Examining Beverage Menu Trends Of Casual Dining Restaurants David Henkes – Vice President

2. On-Premise Industry. Facts. Insights. Consulting. Examining Beverage Menu Trends Of Casual Dining Restaurants David Henkes – Vice President Tim Powell – Senior Manager January 21, 2009 Prepared by:

3. I. Introduction

4. Purpose of Our Session Today… • Beverage menus indicate the strategic importance chains place on beverage • Menus used in different ways to promote offerings • Our objective: Evaluate trends evident on casual dining chain beverage menus

5. Data Used in this Presentation • Pulled from a number of Technomic proprietary databases: • MenuMonitor • CO-PILOT consumer tracking • BarTrender panel • American Express MarketBrief

6. What is Menu Monitor? • Most comprehensive database on chain menus • Contains 700+ food menus and 250+ beverage (alcohol) menus • Includes brands, drink descriptions, price (when available), etc.

7. Screen Capture -

8. Screen Capture - • Search page (flavor, ingredient, preparation, brand, healthy & advanced)

9. Menu Monitor Caveats Evaluating the beverage menu provides valuable insight into items considered strategically important by chains • Not all chains have published bar/alcohol menus • Not all brands are counted • Pricing is not always available • Average pricing numbers can reflect not only changes in price, but changes in mix as well.

10. II. Technomic’s Method of Casual Dining Classification

11. Technomic Has Re-Defined and Re-Segmented Casual Dining Note: The casual-dining segments used here were developed by Technomic using qualitative insight collected from both operators and consumers.

12. “Traditional” Casual is Biggest Segment of Casual Dining Share of Top Casual Dining Units Share of Top Casual Dining Sales

13. BevAl Performance Better in Contemporary, Upscale Casual Segments

14. III. Seven Beverage Menu Trends To Watch

15. Seven Beverage Menu Trends To Watch • Top drinks evolving over time • Menus increasingly include non-alcoholic options • Beverage menus typically don’t reflect actual alcohol occasions • Menu prices rising steadily • Size/complexity of bar menu does not correlate to success of beverage program • Successful operators sell brands as well as drinks • Menus will continue to be a critical piece of a successful beverage program

16. 1. Top Drinks Evolving Over Time Growth in Chains Menuing2H 2007 vs. 2H 2008

17. Bartenders Tell us “Old is New” Top “Hottest” Mixed Drinks/CocktailsIn Casual Dining • New and innovation flavors • Mixes • Real juices • New ingredients Combination of “traditional” cocktails with new twists

18. 2. Menus Increasingly Include Non-Alcoholic Options Non-Alcoholic Specialty Drinks Percent of Top Chains Offering Average Price Point $4.48 $3.36 $3.98

19. Specialty Drinks – Red Robin Gourmet Burgers • “Chillin’ Concoctions” – $4.29 • Dreamy Orange Smoothie • Groovy Smoothie • Hawaiian Heart Throb • Freckled Lemonade • Very Berry Raspberry Lemonade

20. 3. Beverage Menus Typically Don’t Reflect Actual Alcohol Occasions 100% 100%

21. Type of Occasion Should Drive Beverage Menu Development at Specific Chains Base: Share of occasions in each segment, 3rd quarter of 2008

22. 4. Menu Prices Rising Steadily • Average menu prices reflect both price changes and changes in product mix • Spirits have experienced price reductions • Traditional, contemporary CDRs see the price hikes • Upscale may be “discounting”

23. Average Drink Menu Prices, By Major Type of Drink Change in Average Menu Price – All Items (2006-2008) Top 250 Chains • Beer prices have seen a spike in the past year – some shift toward import and craft • White wine prices up over two year period as chains add • Red wine prices down – some evidence of mix shift away from bottles and toward WBG • Specialty cocktail prices continue to rise! Source: MenuMonitor

24. Beer Menu Prices Up Slightly Average Beer Menu Prices • Traditional casual finding it difficult to increase prices of beer • Contemporary has seen a shift in beer prices, particularly in the past year. • Upscale casual has seen double-digit increases in average beer menu prices

25. Average Specialty Drink Menu Prices Up, Especially In Traditional Casual Mixed Drink Menu Price Changes • Cocktails have risen 8% in past 2 years, but last year has been more moderate. • Traditional casual slowing the increase of their average drinks • Contemporary casual chains have generally stayed the same in terms of average price. • Upscale casual are up 7% over 2 years, but average drink price feel in the past year.

26. 5. Size and Complexity of Beverage Menu Does Not Correlate to Beverage Program Success • There is no “statistical” correlation between offerings and success • However, it is still helpful to examine successful chains’ menus • Success levels tend to come down to execution rather than the number/type of offerings!

27. Casual Steak Has The Highest Number of Beverages Menued Varied menu restaurants tend to have the lowest number of offerings of any major casual segment CDR Menu Category

28. High Growth Chain Comparison – Traditional High growth traditional chains typically overindex in one or more categories

29. A Snapshot of High Growth Traditional Chains 26 Specialty Drinks 27 Specialty Drinks • Dirty CEO • Summer Breeze Martinis • Shady Lady • Sun-Kissed • Hawaiian Vacation • Key Lime Pie • BMW • Purple Rain

30. High Growth Chain Comparison – Contemporary High growth contemporary casual chains tend to over index in wine (especially white wine).

31. Contemporary CDR Snapshot: Yard House • “World’s largest selection of beer” (158) • Six pack, goblet, pint, half yard • Draft beer, “floats” • Wines emphasized • 52 reds and whites • Larger than average specialty “house” drinks • 27 Martinis • House Tropic • Escalade

32. High Growth Chain Comparison – Upscale Higher growth upscale restaurants have a focus on wine but otherwise do not over index in any categories

33. Upscale CDR Snapshot: Capital Grille 218 Red Wines

34. 6. Successful Operators Sell Brands As Well As Drinks • Consumers continue to be “brand” or at least “branding tier” loyal • Brands will continue to be the longer term driver of beverage growth in casual dining • Beverage menus increasingly emphasizing “hot” brands, or those most demanded by consumers

35. Top Five Brands on Traditional CDR Menus Source: Technomic Menu Monitor

36. Top Five Brands on Contemporary CDR Menus Source: Technomic Menu Monitor

37. Top Five Brands on Upscale CDR Menus Source: Technomic Menu Monitor

38. 7. Menus Will Continue to be a Critical Piece of A Successful Beverage Program • No “perfect” beverage menu mix • Depends on concept and its customer • Chains can and should benchmark themselves • Beverage menus can, in some cases, help drive sales • But one of many tools

39. The Beverage Menu is Low on the Priority List, But Importance Increasing Food Menu Engineering Takeout Daypart Expansion Raising Menu Prices Driving Restaurant Sales Bar Menu Engineering Driving Restaurant Profitability Operators have other priorities in their attempts to drive sales, profitability

40. Operators Can Use a Number of Resources When Adding Beverages Factors Considered When Adding Menu Items: • Consumer insights • Off-premise syndicated information • Specific on-premise brand and consumer data • Type of clientele • Historic sales data • Trade publications Operators are looking for more on-premise consumer insights from suppliers!

41. IV. Key Takeaways from Today

42. Key Takeaways From Today • Casual dining in 2009 is expected to see real declines throughout all types of establishments • Driving real beverage growth will continue to be extremely difficult • The beverage menu is an important tool, but only one tool! • Most chains can do a better job with their beverage menus! • Share of different types of alcohol, drinks • No “silver bullet” in terms of number of offerings, types of drinks that need to be provided • Important to benchmark against your peer group

43. Questions/Discussion

44. Thank You for Your Time Today!

45. Please Contact Us with Any Questions • David Henkes Vice President On Premise Practice Leader dhenkes@technomic.com • Tim Powell Senior Manager tpowell@technomic.com (312) 876-0004