- sector we're all LOVIN' IT!

I'm lovin' it, you're lovin' it, we're all lovin' it. We're lovin' it more than ever with New Zealanders spending 16 per cent more in 2003 on fast food than they did in 2002. OPPOSlliE: Blue Island Seafoods, Moera, Lower Hutt, has a deep fry preparation area that shines - as do the staff manning the well-known fast food outlet. RIGHT Although not big on advertising, Nando's is recognised for it's tongue-in-cheek topical billboards.

ut most retailers agree that, shrinking market.. . expanding the February-quarter sales 1.8 per cent PIZZA BUSINESS unlike the food they sell, choice makes us a better choice." up on the corresponding period last Brands Piua Hut remains business is not slick and easy. The February launch of the year. But lackluster performance the dominant force in the pizza It's a rapidly changing Saladsplus menu was in direct again at KFC culminated in full-year market, says Salmon. The 91 outlets, B sales at the cooked chicken chain of which achieved sales of $81.3 million market in which the dining outdollar response to consumer demand and is being stretched across an ever- the World Health Organisation's calls $171.1 million, down 2.3 per cent on during 2003 - up 7.4% on the growing smorgasbord of fast food for healthier food. Underpinned by the previous year. previous year - remain perfectly choices. 18 months of consumer research, the Big changes are needed to turn pitched for family business. Over the Although fish and chips and the SaladsPlus inclusion on McDonald's the tables, says ceo Vicki Salmon, but last year resources have been poured burger brigade reign supreme, permanent menu re£lects New Restaurant Brands is back on track. into the delivery part of the business. demand for healthier fare and the rise Zealanders' evolving fast food tastes, At KFC a major in-store operation It's all about making pizza more of smaller players with attitude, brand says Jeov and promotion 'refocus' is bringing convenient for the customer and a and food to match are ma@ for "When we trialed salads a decade the customers back. "Our stores are centralised ordering call centre has tough times at the traditional big ago, they flopped. Customers now cleaner and our product quality helped streamline delivery. chain, fast food counter. find healthier options more appealing scores have increased dramaticallyn The arrival last year of mid- and are more accepting of Improved customer service has market Domino's pizza undoubtedly BIG MAC sophisticated food." also brought to an end the long 'reignited' New Zealanders taste for McDonald's has experienced Further customer calls for queues of tetchy customers at peak pizza, says Salmon. "I'd have to say it challenging times in what's been a sophistication have resulted in a $27 times. We weren't focused on has galvanised competition and hasn't "static pien market, says Liarn Jeoq million bricks-and-mortar update serving the customer. We now have been all bad, but it's driven down director of corporate relations. Like over the past two-and-a-half years. more staff in the right areas at the price." The international chain's July McDonald's worldwide, growing sales More McCafes have been added to right times." 2003 arrival in has been in New Zealand has cenued on menu to create a total fady Although KFC has introduced hall-marked by mid-market pizza evolution and restaurant revamps. dining experience. healthier eating options - such as the price wars. McDonald's critics say the ever- crispy chicken salad and the chicken But Domino's New Zealand expanding menu is nothing but a TOUGH TRADING sub - Salmon doesn't regard salad corporate operations manager, Peter desperate 'reinvention' move and that Tough trading times and the and sprouts as the way to grow KFC Jones' is quick to point out that they the Golden Arches should stick to the increasing complexities of labour sales. "People generally don't go to didn't start the price wan. "F'izza Hut knitting and do the business of relations made for an especially tomd fast food for salad - they go for a and F'izza Haven dropped their prices burgers better. ~ear-endat Restaurant Brands which treat - but for those who do, it gives before we came. In essence, they No way, says Jeory. operates KFC, Pizza Hut and them choice and balance." fired the first shot." In the United States, McDonald's . resurgence over the past year, Combined Restaurant Brands following the parent company's first- sales for the three months to 1 ever posted loss in January 2003, was December on a same-store basis wem largely on the back of menu almost two per cent down. nual expenditure per capita on fast food USS131 evolution and restaurant Sales at KFC, which accounts for New Zealand market closch to saturation development. 60 per cent of Restaurant BBrands And it's customer demand that's turnover, languished by almost seven driving the menu expansion. per cent to $37.6 million. lf you don't offer choice, and Restaurant Brands started the market for change, you're selling to a year on a positive note with

NEW ZEALAND retail APRIL 2~4B TOP LEFE ShTping centre food courts cater to a big variety of takeaway food businesses. The average food court has a big-name chain operator anchoring the court and provides y opportunity for owner-operator businesses to trade within a mall. TOP RIGHE We're lovin' all the nutritional information that's available with McDonald's heplthrer food menu these days. Sports star Sarah Ulmer fronts the McDonald's 'salads plus'campaign. BELOW LEFE Dinner to go - a selection of ready- to-eat full meals all priced at $9.50 from the new McDonald's menu. BELOW RIGHE 0800 83 83 83 says it all - Pizza Hutt's jingle, catchy and remembered.

And Domino's is unlikely to keel TOO MUCH OF A GOOD Ministry of Health and supporting acting director Dr Douglas Lush. over from prolonged pizza price cuts. THING NGOs, he says it will be a population- But despite government-led "Our organisation is h& turnover, High-level talkfests on obesity and wide approach that will support the healthy living legislation and low margins. Our equipment and set how to rid the nation of slothful Ministrys Healthy EatingHealthy initiatives, we still like nothing better up is designed to cope." It is not habits have been popular in recent Action strategy than ripping into a grease-sodden Domino's intention to steal anyones times. The finger is often pointed at Government legislation with paper parcel of fish and chips. market share. fast food retailers and advt&ers but possible ramifications for fast food "New Zealanders buy pizza on neither is the 'root cause' says the retailers is the new Public Health Act WHAT'S TOPS? average once every sixty days, Association New Zealand Adverung's which will replace the existing Health Last year AC NieIsen Media research compared with the average Australian (ANZA) Jeremy Irwin. Act later this year. A November ZOO2 revealed that, over a month, almost who buys one every 20 days. The Irwin along with most others discussion paper sought feedback on 60 per cent of the population had New Zealand market for pizza is agrees that our expanding waistlines whether the new Act should include eaten fish and chips - with the next nowhere near penetrated and our aim are a combination of over- provisions amed at reducing death popular fast food choice McDonalds is to grow the market", consumption, lack of exercise and from hon-cornmunicable diseases (35 per cent) and KFC (30 per cent). Domino's pwthhas been steady lack of dietary education. ANZA, such as diabetes, and cardiovascular However, the research also with 12 Wehgton outlets opening along with major players in the food heart diseases, some of which are showed that market share has slipped within seven months. Wellington, industry and media, is working linked to obesity and poor nutrition. for retailers serving up the traditional rather than , was the obvious alongside the Ministry of Health on The idea of a fat tax was fast foods -possibly due to gradual launching pad, because it offers greater development of a broad-brush, edu- suggested in some of the 600 uptake of the healthy foodhealthy scope for the building of the brand. adverdsing 'initiative'. Although tight- submissions received but was not one living message. We can deliver to 95 per cent of lipped on what the initiative will of the proposals sent on to the Many attribute 's surge in Wellington howseholds." involve pending further talks with the Minister, says Miof Health popularity is largely on the back of c=='fast food sector

Hell, a steadily-expanding gourmet pizza chain, is makin its mark with attitude, quality product and award-winning ordering technology. Over the last year, 12 outlets have opened and another seven will be up and running by Ma Stu McMullin (32), co-owner of the present 16-outlet franchise, attributes the meteoric rise of Hell to the building of a brand with attitude. A 1968 'promotional' hearse, advertising on Auckland's George FM, Hell- sponsored midget racing cars and a recently-launched internet pizza car racing game, collectively create a brand that's "a little bit alternative". Although targeting the younger set, Hell's attracting a broad range of customers through their slightly off-beat and alternative advertising and promo approach. "We're a cult brand. We're not in-your-face or into discounting. We're into cool things." Hell's on-line ordering site, judged the best business-to-consumer website at the 2002 TUANZ awards, is a further point of difference and adds entertainment - a vital part of the pizza-to-go experience. A trip to he1l.co.n~takes customers on-line where they ca view local or nationwide pick-up and delivery times. All Hell outlets are linked to a main database so store owner can keep a watchful eye on nearby rivals. "It keeps them competitive in a healthy sort way, and customer-focused." Up and running for 18 months, on-lin ordering accounts for an average of 10 per cent of sales, although in some outlets 18 per cent of sales are made the internet. "What we find is that those who order on-line usually generate a higher ticket because they can take more time to plan their order."

FAST FOOD SPENDING Annual expenditure per capita on fast food by select country US$; actual; 2003.4: BURGERNOMICS GETS THE BOOT US $322 Germany The Economist magazine will now use the price of a Starbucks tall latte, rather than a Australia $297 France McDonald's Big Mac , to compare foreign currencies, reports The Seattle Times. Canada $164 Spain For years the London magazine used the price of a Big Mac around the world to measure New Zealand $131 Taiwan whether exchange rates were appropriate. But no more with The Economist taking time to smell Japan $90 Brazil the coffee while poring over purchasing power parity theory. uK $55 Italy As Starbucks is made the same worldwide, measuring the difference in local prices shows how Source: SSB; Deutsche Bank; Euromonitor; SNZ; AB much a particular currency is under or over-valued against the greenback. Coriolis Research OR Coriolis Research ABOVE: You design the 'sub' and it's made up right under your nose at Subway. TOP RlGHZ Big and bold - window-filling posters_promore KFC's taste-bud temptations. BELOW RIGm There's no mistaking the big and bold Portuguese-style cockerel that says Nando's.

the healthy eating trend. Although Yes, says Timothy Morris, service sector for the casual dining spiq peri-pen flame-gnlled chicken. the chain opened here in 1995, New prinapal of Coriolis, a food-focussed dollar is one of the major trends Its khly-cooked chicken fare is Zealanders own more than half of the market research company New Morris idended in a recently particularly appeahg to the health- 100 outlet franchises with 92 stores Zealanded spend a mere 25 per cent released food-services report. He says conscious worldng couple who can't opening over the last 18 months. of their food-spend on fast food, demographics and lifestyle changes face the kitchen at the end of the day It's not just the health food aspect whereas Americans hand over almost are largely driving the FCD trend. but baulk at the thought of burger that's made Subway successful, says twice that amount. "Households with income over and fries. And while some customers New Zealand Subway franchise co- We're now where the US was in $5 1,000 account for 66 per cent of prefer their chicken on the run, founder Mark Rutherglen. "Subway's 1962. I can predict that the next 40 expenditure on food away from dining-in at one of the distinctive and been around since 1965 and it's been years will see continued growth of home, and generally they prefer a funky restaurants is an integral part a successful franchise in North food-away buying." And to further casual sitdown dining experience." of the Nando's experience. America for a long time. entice the away-from-home food Although FCD is a new concept Up and running in New Zealand "It's taken time for the brand to spend, Morris says fast food retailen for most New Zealande~,the market for two years, 60 per cent of sales at grow in New Zealand. It's a timing need to go upmarket. is already well-served, says Nando's Nando's 13 outlets are at the casual thing and now New klanders see it Move out from behind the Boet Zaayman. "Burger Fuel, eat-in restaurants. as value for dollar and a good healthy counter and whiteboard menu, add Starbucks, Wwonsin and some piua We're constantly re-evaluating food option." tables, chairs and ambience; get into restaurants all fall into this style of the market to see how Kiwis regard Fast Casual Dining (FCD). eating - and with little price our rrstaurants," he says. ROOM FOR GROWTH "It takes the systems and lessons difference between them it's a McDonald's is also testing New In a market saturated with fast food of fast food and applies them to a competitive market." Zealanders' appetite for FCD with choices, is there further opportunity more up market dining experience." Nando's, a global chain of South 'Tonight's Dinner', a menu offering for retailers to grow sales? The repositioning of the food African origin, specialises in hot and chilled-to-go or dine-in meals

NEW ZWD retail APRIL 2004 Q fast food sector

including Thai chicken cuny and Bassett, "why has it become an Nando's 'liberal thinking' 20 to 40- and money but reduce the lamb shanks. issue? year-old target market. flexibility they had, " says Vicki "They're the type of meals you'd "Because baby boomers are at Last year a raunchy 'hot bird' Salmon. Whether it will increase put on your table or at a dinner that stage in their lives where tagline billboard and poster the price of pizza, chicken zinger party", says Jeory. To enhance the health and well-being is high on attracted the attention of burger or latte is to early to say dining-in concept, the six their minds." But many of the Aucklanders. And following the "We'll have to be smarter. I'm sure participating and traditional fast food chains have successful prostitution reform bill, there will be price pressure." Blenheirn outlets have been failed to recognise the importance Nando's took to the billboards The difficulties small fdst food revamped for added ambience. of the baby boomers and have left again, proclaiming Nando's "bits on busmesses will have in cohplying "It's very much a trial and we the market wide open for the new the side were not only legal but with the Act IS of particular still have to see how best to market, brands. guilt-free." concern to the New Zealaqd handle and serve the food so it fits But how to refresh a tired, big Brand positioning through Retailers Association's advisory and in with our overall business." chain brand? advertising will remain a priority, policy leader, Cliff Daly But Vicki Salmon can't see the Develop a baby-boomer-pulling says Zaayman, especially in the as "It's a very complex law and FCD grabbing a foothold in New "masstege" brand, says Bassett. yet uncharted . "In many of the small operators simply Zealand. Sure, there's increased Pitched at the top end of the Auckland we have some brand haven't got the resources to help demand for convenience, speed and market, a masstege brand offers preference but in Christchurch them comply with the rule&." family-friendly dining but FCD is customers something of 'real value'. we're unknown." Aside from the complexity are the beyond the budget of most families. While Bassett has no real-life added costs of new sickness leave Even so, she says, dining-in is fast food examples, he says The RED TAPE and bereavement leave plus time- still an important drawcard at many Body Shop made its way in the Most fast food retailers are and-a-half on public holidays. Pizza Hut outlets and there are hugely competitive cosmetic grudgingly coming to terms with "They're all real, added costs plans to improve the restaurant industry by taking the masstege the new Holidays Act. The least that businesses won't be able to facilities in some KFC outlets. brand approach. "They built a fazed by what many regard as an recover." brand that's found its way into the unduly complex legislation is Daly warns that more mti- REFRESHING THE hearts and minds of customers." Australian Peter Jones of Domino's. employer legislation is in the CONCEPT Brand positioning and brand "We've dealt with it in pipeline with changes to the Brand specialist Dave Bassett says 'attitude' have played an important Australia for the last 20 years. The Employment Relations Actwhich the traditional fast foods need to role in propelling some of the rising dollar impact on the (public) will make the employment of look well beyond the fat vat and stars such as Nando's. "We're a holidays is likely to be the biggest casual staff more difficult and shop door to boost sales. small voice in a huge market and issue." In Australia, Domino's adds risky." We see both these Acts as "Many of the big chain names all our surveys have indicated that a 10 per cent holiday surcharge barriers to employment and the hold a place in our hearts because many of our customers are coming and Jones says this may be development of retail businesses. we grew up with them, but they're to us through word of mouth," says introduced to New Zealand "Many of the smaller operators old, tired and need refreshing." As Boet Zaayman. outlets. simply won't be able to grow their to how to refresh, take a lead from But aside from the word-of- The Act will be a major thorn business." the ageing population of baby mouth referrals, the brand has been in the side for Restaurant Brands. boomers because thefre the group built on the back of topical and "We have 8500 workers and all By Lynda Gray, a freelance that's driving the market. irreverent advertising that has our contracts will need to be re- writer based in Alexandra, dentral "The healthy eating binge," says found particular favour with negotiated. It will add paperwork otago.