Food for Thought

A couple weeks back, AdWeek printed an interview with Taco Bell CMO David Ovens.  In talking about Taco Bell’s value message, David made the distinction between “price value”, “abundant value” and “quality value”.  At the time, it just sounded confusing, but with the Cantina Taco launch I’m really warming to his distinction.  And to their value strategy overall.

• “Price Value” is what I (and probably most people) associate with Taco Bell.  For example, 79-, 89-, 99-cent price points.  Taco Bell owns cheap.
• “Abundant Value” is a hefty item at a fair price.  Triple steak burrito is an example David Ovens uses.  Sort of the positioning Carls Jr has gone after (though they might argue they have a quality overlay).
• “Quality Value” is a change in perception about Taco Bell.  Cantina tacos fit the mold perfectly.

This framework provides a mindset for product development, as there will be an internal need to fill the pipeline in each category.  It provides structure to communicate to customers, e.g., “abundant value” = ads like this.

Finally, it provide a great background for testing, as it sets up a range of risks and potential benefits.  Margin risk can be mitigated by Price Value testing.  New product risk can be mitigated by Quality Value testing.  For example, the early reviews on food sites are that the cantina tacos are very good…  but will people buy them?  Will it work in California, land of the taco truck?  In Texas, land of the flour tortilla?  In the midwest, where corn means tortilla shells?

In addition to great insights into what specific products are working, testing can help find themes among the most successful offerings by value category.  Certainly Quality Value works for others in QSR (Einstein Noah talked about it a lot at Restaurant Leadership).  Will QV work for Taco Bell?  If so, what media message and vehicles are required to support QV?

The value strategy is a good one, with real promise.  With testing, Taco Bell can figure out exactly how to turn that promise into results.

Great article in yesterday’s Washington Post by Steven Pearlstein, covering the history and business applications of testing and calling out Red Lobster’s use of Test & Learn to drive significant improvements in their remodel program.

Organic.  Sustainable.  Local.  Fresh.  Healthy.  In the restaurant world, these words mean different things, yet they are still lumped together under a general “green” umbrella.  Many restaurant chains seem to be chasing these ideas wholesale.  For restaurant companies to really differentiate themselves, they need to unpack these “green concepts” and figure out what they customers are truly willing to pay for.

Before discussing further, we should say there are many good reasons restaurant companies may go in this direction:  beliefs, PR, employee morale, etc.  But as we think about measurement and analytics, we are primarily concerned about one dimension:  what’s the impact on consumer sales and loyalty? continue reading…

The restaurant industry prides itself on the fact that more American’s eat out today than ever before with the industry boasting a 49% share of the food dollar. This trend hasn’t gone unnoticed by retailers who are expanding offerings to compete head on, according to a recent report.  Supermarkets are leading the race, owning nearly two-thirds of prepared foods purchased at retail, while convenience stores are slowly entering the arena as well.  The Pantry and Quick Chek have recently announced plans to expand their prepared foods offering. How will this trend affect traditional restaurant revenues and profits? Do restaurants face real threats from C-Stores and Grocers?

Many C-stores cite opportunities to drive significant margin growth by cross-selling prepared foods to gas and tobacco customers as well as driving new traffic from the pump into the store. In other cases, c-stores are teaming up with established quick service and casual dining brands to create an integrated offering, such as Pilot Travel Centers’ partnership with Denny’s. Grocers are responding by upgrading meal solutions in an effort to maintain differentiation: Kroger’s bistro includes tilapia and pork loin while Wegmans’ Market Cafe offers gourmet pizza and sushi. Even drug stores are getting in on the act, with Duane Reade and Walgreens recently announcing an expansion of its fresh food offering, the latter headed by former Tesco director Jim Jensen.

One significant advantage for restaurants and grocers lies in their experience mitigating the unique risks inherent in food service. Equipment is pricey, food preparation is highly labor-intensive, building a successful menu is challenging, and profits can erode quickly if spoilage is not properly managed.  Evaluating prepared food expansion plans by running a small scale, limited-risk test has proved the best tactic for a number of sophisticated convenience retailers, including Wawa.

Between PR pressures and new legislation, restaurants are looking at a new metric: calorie counts per transaction. The rise of healthy eating means the fall of super-sizing, and fast-food chains have found themselves scrambling to introduce more items (think breakfast) and healthier options (like salads and smoothies). Of course, any change that erodes sales for some restaurants means a competitive advantage for others: a study found that when similar legislation was introduced in New York, revenue increased 3% at Starbucks stores where a Dunkin Donuts was nearby. Before these laws go into effect, restaurants have the opportunity to test out how and where calorie information will affect consumer preference. Those who do will be well-positioned to steal market share – and may stumble on the newest healthy trend in the process.

Buoyed by its success with coffee and intent on adding $125k per store in annual drink sales, McDonalds has pushed into the fruit smoothie market with two new offerings.  Current smoothie purveyors Jamba Juice, Panera, and Starbucks have publicly offered a sanguine view of the entry with hopes that it will grow the $2.5 billion market.  But P.R. statements aside, McDonalds’ history of success is clearly rattling some nerves:  Jamba Juice recently released an advertisement parodying burger chain smoothies by facetiously offering a “Cheeseburger Chill Smoothie”.  Early returns suggest these companies have reason to worry as McDonalds has canceled their nationwide free smoothie trial due to “unprecedented demand”. Panera’s strategy of positioning itself as a premium brand is likely to be mirrored by the other established smoothie players, but more innovative thinking may be required to keep McDonalds from taking a big sip from this market.

Veterans of the industry (or those with a taste for smoothies) may remember the disaster that was WhipperSnapple – customers struggled with the concept of prepared beverages in a can and a few smaller chains suffered through the first attempt at smoothie introduction in the late 1990s. While the growth of Jamba Juice and McDonald’s early successes seem to bode well, smart chains are looking to run intelligent testing of the smoothie concept first. This testing will drive valuable insight into which flavors and smoothie styles customers will positively respond to as well as understand the logistical and operational impacts of introducing new food prep fixtures required to provide smoothies.

Here’s a great commentary on Shopper 360 blog, regarding the In-Market Testing for Growth team over at Kraft Foods.  Kudos to Autumn and the Kraft IMTG Team!

You might look to hire someone from YUM Brands.  Or their PR firm.

Fresh on the heels of Taco Bell’s petition to the Federal Reserve for more $2 bills, KFC’s latest publicity stunt is a post-World Cup Vuvuzela Exchange Program (promoting the Doublicious, not to be confused with the Double Down).  I’m not sure this is driving YUM’s business, but it sure does make the industry more fun.

Related to the made-fresh-in-house opportunity we discussed a couple weeks ago, 3 of the first 4 articles in today’s Restaurant SmartBrief tackle various angles on sustainability and freshness (and the associated marketing!):

• Chains Cast Nets in Search of Sustainable Seafood (featuring McDonald’s, Darden – The Wall Street Journal)
• Wendy’s New Salad Line Signals a Fresh Start (QSRWeb)
• Ex-McDonalds Execs to Launch Healthy Fast Casual Concept (Advertising Age)

What is your organization’s approach to the increasing demand for freshness and sustainability?  Innovate?  Follow?  Ride the backlash (I’m thinking of you, Double Down).  It’s another rich vein for restaurant testing…