GLOBAL PERSPECTIVE ON FOODSERVICE AND FTG Strategic Overview Insight Global Convenience Strategists NACS Relationship Partner for Europe www.insightresearch.co.uk T: +44 1938 556 090
Channel Blurring - shift vs growth • Strategic insight has never been more important because retail is changing so fast. Many retailers are losing big. Online is changing shopping habits. It is driving a big shift in terms of what kind of retail consumers want to do at home, compared with what they want to buy and experience out of home. Eating Out More and Social Venues • Convenience retailers are becoming more focused on foodservice because more and more consumers globally are eating out of home, for breakfast, lunch and dinner too. Coffee is a good example of this shift from in-home to out of home consumption. Coffee shops in the UK for example are booming not because consumers are drinking more coffee (they aren’t) but also because they fill a ‘social venue’ gap in society which would previously have been met by pubs. Differentiated • Bricks retail is not disappearing, but it is becoming better: more disciplined, more articulate, more differentiated. A new approach to customer service • Convenience needs to work harder at becoming a retail destination and it also needs, if it can, to try to satisfy consumer’s demands for more sociability, more connection and a whole new approach to what is meant by good customer service.
Foodservice – own brand or branded partnerships? • Convenience retailers have little choice but to embrace more complicated foodservice offers as consumer needs mature and move on from models which worked well for them in the 90’s featuring triangular sandwich + drink on a meal deal. • The key question for retailers is whether to develop an own brand or a brand partnership solution to this opportunity and threat? And how this changes their businesses? This is a crucial strategic decision and not an easy one as not only do convenience retailers have to develop a new foodservice offer, they also have to develop a new retail culture to deliver it effectively. • The US is well known for own brand solutions and these are the models developed by Wawa, Sheetz and Rutter’s. By contrast in Europe, two of the most interesting models to date are the Euro Garages ‘convenience mall’ brand partnership model and the ‘brand implant’ model being developed by Tesco. • An evaluation of these European models is a good starting point before we look closely at the US own brand model. What are the strengths and weaknesses of each approach?
The Euro Garages ‘Convenience Mall’ – a branded partner offer From 1-200 sites in 10 years and from 1-70 Subways in 5 years !
Euro Garages - Starbucks Roadside Master Franchise Operator From 1-55 Starbuck’s in 3 years! Page 8
Euro Garages – different brands for different needs Page 8
EG Branded Partner Model – advantages? • Scalability … fast as evidenced by Euro Garage’s growth. • A ‘Convenience Mall’ of brands catering for different consumer needs, for every pocket from premium Starbuck’s to value orientated Gregg’s, with Subway mainstream. • Partner brands are mature, established destination brands which re-invest to stay in touch with consumer behaviours and come with operational manuals and ‘global’ promotional programmes. These brands easily overcome the ‘fuel deficit’, the problematical associations of petrol for fresh food. • And consumer behaviours are developing rapidly. What worked in the 90’s won’t work today. Consumers want hot, fresh & healthy. • EG can switch out poorly performing brands for the latest franchises and as they expand geographically, EG can recruit new, appropriate branded partners for new markets. • EG able to focus on its core expertise of site acquisition, capitally intensive investment and operational execution.
EG Branded Partner Model – requires operational excellence • Royalties reduce profit margins. • EG need to work with a number of different partners, all with their own brand DNA, guidelines, health & safety and quality standards. EG need to make considerable ongoing investment to roll out the brands individually and then to manage their individual and distinct needs once they are rolled out too. • This ongoing brand management is not just about serving customers, its about EG staff managing those brand offers well too. Petrol forecourt managers are not going to look after Subway and Starbuck’s stores too. Dedicated management is required. • Significant training requirement. All staff at EG super sites are employees who need to be trained up to respective partners brand standards. Initially this can be done at partner company owned sites. As the business grows EG need to develop their own trainers to cope with the numbers. • Because many of the brand partners are distinct businesses, EG probably can’t develop as fast as they’d like to with regard to new technologies which consumers increasingly want such as pre-order and pre-pay. This can also slow down adoption of digital signage, etc.
Tesco Express – culture and brand implant for an MTO offer Tesco haven’t got the right culture for foodservice so they are acquiring it, H&H, Giraffe Café, Eurporium, Fred’s Page 8
Tesco Express – new use of technology ‘89% of UK consumers use self checkouts, 39% agree that they offer better customer service’* NCR
Tesco Metro – big changes in store design towards customer engagement
Use of the ‘friendly culture’ of partner brands like Eurphorium, Fred’s, giraffe café, Harris & Hoole
Foodservice – Trends in US Market US is at a more advanced developmental stage, 3-5 years ahead Social interaction and eating out of home • US convenience retailers like Wawa and Sheetz are developing an experience around MTO which can’t be achieved with pre-packed. They are making their stores look as much like restaurants as possible and they have re-evaluated customer service. Growing foodvenience • Another interesting US development is the more advanced breakdown of traditional meal occasions. US retailers may be further advanced in developing options for consumers who no longer want to eat 3 square meals a day. US consumers often eat 5-6 times a day. It’s ‘foodvenience’. We will see how all day eating options are being delivered in the US market. US – the differences? • One question to consider - what advantages does the US MTO in –store produced model offer by comparison with the chilled distribution and re-heat model more common in Europe? Which strategy will win long term? • And which strategy is the right one for Europe in delivering better foodservice solutions; branded partner or own brand as in the US?
US Operational efficiency – what has changed? ’Work cell’ • Sophisticated operators like Wawa fine tune every ‘work cell’ of their business in order to maximise the speed for customers Turning parking spaces • Wawa focuses on turning parking spaces, just like a good restaurant focuses on turning tables. Digital connectivity • Touchscreen ordering and pre-order mobile communications are developing in harmony with increasingly developed hot food offerings. • Mobile ordering and the latest loyalty platforms mean that the most developed foodservice operators like Rutter’s will soon dispense with drive thru and focus on expansion of the hot food offer into more developed menu items which increase share of stomach in evening meal occasions • New technologies also make interaction more efficient and rewarding for consumers. The latest loyalty programmes allow customers to use cell phone numbers as ‘unique codes’ to enable touch screens and phones to recognise them, reward them and remind them of their recent top 10 orders
Wawa – a highly disciplined, well defined and marketed offer Convenience retailers like Wawa are developing increasingly sophisticated store designs with a more ambitious food offering. Wawa has come a long way and is becoming a genuine retail destination . Page 8
Wawa – “Eating out is the new eating in” • As the US moves towards more and more eating on the move and out of home, Wawa has developed new format c-stores which look much more like restaurants. The millennial generation just don’t eat at home much any more and this store is built for them. • Wawa opened its first, new large store in Florida 2 years ago and are now building this new store design in its original home market. Wawa has also been busy advancing its foodservice offer with fresh foods and more variety to cater for all the day parts. • Wawa’s new standard store is 5,600sq ft. Inside, the store features a super sized customer service counter plus touch screens for ordering, delivering a highly efficient service. Customers refer to the store as a restaurant with gas pumps rather than forecourt with food. This has been a clear aim - to get customers beyond the fuel pumps and to think about fresh food. • Joe Bona, president of branded environments at CBX, worked with Wawa on the Florida store format. Bona thinks Wawa’s new store represents the state of the industry and that in future stores will have a more developed food offer. As a result, stores such as Wawa will be competing with retailers like Subway as well as traditional convenience chains.
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