Blurred-Line Dining

Study shows boundaries breaking down within restaurant industry, into convenience

AlixPartners' Blurred Lines: 2014 North America Restaurant & Foodservice Review

CHICAGO -- An increasing number of convenience stores, drug stores and retail food stores are putting stronger emphasis on foodservice, according to AlixPartners' Blurred Lines: 2014 North America Restaurant & Foodservice Review, a semiannual update on the state of the industry, a proprietary consumer research update and the latest thinking on trends that may shape 2014.

Many of these locations are offering manned food stations, free Wi-Fi and comfortable seating. Additionally, many are now beginning to embrace traditional restaurant-style marketing tactics by arranging theatrical food displays and offering daily dinner deals.

There is evidence, the report said, that those strategies are starting to gain traction with consumers, as evidenced by the coffee category.

C-stores are catching up with fast-casual restaurants with a focus on coffee and with fast food restaurants for the location where survey respondents said that they typically buy coffee for consumption outside the home.

Meanwhile, fast food is still a staple for Americans who choose to dine out.

Study participants tend to prefer fast food along with fast casual for lunch. Fast food also dominates when consumers want to get breakfast on the road or grab a late-night snack; however, respondents reported a drop in the average number of fast-food-restaurant visits from 5.8 in first-quarter 2013 to just 4.4 one year later. Top reasons for the reduction in frequency included a desire to "eat healthier" (86% of participants noted that healthy menu options were at least somewhat important in their decisions about where to dine out) and a need to cut back on discretionary spending.

As for food purchases at c-stores and grocery stores, most survey participants said they made such purchases after venturing into such stores to buy other items, which suggests that convenience matters, said the report.

According to Chicago-based AlixPartners' analysis, however, the three most important criteria in Americans' choices of restaurants to visit are quality, price, and value--in that order. But even though quality tops the list, few people say they are willing to pay more for it.

For example, just 16% of participants in the study said they were willing to pay a premium for certified organic food. In addition, their expectations regarding what they will spend per meal in the next 12 months suggest that average spend per meal will decline by more than 9% in 2014. This is the highest reported decline in intended spending over the past few years; most years' averages were close to 5%, the report said.

Consumers are targeting their dining-out budgets for the most-severe belt-tightening, compared with other spending categories such as entertainment, home improvement, clothing, vehicles and travel. To stretch their dining-out dollars, consumers plan to take advantage of coupons, promotions and discounts as well as eat at less expensive restaurants, said AlixPartners.

In a bid to capture fatter slices of this competitive-market pie, restaurants are beefing up their advertising spend, especially on new menu options and limited-time-only promotions. Indeed, advertising spend jumped 6% from 2012 to 2013.

Some companies have continued launching and marketing products aimed at health-conscious consumers, such as gluten-free offerings, sandwiches made with egg whites and lower-calorie versions of their flagship products. That trend may continue, given consumers' claims of wanting to eat more healthfully, as well as the fact that organic and health-food products show the highest growth rates of items sold in supermarkets. But despite those efforts, only about 30% of the consumers in our latest survey expressed a willingness to try new menu items--suggesting that consumers tend to stay loyal to the menu items they know and love.

The fight for market share is also blurring the lines between segments within the restaurant industry when it comes to both food items offered and service models and day-parts.

For instance, some full-service restaurants are developing express formats, a move that's inching them toward the fast-casual model. And some fast-casual operators are adding table service, making them look a bit like full-service restaurants. That practice gives chains the opportunity to target new consumers in new day-parts or in potentially nontraditional venues or formats.

Click here to view the full AlixPartners report.