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Look Towards A New Future

Aug 2, 2010

Breakfast Trends in the U.S. Foodservice Market now available at ReportsandReports

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The recession is reshaping how consumers interact with the restaurant industry, and the breakfast daypart is no exception: value pricing remains at the forefront of menu strategies, as growing guest checks often takes a backseat to generating guest traffic. However, unlike the lunch and dinner dayparts, breakfast benefits from long-term untapped guest traffic potential, and it can generate healthy margins, factors that are drawing major new players into the market.

Packaged Facts’ Breakfast Trends in the U.S. Foodservice Market estimates that breakfast daypart restaurant sales reached $37.2 billion in 2009, and forecasts that they will reach $37.0 billion in 2010 and $37.7 billion in 2011. While these figures may appear tepid at first glance, when viewed against the backdrop of lower overall restaurant sales, the breakfast daypart has fared relatively well, taking share from lunch and dinner. In the final analysis, we believe that near-term challenges will give way to long-term opportunity.

Breakfast Trends in the U.S. Foodservice Market provides unique insights into consumers’ evolving relationship with the breakfast daypart, helping restaurant operators position their brands—and menus—for consumers today and tomorrow.

Table Of contents

Chapter 1: Executive Summary

Scope and Methodology

Scope

Methodology

Macroeconomic Analysis

Fast Facts

Restaurant Usage & Outlook Tracker

Fast Facts

Share of Stomach: Sales Analysis

Fast Facts

Breakfast Trends, Innovations & Strategies

Fast Facts

Breakfast Restaurant Selection Analysis

Fast Facts

Breakfast Menu Selection Analysis

Frequent Coffee Drinkers: Custom Usage, Attitudes and Behavior Drilldrown

Breakfast on the Menu: Restaurant Brand Analysis

McDonald’s

Breakfast strategy: sales growth = guest count growth

Breakfast menu mix

Other snippets

Burger King

Refocusing on breakfast

Other snippets

Wendy’s

Wendy’s reenters breakfast wars with premium QSR differentiation

Starbucks

Recession strategy pays dividends

Brand extensions: VIA and Seattle’s Best

On the food and coffee front

Bob Evans

On the menu: off-premises growth, remodeling, and quickening service

Menu trends

Breakfast in a big way

Cracker Barrel

Menu item innovation

Other snippets

Denny’s

Recession challenges: region, lower-middle income demographic and late-night

2009-2010 breakfast menu strategy

$2 $4 $6 $8, who do we appreciate?

Other moves

Chapter 2: Macroeconomic Analysis

Restaurant sales show life, but we believe positive news is transitory

Restaurant industry rebound still not in cards

February, March and April 2010 food services & drinking places sales sequentially improve

May advance sales point to grocery growth

Graph 2-1: Non-Adjusted Monthly Sales, 12-Month % Change, Grocery Stores & Food Services and Drinking Places, 2009-2010

Packaged Facts’ Consumer Restaurant Tracker: Gloomy Near-Term Outlook

In-home breakfast and dinner trend remains significant

Graph 2-2: Consumer Restaurant Tracker: Current Behavior: A Top Line View

Looking ahead: Saving & grocery spending trumps limited service and full-service restaurant spend

Graph 2-3: Consumer Restaurant Tracker: Next 3 Months: A Top Line View

National Restaurant Association index contracts after transitory spike

Graph 2-4: Restaurant Performance Index, 2006-2010

Macroeconomic factors affecting restaurant sales

Consumer confidence still in a trough

Present Situation Index decreases as perceptions of business conditions, job prospects darken

Expectations Index dips as job prospect optimism dims

Unemployment picture stabilizes

Some perspective

Graph 2-5: Unemployment Rate and Consumer Confidence: 2007-2010

Unemployment rate not one-size-fits-all

Disparity in unemployment rates by education level

Young adults, minorities and men also find harder going

Graph 2-6: Unemployment Rate, Selected Demographics, 2007-2010

Graph 2-7: Unemployment Rate, by Race/Ethnicity, 2007-2010

How can increasing personal savings and reducing the debt burden be bad?

Transitory Spring 2010 restaurant benefit driven by reduced savings

Chipping away at the debt burden

Graph 2-8: Consumer Debt Burden, 2000-2010

Graph 2-9: Savings Rate & Debt Service Ratio & Financial Obligations Ratio, 2007-2010

Unemployment and GPD forecast

Slow employment rebound to coincide with slow rebound in consumer spending

Graph 2-10: Unemployment and GDP Forecast, 2010-2012

Stock & housing declines deflate household wealth; rebound to record 2006 levels a long way off

Q1 2009 to Q1 2010 sees uptick in household wealth, but still $10 trillion off 2006 high

Graph 2-11: Household Net Worth, 2005-2010

Case-Shiller and FOMC housing pessimism

Q2 2010 summary equities analysis

Graph 2-12: Wealth Effect: Wilshire 5000 and Case-Shiller Index: 2007-2010

Food at home maintains pricing edge

Graph 2-13: CPI: Food at Home vs. Food Away from Home, 2005-2010

Farm value comes back down to earth

Graph 2-14: Market Basket of Farm Foods, Annual % Change, 2006-2010

Food inflation forecast revised downward

Food CPI returns to positive annual growth rate

Proteins on the upswing

Dairy prices normalize

Fruits and vegetables

Other

Chapter 3: Restaurant Usage & Outlook Tracker

Note on reading charts

Packaged Facts’ Consumer Restaurant Tracker: at-home food spend trumps out-of-home spend

February 2010 trend continues in June 2010

Graph 3-1: Consumer Restaurant Tracker: Current Behavior: A Top Line View

Looking ahead: Consumers more likely to save & spend on groceries than spend at restaurants

Graph 3-2: Consumer Restaurant Tracker: Next 3 Months: A Top Line View

Eating breakfast at home had significant traction

Students, 18-24s and parents more likely to eat breakfast at home

Graph 3-3: Consumer Restaurant Tracker: Present Behavior: Eating Breakfast at Home

Restaurant breakfast users as likely as restaurant goers in general to eat breakfast at home

Graph 3-4: Consumer Restaurant Tracker: Present Behavior: Eating Breakfast at Home, Restaurant Breakfast Users

Higher-income versus lower-income fast food, family restaurant and coffeehouse breakfast users

Graph 3-5: Consumer Restaurant Tracker: Present Behavior: Eating Breakfast at Home, Restaurant Breakfast Users, HH Income Splits

Planned spending on fast food appears grim

Graph 3-6: Consumer Restaurant Tracker: Future Behavior: Fast Food Restaurant Spending

Intended full-service spend lacks promise

Graph 3-7: Consumer Restaurant Tracker: Future Behavior: Full-Service Restaurant Spending

Intention to save money remains high

Graph 3-8: Consumer Restaurant Tracker: Future Behavior: Saving Money

Restaurant breakfast users more likely to plan higher fast food and full-service spending

Graph 3-9: Consumer Restaurant Tracker: Future Behavior: Restaurant Spending, by Restaurant Breakfast Type

Restaurant usage and usage frequency

Overview

Graph 3-10: Mean Restaurant Usage in Last Month, by Restaurant Type, 2010

Graph 3-11: Restaurant Usage in Last Month, by Restaurant Type, 2010

18-34s drive guest counts

Graph 3-12: Mean Restaurant Usage in Last Month, by Restaurant Type, 2010, by Age

And exhibit higher usage

Graph 3-13: Restaurant Usage in Last Month, by Restaurant Type, 2010, by Age

HH income

Graph 3-14: Mean Restaurant Usage in Last Month, by Restaurant Type, 2010, by HH Income

Graph 3-15: Restaurant Usage in Last Month, by Restaurant Type, 2010, by HH Income

Employment status

Graph 3-16: Mean Restaurant Usage in Last Month, by Restaurant Type, 2010, by Employment Status

Graph 3-17: Restaurant Usage in Last Month, by Restaurant Type, 2010, by Employment Status

Restaurant breakfast use

Breakfast day part accounts for less than 10% of all usage

Graph 3-19: Day Part Usage on Last Visit, 2010

Restaurant breakfast use in past month

Graph 3-20: Restaurant Breakfast Usage in Last Month, Type of Restaurant, 2010

Gender bias?

Graph 3-21: Restaurant Usage in Last Month for Breakfast, 2010, by Gender

Food retail may be siphoning sales from younger restaurant goers

Graph 3-22: Restaurant Usage in Last Month for Breakfast, 2010, by Age

HH income: Fast food as the great equalizer

“Great coffee”: aspiration or reality?

Graph 3-23: Restaurant Usage in Last Month for Breakfast, 2010, by HH Income

Employment status: sense of routine and daily obligation

Graph 3-24: Restaurant Usage in Last Month for Breakfast, 2010, by Employment Status

Appendix: Consumer Survey

Chapter 4: Share of Stomach: Sales Analysis

Market size and overview

Flat sales—but read between the lines

Near-term challenges

Long-term outlook

Growth factors

Full-service caveat

Graph 4-1: Limited-service and full-service breakfast sales, 2005-2011

Breakfast daypart traffic growth outpaces industry

Fast food/QSR segment accounts for 80% of breakfast daypart purchases

Restaurants sales trends by daypart

Consumer food expenditure trends suggest migration to food at home spend

Graph 4-2: Consumer Food Expenditures, 2005-2008

Breakfast share of spend increases by 11% during 2005-2008

Graph 4-3: Meals Away From Home Expenditures, by Daypart, 2005-2008

Spending on breakfast away from home, by region

Graph 4-4: Breakfast Away From Home Expenditures, by Region, 2008

Spending on breakfast away from home, by age

Graph 4-5: Breakfast Away From Home Expenditures, by Age, 2008

Spending on breakfast away from home, by income

Graph 4-6: Breakfast Away From Home Expenditures, by Income, 2008

Spending on breakfast away from home, by race/ethnicity

Graph 4-7: Breakfast Away From Home Expenditures, by Race/Ethnicity, 2008

Daypart meal spend analysis

Breakfast meal spend approaches that for lunch at fast food & family restaurants

Graph 4-8: Consumer Restaurant Meal Spend, by Daypart and Restaurant Type, 2010

Breakfast meal spend, fast food versus family restaurants

Graph 4-9: Breakfast Meal Spend, Fast Food Versus Family Restaurants, Selected Demographics

Meal spend by daypart, fast food restaurants

Graph 4-10: Meal Spend by Daypart, Fast Food Restaurants, Selected Demographics

Chapter 5: Breakfast Trends, Innovations & Strategies

Fast food/QSR pushes breakfast value envelope

Extreme affordability strategy extends to breakfast

McDonald’s $1 value menu to pressure competition

Burger King addresses breakfast challenges

A subversive BK Breakfast Muffin

BK Breakfast Bowl for under $3

Seattle’s Best-branded coffee program

Wendy’s to reenter breakfast wars

Subway rolls out nationwide breakfast program

Fast casual breakfast players results a mixed bag

Au Bon Pain grows breakfast year-over-year

Einstein Noah and Panera Bread tread water

Atlanta Bread does breakfast to the tune of 20% of sales

Other fast casual breakfast moves

Family restaurants push everyday value

Full-service value menus

Value in portion size

Convenience trends

All-day breakfast

Breakfast catering

Customization

I said, “Coffee!”

Coffeehouses embrace value bundling

And Starbucks cashes in on mid-tier Seattle’s Best

Sandwiches rule the breakfast menu

Health on menu

Dunkin’ Donuts sprinkles health onto the menu

Chick-fil-A adds yogurt parfait

A comforting healthful breakfast

Fruits and smoothies

Chapter 6: Breakfast Restaurant Selection Analysis

Note on reading charts

Breakfast restaurant selection influencers

Overview: coffee, routine and low price significantly shape restaurant breakfast decision

Graph 6-1: Breakfast Restaurant Selection Influencers, 2010

Restaurant selection: convenience influencers

Gender: men = linear routine; women = task balancing routine?

Graph 6-2: Restaurant Selection: Breakfast Convenience Influencers, by Gender, 2010

Age: work life holds the key

Graph 6-3: Restaurant Selection: Breakfast Convenience Influencers, by Age, 2010

HH income breeds breakfast routine

Graph 6-4: Restaurant Selection: Breakfast Convenience Influencers, by HH Income, 2010

Employment status

Graph 6-5: Restaurant Selection: Breakfast Convenience Influencers, by Employment Status, 2010

Urban, Suburban, or Rural location

Graph 6-6: Restaurant Selection: Breakfast Convenience Influencers, Urban, Suburban, Rural, 2010

Restaurant selection: breakfast menu item influencers

Gender: women more likely to have value orientation; men as inclined to want healthful offerings

Graph 6-7: Restaurant Selection: Breakfast Menu Influencers, by Gender, 2010

Age: younger patrons seek a difficult balancing act

Graph 6-8: Restaurant Selection: Breakfast Menu Influencers, by Age, 2010

HH income: healthy options and small portions

Graph 6-9: Restaurant Selection: Breakfast Menu Influencers, by HH Income, 2010

Employment status

Graph 6-10: Restaurant Selection: Breakfast Menu Influencers, by Employment Status, 2010

Restaurant selection: breakfast cost threshold influencers

Gender: women more likely to gravitate to lower price points

Graph 6-11: Restaurant Selection: Breakfast Cost Threshold Influencers, by Gender, 2010

Age: $3 is a hit across the board

Graph 6-12: Restaurant Selection: Breakfast Cost Threshold Influencers, by Age, 2010

HH income

Graph 6-13: Restaurant Selection: Breakfast Cost Threshold Influencers, by HH Income, 2010

Employment status

Graph 6-14: Restaurant Selection: Breakfast Cost Threshold Influencers, by Employment Status, 2010

Restaurant selection: breakfast dinein partner influencers

Gender: it’s a work thing

Graph 6-15: Restaurant Selection: Breakfast Dine-in Partner Influencers, by Gender, 2010

Age: 65+ not interested in eating alone

Graph 6-16: Restaurant Selection: Breakfast Dine-in Partner Influencers, by Age, 2010

Restaurant selection: breakfast takeout partner influencers

Gender

Graph 6-17: Restaurant Selection: Breakfast Takeout Partner Influencers, by Gender, 2010

Age

Graph 6-18: Restaurant Selection: Breakfast Takeout Partner Influencers, by Age, 2010

Employment status

Graph 6-19: Restaurant Selection: Breakfast Cost Threshold Influencers, by Employment Status, 2010

Chapter 7: Breakfast Menu Selection Analysis

Note on reading charts

Menu selection influencers, by daypart

Graph 7-1: Menu Selection Influencers, by Daypart, 2010

Breakfast restaurant menu selection influencers, by demographic

Gender

Graph 7-2: Breakfast Menu Selection Influencers, by Gender, 2010

Age

Graph 7-3: Breakfast Menu Selection Influencers, by Age, 2010

HH income

Graph 7-4: Breakfast Menu Selection Influencers, by HH Income, 2010

Employment status

Graph 7-5: Breakfast Menu Selection Influencers, by Employment Status, 2010

Urban, suburban, or rural location

Graph 7-6: Breakfast Menu Selection Influencers, by Rural/Urban/Suburban, 2010

Chapter 8: Frequent Coffee Drinkers: Custom Usage, Attitudes and Behavior Drilldrown

Frequent coffee drinkers

Graph 8-1: Frequent Coffee Drinkers: Selected Demographics

Importance of breakfast to frequent coffee drinkers

Bring on better coffee

Graph 8-2: Importance of Breakfast, Frequent Coffee Drinkers, Selected Demographics

Restaurant types visited by frequent coffee drinkers

Coffeehouses maintain an edge on fast food

Graph 8-3: Restaurant Types Visited for Breakfast, Frequent Coffee Drinkers, Selected Demographics

Restaurant selection factors, mean restaurant use and average spend

It’s all about the coffee

More coffee means more coffeehouse visits—but not fast food visits

Coffee drinkers help enrich coffers

Graph 8-4: Restaurant Breakfast Selection Factors, Mean Restaurant Use, and Average Spend, Frequent Coffee Drinkers

Chapter 9: Breakfast on the Menu: Restaurant Brand Analysis

Note on food lifestyle segmentation charts

McDonald’s

A $7.5 billion breakfast behemoth rolls dice on high-volume, low-ticket breakfast

Breakfast strategy: sales growth = guest count growth

Breakfast menu mix

Core customers: Convenience and Ease and Weekend Cooks

Graph 9-1: McDonald’s Usage Frequency Analysis, Food Lifestyle Segmentation

McDonald’s core low- and high-frequency users

Graph 9-2: McDonald’s Core Demographics: Low- and High-Frequency Users

McDonald’s by the numbers

Graph 9-3: McDonald’s by the Numbers

Burger King

Barbell strategy

Reinvigorating breakfast

Brunch in testing stage

Longer breakfast hours

Convenience and Variety on a Budget

Graph 9-4: Burger King Usage Frequency Analysis, Food Lifestyle Segmentation

Burger King core low- and high-frequency users

Graph 9-5: Burger King Core Demographics: Low- and High-Frequency Users

Burger King by the numbers

Same-store sales dip during nine months ending March 2010

Graph 9-6: Burger King by the Numbers

Wendy’s

2009-2010 strategy: “Real” food at a real value

Coming up in 2010 and 2011

Wendy’s reenters breakfast wars with premium QSR differentiation

Local pricing

Acquire or be acquired?

“Food Lifestyle” segmentation groups a blend of McDonald’s and Burger King

Graph 9-7: Wendy’s Usage Frequency Analysis, Food Lifestyle Segmentation

Wendy’s core low- and high-frequency users

Graph 9-8: Wendy’s Core Demographics: Low- and High-Frequency Users

Wendy’s by the numbers

Graph 9-9: Wendy’s by the Numbers

Starbucks

Recession strategy pays dividends

Menu pricing strategies and customer incentives

Pricing and bundling

Brand extensions: VIA and Seattle’s Best

Rewards, technology and new retail formats

On the food and coffee front

Core Starbucks users a relatively healthful bunch

Graph 9-10: Starbucks Usage Frequency Analysis, Health Attitudes

Graph 9-11: Starbucks Usage Frequency Analysis, Food Lifestyle Segmentation

Starbucks core low- and high-frequency users

Graph 9-12: Starbucks Core Demographics: Low- and High-Frequency Users

Starbucks by the numbers

Graph 9-13: Starbucks by the Numbers

Bob Evans

On the menu: off-premises growth, remodeling, and quickening service

Menu trends

New on the menu

Breakfast in a big way

Emphasizing value for money

Bob Evans by the numbers

Graph 9-14: Bob Evans by the Numbers

Cracker Barrel Old Country Store, Inc.

Restaurant operations

Retail operations

2009-2010 strategy: couponing, promotions & Seat to Eat

Menu item innovation

Guest count demographics

Reformed Traditional users may look to Cracker Barrel to meet them halfway on health

Graph 9-15: Cracker Barrel Usage Frequency Analysis, Food Lifestyle Segmentation

Cracker Barrel core low- and high-frequency users

Graph 9-16: Cracker Barrel Core Demographics: Low- and High-Frequency Users

Cracker Barrel by the numbers

Graph 9-17: Cracker Barrel by the Numbers

Denny’s

Recession challenges: region, lower-middle income demographic and late-night

2009-2010 breakfast menu strategy

Build Your Own Grand Slam continues to deliver

But other rollouts round out the menu

2010 shift to everyday value supported with LTO entrees

$2 $4 $6 $8, who do we appreciate?

Post-Super Bowl free Grand Slam promotions continue

Convenience moves

Courting older consumers and students

Weekend Cooks help drive sales

Graph 9-18: Denny’s Usage Frequency Analysis, Food Lifestyle Segmentation

Store-made, per-cooked meal cross-tie?

Graph 9-19: Denny’s Usage Frequency Analysis, Food Competition

Denny’s core low- and high-frequency users

Graph 9-20: Denny’s Core Demographics: Low- and High-Frequency Users

Denny’s by the numbers

Graph 9-21: Denny’s by the Numbers

Appendix on food lifestyle segmentation charts

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