In Europe, total visits to foodservice establishments represent 176 per capita for Italy, falling to 142 for the UK, 137 in Spain, 108 in Germany, 89 in France and 83 in Russia, according to the latest figures by Leatherhead Food Research.
The UK foodservice industry is worth over GBP44bn, while food sales are worth GBP33bn of this figure. Lunchtime occasions account for 45% of food sales, ahead of breakfast (9%) but behind the evening meal (46%). As statistic show, breakfast is the key growth area at present.
Yum!Brands declines in China
The producer of KFC, Pizza Hut and Taco Bell has met many difficulties on one of its core expansion markets, China. The challenges are even more significant, considering that Yum sees China as the perfect platform for growth, in the hopes of becoming the number one foodservice operator on emerging markets. According to company financial results, China Division sales and profits were significantly impacted by adverse publicity surrounding Avian flu, as well as the residual effect of the December poultry supply incident. Same-store sales declined 20% in this country. June same-store sales declined an estimated 10% for the China Division, improving from a 19% decline in May. This included an estimated decline of 13% at KFC and 6% growth at Pizza Hut Casual Dining. June sales are included in the China Division’s third-quarter results. Worldwide system sales grew 1%, prior to foreign currency translation, including 6% at Yum! Restaurants International (YRI) and 2% in the U.S, while total international development was 315 new restaurants, of which 76% of this development occurred in emerging markets. Worldwide restaurant margin declined 2.7 percentage points to 12.5%, including a decline of 5.0 percentage points in China. Restaurant margin increased 0.8 percentage points at YRI and 0.8 percentage points in the U.S. Referring to worldwide operating profit, the company recorded a decline of 20%, prior to foreign currency translation, including a 63% decline in China. Operating profit grew 12% at YRI and 4% in the U.S. Worldwide effective tax rate, prior to Special Items, decreased to 22.1% from 23.9%, which had a positive impact over the year-on-year earnings per share results, by 2%.
According to company estimates, mid-single-digit full-year EPS decline versus prior year, excluding Special Items, remains unchanged and the China Division same-store sales are expected to continue to recover over the course of the year and be positive in the fourth quarter. David C. Novak, Chairman and CEO, said, “Second-quarter EPS declined 16%, which was generally in line with our expectations. KFC sales and profits in China were significantly impacted by intense media surrounding Avian flu, as well as the residual effect of the December poultry supply incident. The good news is that China sales are recovering as expected. The extensive media surrounding Avian flu in China has subsided and same-store sales at KFC are clearly improving. I’m pleased with the very strong performance at Pizza Hut Casual Dining, which delivered solid same-store sales growth as we continue to open new units at a record pace. For the total China Division, we remain on track to open at least 700 new units this year. This means we will have opened about 1,600 units over a two-year period. As KFC sales continue to recover, we expect to have solid momentum in China heading into 2014. We expect record new-unit openings for Yum! Restaurants International and in India this year. Our emerging market new-unit pipeline is stronger than ever. Additionally, Taco Bell continues to deliver sales growth in the U.S. with industry-leading innovation. Our estimated mid-single-digit full-year EPS decline versus prior year remains unchanged. We expect a strong bounce-back year in 2014 as we continue to aggressively invest behind our core strategies and capitalize on the enormous growth opportunities we see around the world.”
McDonald’s focuses on growth
According to the latest figures made public by McDonald’s Corporation, which include the financial indicators for the second quarter of 2013, the company recorded higher revenues, operating income and earnings per share, compared to the same period of last year. “McDonald’s results for the quarter reflect our efforts to strengthen our business momentum for the long-term,” said McDonald’s President and Chief Executive Officer Don Thompson. “We remain strategically focused on the global growth priorities that help us better serve our customers. While the informal eating out market remains challenging and economic uncertainty is pressuring consumer spending, we’re continuing to differentiate the McDonald’s experience by uniting consumer insights, innovation and execution.” In the U.S., second quarter comparable sales rose 1.0% while operating income was relatively flat. During the quarter, new product introductions across the four key growth categories of chicken, beef, breakfast and beverages, ongoing support for the Dollar Menu and greater accessibility to McDonald’s classic core favorites supported the segment’s sales performance.
While the U.S. grew comparable sales and continued to outpace the competition, sales results were impacted by the comparison against prior year promotional activity. Moving forward, U.S. business initiatives are designed to satisfy evolving customer expectations through a balanced approach to value, variety and convenience. For the quarter, Europe’s comparable sales were down 0.1% as negative results in Germany and France were nearly offset by solid performance in the U.K. and Russia. Looking ahead, Europe remains focused on reigniting momentum with enhanced premium beverage and menu items and everyday affordability options across all dayparts delivered through an enhanced restaurant experience. While Europe’s top-line results continue to be impacted by the challenging consumer environment, second quarter operating income increased 5% (up 5% in constant currency) and drove the majority of the Company’s operating income growth for the period. In Asia/Pacific, Middle East and Africa (APMEA), second quarter comparable sales declined 0.3% primarily due to negative results in China, Australia and Japan nearly offset by positive performance in many other markets. The segment’s quarterly operating income declined 1% (up 3% in constant currencies). APMEA remains focused on driving demand and profitability with innovative daypart initiatives, comprehensive value platforms and market-leading conveniences. Don Thompson concluded, “While our consolidated results this quarter were positive, global comparable sales for July are expected to be relatively flat. Based on recent sales trends, our results for the remainder of the year are expected to remain challenged. Throughout McDonald’s history, we have succeeded in a variety of operating and economic environments. I am confident that our System, global infrastructure and the unique and evolving McDonald’s brand experience will enable us to deliver sustained profitable growth for the long-term.”
Foodservice market slowdown in Romania
2011 witnessed the decline of consumer foodservice in Romania, as a result of reduced purchasing power, as well as the rapid loss of confidence by Romanians in their future since the boom in 2008 when they proved to be the most optimistic Europeans, according to the latest information by Euromonitor International. This turnaround had a negative impact on overall consumption and on consumer foodservice in particular, perceived as expensive during the recession. The painful steps taken for the reduction of the deficit such as decreased salaries in the public system and the growth of VAT by five percentage points in 2010, continued to show negative effects in 2011 on both purchasing power and the performance of consumer foodservice as a whole. The poor economic situation was the main factor responsible for decline of consumer foodservice in 2011. A reduction of incomes came naturally as a result of the austerity measures taken by the Government in order to reduce the deficit, which impacted the incomes of employees in the public system as well as in the private companies. Both had to cope with higher taxes and a changing attitude towards consumption at the expense of saving and caution regarding the future. As a consequence, the main trend of 2011 was the switch from eating out to home cooking and eating, with an impact on overall consumer foodservice.
Domination of multinational chains
Chained operators continued to account for a small proportion within total outlets in 2011, but they proved to be more successful despite the poor economic conditions. Multinationals accounted for the majority of chains but their presence remained limited to Bucharest and other larger cities with significant economic activity. In this context, McDonald’s Romania SRL was by far the leading player in both value and transaction terms, relying on nationwide presence and strong recognition. KFC, from US Food Network SA, also improved its second ranking position while the reduction of incomes contributed to the performance of Fornetti Romania SRL which led by far in outlets and dominated kiosks. On the other side of the spectrum, independent operators continued their decline. Consumer foodservice remained highly fragmented in 2011, with many small outlets operated by a family business. These small outlets were a familiar presence in smaller cities and villages and consisted mainly of small restaurants, bars and kiosks. The small outlets also retained supremacy in Bucharest and large cities but the performance was affected by the presence of chains, which gained recognition through advertising, promotions, word-of-mouth and strong presence in the food courts of large retailers and shopping centers. Chained fast food and kiosks were the most visible but traditional full-service restaurants and cafés also moved rapidly to a strong exposure and important recognition from urban consumers.
Growth despite recession
Euromonitor International shows that Romanians are becoming more pessimistic regarding the evolution of the economy, with a growing number losing confidence in a rapid economic recovery. The effect of the crisis will be seen until the end of the forecast period, when Romania hopes to find itself in the same situation as it was in the booming period 2006-2008. Consumers in Bucharest and large cities will continue to change their lifestyles towards the increasing acceptance of concepts such as 100% home delivery/takeaway, specialist coffee shops and foreign cuisine full-service restaurants but will start to appreciate heavily the self-service cafeterias as an excellent place for rapid consumption of cooked meals.