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Context Analysis

Context Analysis

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Context Analysis

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  1. Context Analysis Is the Quick Service Food Industry a Good Place to Be? September 28, 2005 Group A4: Stephanie Baron Jennifer Jones Christine Tahvonen Nichole Tips Bryant Young Bill Zanow

  2. Defining the Market Context • What is the demographic environment? • Does the sociocultural environment fit? • Is the economic environment favorable? • Will the regulatory environment affect the industry? • How could the technological environment hinder or advance the industry? • What is the natural environment?

  3. Demographic Environment

  4. The Demand for Food Away from Home • Consumer Spending at full service and fast food restaurants will continue to grow, but the largest increase will occur for full service restaurants • Per capita spending at fast food restaurants could grow 6% by 2020 as opposed to 15% for full service restaurants (assuming 1% annual growth in real income) • The increasing proportion of households without children living at home will cause spending to go up by 1-2% • The aging of the population will decrease spending on fast food by 2% per capita between 2000 and 2020

  5. Change in Per Capita Spending Due to Demographic and Economic Trends

  6. How Demographic Trends Will Affect the Restaurant Industry • The National Restaurant Association believes that the overall growth of the market will depend on rising incomes and demographic changes (aging population, smaller household sizes, rising number of households with single people or multiple adults without live-at-home children) • Any shift in the market share could affect what food and services both types of restaurants offer • Full service restaurants are a growing threat to fast food restaurants

  7. Consumer Spending on Full Service vs. Fast Food

  8. Segments of the Market: Full-Service vs. Fast Food

  9. Current & Projected Population Statistics

  10. World Population Growth Rate:1950-2050

  11. World Population: 1950-2050

  12. U.S. Population: 2005 & 2025

  13. Household Characteristics & Expected Expenditures

  14. Fast Food Franchise Opportunities • Fast food franchises continue to be among the most popular of all franchise opportunities • According to the U.S. government, fast food consumption now accounts for over 40 percent of an average family's budget spent on food • This growth trend is expected to continue, as the dietary needs of the pubic change and menus expand to accommodate more ethnic preferences • Fast food franchises are as effective at turning a profit as they are at delivering a quick meal

  15. Fast Food Clusters Around Schools • Fast-food restaurants are concentrated within a short walking distance from schools, exposing children to poor-quality food environments in their school neighborhoods • The median distance from any school in Chicago to the nearest fast-food restaurant was half a mile, a distance that an adult can walk in little more than 5 minutes • Fast-food restaurants were statistically significantly clustered in areas within a short walking distance from schools, with an estimated 3 to 4 times as many fast-food restaurants within 1.5 km from schools than would be expected if the restaurants were distributed throughout the city in a way unrelated to school locations • According to a study by Harvard’s School of Public Health, the pattern probably exists in urban areas nationwide and is likely contributing to the nation’s obesity epidemic

  16. Sociocultural Trends

  17. The Natural Marketing Institute's Top 10 Health & Wellness Trends of 2005 • The Immediacy of Health and Wellness Escalates • The Three F’s of Food Trends: Fiber, Functionality and Fat • The Healthy Get Healthier: The Good, the Bad and the Ugly • Weight Loss: Stability, Challenges and Apathy • Planetary Health and Wellness: Is it Cool to be Green? • Sources of Influence Become Multi-Dimensional • Nutritional Supplements – Can New Science and New Claims Revitalize the Category? • From Low-Carb to Slow-Carb: A Redefinition • Reality Gaps Between What Consumers Say and What They Do • The Organic Market: Finding the Real Value Proposition

  18. Obesity

  19. Obesity in America

  20. Calorie Intake & Portion Control • Calorie intake has increased • Portion size has increased (Value Meals)

  21. Obesity • Two sides to this trend: • Helping people lose weight • Fast-food chains are lightening their menus • More and more school districts are removing junk food from campuses and replacing it with healthier options • Helping heavier people live more comfortably • Health club membership rose by 8.5 percent between 2002 and 2003 • Medicare recently began covering gastric bypass surgery • Flip Side • More than 60 percent of women and teens wear plus-size clothing • The kids plus-size apparel market is growing

  22. Obesity in America • Obesity increased by 74 percent during the past decade to 44 million adults in 2001 • The proportion of Americans who are severely obese also has soared from 1 in 200 adults in 1986 to one in 50 adults in 2000 • About 127 million adults are overweight which means two-thirds of adults nationwide are more at risk for developing conditions such as high blood pressure, diabetes, heart disease, stroke, gall bladder disease and certain cancers • The rise in obesity costs U.S. businesses an estimated $12.7 billion in health care, sick leave and insurance premiums • Increased television watching, larger meal sizes and inventions such as the remote control and riding lawn mowers have pushed up obesity rates • The work force has shifted from agriculture and manufacturing to service jobs, in which workers sit in front of computers all day

  23. Obesity in America • Americans have longer workdays than those in most other countries, cook fewer home meals and rely more on frozen and fast food for nutrition • A recent University of Maryland study found that people living in the suburbs where homes are mainly accessible by car were more likely to be obese; People in more developed counties tended to exercise more from climbing stairs or walking to errands • An estimated 10% of America's preschoolers are dangerously overweight • Obesity rates for elementary school students have tripled in the last three decades • 31% of adults in the U.S. are now considered obese (at least 30 pounds overweight) • Increase in the proportion of Americans characterized as overweight, from 47% in the late 1970s to more than 65% in 2002, including 31% who were clinically obese • Medical costs attributable to obesity reached $75 billion in 2003, almost half of which fell on taxpayers through public health-care schemes

  24. Fitness and Weight Loss • The fitness buzzword for 2005 – “Core Conditioning” • This trend is all about strengthening and stabilizing the muscles of your midsection • Expect the next 12 months to bring expansion across a variety of industries; Fitness and weight-loss franchises will grow as Americans continue their battle to get slim • The number of fitness and weight-loss franchisors in the Franchise 500® grew from 8 to 17 • According to the International Health, Racquet & Sportsclub Association, 39.4 million Americans belong to a health club—up from 24.1 million 10 years ago—so there are definitely more than enough consumers joining in to feed this growing trend

  25. Top 10 Trends in Food and Cookingfor 2005 1. High-Fiber 2. Drive-By Dining - “Fast-food chains have been quick to tout cup-holder cuisine for lunch and dinner. The whole concept got a big breakfast-time boost with the roaring success of McDonald's "McGriddle" sandwiches.” 3. Phood - Phood is a combination of food with a “pharmaceutical pitch - comestibles with health benefits.” For example, breakfast cereals and margarines market their ability to reduce the risk of heart disease. 4. White Tea - more expensive than green or black tea and has a different production process. It has higher levels of antioxidants, natural chemicals, which are thought to prevent cancer. 5. Local vs. Long-Distance - “For some folks, organic isn't enough. Their food also has to be grown next door. Proponents of locally produced foods say the practice ensures fresh, wholesome food. Instead of woody "shipper-friendly" tomatoes, you get the juicy kind (but only in-season, of course). Local production also reduce the energy expended in shipping and supports local jobs. Watch for local growers in 2005 who will offer a full season of produce on a subscription basis.”

  26. Top 10 Trends in Food and Cookingfor 2005 6. Let Someone Else Do the Cooking - “HRM – Home Meal Replacement – has been gathering steam for some time now. Pizza joints have eliminated their dining rooms in favor of delivery and carry-out. And grocery stores now stock huge buffets of hot and cold fare that's designed to pack up and bring home. In 2005, watch the "fast casual" chains – Applebee's – launch curbside catering programs that let you call ahead and pick up your meal in dedicated parking spaces.” 7. Gender Vending - Marketing products to one sex is the trend in the food industry. For example, vitamin and supplement producers have been doing this for years to advertise easing the symptoms of menopause or improve prostate health. Products like "Harmony" cereal and "Nutrition for Women" oatmeal are focusing specifically on women. For the men, beer seems to still be focused toward them. 8. Flexitarians - “Meat-heavy restaurants that offer "veggie" options on their menus are really going after the flexitarians, say trend mavens, catering to folk who might want to go vegetarian a few times a week.” 9. Seitan - the “new tofu.” This is not a new food. It is wheat-based, high-protein food and its texture makes it an easy substitute for meat. 10. Just a Taste, Thank You - “Restaurants on the coasts have been offering bite-size portions for a while now. Expect the small-plate trend to make inroads to the heartland in 2005.”

  27. Fitness and Weight Loss • The fitness and weight-loss industries are hot and on the rise

  28. Young Children & Schools • Low-income people tend to be more overweight than the average population because they buy cheaper, sugar-laden foods and have less knowledge of healthy diets • More states tighten nutritional guidelines, schools stand to lose millions of dollars from vending machine sales • About 70% of 832 public schools polled in 2001 said they had a partnership with a food or beverage company to fund programs •     Some principals are worried about losing their ability to have food fund-raising programs in schools

  29. Portion Control – Is Bigger Better?

  30. In Touch with the Community Dave Thomas Foundation for Adoption® Dave founded this organization to help the thousands of children throughout the United States find permanent homes and loving families. Wendy's Wonderful Kids funds adoption recruiters across the nation that focus exclusively on finding permanent adoptive homes for children in foster care. Wendy's Championship for Children™ The Wendy's Championship for Children at Tartan Fields is widely recognized as the premier woman's professional sporting event held annually in Central Ohio. Wendy's 3-Tour Challenge™ Each year professional golfers from the PGA, LPGA and Senior PGA Tours battle it out to see who will be victorious in the Wendy's 3-Tour Challenge Golf Tournament. Wendy's Classic Achiever Scholarship Program Wendy's Canada honoured 210 Classic Achiever Award winners with scholarships to help fulfill their dreams of post secondary education. Deletree Conmigo™ Wendy's Deletree Conmigo is an in-school, bilingual spelling bee competition and curriculum-enhancing program. Wendy's High School Heisman Program™ Dave Thomas created the WHSH program to honor top students nationwide who excel in academics, athletics and community service.

  31. Home Cooking • Home cooking may also be making a comeback, helped by two factors • The percentage of women joining America's workforce may have peaked • Supermarket chains such as Wal-Mart have been forcing down retail food prices

  32. Vegetarian Options Burger King • Burger King has had its BK Veggie burger available since 2001 • In Canada the BK Veggie is made by Sol Cuisine and is vegan. The U.S. version used to be vegan, but as of Dec 2004, it now contains egg whites Harvey’s • Harvey’s was one of the first burger chains to develop and promote its own simply named, Veggie Burger. It is a soy-based patty without a lot of chemicals and is totally vegan. Their policy is to cook the burger on a separate part of the grill when possible • Aug. 14 2005Update: 'Veggieburger (even by itself) is flagged for those allergic to fish McDonald’s Only in Canada is there a veggie burger called the McVeggie on their menu • They have also released some side salads to accompany the McVeggie • McDonald’s still hasn’t figured out a separate grill for its veggie burger so a warning is posted on their website: “During preparation, the McVeggie Burger may come in contact with meat and/or chicken products.” • McDonald’s has introduced two vegetarian salads and a vegan one called Mandarin California Greens salad • Warning: McDonald’s fries still contain beef fat

  33. Vegetarian Options Wendy’s • The last holdout of the veggie burger movement • Two salads include the spring mix salad is vegetarian but is still loaded with shredded cheese and its honey roasted pecans contain lactose. The side salad is vegan and comes with three vegan dressings, oriental sesame, house vinaigrette and a fat-free French dressing that contains honey. The Caesar dressing contains anchovies and the other dressings are loaded with milk and eggs • Wendy’s has two vegetarian baked potatoes: the Broccoli and Cheese Baked Potato and the Sour Cream and Chives Baked Potato • Their fries are vegan but may be cooked in the same oil as the chicken nuggets • Wendy’s buns are vegan Subway • Subway suggests that you inquire at individual stores as products can vary from region to region • Subway’s breads are all vegetarian (the cheese breads contain rennet of unknown origin) and the following are vegan: Italian bread, roasted garlic bread, hearty Italian bread and sourdough bread • Subway’s cookies all contain egg products and some contain milk products but are otherwise vegetarian

  34. Vegetarian Options KFC • In Canada, the only things remotely vegetarian are a potato salad, a pasta salad and coleslaw. None of these are vegan • In the U.S. menu options include macaroni and cheese, three bean salad, corn-on-the-cob and mashed potatoes • KFC has come under fire recently over their the way their chickens are raised and slaughtered Taco Bell • Beans can be substituted instead of meat to make many menu options vegetarian • The corn-based shells are vegan, free of hydrogenated fats and have relatively short ingredient lists • Hot, mild and fire sauces are all vegan and loaded with chemicals • Taco Bell’s fries are vegan and are cooked in their own 100% vegetable oil • As of 2004 soft shells (for burritos or soft tacos) and the Mexican rice contain no obvious animal ingredients Tim Horton’s • All Tim Horton’s products are vegetable-based

  35. Is Fast-Casual Slowing Down? • Statistics show American diners eat out more than they did last year (2004) • Surveys show they’re willing to spend more to get better food in finer surroundings—and an entire genre of dining emerged to take advantage of that consumers’ largesse • “Fast-casual came on strong because quick-service was so weak, however they aren’t competing against the Whopper anymore.” • Due to customer preferences of better competitors have added premium salads, sandwiches, and leaner offerings to their menu once dominated by cheap eats and fries • At the end of 2002, comps for leading fast-casual brands, including averages from Baja Fresh, Panera, Rubio’s Baja Grill, and Schlotzsky’s were at 2.7 percent, compared to 2.5 percent for casual dining and 4 percent for a segment in the quick-serve/hamburger branch

  36. Is Fast-Casual Slowing Down? • A year later, fast-casual closed out with a 0.6 percent increase in comparable sales for 2003, well behind the 2.1 percent increase shown by casual eateries. The hamburger segment comp sales for 2003: 4.1 percent • “If you can’t beat ’em, join ’em” venture • McDonald’s acquisition of Chipotle Mexican Grill allowed them to grow in a new direction, even as it improved its food quality • Wendy’s in 2002 bought Baja Fresh, another fast-casual Mexican brand, and took a chunk of Café Express and Pasta Pomodoro •  One of the things data shows is that fast-casual might have problems with diner frequency • A heavy user of quick-serve might patronize a store three to four times a week, but upscale folks have different dynamics. In comparison, fast-casual has inspired some serious loyalties for particular brands, but many folks are opting to spend a little more for the casual dining experience. Some 70 percent of casual-dining business comes from repeat customers who’ll upgrade instead of standing in line for something that is now comparable to what they could get at one of the traditional quick-serves • The reality check: Fast-casual sales account for $5 billion annually. McDonald’s does $20 billion a year

  37. Economic Environment

  38. U.S. Unemployment Rate • U.S. unemployment has declined in recent periods

  39. U.S. GDP • US Real GDP has grown consistently over the past 5 years

  40. Inflation Rate • Inflation has increased at a steady rate for the past several years

  41. Oil/Gas Prices • Gasoline prices are moving toward an all time high in 2005 dollars

  42. Effects of Hurricane Katrina • With nearly 1 million jobs lost in the Gulf Coast, unemployment rates will increase • Forecasts for GDP in Q3, Q4 and 2006 have all been adjusted downward • Higher energy costs are contributing to in increase in inflation • Damage done to refineries and supply lines will continue to effect oil/gas prices

  43. Economic Environment Conclusions • Decrease in discretionary income as consumers pay more at the pump and heating homes • Decrease in travel due prices at the pump • Increase in supplier costs and food preparation costs

  44. Regulatory Environment

  45. Mad Cow Disease: Background • Common name for bovine spongiform encephalopothy (BSE), “a slowly progressive, degenerative, fatal disease affecting the central nervous system of adult cattle” • BSE linked to approximately 150 deaths from Creutzfeldt-Jakob disease, a rare but fatal degenerative disease in humans • One human case reported in the U.S. (someone who lived in U.K. during their outbreak)

  46. Mad Cow Disease:Regulatory Effects • First discovered in the U.S. in 2003 in a Canadian-born cow in Washington • Nov. 2004: Texas-born cow identified but not confirmed to have BSE until July 2005 • 2003: U.S. required the removal of the small intestine when cow is slaughtered • Sept. 7, 2005: FDA and agriculture dept. ease rules to allow “a portion of the small intestine to be used as a casing for specialty sausage” • “The department is aware of the financial hardship on businesses that make ethnic sausages,” Daniel Engeljohn, Dept. of Agriculture Health & Safety Inspection office