analyst at Technavio for food research, “The numerous health benefits of gluten-free bakery products have increased their popularity in the Americas and Europe. Vendors have gradually begun to split their focus on health and indulgence cakes and pastries in Western Europe and North America. High-fiber bakery products are witnessing robust retail sales in Latin America and Asia-Pacific (APAC).”
Technavio food and beverage analysts highlight the following three factors that are contributing to the growth of the global bakery market:
- Rising consumption of cakes and pastries
- Increasing popularity of functional ingredients in bakery market
- Rise in in-store supermarket bakeries
Rising consumption of cakes and pastries
There is high demand for cakes as a result of an increase in indulgent consumption. The demand for on-the-go snacks is also contributing to the demand for cakes and pastries. The sales of chocolate-based cakes increased by 19 percent between 2007 and 2012. Consumption of these products is usually unaffected by the prevailing economic conditions. Premium varieties in unique flavors are also much in demand and drive the snacks and pastries market. This is further supported by innovation in packaging, enabling easier on-the-go consumption.
Despite growing health consciousness, there exists a steady market for premium, indulgent foods — cakes and pastries being the prominent ones. Vendors have begun to split their focus on health and indulgence gradually in Western Europe and North America. This trend is now emerging in Latin America and APAC, where high-fiber bakery products have seen robust retail sales.
Increasing popularity of functional ingredients in bakery market
Due to the increasing demand for bakery products suited for specific dietary needs, such as gluten-free, innovation becomes an important driver. Functional ingredients are being used to enhance the products and make them healthier. Increasing innovation is apparent in the Canadian bakery market. Products containing flours other than wheat (rice flour and chia flour) have been launched in recent years. Out of the new products launched in Canada in 2014, an increasing number of bakery products claimed to have rice flour. Cakes and pastries and sweet goods constituted around 13 percent of these products.
Numerous products have been launched over the past couple of years, most of them with claims of being kosher or organic. Organic bakery products have also gained in popularity. The organic claim was the most common one within the bakery industry for products including cakes, pastries, sweet goods, sweet biscuits, and cookies.
Rise in in-store supermarket bakeries
In-store bakeries are found in grocery stores and are relatively small but offer a substantial range of fresh baked products, with increasing amounts of wholegrain bread being produced. Artisanal and industrial bakeries have had to contend with rising competition from the growing number of in-store supermarket bakeries that have their own offerings with competitive pricing. In-store bakeries are gaining prominence due to their lower prices and the convenience of one-stop shopping. Value-conscious customers are increasingly opting for private-label offerings of supermarkets.
In recent years, the par-baked or pre-baked or bake-off range of products are increasingly making a mark. Par-baking is a two-stepped baking procedure, where the batter is baked partially for 15-20 minutes and in the next step, par-baked cakes are cooled and refrigerated until final baking. Many supermarkets, quick-service restaurants, and doughnut chains use pre-baking for bread and doughnuts because it is cost-effective, reducing the requirement for trained bakers. Pre-baked bread and doughnuts are also used when there is a concern that quality cannot be maintained from site to site.
“Par bakery items are frozen to increase their shelf life and lower temperature also retains the texture of crumbs and reduces the rate of crumb hardening that results from staling. These cakes also provide an easy and fast way to offer consumers fresh bread and rolls,” says Manjunath.