FOOD SERVICE FOOD SERVICE FOOD SERVICE. Food service: Food service. Dispensing prepared meals and snacks for on-premise immediate consumption

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1 Food service: Dispensing prepared meals and snacks for on-premise immediate consumption Value added by the food and fiber system, 2001 Farming Input industries Manufacturing Food processing Nonfoods Distribution Transportation Wholesaling and retailing Food service Total food and fiber system Value added to GDP ($ billion) ,244.6 Share of GDP (%) Food service Commercial establishments For-profit establishments that prepare, serve, and sell meals and snacks to the public Noncommercial establishments Meals and snacks prepared and served as support of the primary purpose of the establishment 1

2 U.S. Foodservice Sales, 2000 Noncommercial 18% $64 billion $294 billion Commercial 82% Commercial establishments Eating places Restaurants, lunchrooms, fast-food, cafeterias Drinking places Bars, beer gardens, taverns, night clubs, saloons Lodging places Foodservice operations in hotels, motels, etc. Recreation/entertainment Foodservice operations in theaters, bowling alleys, race tracks and stadiums, amusement parks, etc. Retail hosts Foodservice operations in retail stores, drugstores, etc. U.S. Commercial Foodservice Sales, 2000 Recreation and entertainment 3% Lodging places Retail hosts 7% Other Fast-food 43% Restaurants and lunchrooms 39% Total Commercial Foodservice Sales: $294 billion 2

3 Noncommercial establishments Schools Colleges Hospitals Extended care facilities Plants and offices Correctional facilities Military installations Transportation Airplanes, cruise ships, trains U.S. Non-Commercial Foodservice Sales, 2000 Vending 3% M ilitary 3% Other 7% Child day care Hospitals 6% Education 39% Transportation 8% Plants & office buildings 9% Extended care facilities 10 % Correctional facilities 11% Total Commercial Foodservice Sales: $64 billion Increased share of consumer food expenditures away from home vs. at home Share of U.S. food expenditures for food at home and away from home Share of U.S. Food Expenditures At home Away from home 3

4 Increased share of consumer food expenditures away from home vs. at home Workforce composition Higher income Smaller share of income spent on food Food expenditures as a share of disposable money income Food Expenditures as a Share of Disposable Money Income 18% 16% 1 12% 1 8% 6% 2% Increased share of consumer food expenditures away from home vs. at home increasing share of fast-food, decreasing share of all other foodservice Share of away-from-home food expenditures by type of outlet 45% 4 35% 3 25% 2 15% 1 5% Full-Service Restaurants Fast-Food Outlets All other Foodservice Establishments 4

5 Increased share of consumer food expenditures away from home vs. at home increasing share of fast-food, decreasing share of all other foodservice Increasing competition from nontraditional Increased share of consumer food expenditures away from home vs. at home increasing share of fast-food, decreasing share of all other foodservice Increasing competition from non-traditional Mergers and acquisitions 452 mergers and acquisitions between 1998 and

6 Increased share of consumer food expenditures away from home vs. at home increasing share of fast-food, decreasing share of all other foodservice Increasing competition from non-traditional Mergers and acquisitions Concentration Share of sales by largest 4, 8, and 20 U.S. full-service restaurant firms Share of Full-Service Restaurant Sales 18% 16% 1 12% 1 8% 6% 2% Largest 4 Largest 8 Largest 20 Share of sales by largest 4, 8, and 20 U.S. fast-food firms Share of Fast-Food Sales 2 18% 16% 1 12% 1 8% 6% 2% Largest 4 Largest 8 Largest 20 6

7 The 25 Largest Chain Brands in the U.S., 2002 Rank Chain Sales Units ($ billion) 1 McDonald's ,491 2 Burger King ,029 3 Wendy's ,549 4 Subway ,522 5 Taco Bell ,165 6 Pizza Hut ,599 7 KFC ,472 8 Applebee's ,451 9 Starbucks , Dominos Pizza , Dunkin' Donuts , Arby's , Dairy Queen , Red Lobster Outback Steakhouse Jack in the Box , Sonic Drive-Ins , Chili's Grill & Bar Denny's , T.G.I. Fridays The Olive Garden Papa John's , Hardee's , International House of Pancakes , Cracker Barrel #1 sandwich #1 pizza #1 chicken #1 dinner house rest. #1 family restaurant Increased share of consumer food expenditures away from home vs. at home increasing share of fast-food, decreasing share of all other foodservice Increasing competition from non-traditional Mergers and acquisitions Concentration Globalization 7

8 Increased share of consumer food expenditures away from home vs. at home increasing share of fast-food, decreasing share of all other foodservice Increasing competition from non-traditional Mergers and acquisitions Concentration Globalization Contract management in non-commercial food service 8

9 Contract management in noncommercial food service Self-operated noncommercial converting to contract management Contract management is highly concentrated 3 companies control 4 of the U.S. market: Compass Sodexho Aramark FOOD MARKETS Other trends in the food marketing channel: Expansion of private labels Share of private-label sales in the U.S. 2 Share of Private-Label Sales 15% 1 5% FOOD MARKETS Expansion of private labels Improving consumer perception of private label Diminishing overall consumer brand loyalty Focus on value products avoiding marketing costs associated with national brands Increasing market power of retailers vs. manufacturers 9

10 FOOD MARKETS Other trends in the food marketing channel: Expansion of private labels Products with new attributes FOOD MARKETS Products with new attributes Health, diet-oriented Natural Laura s Lean Coleman s Natural Meats Organic Welfare friendly Niman Ranch Farmer-friendly Good Natured Family Farms Environmentally-friendly Ethical FOOD MARKETS Other trends in the food marketing channel: Expansion of private labels Products with new attributes Food safety 10

11 FOOD MARKETS Food safety Food Processing's 2003 Manufacturing Survey of thousands of industry professionals: Food safety far outweighs any other concern Food safety was the most crucial issue for 5 of respondents 6 of respondents said their company has either established new food safety and sanitation initiatives or is planning to do so 11