Transcript Strategic Review Analysis of the Fast Food Sector

Strategic Review Analysis of the
Fast Food Sector
Report produced by E. Moug, L. Jourdain,
S. Pritchard, R. Smith and J. Wileman
27th November 2001
Analysis of the Fast Food Market
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Convenient
Competitive prices
Varied selection
Wide target market
Convenience of locations
High labour turnover
Low labour costs
Unskilled labour
Relatively low–tech environment
Questionable nutritional value
Product Orientated…
Product Orientated
Production
capabilities
An inward looking stance
Manufacture
product
Sales effort
Customers
The realisation of the ability to produce initially precedes the concept
of the customer, i.e. pizza restaurants and ethnic restaurants moving
into the take away area along with lower cost goods such as fish and
chips take away.
…or Marketing Orientated?
Market Orientated
Consumer
needs
An outward looking stance
Market
opportunities
Market
product and
services
Customers
The desire to provide for the consumers wants is the primary initiative,
i.e. branded chain restaurants such as McDonalds, KFC and Burger
King. A pro-active approach rather than re-active.
D.E.E.P.L.I.S.T. analysis
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Demographic
Population
Socio-Economic Groups
Economic
The Euro
Employment
Terrorist Attacks
Ecological
Foot and Mouth
GM Foods
Vegetarianism
D.E.E.P.L.I.S.T. analysis
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Political & Legal
Disability Discrimination Act
Minimum Wage
Food Legislation
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Information
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Social
Population
D.E.E.P.L.I.S.T. analysis
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Technology
Internet
Advances in kitchen Technology
New discoveries/developments
E.P.O.S system
Competitive Structure and
Environment
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Split by branded and independent operators (see figure 1)
Sales grown through rapid expansion
Investment in marketing campaigns to stay in the public eye
Price wars – rivalry between major brands
To invest in the future and to stay competitive
Rebranding
Market Size
Size of Fast Food Market
10988
12263
2001
Year
2000
1999
1998
1997
1996
10494
11551
10126
10830
9774
10115
9292
9383
8847
8757
Independent
Operations £m
Branded Chain
Operations £m
Branded Market
Size of Branded Fast Food Market
£2,000
£1,500
Value £M £1,000
£500
£-
£1,100
£1,166
£1,315
£1,505
£1,700
£1,840
£691
£633
£555
£530
£503
£475
£408
£388
£366
£338
£304 £15 £318
£17
£18
£19
£17
£16
£7
£7
£8
£8
£8
£8
1996 1997 1998 1999 2000 2001
Year
Burgers
Fish & Chips
Pizza & Pasta
Other Fast Foods
Fried Chicken
Directional Policy Matrix
Generic Strategies
Consumer Trends in the Fast Food
Sector
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Increase in the interest of the takeaway market – a growth market
Women play a greater role in the workforce, more disposable
income
Interest in healthy eating, vegetarianism, and heightened concern
with regard to red meat
Competition from supermarket pre-prepared meals
Burgers
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A decline in the sales of beef burgers due to foot and mouth
disease and BSE fears
McDonalds suffered a fall in profits of 16% in Europe
Diageo are investigating the dispersion of the Burger King chain,
followed closely by Wimpy
WHY?
More consumers are becoming environmentally and health
conscious
High consumer interest in organic food
Desire for higher quality products as a result of more disposable
income and safety fears
McDonalds is looking to expanding into other markets, i.e. hotels
Limited growth in the short to medium term (1 – 5 years)
Fried Chicken
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Segment grew by 33%, between 1996 and 2000, to £633 million
WHY?
Customers are eating more chicken due to its perceived healthier
image
The segment is at a higher growth rate than others in the market,
perhaps due to recent health scares
Takeaway is increasing its share from 50% in 1998 to an
estimated 54% in 2000
Takeaway chicken accounts for an estimated 80% of sector sales
Short term growth will be achieved by planned expansion and
differentiation
Ethnic Takeaways
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Sales are expected to increase by 16% between 2000 and 2004
WHY?
Cheaper foreign travel to long haul destinations encourages
interest
Increasing number of ethnic outlets
Chinese takeaways are more buoyant in terms of segment value
Pizza and Pasta
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Popular with a large target market and is perceived as a healthy
option
The pizza segment is moving more upmarket, e.g. Pizza Express,
Ask etc
Fish and Chips
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A broad age appeal, despite increasing competition
Those in low socio economic groups are among the most common
consumers
The sector is in decline due to rising prices of both fish and
potatoes
Lack of supplies
Success of relatively high market fish cafes
Many outlets have diversified their menu
In the long term, not a good market to invest into
Sandwiches
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In 2001, sandwich consumption will account for over 13% of the
total eating out market
The segment enjoys growth rates of between 7 and 8%
Product innovation
Appeals to the consumer
Satisfies nutritional demand for healthy eating
Suits the increase in busier lifestyles
38% of sandwich eating working managers and 31% of sandwich
eating women stop off for a sandwich
Growing affluence has increased sales
In the long term, growth in this sector will be obtained by sandwich
delivery
Salad Market
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31% increase at current prices over the next 4 years
Driven by the demand for convenience and healthy foods
Key target markets are younger, pre-family, working consumers
with busy lifestyles
Added value products will ensure growth
Product Life-Cycle to reflect market
Pizza & Pasta
Profit
(£)
Fish & Chips
Chicken
Ethnic
Sandwiches
Burgers
Others
Time
Stakeholder Mapping:
Burger King, McDonalds and K.F.C.
Low
Low
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Employees (Part Time)
Level of Interest
High
Employees (Full Time)
Suppliers
Customers
Lenders
Shareholders
Government
High
The Chairman of Directors
Stakeholder Mapping:
Fish and chip and sandwich shop independents
Low
Level of Interest
High
Low
P
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Suppliers
Customers
Employees
Investors (Banks)
Investors (others)
High
Government
Employees
Sandwich shop stakeholder map
variation
Low
Level of interest
high
Low
P
o
w
Suppliers
Employees
Customers
e
Investors (banks)
r
Investors (others)
High
Government
Owner
Stakeholder Mapping:
McDonalds and Prêt a Manger
Low
Low
P
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w
e
r
High
Employees (full time)
Employees (part time)
Employees (full time)
Government
Customers
Government
Customers
Level of Interest
High
Suppliers
Employees (part time)
Suppliers
Shareholders
Chairman/Directors
Lenders
Chairman/Directors
Shareholders
The Short Term Future (1Year)
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Free of antibiotics Growth Hormones
Recession?
‘Cash Rich – Time Poor’
Continued growth in fast-food market predicted
Sandwiches are they the future?
Charity related?
The Mid-Term Future (5 Years)
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Affected by decreased travel and tourism
Shift toward healthier foods due to BSE F&M
The Fast food generation
Better quality all round service of fast food outlets
Labelling of food products
Lack of suitable new sites
What are the possibilities for growth?
The Long-Term Future
(10 Years)
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Increase in Spanish population