Foodservice progresses again in 2016
Dec. 13, 2016
by Rebekah Schouten
Restaurant industry sales are expected to reach $783 billion by the end of 2016.
KANSAS CITY, Mo. — Restaurant industry sales are expected to reach $783 billion by the end of 2016, the National Restaurant Association said, jumping 10.4 percent from $709.2 billion in 2015.
While this would represent the seventh consecutive year of growth in restaurant sales, operators are less optimistic due to uncertainty in the economy in connection to the presidential election. Only 33 percent of those surveyed by the NRA expect higher sales in six months, and only 17 percent said they expect economic conditions to improve in six months.
Declining same-store sales and customer traffic have contributed to the dampened outlook. Fifty-three percent of restaurant operators recorded a decrease in same-store sales from last year, the NRA found, and 53 percent saw a decrease in customer traffic from last year.
The fast-casual segment continues to drive growth in the restaurant industry, most notably fast-casual pizza restaurants, said Technomic, Inc., Chicago. Build-your-own concepts such as MOD Pizza and Pie Five Pizza Co. boosted fast-casual pizza concepts 36 percent over last year.
“Whether it’s for pizza, sandwiches or salads, we have seen customization transition from being an amenity for consumers to becoming a necessity,” Darren Tristano, president of Technomic, said in August. “As evidenced partially by the notable explosion of build-your-own pizza chains, customizability has become a hallmark of successful fast-casual chains and is firmly in place as an expectation among consumers looking either to trade up from traditional fast food or down from casual dining.”
While the customization has influenced foodservice, the trend shaping the industry is clean label. Clean label has permeated restaurants, prompting menu tweaks and innovation in several major restaurant chains.
“Consumers are demanding foods that are clean and free-from artificial sweeteners, antibiotics, GMOs,” said Nancy Kruse, president of The Kruse Co., Atlanta, during a presentation at the National Restaurant Association Restaurant, Hotel-Motel Show in Chicago. “I think the primary driver is … the impact of the fast-casual segment because key players like Panera and Chipotle showed it was possible to deliver on a clean food promise in a mass-market context. Major chains are all over this bandwagon. It would be easier for me to tell you who is not engaged somehow in cleaning up the menu.”
Papa John’s, for example, recently completed a major initiative to reformulate its menu, which involved removing such ingredients as artificial colors, high-fructose corn syrup and preservatives. Panera Bread switched to bacon that is free of artificial ingredients.
McDonald’s overhauled its menu, too. The fast-food giant has announced the removal of artificial preservatives from Chicken McNuggets, pork sausage patties and omelet-style and scrambled eggs. The company also is debuting new buns without high-fructose corn syrup for its Big Macs, Quarter Pounders, hamburgers and cheeseburgers, Filet-O-Fish and McChicken sandwiches. Additionally, McDonald’s pledged to source 100 percent cage-free eggs by 2025 in the United States and Canada.
Cage-free commitments like this have surged in the restaurant industry, fueled by consumer concern about animal welfare and the origin of their food. The list of restaurants making the transition includes Burger King, Starbucks, Taco Bell and Chick-fil-A.
“Consumers aren’t just passive users of food and beverage products anymore,” Darren Seifer, food and beverage industry analyst at The NPD Group, said during a January interview with Food Business News, a sister publication to MEAT+POULTRY. “They want to know more about how that food got to the shelf. They’re more interested in knowing how the animal was treated before it was slaughtered, what kind of feeding processes were used on that chicken. When we talk about cage-free eggs, it’s all part of that same wanting to know what happened down the chain before the food actually got to the consumer. Consumers are shopping more with a cause in mind, so when they go to a restaurant … they want to feel good about buying products that are in line with their values and causes they support.”
The cage-free egg market has experienced a surge in demand due to so many companies transitioning coupled with the new trend of all-day breakfast.
More than half of consumers enjoy breakfast at nontraditional times, Kruse said.
McDonald’s national launch of all-day breakfast earlier this year has “gone gangbusters,” she said, prompting other restaurant chains to add creative breakfast items to the menu. Carl’s Jr. and Hardee’s, for example, introduced a breakfast sandwich on an Auntie Anne’s pretzel bun, and White Castle debuted a waffle breakfast slider.
Mid-scale restaurant chains also are dishing up enticing twists on the morning meal. Shari’s, a regional family dining chain, offers breakfast poutine, featuring fries topped with cheese, bacon and an egg.
“IHOP, Denny’s, Cracker Barrel and Shari’s are absolutely doing wonderful work, and they’ve got the sales numbers to prove it,” Kruse said. “Now, they’re not benefiting from the convenience breakfast trend, but the notion of creative, satisfying breakfasts around the clock 24/7 is right in their wheelhouse.”
The breakfast craze still has room to grow, Kruse said. She predicts a rise in ready-to-eat cereal making some unexpected appearances on restaurant menus.
“In retail grocery, the ready-to-eat cereal market has been in steep decline, yet on the foodservice side, chefs are giving it a second lease on life,” she said, citing such examples as a dessert featuring Cap’n Crunch and a slider dog topped with Froot Loops.
So what else lies in the future of foodservice?
More global flavors will appear on menus, Kruse said. More than 60 percent of consumers surveyed by Technomic said they order ethnic foods to “look for something different” or discover new flavors.
The next big ethnic cuisine, Kruse predicted, will be Cuban food.
“There is a direct line as far back as we can go between what’s happening in the world and what’s happening in your pantries,” Kruse said. “It’s not just by coincidence that Middle Eastern cuisine is trending, and it’s not just by coincidence that I expect we will see more Cuban food appearing on menus around the country.”
Restaurant industry sales are expected to grow 4.8 percent next year, according to Technomic. The segment is expected to outpace retail in 2017, which has a projected growth of 3 percent. Foodservice will account for 60 percent of food industry growth during the year.