DMA Presentation

November 2009Project #13509

Selected Foodservice IndustryInnovation Forces

Food Industry. Facts. Insights. Consulting.

Prepared by:

Introduction

3

Who We Are Consulting firm dedicated to

foodservice Tracking industry

performance for 40+ years Market assessments and

opportunities for Manufacturers Ingredient suppliers Operators Distributors Associations

Ron Paul, Founder

4

Menu Development Activity

Note: Non-alcoholic beverages onlySource: Technomic Menu Monitor, First Half 2009

716

369

236 230

103

Entrees Appetizers Sandwiches Desserts Beverages

Most Active Menu Categories At Top 250 Chains in First Half 2009

5

Seafood Tops Center of Plate

Proteins Added by Top 150in First Half 2009

Source: Technomic Menu Monitor, First Half 2009

Legal Sea Foods’Spice-Crusted Salmon,

Grilled Fruit & MushroomQuinoa

101 104

63

18

50

Seafood Chicken Beef Pork

Fish

Shel

lfish

6

Innovation Forces Are Numerous

Communication / TechnologyInnovation

8

Technology Enables New Approaches

Web-basedmeetingplanning

Touchscreenorderingkiosks

iPhoneordering

application

Sheetz Bros.Coffee truck

9

Bottom Line: Social Media Won’t Wait

Number of Years it Took to Reach an Audience of 50 Million

9Source: Facebook as cited by money.cnn.com, March 11, 2009

10

Naked Pizza Tweets Success

Tracks Twitter-driven sales at the register An April 23rd Twitter-exclusive promotion

accounted for 15% of sales for the day

11

Tweets to Eats

VERDE: 6PM-9PM@UCLA -Gayely & Strathmore; 10:00PM-2AM@The Brig - Abbot Kinney

and Palm in Venice

ROJA: 12PM-3PM@Hannam Chain -2740 W. Olympic Blvd in K-Town;

7:30PM-9PM@Santa Fe Springs - next tothe secret warehouse

KOGI SPECIAL! Korean Burger w Chile SaltedWatermelon! @ ALL LOCATIONS!

3:06 PM May 13th from txt

+ =

12

Kogi’s Korean Short-Rib Tacos

Sesame-Chili Salsa Roja, Korean Chili-Soy Vinaigrette,Cilantro-Green Onion-Lime Relish, Crushed Sesame Seeds,

Sea Salt, Radish & Lime

13

Web 2.0 Upside + Downside:Give Up Some Control Of Your Brand

This new era will demand more “crisismanagement” skills

“Recycling” Innovation

15

Burgers Are the New….Burgers

Hamburger CheeseburgerSpecialtyBurger

Menu Items2006 110 143 1652009 100 136 215% change -9% -5% +30%

FSR Menu PricingAve. Price $ $7.16 $8.18 $8.80% change vs. ‘06 10% 15% 14%

LSR Menu PricingAve. Price $ $3.58 $4.04 $4.93% change vs. ‘06 15% 19% 6%

Burger Development Trends2006 - 2009

Source: Technomic Menu Monitor, First Half 2009 Base: Top 250 Chains

16

Slider’s Are HOT

17

Burger Wars Continue

18

Beef Still Leads Burger Proteins

Source: 2009 Burger Consumer Trend Report, Technomic Base: 150 incidences CasualDining Emerging & Independent FSRs, 373 incidences in the Top 250 CDR

28%

15%

7%

4%

3%

2%

1%

31%

19%

4%

7%

2%

Ground beef

Angus

Chicken

Sirloin

Turkey

Fish/Seafood

Bison

Top 250 Casual Dining FSRs

Leading/Independent FSRs

19

The Pool Is Getting CrowdedBurger chains expanding

The Counter, 5 Guys,Smashburger, etc.

Elite chefs enter the game

Sodexho introduces TheOriginal Burger Company

Survival Innovation

21

Across Income Groups, ManyConsumers Have Felt a Direct Impact

No

30%Yes

70%

“Has the economy had adirect impact on you?"

74%

71%

70%

59%

66%

<$35,000

$35,000-$59,999

$60,000-$99,999

$100,000-$149,999

$150,000+

“Yes” by Income

22

Price Has Been Increasingly Importantto All Groups

In 2009, consumers will: Total TQ* Rely more on money-

saving options 71% 70%

Seek out special offers 64% 62%

Order less expensive items 33% 31%

Visit less expensiverestaurants 29% 30%

*TQ = Top Quintile household income (median after tax income = $158,388).This group represents 40% of all FAFH spending!

INSIGHTInsight

23

Demonstrating Value and Affordability

Absolute price points “Barbell” pricing Happy Hour migrating beyond the

bar Free! offerings

24

“Value menus” evident in all segments

Lower prices on core menus

Lower Price Points Demonstrate Value

Small Plates,Small Prices

Big Eat, Tiny Price Business LunchMenu

Reductions on 100 Items New Items for $5

25

“Barbell” Pricing: Balancing Premiumand Lower-Priced Options

Discounting common drinks, raisingprices for specialty options

Premium options in test balance“Why Pay More?” menu

Wines by the glass in three portionoptions

26

The Food-Centric New Happy Hour

$2 snacksin afternoon

Half-pricesmoothiesfrom 5-6

Penny perksfor sides orextra entrée

Kids eat freeon familynight

27

“Casualization” of Upscale Diningthrough Comfort Foods

Next evolution after deep discounting?

Prix-fixe menu; newideas about future offine dining

New burger menu

High-end celebritychefs shifting tocasual dining

28

“What is the long term consequence ofdeep discounting?”

Q3-08 Q4-08 Q1-09 Q2-09 Q3-09

Capital Grille (Darden) -9% -9% -19% -22% -18%

Flemings (Outback) -10 -20 -20 -22

Longhorn (Darden) -5 -6 -5 -7 -6

Morton's Restaurants -8 -12 -24 -26 -17

Outback Steakhouses -8 -10 -8 -10

Ruth Chris Steakhouse -7 -19 -19 -23 -24

Stoney River -8 -18 -17 -20 -17

Full Service Steak RestaurantsQuarterly Sales Reports

Mandated Innovation

30

Mandated Menu Disclosure

Gaining momentum andsupport

NRA supports LEAN Act Overrides various local

mandates Provides protection from

lawsuits Jury is out on the real

impact

31

NYC Consumers Surprised by CalorieCounts; Higher than Expected

“Have you been surprisedby the calorie counts?”

Base: Have read calorie information = 203“Are they …”

Base: Surprised by calorie content = 163

Yes

80%

No

20% 1%

10%89%

Higherthan

expected

Aboutwhat

expected

Lowerthan

expected

Source: Technomic Economic Impact Update, August 2009Base: 300 NYC residents

32

Operators Investing in Health &Nutrition in Myriad Ways

Specialequipment forfortified tea

Kids’ menu:broad-basedoverhaul toenhancenutritional profile

Emphasizing“pure” options

Iced tea withprobiotics

Mediterraneanoptions

Key Takeaways

34

Key Takeaways Innovation sources are many – challenge your

cross functional teams to get engagedSome sources of innovation are unavoidable;

get ahead of the wave as early as possible Menu disclosure Technology

Find ways beyond core menu pricing to showyour value

How can you stimulate demand in thisenvironment while balancing profitability andcustomer frugality?