Industry Research: Satisfying Our Thirst for Beverages

2016

During the 2016 VIBE Conference in San Diego, Warren Solochek addressed the challenges operators are facing in terms of beverages. Solochek revealed the results of research conducted by the NPD Group which looked at the economy, DPI growth, and factors that influence consumer beverage selection during his presentation.

The good news is that the unemployment rate and consumer confidence are both improving. The bad news is that DPI growth is weak and expected to slow down throughout 2016. There is also good news and bad news for Fast Casual and Full-Service restaurants. Fast casual, the NPD Group found, is winning in many areas. The research firm found that food-related scores at Fast Casual restaurants more closely mirror those of Casual Dining restaurants than those of the Fast Food segment. The bad news is for the Full-Service segment: Fast Casual restaurants are now hurting Full-Service restaurants more than traditional Fast Food restaurants.

Solochek shared that it appears as though everyone wants to be Fast Casual. For examples, TGI Friday’s has eliminated the backups that often occur at POS systems by using tablets; the waitstaff can take orders and process checks at the tables. Macaroni Grill has implemented a Fast Casual lunch format between the hours of 11:00AM and 4:00PM. Ten to 12 faster, less expensive lunch options are on offer, and they are ready “in 7 minutes or it’s free.”

Household incomes are under pressure, with median household income below the levels that were seen the late 1990s. This is contributing to the shrinking of the middle class. Food spending the past 5 years has held steady at 10% of our income. Overall food spending simply won’t grow if DPI doesn’t grow.

The number of annual per capita restaurant visits in both 2006 and 2007 was 208. In 2008, the Great Recession impacted customer view of restaurants and put the brakes on per capita restaurant visits at 207. That led to just 199 restaurant visits per capita in 2009. That downward trend has continued, according to the NPD Group, dropping to 191 in 2014. However, restaurant traffic has now risen to the same level that was attained in 2009. All of the growth has been experienced by the QSR segment. In comparison, the fine dining segment has slowed to flat and been held back by unit closures.

Along with the decline in per capita restaurant visits, beverage servings have declined. In the past 5 years, beverage servings have dropped almost 2 billion. That translates to roughly 6 servings per person per year. The NPD Group has found that the top three reasons consumers don’t purchase a beverage are based on economics:

  • Too expensive, 22%
  • Already have a beverage, 18%
  • Not a good value, 15%

These results make it clear that operators must emphasize the beverage value proposition in order to drive sales.