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 27 th November 2001

Analysis of the Fast Food Market l l l l l 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 Mc. Donalds, KFC and Burger King. A pro-active approach rather than re-active.

D. E. E. P. L. I. S. T. analysis l l l 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 l Political & Legal Disability Discrimination Act Minimum Wage Food Legislation l Information l Social Population

D. E. E. P. L. I. S. T. analysis l Technology Internet Advances in kitchen Technology New discoveries/developments E. P. O. S system

Competitive Structure and Environment l l l 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

Branded Market

Directional Policy Matrix

Generic Strategies

Consumer Trends in the Fast Food Sector l l 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 l l l l A decline in the sales of beef burgers due to foot and mouth disease and BSE fears Mc. Donalds 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 Mc. Donalds is looking to expanding into other markets, i. e. hotels Limited growth in the short to medium term (1 – 5 years)

Fried Chicken l l l 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 l l 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 l l 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 l l l l 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 l l l l l 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 l l 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, Mc. Donalds and K. F. C. Low P o w e r High Employees (Part Time) Level of Interest High Employees (Full Time) Suppliers Customers Lenders Shareholders Government The Chairman of Directors

Stakeholder Mapping: Fish and chip and sandwich shop independents Low Level of Interest High Low P o w e r 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: Mc. Donalds and Prêt a Manger Low P o w e r High Employees (full time) Employees (part time) Employees (full time) Government Customers Level of Interest High Suppliers Employees (part time) Suppliers Shareholders Chairman/Directors Lenders Chairman/Directors Shareholders

The Short Term Future (1 Year) • • • 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) • • 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) • Increase in Spanish population