The Financial Impact of Offering Lower-Calorie Foods & Beverages
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1 The Financial Impact of Offering Lower-Calorie Foods & Beverages Hank Cardello Senior Fellow & Director Obesity Solutions Initiative 2015 CIA-HSPH Worlds of Healthy Flavors Retreat Friday, January 23, 2015 The Culinary Institute of America at Greystone St. Helena, CA
2 MISSION: Drive practical business solutions to healthier eating & obesity
3 High Obesity Rates Persist Despite Numerous Efforts to Reverse the Epidemic Source: CDC, 2013
4 Food Industry Under Fire for Its Role Study: 96% of restaurant entrees exceed USDA limits
5 Is There A Win-Win?
6 Studies Have Demonstrated That Better-for-you/ Lower-Calorie Foods Are Key Growth Drivers 6
7 21 Restaurant Chains Analyzed
8 Lower Calorie Menu Items Were the Key Growth Engine Across Both Foods & Beverages +2.5% +1.8% +4.5% +0.1% -1.6% -4.2% -2.3% -4.9% -2.3% Source: NPD Group/Crest Total Food & Beverages Food Only Beverages Only
9 Lower Calorie Items Outperformed Traditional Ones in Overwhelming Majority of Chains Source: NPD Group/Crest
10 Chains Growing Lower Calorie Food Servings Recorded Increases in OVERALL Food Servings Other Chains Declined Total 21 Restaurants Restaurants With Lower Calorie Servings Down Restaurants With Lower Calorie Servings Up Source: NPD Group/Crest
11 Chains Growing Lower Calorie Food Servings Also Recorded Strong TRAFFIC Growth Other Chains Declined Total 21 Brands Restaurants With Lower Calorie Food Servings Down Restaurants With Lower Calorie Food Servings Up Source: NPD Group/Crest
12 Critical Same Store Sales ( SSS ) Metric Superior for Chains Growing Their Lower Calorie Servings Total 21 Chains Chains With Lower Calorie Servings Declines Chains With Lower Calorie Servings Growth Sources: Nations Restaurant News, Trinity Capital, Company Annual Reports
13 French Fry Servings Declining in Top Soda/Fries Chains French Fry Trends (2006 to 2011) Fries Share of Total Foods 24.8% % Change in Servings +1.2% 24.1% Total Food -1.9% French Fries Source: NPD Group/Crest QSR chains $3 billion; Fries 20% of chain servings
14 Soda Consumption Down Sharply from Peak
15 Recently Analyzed HWCF Companies 15
16 Lower-Calorie Products Drove Virtually All Sales Growth 16
17 Lower-Calorie Product Sales Up Significantly While Higher-Calorie Items Remained Flat +$485mm +$2mm Source: AC Nielsen ScanTrack 5-year period ending December 31,
18 Companies Growing Their Lower-Calorie Products Increased Total Sales; Companies That Didn t Declined Sales Δ With Lower- Calorie Growth Sales Δ With Lower- Calorie Flat Sales Δ With Lower-Calorie Declines Source: AC Nielsen ScanTrack 5-year period ending December 31, 2012 (flat = chg. < 0.1%) 18
19 Stick Rate Is Higher for Lower-Calorie Items 22.5% 11.0% Source: AC Nielsen ScanTrack 5-year period ending December 31,
20 Companies Emphasizing BFY Products Recorded Superior Operating Profit Growth % Growth in Operating Profit
21 Restaurants vs. Packaged Goods
22 Lower-Calorie Items a Larger Portion of Packaged Goods Sales Source: Nielsen; NPD Group/Crest
23 HWCF Companies Have Made a Hard Commitment to Reduce Calories
24 Figure 1 While New Fast Food Options Average 60 Fewer Calories, No Commitment to Lower Calories American Journal of Preventive Medicine DOI: ( /j.amepre )
25 Kids LiveWell the Primary Initiative Lacks Teeth 1 Item 1 Item Criteria for Full Kids' Meals: 600 calories or less 35% of calories from total fat 10% of calories from saturated fat < 0.5 grams trans fat 35% of calories from total sugars 770 mg of sodium 2 or more food groups Criteria for Side Items: 200 calories or less 35% of calories from total fat 10% of calories from saturated fat < 0.5 grams trans fat 35% of calories from total sugars 250 mg of sodium 1 food group
26 Key to Progress: Understanding Customer Who Is Driving Growth of Better-for-you Items
27 Consumers Approach Healthy Eating Differently WELL BEINGS : 19% FOOD ACTIVES : 18% FENCE SITTERS : 20% MAGIC BULLETS : 23% EAT, DRINK & BE MERRYS : 20% Most health proactive Mainstream Healthy Wannabe Healthy Whenever Healthy Least Health Active Pure & Simple Practicing Healthier; Big Food skeptics Healthier & Convenient Pills = Health Taste & Indulgence Unadulterated Better-for-you Stealth Health 2012, NMI 27
28 Challenges in Implementing Better-for-you WELL BEINGS : 19% FOOD ACTIVES : 18% FENCE SITTERS : 20% MAGIC BULLETS : 23% EAT, DRINK & BE MERRYS : 20% Unadulterated Better-for-you Stealth Health 2012, NMI 28
29 Must Deliver Healthier Options Where Best Prospects Live Concentration % of DMA comprised of Fence Sitters HHs Quantity # of Fence Sitters HHs living in DMA Top DMAs Laredo, TX 48% Salt Lake City 36% Harlingen, TX 36% Los Angeles 33% Houston 31% New York 2.2M Los Angeles 1.9M Chicago 963K Dallas-Ft. Worth 740K Houston 707K National Average 20% National Total 24 mil The most promising markets have both high concentration of HHs in this group and a large number of HHs in this group Sources: Natural Marketing Institute and Nielsen 29
30 White Hot Issue: Kids Health
31 Healthier Kid s Foods Essential for Restaurants For households with kids under age 12, 75% of them say that a kid-friendly menu is important always/most of the time when visiting a QSR Still at 51% for households with children age Source: Restaurant DemandTracker, March, 2013
32 Mandate from the Top
33 Kid s Health Issue Driving Stricter Advertising Standards
34 Increased Pressure to Offer More Healthier Products Sales of less healthy kids products will plummet Incorporation of fruits & veggies into meals & snacks will become the minimum ante
35 The Bottom Line 1. Shift to Better-for-you/Lower Calorie items for sales, traffic and profit growth
36 The Bottom Line 2. Must target segments driving healthier product growth where they live FOOD ACTIVES FENCE SITTERS
37 The Bottom Line 3. Place Emphasis on Convenient, Healthier Kids Meals
38
39 Thank You!
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