Breakfast sandwich vital to QSRs, retail

by Allison Gibeson
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KANSAS CITY, Mo. – Breakfast sandwiches have expanded beyond the classic Egg McMuffin to include wraps and burritos, and may be found in both the drive-through and the grocer’s freezer case.

“Consumers basically say breakfast sandwiches take shape as the perfect breakfast food,” said Wade Hanson, principal at Technomic Inc., Chicago. “It’s an item that has everything we are looking for, and at the same time it’s been done in such a way that works in our lifestyle. It’s an affordable food, it’s a fast food to eat, and it’s not messy.”

Hand-held profitability

Breakfast sandwiches have seen use in food service for some time. Jack In The Box claims it was the first major chain to introduce the item in the late 1960s. Over the years, the products have come to represent a good percentage of business at quick-service restaurants. Breakfast as a whole now represents about 30 percent of McDonald’s business, and breakfast sandwiches are a good portion of that, Hanson said.

“If you took breakfast sandwiches away, you are essentially taking away the primary center-plate breakfast entrée in terms of a drive-through and portability item … The breakfast sandwich is absolutely vital to the success of the breakfast day part for most quick-service restaurants,” he said.

Success of the products is due in large part to their portability as other breakfast foods are difficult to execute in a drive-through. Items such as pancakes and scrambled eggs are complicated in packaging, require condiments and flatware, and may cause a mess.

Hanson said many chains now are looking into wraps and burritos as a way of introducing new innovation to hand-held breakfast. He said only so many types of carriers may be used for the sandwiches with English muffins, toast, biscuits, bagels and croissants having all been done before. So there has been more of a focus on the use of the tortilla.

Dunkin’ Brands Inc., Canton, Mass., has seen the profitability breakfast sandwiches may achieve as well as the importance for new innovation.

“We talk about beverage mix and beverages being the Holy Grail of profitability,” Paul Carbone, chief financial officer at Dunkin’ Brands, said at the Bank of America Merrill Lynch Consumer & Retail Conference on March 12. “I can tell you our breakfast sandwiches are slightly below beverages. They are not at the beverage level, but they are slightly below beverages, significantly above bakery, which is donuts and bagels.”

Yet, consumers are looking for innovation in the breakfast offerings. Dunkin’ Brands has found success with limited-time breakfast handheld offerings in 2013 including a turkey sausage sandwich and an Angus steak wrap. Carbone said in 2010 the company launched a waffle breakfast sandwich, and that was the best-selling limited-time offering in company history at the time, but today it’s not even in the top five. So he said it’s important for the company to launch newer items that “take us to the next level.”

Extending into retail

The breakfast-sandwich trend has jumped over to the retail space as well, but it has taken awhile, Hanson said. He said it’s been difficult for packaged foods companies to execute a product with high-quality in the frozen format. Yet retail companies such as ConAgra Foods, Inc., Omaha, are seeing the potential for profitability and developing the products.

“Eating occasions and consumers on the move are also impacting the frozen segment and presenting new opportunities,” Andre Hawaux, president of Consumer Foods at ConAgra, said at the Consumer Analyst Group of New York Conference in February. “Frozen breakfast sandwiches have become an exciting category with strong net sales growth, and they have played a part in the growth of frozen breakfast overall. The frozen breakfast category has increased almost 30 percent over the last five years. Now leveraging the capabilities we gained with the purchase of Odom's Tennessee Pride, we are expanding our presence in the fast-growing breakfast category.

“Building off of Odom's technology and strong regional business base, we are using national brands like Marie Callender's and Banquet to introduce new products and take advantage of that trend. You'll see us get very, very big in breakfast sandwiches in fiscal 2014.”

Hillshire Brands Co., Chicago, said the fastest-growing category in its portfolio and potentially the grocery store as a whole is frozen breakfast items that offer protein. Sean Connolly, chief executive officer, said at the CAGNY conference that consumers are beginning to understand the value of getting protein in the breakfast meal and are recognizing they may get a convenient, great-tasting and healthy protein food for breakfast. Despite the large potential for meat options, Connolly said it as important to also offer some meatless options. The Jimmy Dean Delights line has an egg white with spinach and mozzarella-style cheese product, which he said was important to build relationships with consumers who do not want meat.

Just as in food service, innovation and the use of different carriers are also important considerations for retail breakfast sandwiches. Hillshire Brands uses quesadillas in its Jimmy Dean Delights line, and the line has other flatbread options and uses French toast and pancakes as carriers.

In food service, Hanson said he sees more ethnic wraps appearing on menus in the future and higher-end fast-causal restaurants using specialty or artisan breads. Overall he said there will be more creativity in meats with the use of chipotle flavors and more creativity with cheeses as well.

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