Foodservice Dinner Trends in the U.S.

Mired in what we’ve termed “entrenched pessimism,” the U.S. consumer’s penchant for increasing savings and reducing debt at a time when incomes have stagnated only serves to depress foodservice spending in the short run. For the dinner daypart, the ramifications are dramatic: Packaged Facts estimates that dinner daypart restaurant sales dropped 4.6% to $174.4 billion in 2009, and we forecast a 2.8% drop in 2010.

But during an era when consumers are viewed more than ever by their debt-to-income ratios, we believe that a spending renaissance among consumers with stable household balance sheets may already be underway. At the dinner hour, we expect full-service dinner to benefit from the return of the fiscally confident—more affluent consumers with strong household balance sheets. We expect limited-service restaurants, on the other hand, to face the prospect of modest trading up in restaurant choices while weaning extreme affordability customers from low-margin menu items intended to drive traffic but not sales.

By combining investment-grade industry analysis with key trend analysis, Dinner Trends in the U.S. Foodservice Market not only helps foodservice industry participants address challenges unique to the dinner daypart but also helps participants contour their strategies to meet consumers’ evolving needs. By providing insight on the dinnergoer’s decision-making process, this report provides direction on how and why the consumer decides on a specific restaurant from which to obtain dinner, and how and why that consumer decides what to order from the menu. Selection factors are analyzed according to the following categories: convenience; dinner menu items; meal cost thresholds; dine-in partner; and takeout partner; menu positioning and advertising; health positioning; and bundled offers.

Key coverage includes but is not limited to:

• “Share of stomach” restaurant dinner sales analysis, which includes 5-year sales trends for the fast food/quick-service restaurant and full-service restaurant segments, with forecasts for 2010 and 2011.
• Guest traffic frequency analysis of leading dinner-centric restaurant brands, giving a directional perspective on current sales trends.
• Trended analysis of demographic dinner daypart expenditures, including 4-year sales historical sales trends and spending according to key demographics, such as age, income, region, and race/ethnicity.
• Thorough psychographic analysis of Budgeters, Alcohol Indulgers and Healthy Eaters, key psychographic groups shaping the dinner daypart.

The report also conducts trend analysis on key dinner-centric restaurant brands, including menu strategies and new menu item introductions, core users; snacking tendencies; food, diet and health attitudes; as well as trends sales metrics. We focus on recession-driven responses and menu strategies taking the brands into 2011.

Coverage extends to fast food/QSR, coffeehouse, smoothie shop, ice cream shop, family restaurant, casual restaurant, and fine dining restaurant segments; as well as prepared foods segments at convenience stores/gas stations and grocery stores/supermarkets.

Market Insights: A Selection From The Report

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Supporting metrics

Naturally, the dinner daypart is important to the fast food/QSR restaurant segment, with 42% of respondents to Packaged Facts’ June 2010 proprietary consumer survey saying that they had gone to a fast food/quick-service restaurant in the past month (see table below). However, lunch and breakfast also draw strong usage, with lunch trumping dinner as the most used daypart.

Similarly, coffeehouse use is most pronounced for breakfast and snacking; only 2% of coffeehouse users visit a coffeehouse for dinner.

Tendency toward non-discretionary spending a recession rule

During the recession, the movement has been in the opposite direction, with non-discretionary consumer spending taking an increased share of total spend—at the expense of discretionary spending.

This has been true even at American Express, a financial services brand synonymous with affluence.

• According to Packaged Facts’ August 2010 Rewards Cards in the U.S., 3rd Edition,during 2007-09, American Express reported higher relative non-discretionary spend (which it defines as spending in oil, supermarket and warehouse) among its cardholders than discretionary spend (which it defines as spending in department store, electronics, restaurant, fitness and wellness, fashion, lodging, airline, entertainment, home improvement and home furnishing).
  

Restaurant usage and usage frequency

As part of our proprietary June 2010 consumer survey, Packaged Facts measured restaurant usage and mean usage frequency by restaurant type.

• As expected, mean use of “fast food/quick service restaurants” was substantially higher than any other restaurant type—about two and a half times higher than the runner-up causal restaurants—a testament to fast food’s strong value, low-cost, and convenience propositions.
• Consumers report an aggregate 11.2 visits in the past month to the listed restaurant types: fast food/quick-service visits represent under half (45%) of all visits, followed by casual restaurants (18%), family restaurants (15%) and coffeehouses (14%).
• After aggregating responses to track usage by restaurant type and rolling up results into limited-service and full-service industry categorizations, we found the following:
  • Usage by restaurant type generally follows that set by mean usage, with fast food used in the past month by 88% of respondents age 18+, followed by casual restaurants (65%), and family restaurants (55%).

In the News

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New York, October 28, 2010 — Conventional wisdom might suggest that more gloom lies ahead for the U.S. foodservice industry. However, hope in the form of a rejuvenated affluent consumer may already be breathing much-needed life into casual and fine dining restaurant sales. Full-service restaurants sales in particular are on the upswing, which bodes well for the dinner daypart, according to Dinner Trends in the U.S. Foodservice Market by market research publisher Packaged Facts.

"For the restaurant industry to rebound, we believe increased discretionary income is the key. Without it, there will simply be no rebound. The bottom line is that consumers with more money and more stable finances have the potential to spend and our data shows that consumers are making headway in cleaning up their balance sheets," says David Morris, Packaged Facts analyst and Mosaic Research Consulting, LLC associate. "But for now at-home breakfast and dinner trending remains significant."

Like family restaurants, casual and fine dining restaurants rely more on the dinner hour: 55% of casual restaurant users got a meal at a casual restaurant for dinner, a 175% increase over lunch usage. Fine dining restaurants are often wholly reliant on the dinner daypart, reflecting in dinner usage that is almost eight times that of lunch usage.

While casual and fine dining establishments linger on the cusp of recovery, Packaged Facts reveals that fast food and quick-service restaurants are more pressured, being shackled by consumer expectations of lower pricing and by the fact that "trading up" among recently invigorated spenders will hurt traffic in much the same manner that "trading down" benefitted the segment in 2008 and into 2009. The dinner daypart is important to the fast food/quick-service restaurant segment, with 42% of respondents to Packaged Facts’ June 2010 proprietary survey revealing that they had gone to a fast food/QSR in the past month. However, lunch and breakfast also draw strong usage, with lunch trumping dinner as the most used daypart.

The report concludes that for the average American family, eating dinner at home instead of at a restaurant may bring the greatest economic benefit. Thus the trend toward eating dinner at home is most pronounced among consumers age 18-24, students, homemakers, females, and consumers in households with an income less than $50,000. Consumers say that a dinner meal at a family restaurant costs about 29% more than lunch at a family restaurant and 21% more than breakfast at a family restaurant. While fast food has lower prices points across all dayparts than family and casual restaurants, consumers report an even higher dinner cost burden: 45% more than a fast food breakfast meal and 26% more than a fast food lunch meal.

Dinner Trends in the U.S. Foodservice Market not only helps foodservice industry participants address challenges unique to the dinner daypart but also helps participants contour their strategies to meet consumers’ evolving needs. By providing insight on the dinnergoer’s decision-making process, this report provides direction on how and why the consumer decides on a specific restaurant from which to obtain dinner, and how and why that consumer decides what to order from the menu. Selection factors are analyzed according to the following categories: convenience; dinner menu items; meal cost thresholds; dine-in partner; and takeout partner; menu positioning and advertising; health positioning; and bundled offers. For

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