FOODSERVICE 2003 Inside the Kitchen: How to grow your business in the restaurant and café sector November 25th 2003 Coriolis Research Ltd. is a strategic market research firm founded in 1997 and based in Auckland, New Zealand. Coriolis primarily works with clients in the food and fast moving consumer goods supply chain, from primary producers to retailers. In addition to working with clients, Coriolis regularly produces reports on current industry topics. Recent reports have included an overview of the growth of private label and an analysis of the strategies of the major Australasian supermarket retailers. The coriolis force, named for French physicist Gaspard Coriolis (1792-1843), may be seen on a large scale in the movement of winds and ocean currents on the rotating earth. It dominates weather patterns, producing the counterclockwise flow observed around low-pressure zones in the Northern Hemisphere and the clockwise flow around such zones in the Southern Hemisphere. It is the result of a centripetal force on a mass moving with a velocity radially outward in a rotating plane. In market research it means understanding the big picture before you get into the details. PO BOX 10 202, Mt. Eden, Auckland 1030, New Zealand Tel: +64 9 623 1848; Fax: +64 9 353 1515; email: [email protected] www.coriolisresearch.com REPORT OVERVIEW This report is structured as three distinct sections Section 1 Section 2 Section 3 Developments in the Inside the mind Developing a strategy foodservice market of the chef for growth Introduction PROCESS OVERVIEW: SECTION 1 The first section of this report presents a quantitative analysis of developments in the foodservice market Section 1 Developments in the foodservice market Foodservice Foodservice Identified Understanding demand supply trends cost-to-serve Households Non-commercial Consumer Relationships Tourists Institutional Operator Supply chain activities Businesses Accommodation Distributor Functions of distribution Non-commercial Bars, pubs, clubs Manufacturer Logistics Institutional QSR/takeaway Outsource or DIY Restaurant/café Customer mix Foodservice 2003 4 Introduction PROCESS OVERVIEW: SECTION 2 The second section of this report takes you inside the mind of the chef or owner operator Section 1 Section 2 Developments in the Inside the mind foodservice market of the chef Six Day-to-Day Five Types of Roles Chef/Owner Operator 1. Sales 1. Mainstreet Struggler 2. Labour 2. Optimistic Dreamer 3. Operations 3. Bitter Borderline Bankrupt 4. Business 4. Self-Made Local Personality 5. Purchasing 5. Innovative Creator 6. Profit Foodservice 2003 5 Introduction PROCESS OVERVIEW: SECTION 3 The third section of this report gives you direction on developing a strategy for growth Section 1 Section 2 Section 3 Developments in the Inside the mind Developing a strategy foodservice market of the chef for growth Doing the Developing strong Category specific basics right relationships issues P1: Product Support marketing Fruit and Vegetables Meat P2: Price/Promotion Exceed expectations Seafood P3: Process Provide information Dairy/Chilled Bread P4: People Drive innovation Grocery Frozen Beverages - Alcoholic / Non-Alcoholic Paper Cleaning Foodservice 2003 6 Introduction BACKGROUND Foodservice is easily the most interesting sector of the New Zealand FMCG industry – Turnover of $4.6 billion, making it half the size of the supermarket sector at $9 billion. – Restaurants and cafes grew twice as fast as the supermarket sector in past year. – The foodservice sector is highly fragmented, unconsolidated and difficult to serve; as a result it is poorly understood. – Many manufacturers feel they are underperforming in sales and profit in this sector. – There is no reliable data on sales or market share either at a total or sector level. – Most new food and beverage product trends have their origin in the foodservice sector. Chef’s experiment with new products and flavours in their restaurants, where they are introduced to consumers. They then trickle into the supermarket following consumer demand. – No comprehensive study has ever been done in New Zealand on this market looking at industry trends, end user needs and how suppliers can better service this sector. – Currently, it is a real challenge for suppliers to understand the sector. Decisions are being made on ‘gut feeling,’ trial and error and what has worked in other markets. Foodservice 2003 7 Introduction OBJECTIVES By reading the report you should… 1. Have a baseline of information from quantitative and qualitative sources that gives an overview of the industry and explains both the current situation and its likely future direction 2. Understand the basic service requirements of the sector, to ensure you get in the door, and on the menu 3. Understand the different types of operations and operators that exist in this market and the different challenges they face to ensure you are accurately targeting each group 4. Have the building blocks to create a sales and marketing plan with strategies to target the restaurant and café sector of the foodservice industry 5. Have the ability to craft a marketing and communications message to chefs and owner operators that speaks to their issues 6. Understand what leading manufacturers and distributors do that differentiates them from their competitors in this sector, with examples of best practice Foodservice 2003 8 Introduction METHODOLOGY Our methodology is a blending of both quantitative and qualitative tools Quantitative Qualitative Facts and figures Attitudes and opinions What and how many Why and how Numerical trends Conceptual trends Measurement of a situation Indicative of direction Foodservice 2003 9 Introduction METHODOLOGY Fifty six face to face interviews were conducted, representing a cross-section of restaurants and cafes Research Interviews 56 face-to-face interviews with owner operators, chefs and managers Areas Auckland - urban and rural Wellington - urban and rural Christchurch - urban and rural Operator type European Asian Other Ethnic Average main Less $10 price $10-$20 $20+ Foodservice 2003 10 Introduction SCOPE OF THE PROJECT The research covers only independent restaurants and cafes – This research only analyses independent (non-chain) restaurants and cafes in New Zealand – Other than in the Industry Overview, it excludes: – Commercial foodservice operations – Fast food chains and takeaway outlets, hotels/pubs and clubs, caterers and non- commercial self-operators – Institutions including hospital and nurse homes, staff canteens, education, defense and prisons are all out of the scope of this project – We interviewed the key decision-makers - usually the chef or owner operator and sometimes a manager – We looked at ten categories in total, seven major food categories: – Perishable Food Fruit & Vegetables, Meat, Seafood, Dairy, Bread, Frozen – Dry Food Grocery – Beverages Alcoholic, Non-Alcoholic – Non-foods Paper and Cleaning Foodservice 2003 11 Developments PROCESS OVERVIEW: SECTION 1 The first section of this report presents a quantitative analysis of developments in the foodservice market Section 1 Developments in the foodservice market Foodservice Foodservice Identified Understanding demand supply trends cost-to-serve Households Non-commercial Consumer Relationships Tourists Institutional Operator Supply chain activities Businesses Accommodation Distributor Functions of distribution Non-commercial Bars, pubs, clubs Manufacturer Logistics Institutional QSR/takeaway Outsource or DIY Restaurant/café Customer mix Foodservice 2003 1 Developments SCOPE OF THE STUDY This section is an attempt to provide a basic framework of facts and figures on the size and scope of the foodservice market − The purpose of this section is to − Provide a common basis in terms of market size and scope to underpin discussion − Explain why we chose to focus on the restaurant and café market for our interviews − The numbers in this section come from three main sources − Data from numerous Statistics New Zealand reports and databases provided the raw material − Key sources include the household expenditure survey, the retail trade survey, the tourism expenditure surveys and satellite account, the 2001 census, the quarterly business demographics survey, the CPI index, the household labour force survey, the INFOS database and numerous other data sources hidden in some computer in Wellington − Discussions with more than a dozen Statistics New Zealand staff − Interviews with numerous industry experts, chefs and owner operators − Various other data sources, as required (e.g. annual reports, press articles, the yellow pages) − While we believe the data is directionally correct, we recognise the limitations in what information is available − On the supply side, many restaurants under-report their sales for GST/tax purposes − On the demand side, the methodology used for household expenditure has acknowledged weaknesses, not least of which is its understatement of tobacco and alcohol expenditure − If you have any questions about the source or meaning of a number in this report, please call us Foodservice 2003 2 Developments FOODSERVICE LIFE CYCLE The development of a foodservice market appears to go through a definite lifecycle; foodservice in New Zealand is still a relatively immature market Life stages of the foodservice market Model Traditional Semi-organized Established Mature Characteristics •Disorganised •Small chains •Large national chains •Chains dominate •Fragmented •Regionalised •Centralisation •Foodservice close