Menu innovation and older consumers’ increased spending are among the top 10 trends shaping the restaurant industry in 2014, according to The NPD Group.
The Port Washington, N.Y.-based market research firm released its list of predictions for the industry in the year ahead and beyond, ranging from the impact of baby boomers and seniors to the effect of prepared meals at supermarkets on market share.
“If there is anything that’s a common theme here — maybe more so than in years past — it’s menu innovation, “ said NPD Group restaurant industry analyst Bonnie Riggs.
New top-selling products of 2013, such as Wendy’s pretzel bun burger and Taco Bell’s Doritos Locos Tacos, were based on innovation, Riggs said.
“Those that came out with something really different and unique had big hits,” she said. “That’s what it is going to take to get especially the Millennials and younger folks out of the home and back into restaurants.”
However, operators should also closely watch the increased spending among baby boomers and seniors, as this group is “keeping the industry afloat,” Riggs added. “They are the ones that are increasing their usage of restaurants, while those younger — under 50 — have pulled back dramatically and are still pulling back,” Riggs said.
Baby boomers’ and seniors’ usage rate of restaurants is now heavier than younger generations, she said, and many of them continue to delay retirement. “They are the driver of any growth that the industry is achieving,” she added. “They tell us they want comfortable seating, less noisy restaurants [and] a menu that is easy to read. We need to pay attention to them.”
NPD’s top 10 trends it expects to influence the restaurant industry also included:
• An improving economy. Real disposable income is forecast to grow, inflation will remain moderate, and unemployment will continue to inch down in the year ahead.
“While consumers’ mindset for cautious, controlled spending is expected to remain in place for some time, our forecast of traffic and dollar growth for 2014 shows improved performance compared to 2013,” NPD said.
Segment strengths, protein prices and more
• Segment strengths. NPD forecasts indicate that traffic will build for fast-casual restaurants, sub shops and gourmet coffee/donut outlets.
“Additionally, convenience stores are likely to experience traffic growth as they take advantage of consumers’ current tendency to ‘trade down’ from more expensive options,” NPD said, adding that food retailers with convenient meal options would capture more visits from traditional restaurants.
“Those supermarket meal sales are growing at double-digit rates for lunch, and also growing for dinner at rates much higher than for the industry overall,” Riggs said, citing Whole Foods Market and Mariano’s Fresh Market.
• Protein prices. An expected rise in beef prices and lower chicken prices will be reflected in menu offerings.
“You’ll see an increased focus on other proteins because of the high cost of beef,” Riggs said.
• Population shifts and diversity impacts on menus. The influence of the growing U.S. Hispanic population is reflected in the increased popularity of fruits, juice drinks and more flavorful spices and seasonings, NPD said. And the growing Asian population carries its influence on menus, as well, with noodles, rice, specialty sauces, and other foods and flavors.
• Strong baby boomer and senior spending. Boomers and their older counterparts have been less affected by prolonged high unemployment and the recession, NPD reported.
“These individuals have continued to visit restaurants at an ever-increasing rate,” NPD said. “While their food and beverage preferences may differ from those of the younger set, many older consumers are bringing their ‘younger’ preferences with them.”
• Changing incentives. Paper coupons gave way years ago to tiered pricing strategies, combo meal offers, sweepstakes and value menu items. With greater online availability, coupons are again popular, NPD said, but loyalty rewards are also increasing.
“Going forward, rotating offers and creating new ways to entice consumers to visit must be a part of any operator’s marketing plan,” NPD said.
• Mobile technology. Mobile devices continue to grow as important tools for consumers, who expect most of their needs to be met with the devices, NPD said. Consumers’ use of mobile devices for ordering and paying for meals and reporting on the meal experience will continue to grow.
• Healthful menu offerings. Consumers’ interest in healthful meal options is tied to the health needs of boomers and older individuals, the growth in ethnic groups accustomed to fresh food preparation, and greater awareness of the need for and benefits of healthful eating among younger patrons. As an example, NPD found a growing number of consumers who prefer gluten-free foods, not because of required dietary restrictions, but because of the benefits of overall more healthful eating.
• Fine-dining strength. “Fine dining, from our view, has fully recovered from the recession and is growing,” NPD said.
The segment will continue to offer more casual décor and accept casual attire.
• New concepts. NPD said the industry can expect more innovation from new concepts, such as Houston-based My Fit Foods, with more than 60 units, and Chicago-based Lyfe Kitchen, with four units. Both address the interest in fresh and healthful food, as well as portion options.
“This plays into giving consumers more choices and healthier options,” Riggs said. “These concepts allow consumers to buy different sized portions: small-, medium- and large-sized. You can eat very healthy. There’s a lot of innovation and flavor profiles in those offerings.”