Foodservice Solutions® Steven Johnson - Grocerant Guru™

SJU Food Summit 2015“Fresh” Thinking in Food MarketingOctober 13, 2015

Food Quality Never Takes a Step Backward

Exploring expanding points of fresh food competition and opportunities.

Consumers Like Eating-Out when Eating-In

Grocerant Guru™

Steven JohnsonGrocerant Guru™Foodservice Solutions®Tacoma, WA

253.759.7869www.FoodserviceSolutions.us

THE GROCERANT NICHE

Fresh Prepared Ready-2-Eat Heat-N-Eat

“ITS ABOUT TIME”Thinking About your Customers

Differently ©Foodservice Solutions®

Executive Insights

Value Retailers continue to garner market share (Fresh Format & Dollar stores winning)Grocery consolidation & trip erosion continueRite Aide, CVS, Walgreens customer expansion grabbing “quick” tripsRestaurants sales of Take-Away continues to riseStart-up’s from Meal-Kit’s to Delivery companies are well funded.

Executive Insights

Time is the true commodityCustomer outcomes are more important than productsFresh food fast is the only

difference between profitable differentiation & commodity competition

Price = Transparency

A Danish Philosopher

“Life can only be understood backwards; but it must be lived forwards.”

- Soren Kierkegaard

Battle for Share of Stomach

GrocerantGuru.com

Points of Distribution

Sources: Nielsen, NRA, Progressive Grocer Annual Reports (various years)

Forced Fresh Looking Differently

Sources: Bureau of Labor Statistics, SNAP

Chain Restaurant YOY Customer Counts

Sources: Company SEC 10Ks, Piper Jeffray Cookbook, Pacific Management Consulting Group

Restaurant Off Premise

Source: Pacific Management Consulting Group / Foodservice Solutions®

US Retail Sales Dollars

Buying More Grocerant vs. Fast Food

Source: Technomic, 2015

Buying more Grocerant Ready-2-Eat andHeat-N-Eat than last year

Why More Grocerant

Why are you purchasing food service items at retailers more often?

(select all that apply)

Sources: Technomic, 2015

Fresh First Traditional Supermarket last

Projected percent change in store count, 2013 – 2018 (projected)

Sources: Willard Bishop

Grocery Discontinuity

Sources: Willard Bishop

Projected change in market share, 2013-2018(select all that apply)

Looking Ahead

Is Amazon providing instant gratification vs. your impulse buy?

Amazon Marketing Power

“Time is the true commodity and only Amazon really gets that”

Source: Lee Peterson, EVP Brand Strategy and Design WD Partners

All Food Products are CommoditiesPrice, Value, Service, Equilibrium is resetting

Source: Foodservice Solutions®

Amazon Prime, a yearly subscription service with 50 million consumers

Source: WSJ, WD Partners

It’s About Time

1940: Home Cooked 150 Minutes2000: Average time spent inside McDonalds was 11 minutesToday: Home Cooked Meal In Less than30 Minutes74% of All QSR meals Drive-Thru1 in 3 men spend 15 min or less a day on food prep

Source: National Restaurant Association, Foodinsights.org

How much time to Consumer take to prepared Dinner each night?

It’s About Time

Source: How America Eats – The Hartman Group

It’s About Time

EVERYDAYAt Noon 83.7% Do not know what’s for Dinner

At 4:00 PM 68.7% Still Don’t know What’s For Dinner?Source: Foodservice Solutions / Walgreens

Michael Porter

“ Industry boundaries are expanding, and they can

expand even more. We’re going to see a combination of

barriers to entry going up and the opportunity for

disruption going up simultaneously.”

Source: Michael Porter. FoodInsights.org, 2015

Looking Ahead

50% of Americans Over the Age of 18 are Single

Nearly 50% of all eating occasions

are alone

Only 31% of dinners were made from scratch

Six in 10 dinners were planned within an hour of eating

Source: US Census, Hartman Group

Price Matters

“Poor people must save, rich people

like to” ALDI believes that they are

purveying a universally exportable price message to the world

Source: WSJ. FoodInsights.org, 2015

Price Matters But How Much?

The average cost of a restaurant meal per person in 2014 was $6.96; the estimated average cost for an in-home prepared meal was $2.31

All the while the U.S. Census Bureau announced foodservice spending exceed grocery spending for the first time ever. Note: It did not include spending at ‘big box club stores’

Taste came in first but Price came in second at 68% in a 2015 IFIC poll. Quick service restaurants represent 78% of total restaurant industry traffic.

Source: The NPD Group, IFIC, US Census Data

Don’t Be Static... Evolve.

Consumers are Dynamic not Static.

Brands must be as well.

Pizza Hut

Opened first store in 1958 by 1966 Pizza Hut had 145 restaurants serving pizza, lasagna, salads, all walk in sit down table service dining. Source: Pizza Hut 2015

Pizza Hut

By 1968 Pizza Hut had 301 units open. 500 units open by 1970 and 1,000 open by 1971 and Pizza Hut was the largest Pizza Chain in the world. All walk in restaurants with table service.

Source: Pizza Hut 2015

Pizza Hut

By 1973 Pizza Hut had 2000 restaurants open. In 1977 they had 3,000 restaurants open and things were changing.

Pan Pizza was introduced.

Source: Pizza Hut 2015

Pizza Hut Time for Change

In 1983 boundaries were coming down. Pizza Hut was expanding this time introducing delivery but in Australia. Source: Pizza Hut, 2015

Pizza Hut Kept Moving

By 1986 Pizza Hut had 5000 units with the conversion to delivery only drove sales and profits, reduced time and cost to open new units and in 1988 6,000 units. Source: Pizza Hut, 2015

Pizza Hut

Today 15,000 units with less than 50 full service sit down restaurants in the world. Source: Pizza Hut, 2015

Yum Brands

Out-Sourced: Amazon Why Not?

Evolving Pizza

Americans spend 37 billion a year on pizzaHouseholds eating frozen pizza dropped between 2010 - 2014, and the percentage of households that ate a lot of frozen pizza dropped 15%

About 1 in 8 Americans eats pizza any given

day

Pre-teens eat about two times the national average

60 years old eat about half the national average

More than ¼ boys between 6 and 19 eat pizza every day

Girls between 6 and 19 eat more pizza than any category of guys

Source: USDA, Packaged Facts

Things You Might Not Know

The number one new food product launch in 2014 was Lunchables (Ready-2-Eat), Uploaded with 87% distribution and $143 Million in Sales.

Fully 18% of Starbucks transactions in stores are done by Phone.Source: 2015 Fare Conference, IRI Summit 2015

SNAP Status Quo

ONE QUESTION:Compelled to buy to Want to Buy?

SNAP average transaction is $23

75% of SNAP participants have to spend their own money to buy food

In 2005 , 25,628 participants in SNAP vs 46,537 in 2014

The SNAP shopper is moving from paper coupons to digital and online

Source: USDA, IRI 2015 Summit

Price, Value, Service Equilibrium

Consumers are resetting the Price, Value, Service Equilibrium. Here is Foodservice Solutions® formula:

(Mobile Access + Digital Payment +Delivery) X (Price + Food Quality + Speed) = Value

Incremental Value:

Constantly Changing Menu (Seasonally / Sustainability with Creditability).

Source: Foodservice Solutions®, 2014

Attribute

Outlet

#1216

ParkingLot Food

VisualAppeal

SmellOderAroma

CustomersLikeMe

Temperature

Taste

RestaurantsQSR, FC, C, FS, Fine

178 8.5% 7.1% 9.1% 9.5% 9.6%

C-Stores7-Eleven, Sheetz, QC, Wawa, Rutter’s etc.

369 7.8% 6.2% 8.8% 7.4% 9.5%

GroceryWal-Mart, Publix, Aldi WinCo, Safeway, Whole Foods etc.

550 4.7% 5.1% 6.2% 7.5% 6.1%

Drug & LiquorPinkies, Duane Reade,Rite-Aid, Walgreens etc.

48 6.8% 8.2% 8.4% 8.5% 8.8%

Non-TraditionalNordstrom’s, Food Trucks, Hello Fresh etc.

71 NA NA NA 9.6% 9.7%

Grocerant Scorecard

Grocerant Scorecard

Attribute

Outlet

#1216

Price Delivery

Catering DigitalPayment

In StorePOP

RestaurantsQSR, FC, C, FS, Fine 178 7.4% 9.4% 7.6% NA 9.5%

C-Stores7-Eleven, Sheetz, QC, Wawa, Rutter’s etc.

369 8.9% 5.4% 3.8% NA 7.9%

GroceryWal-Mart, Publix, Aldi WinCo, Safeway, Whole Foods etc.

550 6.4% 6.5% 4.4% NA 1.1%

Drug & LiquorPinkies, Duane Reade,Rite-Aid, Walgreens etc.

48 9.0% 9.1% 6.64% NA 3.5%

Non-TraditionalNordstrom’s, Food Trucks, Hello Fresh etc.

71 NA 9.6% 2.7% NA 2.1%

Grocerant Scorecard

Attribute

Outlet

#1216

DigitalMenu’s Staff

WellGroomed

SpeedatBreakfast

SpeedatLunch

SpeedAtDinner

RestaurantsQSR, FC, C, FS, Fine 178 8.5% 7.1% 9.1% 9.5% 9.6%

C-Stores7-Eleven, Sheetz, QC, Wawa, Rutter’s etc.

369 7.8% 6.2% 8.8% 7.4% 9.5%

GroceryWal-Mart, Publix, Aldi WinCo, Safeway, Whole Foods etc.

550 4.7% 5.1% 6.2% 7.5% 6.1%

Drug & LiquorPinkies, Duane Reade,Rite-Aid, Walgreens etc.

48 6.8% 8.2% 8.4% 8.5% 8.8%

Non-TraditionalNordstrom’s, Food Trucks, Hello Fresh etc.

71 NA NA NA 9.6% 9.7%

Positioning Choice

Retailers have 4 options:Different, Better,Cheaper, or Not Around Much Longer.

Source: Foodservice Solutions®

Portability Success Leaders

The Face of Fresh

Source: Willard Bishop, Technomic

Funding Food

In 2014 $2.36 billion was raised to fund 264 Food Start-Up’s.

Hello Fresh IPO Priced at $2.9 BillionPlated, Munchery, FoodPanda, Lish, Peachd, SpoonRocket, Eat24, GrubHub, PostmatesSource: Venture Capital Form, Food + Tech Connect

Eatzi’s – Niche Pioneer

Rutter’s – Steps to SuccessMIX & MATCH LUNCH & DINNER

Pantry Busters

Source: NACS

SQUARE ONE MARKETS

SIX ’O’ CLOCKSCRAMBLE

Whole Foods Is Fresh Food

Safeway

Walgreens Café W Plus

Walgreens Fresh & Fast

Summary

Consumers take advantage of options

Grocery channel shopping frequency continues to decline

Value retailers posting penetration & frequency gains

Everyone purchases in multiple channels

Consumer trends can drive growth

Summary

RETAILERSCompetition is going after your shoppers & their shopping tripsInvest dollars to re-invent yourselves!

Grocerant Fresh Format is on top of key consumer trends

 MANUFACTURERS 

Capitalize on channel shopping retailer diversity through expanded distribution

If you don’t, a competitor will!

Summary

Price = Transparency Time is the True CommodityCustomer Outcomes are more Important than ProductsFresh Food Fast is the Difference Between Profitable Differentiation & Commodity Competition

Grocerant Guru™

Steven JohnsonGrocerant Guru™Foodservice Solutions®Tacoma, WA

253.759.7869www.FoodserviceSolutions.us

THE GROCERANT NICHE

Fresh PreparedReady-2-Eat Heat-N-Eat

“ITS ABOUT TIME”