Despite economic headwinds, restaurant sales start their reignitions

While the U.S. economic recovery remains fragile, the restaurant industry is finding ways to spell relief. The FoodserviceLandscape in the U.S., our outlook report for the restaurant industry, projects that sales will grow 4.2% to $487 million in 2012, on the heels of 6.1% market growth in 2011.

Nonetheless, operators must continue to experiment aggressively with menu pricing strategies and focus on courting minority racial/ethnic groups—and prepare for profit margin compression.  The onus of food commodity price increases is sizeable enough to threaten the restaurant recovery unless restaurant operators are prepared to bite the bullet on profit margins.  Continuing a trend that gathered momentum in 2011, many operators will need to maintain menu prices at the expense of higher margins or risk losing customers.

In addition, demographic-specific employment trends will continue to have disproportionate consequences and create distinct opportunity micro-climates by restaurant industry segment and geographic zone.

Although the housing market remains in a trough, consumer spending is rising modestly. Household debt ratios have declined, which bodes well for the discretionary income growth needed to increase guest traffic and perk up guest check averages.  Food and accommodations spending is outpacing other personal consumption expenditures.  Moreover, restaurant companies will increasingly leverage the technological and marketing power inherent in the smartphone. Location-based services such as Foursquare are a relatively new aspect of social media, but we expect quick uptake to continue among consumers and foodservice operators.

By segment, full-service restaurants posted the highest growth rate, at 8.1%.  Fine dining had a moderate rebound in 2011, though the hill back to 2007 spending levels remains very steep. Growth in the restaurant breakfast (5%) and snack (8%) customers has outpaced population growth since 2008, and the overall percentage of consumers using restaurants for these occasions has increased—although the reverse trend holds among Generation X.  All natural and organic are not only the most prevalent health-related claims on restaurant menus, but their menu presence grew during 2007-2011.   In 2011 menus, 15.7% of restaurants featured a natural claim and 13.5% featured an organic claim.  Not surprisingly, the tendency to market these claims on menus rises with restaurant price points.

Consumers age 65 or over are spending significantly more (13%) on limited-service restaurants than they did in 2007. Millennial generation consumers, at the other end of the age spectrum, are spending significantly more on limited-service restaurants as well as full-service restaurants.

By household income level, those with an income of $100K or more generate over one-third of spending on meals at restaurants, even though they comprise only 17% of all households.  The number of higher-income households and of lower-income households has grown since 2007, while the number of middle-income households declined. Because restaurant spending correlates to household income, the crimping of the middle class is obviously and inevitably a major hurdle for the industry, as for the national economy overall.  

Packaged Facts estimates that the number of restaurant visits grew by 3% during 2008 to 2011, based entirely on population growth, not usage increase.  Even then, restaurant operators across restaurant segments contend with the increased numbers of lower-spending guests and decreased numbers of higher-income guests, which has translated to higher volume but lower guest check averages.

And food commodity price increases could set the restaurant industry back, threatening the modest sales recovery seen in 2010 and 2011. Such price increases have the potential to erode the pricing gains restaurants have made relative to grocery prices, creating increased incentive for consumers to eat at home, and throw into disarray the delicate balancing act so many restaurant operators now walk in planning their menu strategies, which rely more now than ever on hitting the appropriate pricing and food margin mix.  Facing reduced consumer discretionary income and higher rates of unemployment, some of the industry’s major chains are pursuing sales growth by creating sister brands or new brands that are cut from fast casual cloth. Enticements include expansion opportunities, reduced capital investment, and new customer bases.

Most importantly, further employment gains are needed to spur overall restaurant industry growth. Consumers age 18-24, those without high school diplomas, and African-American consumers in particular remain saddled with unemployment rates much higher than the average.

LA Times: Small pet stores see healthy growth of organic food sales

Sales of premium-priced organic and natural pet food are expected to grow three times as fast as pet food sales overall through 2015.

Lance Castro, left, and Guy Miracle, owners of the Modern Dog in Venice, sell several brands of freeze-dried raw food and premium kibble. “It’s done wonders for our business,” Castro says. (Ricardo DeAratanha, Los Angeles Times)

By Cyndia Zwahlen

February 7, 2011

Organic, raw and even gluten-free food choices aren't just for people anymore.

These options are showing up at local pet shops that are looking to distinguish themselves from big-box competitors. After a slowdown in sales of premium-priced food during the recession, independent pet shops said the sector was recovering.

At the Modern Dog, a boutique in a Venice bungalow, co-owner Lance Castro was looking to add two new brands of freeze-dried raw food and premium kibble to the seven he already sells.
"It's done wonders for our business," said Castro, who opened the Abbot Kinney Boulevard store with Guy Miracle five years ago.

The store's popular Sojos dehydrated dog food mix of sweet potatoes, turkey, apples and flax meal, among other ingredients, costs $21.99 for a 2-pound bag, to which water is added to make 10 pounds of food.

Castro said he was looking at sites for a second location where he plans to have a refrigeration unit for fresh and frozen raw-food brands.

Nationwide, annual retail sales of organic and natural pet food are expected to grow three times as fast as pet food sales overall through 2015, according to an industry report to be released this week by the Packaged Facts market research company.

Industry analyst David Lummis, who wrote the report, estimated that natural and organics would grow 12% a year on average, hitting $2.8 billion in 2015. By comparison, he expects an average 4% annual growth rate for the entire pet food market over the same period. Overall pet food sales will reach $22.1 billion in 2015, Lummis said.

"People are treating their dog food like some people are treating their baby food," said Todd Martin, vice president of marketing for Castor & Pollux Pet Works, a Clackamas, Ore., company that makes organic pet food and treats. "They want to know it's safe, and they want to know it's quality."

Still, organic pet food — which costs as much as 30% more than non-organic — remains a tiny part of the overall market.

Many independent shops, which are in the vanguard of the organic food sector, got a boost in business in 2007 when pets died from eating food that contained imported wheat gluten and rice protein contaminated with melamine. The poisonous contaminant even showed up in some brands sold as being natural.

As with food for people, there are no regulations governing the word "natural" on pet food labels. But pet foods marketed as organic must meet the same U.S. Department of Agriculture standards as human food in the category, according to USDA spokesperson Soo Kim.

Annual sales of organic pet food increased tenfold from 2002 to 2009, when sales hit $84 million, according to the Organic Trade Assn.

Now that organics are becoming more popular, some large pet store chains are also carrying them, said Joan Storms, an analyst at Wedbush Securities in Los Angeles.

But the more exotic raw and organic pet food is still mostly the province of independent shops.

Neal Massa is co-owner of My Pet Naturally in West Los Angeles, where customers can find raw elk meat for $7.49 a pound and raw chicken and lamb for Fido for about $4 a pound.

"My clientele are probably mostly single, more single women than not, and what I am finding is that these are their kids," Massa said, referring to his customers' pets. "So you are going to spend a little bit more money for pet food."

Full Article: Pet food: Independent pet stores see growing sales of organic and natural pet food - latimes.com

Economically Potent and Increasingly Acculturated Latino Consumers Spend More, Display Strong Financial Optimism

New York, December 21, 2010 — The United States population of Hispanic consumers wields a formidable combination of fiscal optimism and buying power in excess of $1 trillion, making progressively more acculturated Latinos a demographic capable of shaping the nation’s future economic and marketing trajectory, according to Latino Shoppers: Demographic Patterns and Spending Trends among Hispanic Americans, 8th Edition by market research publisher Packaged Facts. Hispanic buying power is projected to reach $1.3 trillion in 2015, a cumulative increase of around 25%.

"Although suffering their full share of job losses and foreclosures, Hispanic consumers are more optimistic than non–Hispanic white consumers about their own personal financial situation and about the future of the American economy," says Don Montuori, publisher of Packaged Facts. "Between 2008 and 2009 above–average growth in the Hispanic population caused aggregate spending by Latino households to increase slightly even as spending declined in non–Hispanic households. Considering that one in six Americans are now of Hispanic heritage, Latino consumers will remain influential over the ensuing years, especially because there are a significant number of high–income Latino households."

Marketers must be aware of how increasing acculturation will affect the decisions of Latino shopping behaviors. Compared to their low–acculturation counterparts, high–acculturation Latinos are much more likely to own credit cards, take out loans and have health and life insurance, according to the report.  They are also less influenced by advertising and product placements but are much more alert to in–store promotions. Additionally, they are far more likely to shop and buy online and from catalogs. Packaged Facts further reveals that more education leads to better paying jobs and increasing influence among high–acculturation Latinos, who are more likely than their low–acculturation counterparts to work as managers and professionals, are more likely to own their own homes, and are twice as likely to have a household income of $75,000 or more.

Although advertising campaigns have increasingly featured Hispanics and Hispanic themes, marketers targeting Hispanic consumers must recognize substantial regional differences in the composition of the Hispanic population. For instance, Latinos living in  western and southwestern states tend to be of Mexican heritage, while Latinos in the Northeast have a much more varied country–of–origin background. With an estimated buying power of $616 billion, Latinos of Mexican heritage represent the single most influential segment of the Hispanic market. Mexicans in the U.S. account for 59% of all Hispanic buying power. On a per capita basis, however, Cubans are the most affluent of the major Hispanic population segments.

Latino Shoppers: Demographic Patterns and Spending Trends among Hispanic Americans, 8th Edition provides an in–depth look at the shopping habits and spending patterns of Hispanic consumers today. It also provides a glimpse into Latino shoppers of the future. As more acculturated Latinos become an ever–larger share of the population, marketers may need to address the potential for a significant change in the profile of the Latino consumer. This Packaged Facts report provides important insights into the way acculturation may affect the shopping behavior and buying decisions of Latinos in the years to come. For further information, please visit: http://www.packagedfacts.com/Latino-Shoppers-Demographic-2848314/.

About Packaged Facts—Packaged Facts, a division of MarketResearch.com, publishes market intelligence on a wide range of consumer market topics, including consumer goods and retailing, foods and beverages, demographics, pet products and services, and financial products. Packaged Facts also offers a full range of custom research services. To learn more, visit: www.packagedfacts.com. Follow us on Facebook, LinkedIn and Twitter.

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Millenials in the U.S.: Trends and Opportunities Surrounding Gen-Y Adults

The 51 million adult members of the Millennial Generation (also known as Gen-Y) have been hit harder than any other age group by the recession. Millennials have the highest unemployment rate of all age groups, while those with jobs are most likely to have been asked at some point during the recession to work fewer hours, switch to part-time employment or agree to have their pay cut.

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Yet, paradoxically, survey data show that Millennials are less likely than any other age segment to have cut spending during the recession, and they are more optimistic than other American consumers about the future of the American economy.

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U.S. Pet Market Outlook 2010-2011: Tapping into Post-Recession Pet Parent Spending

As the U.S. economy moves out of recession and into recovery, the purse strings of many pet parents will loosen, but shoppers will continue to demand greater value in the pet products and services they purchase as well as from the channels they shop. U.S. Pet Market Outlook 2010-2011: Tapping into Post-Recession Pet Parent Spending provides essential insights into the U.S. pet market overall as well as each of its four core categories: veterinary services, pet food, non-food pet supplies, and non-medical pet services (grooming, boarding, training, etc.).

Benefiting from many current trends and “future factors,” the market will rise from $53 billion in 2009 to over $70 billion in 2014, the report forecasts, with strong demand for products and services that both enhance pet health and pamper lifting many boats as pent-up pet parent demand begins to kick in during 2010.

Continuing the market tracking and forecasting of the previous edition of Packaged Facts’ annual report (see U.S. Pet Market Outlook 2009-2010: Surviving and Thriving in Challenging Economic Times— http://www.packagedfacts.com/prod-toc/Pet-Outlook-Surviving-2154192/), the 2010-2011 edition projects sales, market growth drivers, and competitive and marketing opportunities. In a new focus discussion, it details...

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Rewards Cards in the U.S., 3rd Edition

2010 brings a perfect storm to the credit card industry, driven by recession-induced changes that are reshaping its core. At the same time, card rewards have become ubiquitous. In the face of some of the most significant changes the credit card industry has ever faced, some argue that rewards programs are simply no longer feasible in an era of constrained revenue and profits. However, as detailed in Packaged Facts’ Rewards Cards in the U.S., it is not a matter of eliminating reward programs, but rather about adapting them to some of the most significant changes the credit card industry has ever faced.
In its most consultative report in the series, this 3rd edition of Rewards Cards in the U.S. helps position industry participants to navigate this reengineering in card rewards by assessing the following industry trends and challenges:

• How does continued migration to electronic payments shape the future of rewards?
• Which regulatory changes are most relevant to rewards?
• Understanding the macroeconomic and credit factors that shape the pool of current and future credit card customers.
• How large is this pool of customers? 
• Does the current credit environment effect migration from credit to debit? Why? How?
• Which fee structures are being implemented—or could be implemented—to counteract regulatory change?
• How are card issuers’ credit card portfolios adapting to change? How can they share in tapping a smaller pool of cardholders while growing profits?
• What will happen to affluent, credit worthy cardholders? Less credit worthy cardholders? How do rewards play a role?
• Can rewards help grow transactions and help extend card reach beyond a shrinking consumer base?
• How does closed-loop versus open-loop competition and significant industry consolidation affect competition?
• What is the fate of co-brand rewards?
• Which reward types best fit the needs of specific consumers?
• Over the course of the recession, which consumers are active card users? Multiple card users? Transactors? Revolvers? How has this changed over time?

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Gay money talks - PrideSource.com

New study highlights LGBT buying power, attitudes toward economyby Lucy Hough - Originally printed 9/16/2010 (Issue 1837 - Between The Lines News)

A recent report states that LGBT people are typically more optimistic about the general direction of the country, specifically in terms of economic growth, the job market and personal finances. And, as a result, LGBT buying power is high.

"The Gay and Lesbian Market in the U.S.: Trends and Opportunities in the LGBT Community, 6th Edition" was released by Packaged Facts, a division of MarketResearch.com, in early August and relies on various data including that collected by Witeck and Combs Communications, which released a report in March 2010 about LGBT households' opinion of the economy.

"What we found out in March was that they were clearly more confident," Bob Witeck said.
Witeck and Combs work with Harris Interactive to do various research initiatives, typically dealing with LGBT people throughout the United States. Their sample includes individuals who are 18 years and older and self-identify as lesbian, gay, bisexual or transgender.

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Millennials Remain Ever Hopeful during Great Recession

Adult Millennials (those in the 18- to 29-year-old age group also often referred to as members of Gen-Y) have been hit harder than any other age group by the recession.  In 2009 the 16.6% unemployment rate experienced by 18- to 24-year-olds was higher than that of any other age group.  The unemployment rate for 25- to 29-year-olds (10.6%) was more severe than the unemployment rate among workers in older age groups.

Besides facing a higher risk of unemployment, Gen-Y workers are more likely than older workers to have faced on-the-job hardship as the recession unfolded.  According to data published by Washington, D.C.-based Pew Research Center in February 2010, 18- to 29-year-old workers are more likely to have been asked by their employers at some point during the recession to work fewer hours, switch from full-time to part-time employment or take a pay cut.

Yet, as seen in a new Packaged Facts report (“Millennials in the U.S.: Trends and Opportunities Surrounding Gen-Y Adults,” October 2010) 18- to 29-year-olds have remained resolutely upbeat about the economy even in the face of their especially adverse circumstances.

To find out how Millennials compare to other consumers, this Packaged Facts report uses the Consumer Confidence Index of the Experian Simmons National Consumer Study, which ranks the confidence of consumers on a scale from 1 to 8.  “Anxious Consumers” are defined as consumers who rank between 1 and 3 on the scale.  “Confident Consumers” are those between 6 and 8 on the scale.

The analysis shows that only 12% of 18- to 24-year-olds and 25- to 29-year-olds are classified as Anxious Consumers, compared to 24% of Boomers (those in the 45- to 64-year-old age group) and 26% of consumers in the 65+ age segment.  While 26% of 18- to 24-year-olds and 29% of 25- to 29-year-olds fall into the Confident Consumer category, only 20% of 45- to 64-year-olds are categorized as Confident Consumers.

Conventional wisdom views Millennials as the product of “helicopter parents” who hovered over their kids during their childhood years and into their teens and even after they entered college.  The Boomer parents of Millennials are often criticized for being more concerned about beefing up their children’s self-esteem than subjecting them to rigorous academic competition.  The data in this Packaged Facts report suggest, though, that the parents of Millennials did something right and somehow prepared their kids to face the worst economy in 70 years with a spirit of hope and confidence.

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Shifts in Consumer Demographics during the Great Recession

Attitudes and habits among American consumers are undergoing a change in the aftermath of the recession. Recent survey data from Nielsen group reveals that while the intensity of the economic panic had subsided since 2008, concerns persist and new habits in spending and saving are solidifying.

Consumer Confidence a Dynamic Phenomenon

One of the most striking findings of this Packaged Facts analysis is that “consumer confidence” is a highly fluid concept. From 2005 through 2009 there were tens millions of Americans who migrated in and out of the ranks of Confident and Anxious Consumers. At the end of this period, the demographic profile of Confident and Anxious Consumers had been dramatically transformed.

Multicultural Consumers More Confident

As noted in the February 2010 edition of Packaged Facts The African-American Market in the

U.S., African Americans were especially hard hit by the Great Recession. Yet, in the face of declining incomes and daunting unemployment rates, survey research from a variety of sources suggests that the sense of empowerment created by the election of Barack Obama has led blacks to adopt a more optimistic vision of the future than that held by other Americans. For example, data released in January 2010 by Washington, D.C.-based Pew Research Center survey found that the number of blacks who rate their personal finances as excellent or good was up from 2007 (32% vs. 27%). In sharp contrast, the ratings among whites dropped substantially, from 52% to 35%.

While non-Hispanic whites account for 69% of the population, they represent 80% of Anxious Consumers. In sharp contrast, 29% of blacks are counted as Confident Consumers, compared to only 19% of non-Hispanic whites. Non-Hispanic whites are three times as likely as blacks to be categorized as Anxious Consumers (23% vs. 8%). Latinos and Asians also are more likely than non-Hispanic whites to be Confident Consumers and are less likely to be Anxious Consumers.

The Confident Consumer represents the most attractive target for marketers eager to participate in a post-recession rebound. The average household income of Confident Consumers is significantly higher than that of Anxious Consumers ($82,928 vs. $64,279). The aggregate income of Confident Consumers totals $1.9 trillion, 27% higher than that of Anxious Consumers.

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