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Consumer Trends

Game changers

Something’s happening. Well, a lot of things are happening. Quickly. Through a confluence of the recession, advancements in technology, a new-found legislative assertiveness and—what would you call it?—modernity, the industry is changing. Consumers are acting differently. The playing field has been changed—and leveled—with new high-tech tools. And with changing demographics, the world’s largest oil spill and legislation to address modern concerns there is uncertainty. So what will the future hold? Would be a fool’s game to try to guess. For now, let’s take a look at what’s coming down the pike and promises to alter the landscape of the industry—for better and worse.

Hispanics rise
As the 2010 Census prepares to show a mammoth population increase, an entrepreneur stakes a claim on south-of-the-border burgers.

According to 2010 Census estimates, there are now 50 million Hispanics living in the U.S.—one in every six residents—a stunning 42 percent increase from the 2000 Census. (Meanwhile, the non-Hispanic population has edged up 5 percent). And with buying power approaching $1 trillion this year and nearly half of all Hispanics comfortable with English, this market has reached the tipping point.

Restaurant companies like El Pollo Loco and Pizza Patron have seen the writing on the wall. So has Jeff Sinelli, founder of Which Wich?, whose nascent Burguesa Mexican-style burger chain has grown to four Texas locations since first opening, in May 2009.

“Simply put, we saw an opportunity to develop a restaurant segment that would appeal to both Hispanics and non-Hispanics,” says Sinelli. “El Pollo Loco does chicken. Pizza Patron does pizza. But the burger space was wide open, so we created Burguesa Burger.”

In many ways it’s a bold move—and not just because of the jalapeños in the special sauce. According to Darren Tristano of Technomic, the perception that Hispanics either eat at home or stay within their own communities, patronizing independent taquerias, means they are underserved by major chains.

“Hispanics represent a rapidly growing market, and it’s really surprising that they’re aren’t more concepts like Pizza Patron and Burguesa out there,” says Tristano. “Chains like Burger King add tacos to their menus in Hispanic trade areas, and Shakey’s Pizza has done a great job promoting traditional Mexican 15th birthday Quinceanera parties, but there’s a lot more opportunity.”

Making a concept directed at Hispanics work isn’t simply a matter of printing menus in Spanish, argues Sinelli.

“You have to work to continually make it authentic,” he says. “We use Mexican brands, products and ingredients, from our buns to our beverages. Most concepts start off trying to be authentic and get Americanized and diluted. We started with a more diluted food—burgers—and went the opposite way.”

Sinelli, who admits to gaining 50 pounds when he traveled through Mexico, Argentina and Brazil to research Burguesa, learned several important lessons about serving the Hispanic market along the way. “You have to understand all aspects of the cuisine and culture you’re trying to replicate. It’s important to bring in consultants and key employees to educate you about flavors, palates and nomenclature.” Ultimately, he hired a “transculturalist” to interact with both cultures and work with Hispanic agencies.
Burguesa accepts pesos—as Pizza Patron famously began doing in 2007—and even stamps to-go bags with Bible verses, in acknowledgement of the deep Catholic roots in the Hispanic community.

The ratio of Hispanics to non-Hispanics at Burguesa ranges from 50/50 at the original Dallas drive-thru and 75/25 at the franchisee-owned location in outlying McAllen, to a largely non-Hispanic clientele in downtown Dallas. “We intend to develop Burguesa in border towns like McAllen and El Paso, because it’s the preferred play for this fledgling brand,” says Sinelli. “In larger cities such as Austin or Houston, we would expect a 50/50 split.”

GS1 commeth
A new bar coding system will change the way products are shipped and bought—for the better.

Time to add a few more initials to your industry vocabulary: GDSN, GTIN and GLN. They stand for Global Data Synchronization Network, Global Trade Item Number and Global Location Number and they’re all part of the Foodservice GS1 U.S. Standards Initiative. The concepts and systems behind them promise a brave new world of supply chain efficiency and transparency that at the operator level will impact everything from purchasing and receiving to inventory management, credits and recalls.

GS1 is essentially next-gen UPC (Universal Product Code), the standards system established some 35 years ago. Other industries—grocery and those involving retail point-of-sale—have been on board for many years. Foodservice is still, in the words of Dan Wilkinson, vice president of industry development for
the GS1 U.S. Foodservice Initiative,“a bit messy.” But not for long.

The GS1 initiative, launched last year, brought together the industry’s leading manufacturers, distributors and operators to finally get it done, and they are. “The goal of GS1 is to uniquely identify products and all of the information associated with those products moving through the supply chain,” Wilkinson says. “Right now, depending on the breadth and reach of your business, a single item sourced from a single manufacturer might have eight or nine different item numbers that apply to it at the manufacturer level. A single distributor can have 10 to 12 numbers for the same product within a single distribution center. And the operator likely has its own numbers within its procurement system. Having all these separate codes, systems and methodologies at each link is administratively heavy and inefficient. GS1 assigns a single, universally recognized number to that product and makes standardized information about it readily available throughout the supply chain. It’s a commercial language that everyone can recognize and understand.”

When the initiative’s founding members came together they identified three major principles that GS1 would address. First was excess waste within the supply chain; second was the need for consistent, accurate product information (i.e., ingredients, nutrition, potential allergens) available instantly from a manufacturer’s production line and batch through to distribution center, to DSR, to operator, to consumer; and third was food safety, with a focus on fast access to accurate information in case of product recalls.

“It won’t solve the entire food traceability issue, but puts a foundational layer in place by creating a common commercial language,” Wilkinson says. “Products will have a license plate that can be read by manufacturer, distributor and operator. For keeping track of a product through the supply chain in general, we can easily identify it as it moves through inventory and out to the restaurant level. In the case of a recall, operators engaged with GS1 can move quickly to identify the product, move it out of their entire system, get it back to the source, handle it financially and, most importantly, assure customers that their restaurants are safe and free of any product that’s been withdrawn from the supply chain.”

Keith Rosenthal, vice president of purchasing and product development at Bojangles’ and a member of the Foodservice GS1 steering committee, likens the current scenario to a “scavenger hunt” to find and manage inconsistent product data flowing downstream from manufacturers and distributors. As an operator, among the biggest benefits he anticipates are the ability to touch data just once, reducing man hours and errors; the ability to scan products and generate accurate invoices at delivery, greatly reducing costly credits; the ability to do inventory electronically and generate orders automatically, increasing turns and cash flow; and having accurate visibility into products throughout a chain’s entire system for fast action in cases of menu changes or recalls.

According to the roadmap for the initiative set out by its founding members, 75 percent of U.S. foodservice industry buying transactions will be made using GS1 standards by 2015. For more information on the Foodservice GS1 U.S. Standards Initiative, visit http://www.gs1us.org/sectors/foodservice.

As goes New York City…
The Big Apple has no problem legislating change in restaurants—and the rest of the country usually follows.

From art to fashion to music, the Big Apple has always been ahead of the curve—so it’s no surprise that New York City is a trendsetter in the food industry. In 2003, New York became one of the first major American cities to ban smoking in restaurants and bars; now 26 states have enacted statewide smoking bans in all public places. The city sent the first shot over the bow in the fight against trans fats. What’s the Big Apple have in store for us now? Take a look:

Turning against salt
Why: While the 2010 Dietary Guidelines for Americans recommend limiting sodium intake to 1,500 mg per day, the Centers for Disease Control and Prevention found that most people eat more than double that amount. Excessive sodium intake has been linked to high blood pressure and a higher risk of strokes and cardiovascular disease.

What’s happening: Much of the extra salt comes from packaged foods like bread and cheese, as well as casual-dining and fast food restaurant meals. New York City’s Department of Health and Mental Hygiene is now waging war on these targets, pushing operators and food industry execs to voluntarily cut their dishes’ salt content by 25 percent in the next five years. The city is also leading a group of local and state-level health organizations in The National Salt Reduction Initiative.

What to expect: Some chains and food companies are already moving: Kraft, for example, has spent more than $20 million on sodium substitution research. If members of the food industry don’t meet the new sodium guidelines, Dr. Thomas Friedan, director of the CDC—and, coincidentally, former director of the New York City DHMCH—says legislation may be introduced to levy fines on companies that don’t comply.

Public restaurant grades
Why: New York City is home to over 24,000 restaurants. Needless to say, the quality can run the gamut, and unsanitary restaurant conditions can cause food poisoning and other illnesses: Each year, more than 11,000 people in New York City go to the hospital
for illnesses related to dining out.

What’s happening: All restaurants receive a letter grade of A, B or C from the city health department. Previously, diners needed to visit
an online database to find out a restaurant’s rating. A new regulation, launched in July, will require all restaurants to display their letter grades in the window. Restaurants with 13 or fewer sanitary violations will receive an “A” grade, and those that receive lower ratings can appeal the decision—but many operators worry that a sub-par grade will hurt business in the meantime.

What to expect: It will take about a year until all restaurants receive public ratings, but the regulations are already having a major impact on New York restaurants, with countless eateries cleaning up their act. Similar regulations already exist in Los Angeles, North Carolina and South Carolina, but it’s likely that the publicity push from NYC’s new system will spark other city and state health departments to follow suit.

Publishing nutritional information
Why: Obesity is a national health crisis, and many chain restaurants help patrons pack on the pounds. According to the USDA, an average adult must consume 2,000 to 3,000 calories daily to maintain a healthy weight—but at many restaurants, diners can devour more than 1,000 calories in an appetizer alone.

What’s happening: In 2008, the New York City Board of Health required restaurants with at least 15 outlets nationwide to publicly post calorie details for each dish on their menus. The law has affected more than 2,000 of the city’s 24,000 restaurants. A follow-up study from the city’s department of health found that diners who notice the calorie information typically consume a meal that’s over 100 calories lower than other diners.

What to expect: Numerous regional boards of health have already followed New York’s example—and a provision in the new federal health bill has made publishing nutritional information on restaurant menus a national mandate. By 2011, all chains with 20 or more locations are required to publish calorie, fat and carb counts. Operators with less than 20 restaurants aren’t required to share their nutritional details, but consumers may soon demand it.

The year supermarkets won
We’ve long heard supermarkets would steal market share some day. Guess what?

Supermarkets are giving restaurants a run for their money. We know, you’ve heard this all before—the home meal replacement threat of the 1980s and ‘90s is still a fresh memory. But this time around, supermarkets are playing the game differently—as are tightfisted, time-strapped consumers. Restaurants are no longer getting the dinner business they did a decade ago, according to The NPD Group, the Chicago-based market research company. The demand has been particularly weak over the past three years. And NPD projects that the need for prepared meals to take home will continue to grow over the next decade.

Supermarkets are stepping up to the plate to get a piece of the action. “Today’s supermarkets are more sensitive to the way people are using food; from the ‘I hate to cook’ to the ‘semi-homemade’ mindset,” says Ed Weiss, senior market analyst for Packaged Facts, a market research publisher. “Customers can pick up a chef-prepared salmon and pair it with fresh asparagus from the produce section and leftover potato salad in the fridge.” Not only have supermarkets raised the bar in terms of selection, presentation and packaging, they are aggressively competing with price, he adds.

Bonnie Riggs, restaurant industry analyst for The NPD Group, contends that the reasons for this trend go beyond the financial and convenience. “During the recession, people got used to staying at home and being with the family around the dinner table. You’re dealing with a different mindset; restaurants are going to have to work harder to lure consumers back in.” Weiss agrees that “the public has a new mindset that isn’t going to be reset in five years. But people still want to get out of the house,” he believes. “Restaurants have to analyze their strengths; what they offer over supermarkets. They have to compete on price, perhaps cutting down on service costs to the customer, offer right-size portions, emphasize ambience and play up the entertainment angle.”

  • According to Packaged Facts, the market for fresh prepared foods grew by 5 percent in 2009 to reach sales of $22 billion—one of the few categories to improve during the recession. In contrast, the company’s consumer survey found that 49 percent of adults reported eating fewer meals at fast food restaurants, 61 percent ate less often at sit-down restaurants and 50 percent said they had eaten less fast-food takeout during 2008/09.
  • The majority of prepared food sales take place in supermarkets and grocery stores—this retail channel accounted for an estimated 68 percent share of 2009 retail sales, states Packaged Facts.
  • The desire to patronize supermarkets for prepared foods cuts across all age groups, according to the Food Marketing Institute. But 20-somethings are more apt to shop the supermarket for dinner than in previous years. In 2006, 24 percent of younger shoppers ate in restaurants four or more times a week, compared to only 11 percent in 2009.
  • FMI reports that 92 percent of shoppers surveyed say they eat healthier when dining at home—a motivation they think will continue once the economy improves. In a 2:1 ratio, NPD’s respondents also cited “healthy choices” as a reason to visit food stores over QSR restaurants.
  • Packaged Facts predicts that sales of fresh prepared foods will go up another 28 percent by 2014 to $29 billion.

Seafood after the spill
Dealing with the reality, fighting the perception.

The long-term effects of the Gulf oil spill are a big unknown. But short-term, the effects will linger for many months, or some say, years. Restaurateurs close to the scene share their thoughts.

One of the biggest hurdles will be regaining the public’s confidence, believes Ralph Brennan, of New Orleans’ Brennan Restaurant Group. Testifying before a House subcommittee, Brennan cautioned that without correcting consumer perceptions about the spill, the Gulf Coast could become a “damaged brand.” Chef John Folse, restaurateur and owner of John Folse & Company in Gonzales, Louisiana, reports that “customers see seafood on the menu and want to know its source. Even though there has been an unprecedented amount of rigorous testing and retesting since the oil spill and only top quality Gulf seafood is reaching the table, many won’t order it.”

Restaurants are just as wary, shying away from the large supply of processed seafood in storage because they can’t be sure when it was caught.

Brennan suggests that rallying high-profile chefs behind a cause is one way to change public misconceptions. Back in July, Folse gathered Tom Colicchio, Rick Moonen, Susur Lee, Rick Tramonto and others in Grand Isle, Louisiana, to make the point that 70 percent of the area’s fishermen are back fishing Gulf waters and the Gulf seafood supply is safe. During Folse’s “Chefs Ashore” event and press conference, they committed to using Gulf seafood on menus and some are donating a portion of the profits to local fishermen.

The fact is that most of the white shrimp—the most abundant and in-demand species—were harvested before the spill. Brown shrimp are again being fished and “there’s not as much encroachment into the marshes as was first thought,” notes John Besh, chef-owner of several well-regarded restaurants in New Orleans. “But prices to shrimpers are very low because demand is way down. I think prices will rise again over time, but meanwhile, it’s hard to make a living.”

Oysters, on the other hand, were severely impacted. “The oil encroached on some of the best oyster beds in the country,” explains Besh. “These oysters are in natural beds that will take longer to regenerate.

If everything works out perfectly, that may happen in five years… or it could take a decade.” In the meantime, Gulf oysters are down 80 percent in supply and prices of oysters have doubled. But Besh and other chefs are sourcing from other coastal waters and finding substitutions if fish like speckled trout are not to be had.

One positive outcome is the mobilization of chefs to get proactive. Along with Chefs Ashore, there are several initiatives to support Gulf fishermen and the restaurant industry. “While foodservice and hospitality industries in states along the Gulf of Mexico are certainly impacted by the largest oil spill in U.S. history, what many people don’t realize is that restaurants throughout the nation have suffered from lack of sufficient fresh seafood from the Gulf,” says Jamie Leeds, a Washington D.C. chef. She is working with New Orleans chef Susan Spicer and the Gulf Restoration Network, as well as Women Chefs and Restaurateurs, to alleviate some of the economic hardship that restaurants that rely on a healthy Gulf region are experiencing.

Social media’s next move
The next-gen technology has already changed the industry. Here’s what’s coming now.

On a cold rainy day at noon, a hungry customer opens up a mobile app to help decide on where to go. He receives an alert from a restaurant that has two locations in the town offering a lunch chicken soup special good for one location. Behind the scenes, the customer is directed to the least busy of the two restaurants. The software already knows that this particular customer likes soup, understands his preferred price range and sees that he is just a short walk from the restaurant. “It’s much richer information about where they are and what kind of information they want back. It’s powerful for restaurants,” says Mani Dhillon, general manager of Urbanspoon, a restaurant information provider that develops mobile apps.

Right now, customers load up mobile applications, check in with their friends at restaurant locations, make comments about their experience and snag the occasional coupon or special offer. That’s all pretty cool, but it’s baby steps compared to what’s in store. “What’s coming up is a lot more exciting. We’re going to add in the ability for the software to understand how somebody actually behaves and where they are,” says Aron Ezra, CEO of mobile apps development company MacroView Labs.

The pace and broad scope of innovation in the mobile arena makes it hard to pin down just one area that will rock restaurants. Ezra updates his company’s apps every five to six weeks to keep up. What’s coming is a heady combination of mobile apps, social media, geolocation, customization, interaction and heaps of data all tied intimately in with restaurant marketing. Ezra sums it up as “the ability to dramatically expand the reach of the restaurant into the real world.”

Geolocation plays a huge role in all this. Geolocation is about knowing where exactly a customer is and using that information to provide content, recommendations
and offers. “It’s already gained enough momentum to insure that it is going to be a big thing. You can have a very specific experience that is served up to you and that can be different depending on where you are,” says Ezra. This could be especially useful for chains that want to direct customers to certain locations or boost sales of specific items at each restaurant.

Michael Francesconi, director of content and community for online and mobile city guide Citysearch, expects loyalty programs connected to mobile social media and geolocation to explode in the coming years. “Five years ago, ‘user-generated’ was the buzzword. With reviews, users took over and it could overwhelm a restaurant’s reputation,” says Francesconi. “Having more data and enhanced technology on the mobile side puts merchants front and center again. Restaurants can guide the decision making.”

These next generation apps will tie in with restaurant reservation systems and play nice with established social media giants like Facebook and Twitter. Ultimately, mobile innovation will allow restaurants to learn more about their customers while reaching them through fine tuned and in depth marketing campaigns that are custom tailored to each user. Imagination and the pace of innovation are the only limitations.

Grant Achatz
Chef-partner in Alinea, Chicago

When Grant Achatz left his stove at Trio to open Alinea in 2005, the restaurant world was abuzz with anticipation.  The Chicago chef had made a name for himself for his edgy cuisine, turning the suburban Trio into a mecca for adventurous diners. Now he would have the independence to push the envelope further.

Five years later, Alinea stands out as a culinary destination for its innovative menu, service and presentation—an overall dining experience that tantalizes all the senses. “At Alinea, I set out to create something that would change the game and we accomplished that,” Achatz notes. “The question was ‘what could we do next’? I had tons of opportunities in Las Vegas, Tokyo, New York, but nothing was compelling; they were all pedestrian ideas.” 

So instead of pushing forward, Achatz decided to look backward for culinary inspiration. At the appropriately titled Next, on track to open by the end of 2010, his quarterly changing menus will go back in time—to Kyoto, Japan in 1812, for example, or Sicily in 1946. Guests at Next will experience the authentic taste, feel and look of that time and place—as interpreted by Achatz. He has traveled extensively throughout Europe and Asia, and those trips are serving as a springboard for Next.

“We started experimenting with ‘gastronomic time travel’ at Alinea, preparing one of Escoffier’s dishes from 1912 Paris and serving it on dinnerware from the period,” Achatz explains. “People really enjoyed it, so we decided to build an entire restaurant around the idea.” Since the menu time travels four times a year, there’s no monotony—something that really excites Achatz and his staff. Plus “customers can come back several times and have a completely new experience,” he adds.

Next will also be changing the reservation game. Patrons will purchase tickets to dine at the restaurant, just as they would for a concert, a Broadway show or a basketball game. “This was my business partner, Nick Kokonas’s idea. As business owners, we had to strip back the risk of no-shows—they’re a giant revenue loss for a restaurant,” Achatz reports. “Making people pay in advance holds them accountable for the reservation. After all, you wouldn’t get your money back if you didn’t show up for a Bruce Springsteen concert or a Chicago Bulls game.”

As a benefit, selling tickets allows Next to reduce the price of its tasting menu; they can charge $85 instead of $105. The reason—high-end restaurants like Alinea always have to factor in a no-show rate. Having patrons pay before they eat is a gutsy move, Achatz admits. “Unlike a concert or show, eating is a necessary part of life. There’s a chance this won’t work. But we think that [selling tickets] will make a dinner at Next highly anticipated and the great meal guests are served will be worth it.”

Also in the works is a groundbreaking cocktail bar called Aviary, slated to open in a separate space next door to Next. Achatz is extensively researching the liquid side of the menu to infuse Aviary with his unique vision. “Our goal is to revolutionize the cocktail—recreate it in the same fashion as we looked at food at Alinea.”

Danny Meyer
CEO, Union Square Hospitality Group, New York City

Everything Danny Meyer touches glows with hospitality—from his concessions at the Mets’ CitiField ballpark to the elegant, award-winning Eleven Madison Park. After the 2006 publication of Meyer’s book, Setting the Table, his company, Union Square Hospitality Group, received countless requests to learn more about his magic touch. Many queries were from corporations and other organizations outside the restaurant world looking for a competitive edge. “Hospitality applies and works in any customer-facing business,” Meyer contends. “While outstanding products and excellent service will always be critically important elements in any successful organization, we have also learned that how you make your customers feel when they use your excellent products and services is what distinguishes one company from another.”

The logical next step was to develop a marketable program that embodied Meyer’s principles. Introduced in 2010, Hospitality Quotient is a new company within the hospitality group that offers interactive classes and custom training. Sessions range from half-day classes ($425 per person) to two-day management courses ($1,500 per person). The customized arm may include a combination of classroom learning, behind-the-scenes tours of Meyer restaurants, discussions with its leadership teams and training in how to best apply these new ideas.

“There’s already been a tremendous response from a wide range of industries looking to apply the techniques of hospitality to their businesses,” says Susan Salgado, managing director of HQ. These include veterinary practices, health care, insurance, engineering, retail firms and supermarkets, as well as hotels and restaurants. The veterinary practice, for example, wanted to improve the hospitality of their staff, to become more engaging with pet owners. “Hospitality boils down to improving the customer experience and the work environment. It can be an incredible differentiator,” notes Salgado.

Mario Batali
Chef-partner, B&B Hospitality Group, New York City

Batali and his business partner, Joe Bastianich, have launched wildly popular restaurants in New York, Los Angeles and Las Vegas. Now they’re going retail, with the debut of EATALY this Fall. Rather than a single dining concept like Babbo, Del Posto, Tarry Lodge or Osteria Mozza, EATALY is a mega-apolis for foodies. Under one roof on 23rd Street in New York City is a 50,000 square foot complex housing a diverse lineup of retail shops featuring artisanal Italian foods and wines, each paired with its own dedicated restaurant. Included in the mix are a wood-fired pizza and pasta bar, a salume counter, a crudo and seafood bar, a gelato/espresso café and a large rooftop beer garden serving pizza and sausages. A culinary education center with year-round events and food and wine courses will be an added attraction.

EATALY is modeled after Oscar Farinetti’s groundbreaking food and wine market in Turin, Italy. Now Farinetti is teaming up with Batali, Joe Bastianich and Lidia Bastianich to replicate this authentic experience and celebrate the slow food movement here in the States. “I am extremely excited to be working with the Farinetti family from Piemonte, the Saper family from New York and a veritable all-star roster of cooks and chefs with whom Joe, Lidia and I have worked over the last 12 years in New York City,” says Batali. “This will be a capolavoro that will hopefully fill the need in New York City for a major gastronomic tourist destination as well as a full service grocery and wine store for locals who love Italian culture, food and wine as much as we do.”

The partners’ recruitment strategy is as novel as the concept. A “Help Wanted” ad on Craigslist calls for “successful professionals with at least 5 years of strong managerial experience in other industries, such as finance, who will do whatever it takes to switch their long-term career into an exciting opportunity with EATALY.” No restaurant experience required.

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