Summary from COEX 2008 '08

This year's COEX meeting was very informative and it was interesting to learn how the overall state of the restaurant industry has changed over the last year. I am glad to share with you some of my key learnings from this event. While we didn’t need to be told that this year is shaping up to be a bleak one for many segments, it was interesting to get several perspectives on the two primary causes for the situation many find themselves in. It’s scary how big, far reaching and damaging the President’s Energy Bill will have, long-term on food prices and operators’ bottom line shrinkage! Trading food for fuel is impacting commodity prices on just about everything.

NPD Situation Analysis:

• The industry isn’t very optimistic this year…consumer confidence is way down. Talk of the recession, all-time high price of oil and gas, and the number one issues, rising food costs are the major contributors. Operators are feeling the crunch because they’re not able to raise menu prices knowing the low consumer confidence levels and depressed customer counts. Costs are up, counts are down.

• Breakfast contributed to 65% of the industry’s growth (driven by Starbucks, Dunkin Donuts and McDonalds). Dinner was the big looser and pizza was the biggest loosing category.

Operator Panel:

• In order to control costs operators are cutting back on the number of ingredients with an eye towards product rationalizations. They are only keeping multi-applications ingredients and paying a lot of attention to labor efficiencies (pre-cooked, pre-sliced, pre-measured, speed-scratch ingredients).

CIA on Innovation:

• Their research indicated a big gap between perceptions of how innovative companies actually are vs. how operators actually see them. They surveyed both marketers and operators on several factors including: product innovation, service, and value. The biggest gap was in product innovation. Larger companies scored themselves very high on innovation while operators scored larger companies the lowest. The larger the company the worse operators scored them on product innovation.

• CIA identified some immediate areas for innovation: global flavors (Asian and Mediterranean); healthfulness (reduction in calories and salt); menu ethics (environmentally friendly, hormone and chemical free, sustainability/green).

NRA: Retaining Customers through Innovation:

• Experimentation and testing is a mandate. Let consumer behavior lead innovation. Practice “kitchen table” marketing (small talk, lots of contributors) drive marketing and end silos. Surprise marketing is required…deliver the unexpected messaging…again looking at viral.

Building Relationships (Operator Panel)

• Choosing suppliers – trust is key, companies with a partnership attitude, a passion for caring and a commitment to serve their customers (patrons), win.

• A service portfolio needs to include: commitment to R&D; bring resources through innovation; demonstrate hands-on service (work in their operations); present positive solutions to help them control costs; provide lead times on price increases and when the occur bring ideas to help operator manage/control the increase; communicate best practices concerning the product and handling, bring unique innovative ideas (products and programs).

Posted by Mike Gordon