future retail & foodservice opportunities james degen j. m. degen & company, inc. ...
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Future Retail & Foodservice Opportunities
James Degen
J. M. Degen & Company, Inc.
www.Degenconsulting.com
805-434-2400
J. M. Degen & Company, Inc.
Words of Wisdom
“So like Noah said--you’d better wake up you don’t want to get stuck in this zoo. Cause when he leaves the dock he ain’t waiting round for you. Be prepared to change some too.” Boz Scaggs--”Some Change”
J. M. Degen & Company, Inc.
Undercurrents Of Change Food At-Home
Working women Time to prepare Declining skills Decline of
“family meal” Expectations
Food Away-From-Home Labor cost Labor
skill/availability Consistent
quality Safety Menu
differentiation Profitability
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Declining Food Expenditures
11.2%
10.1% 10.2% 10.1% 10.1%
9.00%
9.50%
10.00%
10.50%
11.00%
11.50%
12.00%
1990 2000 2001 2002 2003
U. S. Share of Income Spent On Food
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Shift In Consumer Food Expenditures To Foodservice
59%
41%
51%
50%
47%
53%
45%
55%
0%
20%
40%
60%
80%
100%
1980 1990 1995 2003
Retail/Foodservice Sales Share
At Home Away From Home
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Food Marketing and Consumption Have Changed Forever Demographics Wellness Culture Search For Value Value of Time Channel Blurring
J. M. Degen & Company, Inc.
Demographic Drill Down 78MM Boomers enter new life
Stage--empty nest, retirement 73MM Gen Y’ers are becoming
adults driving new culture cohort 61% of population growth by 2014
due to immigration 34% of U. S. households will be
single person by 2010
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Wellness Culture
Obesity and related heart health and diabetes concerns increasing--world-wide
In 2004 33% of U. S. Adults on a diet 37% of health club memberships held by boomers 32% of Americans dieting for health reasons in
2001 71% of Americans believe that food & nutrition play
a great role in maintaining overall health Increasing consumer interest in digestion/gut health Functional food category is estimated at $16+B Fresh = Healthy
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Search For Value
According to FMI, price is the leading reason for switching supermarkets (32%)
Households most likely to participate in frequent shopper programs is $75K+ (35%)
39% of consumers shop at both Wal-Mart Supercenters and traditional supermarkets. In the South it is 92%
82% of consumers participate in at least one frequent shopper program--93% of consumers over $100K in income
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Value of Time
Convenience culture continues with “time” the currency of 21st century
46% feel more stressed Vs 5 years ago 46% don’t have enough time in the day--
53% of boomers 1/5 of all meals eaten in a car Food prepared away from home continues
to grow Disappearance of traditional meal leads to
more snack meals--4-6 meals/snacks per day
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Channel Blurring
Traditional retail food channels blurring into multiple retail channels offering food
Traditional foodservice channels following similar patterns particularly snack meals
Food becoming a traffic building tactic due to purchase frequency
Value-priced food appeals to value-conscious consumers
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Non-Traditional Channels Impact Retail Food Purchases Wal-Mart--U.S. food/beverage sales $67.6B
(2003) Supercenters Sam’s Clubs Neighborhood Market Stores
Membership Clubs Dollar Stores/Extreme Value Retailers Limited Assortment Stores Convenience Retailers Result: Supermarkets given up competing for
center-store sales
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Supermarket’s Decline In Relative Food Retailing Importance
U. S. Food & Beverage Sales Share 2004
66.9%7.7%
2.4%
6.7%
8.1%
2.8%
2.9%
2.5%Grocery Stores
C-Stores
Drug Stores
Membership Clubs
Supercenters
Discount Stores
Spec. Wholesale-Retailers
All others
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Retail Food Channel Growth Rates
Supermerchants Food & Beverage Sales Average Annual Compound Growth
1994-2004
2.4%6.3% 6.8% 7.7%
23.9%
7.1%
36.6%
3.8%
0%5%
10%15%20%25%30%35%40%
Groce
ry S
tore
s
C-Sto
res
Drug
Store
s
Mem
bers
hip
Clubs
Super
cent
ers
Disco
unt S
tore
s
Spec.
Who
lesa
l...
All Oth
ers
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Foodservice Is Defined By Chains Restaurants account for 63.6% of all
foodservice industry retail sales. Top 100 chains account for 96.3% of all
restaurant sales 96.3% of hamburger restaurant sales 91.3% of all family steak restaurant sales 83.4% of chicken restaurant sales 57.6% of other sandwich restaurant sales 50.7% of pizza restaurant sales
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“The most frequently used culinary utensil is the window control of a car.”--Harry Balzer, NPD
Customer Eating Place Traffic 2002
On-Premise42%
Off-Premise58%
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Retail & Foodservice Opportunities
New retail and foodservice products are going to have to deliver against these changes in consumer definition, behavior and motivation
J. M. Degen & Company, Inc.
Retail & Foodservice Opportunities Foodservice or food “prepared away from home”
an opportunity for companies not already participating
Members of Gen-Y eat out on average 24 times per month--almost once per day (Technomic)
51% of Gen-Y ate restaurant-prepared food growing up “sometimes” or “more often” compared with 12% of their baby-boom parents (Technomic)
“These (Gen-Y) are consumers of bagged lettuce and (healthful)prepackaged meals” (FMI)
“BATH restaurants (Better Alternative to Home), i.e., simple ethnic establishments” (Tim Zagat)
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Rise of Culinology
With most consumers growing up on eating out, food quality expectations and experiences are high
The research chef has joined with the food scientist to create the culinary linkage between the supermarket, foodservice and food processing industries called Culinology
Consumer and foodservice operator demand for nutritionally improved, convenient to prepare foods with acceptable sensory characteristics has created unique challenges for food scientists and research chefs.
Prepared foods must replicate scratch-made quality in flavor, aroma and authenticity
J. M. Degen & Company, Inc.
Retail & Foodservice Opportunities Food Movements
Organic foods “Free range” meats/poultry Artisan foods Vegetarian Slow foods “Locally grown” Pedigreed/heirloom foods
J. M. Degen & Company, Inc.
Retail & Foodservice Opportunities Next Big Food Wave--Pan-Asian
Consumers seeking more variety and new tastes
Bigger and more diverse than Latin Beyond food to the importation of culture Asian foods deliver against many consumer
food demands Healthy Craftsmanship from complex recipes Exotic Fresh perceptions
J. M. Degen & Company, Inc.
Retail & Foodservice Opportunities The “G” word replaces the “C” word Low-carb trend (always a U.S. phenomenon)
fades (Mintel) Other parts of the world look to low glycemic Reduces food intake decisions to a number Can be difficult to understand but can be
simplified for consumers
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International Food Labelling Program
Registered trademark in Registered trademark in Australia/USA/UKAustralia/USA/UK
Foods must be GI tested by Foods must be GI tested by accreditedaccredited laboratory laboratory
Must meet nutritional criteria Must meet nutritional criteria (eg saturated fat, salt)(eg saturated fat, salt)
J. M. Degen & Company, Inc.
Retail & Foodservice Opportunities Recap
Less money spent on food Price motivation to purchase on deal and at
non-traditional channels Food prepared away from home including
foodservice and “restaurant quality” prepared foods
Diminishing consumer cooking skills and limited time to cook
More snacking and smaller portions Foods that travel including dashboard dining
and “Desk-fast”
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Retail & Foodservice Opportunities Recap (Continued)
Weight control foods including the trend towards glycemic testing/labeling, nutrient-dense foods, etc.
Food as medication including Pharmafoods directed at heart health, quality of life improvement, pre/probiotics, etc.
Shift from Western European cuisine to ethnic alternatives including Pan-Asian
Rise of Culinology Demand for “fresh” ingredients that implies
healthy
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Retail & Foodservice Opportunities SUPER TRENDS
Cleaner labels Fewer ingredients Recognized ingredients Natural and organic ingredients Nutritional label claims Natural label claims
Big Flavor Higher consumer expectations Ethnic flavors including regional ethnic
flavors, Latin, Asian New flavors and flavor combinations
J. M. Degen & Company, Inc.
Retail & Foodservice Opportunities Meeting the challenges of clean labels and big
flavor, naturally Multi-functional commodities Fewer processed food ingredients Nutritional and functional improvements Flavor enhancement capabilities Flavor contributions Multiple ingredient forms
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Retail & Foodservice OpportunitiesDried Plums
Composition Fiber Sorbitol Malic Acid No Sucrose Low Glycemic
Index Antioxidants
Benefit Fat replacement Sugar
replacement Antimicrobial
agent Flavor
enhancement Preservation Natural color Extend shelf life
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Retail & Foodservice Opportunities Mushrooms Composition
Low calories Glutamate Fat-free Sodium-free Sugar-free Selenium Low
Carbohydrates
Benefits Consumer
satiety Flavor
enhancement Savory flavor Meat
replacer/vegetarian
Increased value perceptions
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Retail & Foodservice Opportunities Almonds
Composition High protein Low
carbohydrates Glutamate Fiber Vitamin E Low in
unsaturated fat
Benefits Consumer satiety Flavor enhancement Nutrient dense Crunchy texture Baked breading
alternative Protein replacer Increased value
perceptions
J. M. Degen & Company, Inc.
Retail & Foodservice Opportunities Dried Plums, Mushrooms, Almonds
demonstrate multi-functional ingredient benefits Fresh perceptions Replace artificial ingredients Add nutritional improvements Eliminate duplicated ingredients Increase and enhance flavor and texture
characteristics Communicate favorable consumer
perceptions
J. M. Degen & Company, Inc.
Final Words of Wisdom "As you discover changing times
you must have the strength to endure. As you discover a changing world you can't be guessing, you must be for sure. In these ever changing times.” Earth, Wind & Fire
Future Retail & Foodservice Opportunities
James Degen
J. M. Degen & Company, Inc.
www.Degenconsulting.com
805-434-2400