final handin research

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Student Name:

Research

Report

Fast Food Market

in New Zealand


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Introduction

THE GREAT FAST FOOD CHALLENGE IS COMING

In fact, the fast food industry is definitely responsible for today's proliferation of franchising.From the 1950s onwards, were it not for the likes of McDonald's explosive growth,franchising might never have gained the profile it commands today.

The fast food industry is a dynamic industry featuring a high density of franchising. It is alsoone of the most challenging new industries to operate in, due to an ever-increasing amountof operations competing for the same profits. Intense rivalry exists between concepts.

Competing and defending market share within the fast food market industry has alwaysbeen defined as a challenging task. Operating within the current environment is even moredemanding. This particular industry has been rocked by a number of trends requiring rapidand fundamental action.

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Fast food market in NZ research report 2012 by kim


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FAST FOOD

CATERGORY

OTHERS CATERGORY

Fig 1 average weekly household expenditure (dollars spent, 2008)

The average household spends $171.20 a week on food and Fast Food category

Total $683.10FMCG$171.20 25%Others expenditure $511.90 79%

FMCG GROUP WEEKLYHOUSEHOLDEXPENDITURE

% OF FMCG

Food at home $ 88.40 51%Food away from home $ 25.10 15%alcohol $ 16.90 10%Household supplies $ 40.80 34%

Total expenditure $ 171.20 100%

Fig 2 New Zealand household FMCG expenditure (dollars per household per week, 2008)

The chart above reveals that the food category is about 66% of the total FMCGexpenditure, while the non-food category is 34%

With 15% in the food category is for fast food consumption

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25%

79%


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Current New Zealand Fast food market

Increased Competition

While the fast-food industry has long been regarded as competitive, the level of rivalry onlyintensifies in New Zealand. Numerous chains are expanding: multi-unit development dealsare being inked left, right, and centre. Brands like Subway, Mc Donalds, Pizza Hut,Domino Pizza, Burger King, etc are all on the expansion trail. Meanwhile, a number ofincumbent chains and/or their franchisees are struggling to return positive results onexisting operations.

Heat goes on rivals in fast-food war1

New Zealand's fast-food wars are heating up, with McDonald's revamping its Golden Arch

restaurants and revealing plans to open five new outlets each year.

Obviously, sales growth would depend on the performance for individual stores.

The makeover includes new imagery and different store layouts to make outlets moreattractive to a range of different customers. The bolted-down plastic chairs will be replacedwith free-standing furniture, including couches.

Around 80 per cent of McDonald's restaurants in New Zealand are owned by franchiseesthat pay a rental for their properties as well as royalties on sales. Franchise owners will payfor fittings for much of the makeover, although they will be financed for the capital outlay byMcDonald's.

The McDonald's moves come amid major upheavals in the fast-food sector. McDonald's iskeeping a close watch on Subway, whose outlets cost less to set up than the $400,000 to$1.3 million for a McDonald's.

On another side, New Zealand fast food market becomes more multiculturalMore south-east Asian fast food comes into existence.

Fig 3 Chinese Takeaway Fig 4 Indian Takeaway(HONG KONG Kitchen in Parnell) (Mr India takeaway near Kingsland train station)

1 Source: new Zealand herald journal 2011/August edition

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02468

1012141618

202224262830

2008 2009 2010 2011

FAST FOOD

CATERGORY

GENERAL FOOD

RETAI LS

(Emphasis on the blue column: fast food category)

0

5101520253035404550556065707580

2008 2009 2010 2011

FAST FOOD

CATERGORY

GENERAL FOOD

RETAI LS

(Emphasis on the purple column: general food retails)

Fig 5-1 / 2 changing share of the food services outlets (fast food retails vs. general foodretails)

From 2008, fast food category is 22.5%, to 2011 is 23.2%

Gradually, FMCG group is increasing over the general food retails

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05

1015202530354045505560

65707580

2007 2008 2009 2010 2011 2012

FAST FOOD

TAKEAWAY

FOOD AT HOME

Fig 6 changing share of the food takeaway and food at home (% of total food sales)

From 2008 fast food takeaway is 42%, till 2011 is 49%

Gradually, fast food takeaways are increasing over the general food at home from years toyears.

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Fig 7 Fast food market location in New Zealand

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Convenience

stores: Fix 7

etc.

Supermarket

Deli Dept.:

Countdown,

New World

Multi-cultural

Takeaways

shops:

Chinese Fishchips

Fast food

retailers: Mc

Donalds

KFC, BurgerKing Etc.

Fast food and

Takeaway

Market


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Examples of Successful fast foodretailer in New Zealand

Fast food retailer advertising slogans

Burger king have it your way; youre the boss; it takes two hands to hold awhopper

Dominos pizza you got 30 mins; getthe door, its dominos; dominos, the

pizza delivery experts

Kfc there s fast food, then there s kfc ; we do chicken right

Mc Donalds Im lovinit nothing can do it like

McDonalds/

Subway subway eat fresh, the way a sandwichshould be

Pizza hut now yourre eating gather round thegood stuff

Subway

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In an age travelling at the speed of light, we are all after a quick fix an easy lunch or a fastway out. Fortunately many of the fast food chains are coming to the party as far as healthymeals are concerned.

Subway is one of the fastest growing franchises in the world with approximately 31,949restaurants in 91countries as of November 2009. Many restaurant analysts attributeSubway's fast growth to the growing health concerns by restaurant customers, a trendthat Subway has taken advantage of in its marketing .Subway has become the biggestseller of sandwiches

"In a lot of city centres it has replaced the donor kebab shop as a place where people go toget food and hang out after the pub."

SUBWAY Specialist in hot and cold submarine sandwiches and salads, the SUBWAYchain has experienced significant growth in recent years as a "healthy alternative" to other

fast food options. For health-conscious consumers, the SUBWAY chain has become apopular choice in the quick-serve category. With today's busy lifestyles, a meal on the go isa regular occurrence, yet many people are demanding more that just convenience - theywant healthier choices. The '7 under 6' menu gives them exactly that - a low calorie, low fatoption and great taste too. This is where the SUBWAY chain fills the gap in the fast foodmarket for great tasting, healthy food.

Classic Sandwiches CALS FAT SOD CARB PROT KJ

6" BMT 456 23 1830 40 21 1910

6" Cold Cut Trio? 470 26 1590 42 18 1960

6" Meatball 510 27 1550 48 21 2140

6" Seafood & Crab 395 17 1330 46 14 16506" Steak & Cheese 361 13 1240 41 22 1510

6" SUBWAY Melt 380 15 1640 39 22 1590

6" Tuna 450 24 1250 40 17 1880

Select Sandwiches CALS FAT SOD CARB PROT KJ6" Asia go CaesarChicken

383 15 800 45 21 1600

6" Horseradish RoastBeef

354 15 960 39 17 1480

6" Southwest Steak &Cheese

409 18 1140 42 23 1710

6" Horseradish Steak &Cheese

439 21 1140 42 23 1840

6" Honey MustardTurkey with Cucumber

266 3.4 1060 44 16 1110

6" Southwest Chicken 350 12 830 40 23 1460

6" Caesar Italian BMT 521 30 1870 41 21 2180

7 Under 6 Sandwiches CALS FAT SOD CARB PROT KJ

6" Ham * 264 4.2 1060 38 16 1100

6" Roast Beef * 245 3.7 930 38 17 1030

6" Roasted ChickenBreast *

291 5.2 780 42 21 1220

6" SUBWAY Club * 260 3.9 1160 38 18 1090

6" Turkey Breast * 244 3.4 1060 38 16 1020

6" Turkey Breast & Ham*

261 4 1160 38 17 1090

6" Veggie Delete * 200 2.5 500 37 7 840

Fig 8 subway menu

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McDonald's

With over 35,000 locations in 119 countries, McDonalds has a large chunk of thefastfoodmarket share; it serves 47 million customers each day, and employs 1.5 millionpeople. McDonalds operates its own restaurants and franchises its brand to localbusinesspeople (about 70 percent of the world's McDonald's are franchise). McDonalds iswell-established in Europe, Asia/Pacific Islands, the Middle East, and Africa.

In Asia, the general management has indicated that there is significant potential in theChina market. The corporation has adapted its menu items to local cultures, such as theTeriyaki Mac in Japan, variants of Filet-O-Fishing China, and using lamb instead of beef inIndia.

Fig9 Mc Donalds KIWIBURGER is BACK

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Market share

Around the world, fast food is a huge market, with the largest fast food marketshare inEurope going to the UK. Fast food is classed as burgers, pizza, chicken, sandwiches, fishand chips and fatty ethnic foods such as curry and Chinese takeaways.

As people work longer hours, subsequently leaving them with less time in their lives, fast-food has become an easy option to save cooking.

The global fast food market recorded good sales results in 2008 with further positive resultsanticipated in 2009 as the sector taps into consumers' desires for better value when eatingout.

Developments in the fast food sector in New Zealand have closely mirrored the trendsof consumers for better value for money when eating out. The kiwis food lifestyle ischanging with the introduction of the European timetables, not allowing most employeeshave their traditional lunches or dinners.

The fact that consumers have less time to eat and are now more price conscious hashelped the fast food chains grow.

740

750

760

770

780

790

800

810

820

0 1 2

2008

2010

Fig 10 fast food and takeaways increasing rate (dollars, 2008 -2010)

From 2008 is $752 to 2010 is $814

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http://www.nextgenerationfood.com/article/fast-food-market-share/http://www.nextgenerationfood.com/article/fast-food-market-share/http://www.nextgenerationfood.com/article/fast-food-market-share/http://www.nextgenerationfood.com/article/fast-food-market-share/


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Promotion strategy

Sales promotions in the fast food industry are a marketing tool used on various scales bythe chains. Special sales promotions may include limited time offers on items for specifiedtime. It may also include special promotions such as McDonalds Monopoly, whereconsumers have a chance to win prizes, including coupons for free or discounted menuitems.

DISTRIBUTION CHANNELSThe distribution of food products within the fast food industry is resolute. This intensivestrategy leads to more exposure, increased brand awareness, and potentially higher sales.The distribution channel of fast food restaurants includes Producers, Intermediaries,Retailers, and Consumers.

ADVERTISING EXPENDITURESAdvertising expenditures for any major business can be expensive, especially when themarket is saturated with competition that is willing and able to spend money on marketingand promotional advertisements. In the fast food industry, spending millions on a singlefood item campaign is not uncommon. Through print, radio, television, and internet ads,fast food chains can reach their target markets easily.

PROMOTIONAL TRENDSSome recent promotional trends include the utilization of android and mobile applications,age/gender specific advertisements, internet banner ads, Corporate Facebook and Twitter

accounts, and nutritional or healthy options. Each of these trends is tailored to answer thegrowing demands of the consumer in todays economy.POSITIONING AND PLACEMENTThe positioning and placement of fast food chains is easily identifiable: fast-food, at a greatprice, with a predictable taste! This position has set all fast food chains apart from their fullservice counterparts, and has created a market all of its own, with repeat customer base.

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Control ability & Barrier Strategy

The above trends raise a number of challenges for chain management.

"Emphasis is on Return to Core Consumers, Commitment to Quality, Innovation andDifferentiation and Unwavering Dedication to be 'Brilliant with the Basics."

--burger king press

Differentiation & New Marketing Initiatives

A number of chains have responded to the current environment by attempting todifferentiate themselves from competitors, whilst at the same time making themselvesmore attractive to existing and new customers.

McDonald's sought to distinguish itself by introducing a range of products, a new focus onstore quality, and the new "I'm Loving' it" jingle. McDonald's new health focus involves newGo Active Happy Meals for adults that include salad, bottled water, a pedometer andadvice to walk more. Other health initiatives include new low-fat dressing, more salads, andmore nutritional information. So far the healthy initiatives have stood have stood thecompany in good stead.

Another technology-based differentiation example include pizza hut "Pizza and

Entertainment" promotion giving customers a perishable DVD movie (DVD's becomeinactive 48 hours after removal from packaging) free with pizza.

THE IMPLEMENTATION CHALLENGE

While there may be compelling reasons for change, implementing new initiatives is achallenging task. What sells in one market market may not in another and new initiativestypically don't come without expense or risk to existing franchisees.

Clearly, franchisors need to work very closely with franchisees on new initiatives. FranchiseOrganizations, which explores restaurant chain management, affecting system wide

adaptation is a complex and challenging task. Successful adaptation requires not only anunderstanding of organizational change, but also an understanding of franchisor-franchiseerelationship dynamics.

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Bibliography

1. NZ herald journal 2011 August2. Text book (add here by yourself)

3. Coriolis FMCG retailing nz report.pdf

4. Internet source from Mc Donald, SUBWAY,KFC

5. General data statics from National Statics Bureau to produce the charts and diagram

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