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The Consumer Pricing Strategy Report Product Image

The Consumer Pricing Strategy Report

  • ID: 1084680
  • September 2009
  • 171 Pages
  • Technomic Inc

A guide for understanding attitudes and behavior in a cost-driven market.

Technomic, the most trusted source for industry information, expands your understanding of how the rapidly evolving economic climate impacts restaurant prices, and ultimately consumer spending. The Consumer Pricing Strategy Report provides comprehensive insights—based on 2,000 consumer interviews and exclusive Technomic foodservice pricing data—to explore how current and emerging economic trends, as well as restaurant pricing strategies, impact consumer decision-making.

REPORT BENEFITS
- Consumers’ thoughts and expected actions around restaurant menu price increases
- How much restaurants can increase prices, when price increases are expected by consumers and the best way to implement and communicate a pricing increase
- The conditions in which consumers will trade up, down or across different restaurant segments
- Specific concept positioning and/or menu amenities that influence price elasticity

CASE STUDY ANALYSIS AND BEST PRACTICES
- Controlling commodity costs
- Revamping and repositioning menu items
- New product/menu item development with the new READ MORE >

Executive Summary
- Introduction
- Exhibit 1: Same-Store Sales?Quarterly Data Weighted Average Change,
- Excluding McDonald’s*
- Methodology
- About Technomic

The Economic Landscape
- The Unique Role of the Housing Crisis in the Consumer Crunch
- Where are We Headed?
- Supplier Costs
- Pressures on the U.S. Corn, Wheat and Soy Crops
- Exhibit 2: Crop Acreage
- Impacts on Dairy and Protein Prices
- Future Scenarios and Risk Management
- How Operators are Coping

Industry Status
- Exhibit 3: 2007 Restaurant Industry = $364b
- Exhibit 4: 2007 vs. 2006 Sales Growth
- Industry Sales by Menu Category
- Exhibit 5: Technomic Top 500 Share of Industry Sales by Menu Category
- Industry Units by Menu Category
- Exhibit 6: Technomic Top 500 Share of Industry Units by Menu Category
- The Top 500 Chains: Where the Growth Was in 2007
- Exhibit 7: Top 5 Fastest Growing Limited-Service Chains*
- Exhibit 8: Top 5 Fastest Growing Full Service Chains*
- Exhibit 9: Smaller Chains* To Watch

An Overview of Consumer Price Sensitivity
- Price Flexibility: What Consumers Are Willing to Spend
- Hanging On to Customers Despite a Price Increase
- Consumer Price Thresholds
- Exhibit 10: Menu Item Opt-Out Continuum
- What Operators Can Do to Retain Customers
- Implications and Recommendations

Menu Insights: Examining Price Changes on Operator Menus
- Full-Service Menus
- Breakfast
- Exhibit 11: Breakfast Listings and Prices (Top 250 FSR)
- Exhibit 12: Breakfast Listings and Prices
- (Emerging Chain and Top Independent FSR)
- Lunch and Dinner

Appetizers
- Exhibit 13: Appetizer Listings and Prices (Top 250 FSR)
- Exhibit 14: Appetizer Listings and Prices
- (Emerging Chain and Top Independent FSR)

Entrées
- Exhibit 15: Entrée Listings and Prices (Top 250 FSR)
- Exhibit 16: Entrée Listings and Prices
- (Emerging Chain and Top Independent FSR)

Desserts
- Exhibit 17: Dessert Listings and Prices (Top 250 FSR)
- Exhibit 18: Dessert Listings and Prices
- (Emerging Chain and Top Independent FSR)

Beverages
- Non-Alcoholic Beverages
- Exhibit 19: Non-alcoholic Beverage Listings and Prices (Top 250 FSR)
- Exhibit 20: Non-alcoholic Beverage Listings and Prices
- (Emerging Chain and Top Independent FSR)
- Alcoholic Beverages
- Exhibit 21: Adult Beverages Listings and Prices (Top 250 FSR)

Kids’ Menus
- Exhibit 22: Kids' Menu Listings and Prices (Top 250 FSR)
- Exhibit 23: Kids' Menu Listings and Prices
- (Emerging Chain and Top Independent FSR)
- Limited-Service Menus

Breakfast
- Exhibit 24: Breakfast Entrée Listings and Prices (Top 250 LSR)
- Exhibit 25: Breakfast Sandwich Listings and Prices (Top 250 LSR)
- Lunch and Dinner
- Side Items
- Exhibit 26: Side Item Listings and Prices (Top 250 LSR)
- Exhibit 27: Side Item Listings and Prices
- (Emerging Chain and Top Independent LSR)

Entrées
- Exhibit 28: Entrée Listings and Prices (Top 250 LSR)
- Exhibit 29: Entrée Listings and Prices
- (Emerging Chain and Top Independent LSR)

Desserts
- Exhibit 30: Dessert Listings and Prices (Top 250 LSR)
- Exhibit 31: Dessert Listings and Prices
- (Emerging Chain and Top Independent LSR)

Beverages
- Exhibit 32: Non-Alcoholic Listings and Prices (Top 250 LSR)
- Exhibit 33: Non-alcoholic Beverage Listings and Prices
- (Emerging Chain and Top Independent LSR)

Kids’ Menus
- Exhibit 34: Kids' Menu Listings and Prices (Top 250 LSR)
- Exhibit 35: Kids' Menu Listings and Prices
- (Emerging Chain and Top Independent LSR)

Operator Pricing Strategies: Case Studies and Best Practices
- Introduction
- Portions and Prices
- Drawing Consumer Focus Where You Want It
- Rethinking Ingredients
- Taking a Look at the Supply Chain and Input Costs
- Re-evaluating the Consumer Value Equation

Consumer Insights
- Consumer Insights
- Key Findings
- Foodservice Consumer Profiles
- Exhibit 36: How often do you eat out at restaurants for any meal?
- Exhibit 37: How often do you visit each of the following types of restaurants?
- Exhibit 38: How often do you visit each of the following types of restaurants?

The Consumer Mindset
- Who’s Responsible for Rising Menu Prices?
- Exhibit 39: What are the main reasons you think prices at restaurants are increasing? (Select all that apply)
- Exhibit 40: What are the main reasons you think prices at restaurants are increasing? (by age)

Restaurants want to make money
- Opportunities:
- Consumers Curbing Spending
- The Effect of Rising Gas Prices
- Exhibit 41: As a result of the rising gas prices, which of the following are you doing? (Select all that apply)
- Consumers Cut Back on Retail and Restaurant Spending
- Exhibit 42: Over the past year, have you cut back in any areas?
- (Select all that apply)
- Exhibit 43: In what areas are you cutting back as a result of rising gasoline prices (Select all that apply)
- The Lowest-Income Consumers are Cutting Back the Most
- Exhibit 44: Over the past year, have you cut back in any areas? (by income)
- Opportunity:
- Purchase Patterns: FSRs and LSRs
- Exhibit 45: As a result of rising gas prices, how are you cutting back on your spending at full-service restaurants? Select all that apply
- Full-Service Restaurant Cutbacks
- Exhibit 46: Which types of full-service restaurants have you cut back on?
- (Select all that apply)
- Limited-Service Restaurant Cutbacks
- Exhibit 47: As a result of rising gas prices, how are you cutting back on your spending at fast-food restaurants? (Select all that apply)
- Exhibit 48: Which types of limited-service restaurants have you cut back on?
- (Select all that apply)
- It’s Not Just A Matter Of Eating Out Less Often
- Exhibit 49: How have you cut back on full-service restaurants?
- (Select all that apply)
- Money-Saving Strategies in Full Service
- Exhibit 50: Please indicate how much you agree with each of the following statements about value. (top 2 box)

The U.S. restaurant industry has been hit by a “perfect storm” of price pressures—severe and sudden upward pressure from fast-rising rising costs of food and fuel, and simultaneous downward pressure from consumers who are weighing discretionary expenditures more carefully now that their own disposable personal income has shrunk.

There is no question that operators must pass on their own rising costs to their customers in the form of higher menu prices. But restaurants that have done so have, all too often, seen traffic decline and sales totals fall instead of rise. Reports of public chains show that same-store sales comparisons with yearbefore figures have slowed to a halt this year and even entered negative territory.

Clearly, adjustments to menu prices are a tricky endeavor in this economic and psychological climate. Absorbing price increases for food inputs can wreck the bottom line, but so can pricing consumers out of the market for your restaurant. For most operators, increases in menu prices are a necessity that can no longer be delayed. But operators are too often in the dark about how these increases will be received. How with they affect the purchase and visit behaviors of the concept’s customers? The specific answers to those questions will vary from concept to concept, based on its customer profiles, the primary motivators for visits, the concept positioning and value equation, and of course, the specific menu item.

Knowing when, how and how much to raise prices requires research into consumer intentions and behaviors as well as close examination of industry practices. This report is designed as a stepping stone to help restaurant organizations begin the evaluation of these factors in terms of their own unique needs, menu price structure and customer base, with the ultimate goal of making adjustments that preserve profitability.

The following methodology was employed for the production of this report:

- Integration of Top 500 restaurant industry data: Each year Technomic publishes a thorough listing of the Top 500 U.S. restaurant chains including sales, unit and growth data. The Industry Overview section of this report summarizes Technomic’s 2008 Top 500 Report, providing overall sales and unit data for these leading chains as well as the industry as a whole. The summary details industry leaders and growth drivers, as well as segments that have experienced sales or unit declines from the previous year. This overall industry snapshot can help the reader put into perspective the data and conclusions in this Consumer Pricing Strategy Report.

- Mining of existing secondary data: To uncover and analyze current trends related to foodservice product pricing and operator pricing strategies, extensive secondary research was conducted. A primary source for secondary information was the Technomic Information Services Digital Resource Library (DRL). The DRL, which is updated on a daily basis, tracks and houses industry news from more than 50 printed and online sources. Additional research was gathered through Technomic’s Knowledge Center, one of the most extensive foodservice libraries in the industry.

- Mining of existing primary data: To leverage information collected and analyzed in current Technomic consumer research studies, a thorough review of previous Technomic studies was conducted. Relevant research was collected from Technomic studies conducted within the past 18 months, including the Retail Meal Solutions Consumer Trend Report, Dinner Consumer Trend Report and The Generational Consumer Trend Report as well as the American Express MarketBrief produced for American Express by Technomic Information Services.

- In-depth search and analysis of restaurant menus: For this step, Technomic Information Services’ MenuMonitor was utilized. MenuMonitor is a continually updated online product that houses menu information for 500 restaurant chains throughout the U.S. and Canada. The database is searchable by restaurant name, restaurant segment, daypart, cuisine, region, menu offering, foodservice brand, ingredient menued and preparation type. Prices for each item and each item category are listed as well as high, low and average prices and year-over-year comparative pricing. By conducting an indepth search and comparison of menu item from the Top 250 chain restaurants by sales as well as from emerging chains and leading independents, TIS was able to showcase menu classification incidences and pricing trends.

- Quantitative consumer research: A 20-minute online survey of 2,000 consumers was conducted in May 2008. Consumers were asked about their current spending behavior at restaurants, their intended future food-away-from-home spending, and motivators for purchase of certain specific food items containing a range of attributes at several price points across the various segments. The consumer sample is representative of the U.S. population (according to U.S. Census Bureau data).

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