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What The Hell Just Happened To Diet Coke? 2018 Edition

What_happened_to_diet_coke_2018_edition

Vanessa Wong
BuzzFeed News Reporter
https://www.buzzfeed.com/venessawong/diet-coke-just-got-an-insane-candy-colored-makeover-to?utm_term=.psLPgVw0x#.kwMMXld8O 

With new flavors like “twisted mango,” “zesty blood orange,” “feisty cherry,” and “ginger lime,” as well as slimmed-down, candy-colored cans, the new Diet Coke is barely recognizable.

Diet Coke is in a rut. Sales have been falling and people are trading in their diet sodas for other zero-calorie beverages like LaCroix and waters both bubbly and still. So Coca-Cola is giving its 36-year-old brand a massive facelift, and it’s launching four new millennial-oriented Diet Coke flavors. “Twisted mango,” “zesty blood orange,” “feisty cherry” and “ginger lime” Diet Coke, as well as the classic Diet Coke flavor, will come in slim, candy-colored cans rather than the classic silver cylinder that’s been a marker of the brand for years.

The new products will be available in the US later this month and in Canada in February. The old-fashioned Diet Coke with lime and Diet Coke Cherry that are currently available will only be sold on Amazon hereafter.

“We love the essence of Diet Coke and we don’t want to throw it away — just modernize it so we can re-express it for a new generation of fans,” said Rafael Acevedo, Coca-Cola North America’s group director for Diet Coke, in an interview with BuzzFeed News. He compared it to how the James Bond franchise, which “had a winning formula,” needed an update and came up with a “rougher, more personable” Bond with Daniel Craig.

Sales of diet colas fell 3.5% last year; Acevedo said Diet Coke declined about that much as well. Still, annual sales of Diet Coke in the US exceed $2.1 billion and thousands of cans of Diet Coke are consumed every minute, he said — so despite some very real troubles, the brand still has a lot of fans.

David Henkes, senior principal at the food industry consultancy Technomic, said on Twitter, “Interesting facelift for an iconic brand. Still, soft drink sales are losing out to other types of beverages and getting young consumers back will be a challenge.”

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Diet Coke’s primary challenge: millennials, of course. The product’s main customer base is made up of boomers — white boomers, to be exact.

“Eighty percent of Diet Coke consumption is Anglo,” said Acevedo. “We believe that to recruit a new generation, we have to appeal to them, and millennials are 40% multicultural.” Beverage marketers have taken note that young people — and Latinos — love flavors. So here we are, with mango- and zesty blood orange–flavored Diet Coke. The “feisty cherry,” Acevedo said, is a little spicier than the old cherry flavor.

The new slimmed-down cans have the same shape and silver color as Coca-Cola’s Dasani Sparkling, giving the revamped Diet Coke an appearance more similar to the zero-calorie sparking water than to the other Cokes and sodas. And fear not: The rebrand didn’t change the basic Diet Coke recipe, while the new design conveys a subtle cue to consumers who have increasingly switched to sparkling waters over caloric sodas and artificially sweetened diet beverages.

That, and Coca-Cola “wanted to make sure packages are Insta-ready,” said Acevedo.

Keenan Beasley, co-founder and managing partner at marketing agency BLKBOX, said any impact of the rebrand may be short-lived. “Millennials for years have rejected the idea of soda due to health concerns. This is the bigger issue for Diet Coke and the Coke franchise. They still have to face this issue head on.”

Diet Coke’s rebrand is the result of two years of work deciding among 30 original options based on feedback from 10,000 consumers. It will include a “significant investment” to promote the product, according to Coca-Cola, including advertising during the Winter Olympics, billboard ads, and free samples.

Coca-Cola in 2016 announced a “One Brand” approach to unite the marketing of its various Cokes. The company introduced a new look for Diet Coke in Mexico that did away with the iconic silver can, but at the time, it said that it would consider “how it will integrate Diet Coke into the ‘One Brand’ strategy” in the US. It looks now like Diet Coke is going its own way.

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Filed under Beverage, Financial Activity, Future Plans and Announcements, Innovation, Sales, Uncategorized

Restaurant killings changed business forever

Restaurant killings changed business forever

Bob Susnjara
Daily Herald
January 22, 2018
http://www.myjournalcourier.com/news/118445/restaurant-killings-changed-business-forever

ARLINGTON HEIGHTS (AP) — Since Jan. 8, 1993, Frank Portillo Jr.’s thoughts at this time of year have been with seven people.

Portillo was president of Brown’s Chicken and Pasta when franchisees Richard and Lynn Ehlenfeldt and employees Michael Castro, Guadalupe Maldonado, Thomas Mennes, Marcus Nellsen and Rico Solis were found dead in a now-former restaurant at Smith Street and Northwest Highway in Palatine.

Accompanied by another Brown’s executive, Portillo raced to the scene from his West suburban home early that morning 25 years ago after seeing a television newscast about what happened.

The sad memories of that day can surface for him at any time, but they have been a given on Jan. 8 each year.

“I’ve never experienced such emotion in my entire life,” said Portillo, 84. “And it is just something that will probably be with me until the day I die. I don’t cry anymore. It used to be for a long time, I’d think of it and tears would come into my eyes when I would talk about it. I just remember the victims’ families. That was just heartbreaking.”

Unsolved for nine years, the case was cracked open in 2002. Former restaurant worker Juan Luna and friend James Degorski were convicted and sentenced to life in prison without the possibility of parole.

Stressing that his problems will never compare to the tragedy that struck the victims’ families, Portillo found himself trying to cope with the murders while running a popular restaurant chain that suddenly found itself in a financial free fall. After the killings, the company saw two consecutive years of more than 30 percent sales declines.

Crisis communications experts and major vendors urged Portillo to change the eateries’ name in hopes of turning around the business, said his daughter, Toni.

He refused out of loyalty to John Brown, whose first fried chicken restaurant opened in Bridgeview in 1949. Portillo partnered with Brown to start franchising the eatery in 1965. Brown died about a month before the Palatine killings.

“He figured it was disrespectful,” said Toni Portillo, who became company president in 2006 and served in that capacity until an investment group bought Brown’s in a bankruptcy auction four years later. “If we had to do it all over again, we should have changed the name. And my dad and I talk about it a lot.”

The murders ended a 20-year period of growth for the chain. From the early 1970s until 1993, the chain expanded to about 300 locations in 13 states, Toni Portillo said.

But restaurants started to close amid eroding sales after Jan. 8, 1993, which the Portillos blamed in part on the stigma from what commonly has been called the “Brown’s Chicken massacre.” Customers voiced fears about visiting the restaurants at night.

Today, the chain is down to 23 restaurants, all in Illinois, according to its website.

The Portillos estimate at least 3,000 people were affected by the closures, a figure they base on a typical number of employees, franchisees and their families. Brown’s filed for bankruptcy in 2009 and it was scooped up by Pop-Grip LLC for $585,000 in 2010.

“It was a terrible tragedy,” Frank Portillo said, “and the business people that owned Brown’s (restaurants), they had nothing to do with the tragedy, but yet their investments got hurt pretty bad.”

Despite the company’s struggles, Brown’s remains in Palatine. Portillo said it was important to him and many customers to keep a location in the suburb, so another Brown’s opened in 1995 near Hicks Road and Northwest Highway.

Michael Halter and a partner bought the location in 1998. He said he’s asked every day whether his restaurant is the site of the killings.

“It’s still in people’s minds,” he said, adding that the restaurant has done well over the years, thanks to a loyal clientele.

David Henkes, senior principal at food-service research firm Technomic Inc., said Brown’s now is considered a “minor chain” in the restaurant industry. It ranked 831st among the 1,500 chains followed by Technomic in its latest report from 2016, and it has fallen from a $36 million business in 2001 to about $24.3 million in sales two years ago.

Chicago-based Technomic’s research shows Brown’s sales have declined by a half percent annually between 2013 to 2016, a time in which fried-chicken restaurant revenue has been rising overall.

“Listen, what’s done is done and they are where they are,” Henkes said. “That was 25 years ago, so there’s a lot of consumers who weren’t even born then. Look at a lot of the millennials and the Gen Y’s — that ‘93 is ancient history for a lot of them.”

Toni Portillo said she now believes it was for the best Brown’s was acquired by Pop-Grip, allowing her father to enjoy retirement with his wife of 66 years, Joan. Frank Portillo said the murders on Jan. 8, 1993, led him to become a good-government crusader who pushed for tougher gun laws.

“It made my dad a different person,” Toni Portillo said.

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Filed under Bankruptcy, Chicken, Financial Activity, Sales, Uncategorized

Jack in the Box flirts with cannabis culture, but don’t expect other big names to follow just yet

Jack in the Box flirts with cannabis

Angelica LaVito
© 2018 CNBC LLC. All Rights Reserved. A Division of NBCUniversal
https://www.cnbc.com/2017/12/22/jack-in-the-box-flirts-with-cannabis-culture-but-big-names-may-not-follow.html

  • Jack in the Box teams up with Merry Jane, a weed-focused online publication.
  • The two are launching the Merry Munchie Meal to celebrate recreational pot becoming legal in California.
  • Big brands have largely stayed on the sidelines of the marijuana debate.
  • The majority of Americans support legalizing weed, but consumer brands want to avoid backlash from opponents

Jack in the Box is flirting with marijuana culture in its latest venture.

The fast-food chain is teaming up with Merry Jane, a weed-focused online publication, to launch the Merry Munchie Meal in celebration of recreational pot becoming legal in California come the new year. The bundle includes a curated selection of what the restaurant says are its “most craveable and snackable” products.

Jack in the Box already offers Munchie Meals on its late-night menu. Teaming up with a marijuana-centric website makes a subtle hint more overt. However, the promotion is relatively small: It will only be available in three Long Beach restaurants for one week.

Jack in the Box has teased the concept before in its advertising, so the move is not entirely shocking. However, a major restaurant chain attaching its brand to marijuana suggests the once-taboo topic is becoming mainstream enough to adopt. But don’t expect to see the Golden Arches go green anytime soon.

“I don’t want to say absolutely not, but most chains at their heart are at least financially conservative, if nothing else,” said David Henkes, principal at Technomic. “They don’t want to jump into an issue where they can risk facing consumer backlash.”

Eight states and the District of Columbia have legalized small amounts of marijuana for adult recreational use, according to the National Conference of State Legislatures. Support for marijuana hit its highest level in nearly five decades this year, with 64 percent of Americans saying it should be made legal, according to a Gallup poll.

Despite growing acceptance, big brands have largely shied away from the subject. Most chains are probably already considering ideas, said food-service trend expert Darren Tristano. Marijuana-infused marketing could attract coveted millennials, he said, but concerns over stoned driving could stall any action just yet.

At their core, chains aim to appeal to as many people as possible, meaning they’re not likely to adopt any trends until they’re truly mainstream. So even as more states legalize pot and more people grow comfortable with the idea, it could be a while before big names align their brands with marijuana, let alone start using it in their products.

“I think restaurants are going to learn their way into it,” said Ken Harris, managing partner at Cadent Consulting Group. “Nobody wants to bet everything into this particular product association, but if there is a commercial value to be gained, I think companies will try and learn the best way to approach.”

Constellation Brands, which sells Corona beer in the U.S., shocked the food and beverage world when it announced in October that it would take a stake in Canopy Growth Corporation, the world’s largest publicly traded cannabis company. The two plan to develop, market and sell cannabis-infused beverages.

Brewers may have more at stake to lose. Studies have suggested that legalizing weed may hurt beer sales. Food may have more to gain, since marijuana tends to be correlated with eating more.

Still, a major restaurant like Jack in the Box experimenting with marijuana shows how acceptance is becoming fairly mainstream quickly, Henkes said. It also suggests that other names are going to have to consider how they plan to address it, if at all.

“These are issues the restaurant industry, I think, are really going to struggle with over the next couple of years and are going to need to figure out which way they’re going to go with this,” he said. “It’s still early, and it’ll be interesting to watch because this is something the top 100 chains could take probably 100 different approaches to.”

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Filed under Cannabis, Fast Food, Future Plans and Announcements, Limited Time Offers, Marijuana, Menu, Menu Trends, Promotions, Uncategorized, Weed

New York City once repelled fast-food chains. Now it is their hottest market

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By Aaron Elstein
http://www.crainsnewyork.com/article/20171106/SMALLBIZ/171109948/new-york-city-once-repelled-fast-food-chains-now-taco-bell-chik-fil-a-and-more-think-its-the-place-to-eat-fast-food

The busiest place in town during lunch hour is the Chick-fil-A at the corner of West 37th Street and Sixth Avenue, where a fried chicken sandwich is sold every six seconds. To keep the frenzy from turning into a free-for-all, staffers are trained to be scrupulously polite. “I always ask them, ‘Did you bring your smile to work today?'” said the restaurant’s owner, Oscar Fittipaldi, who opened the Atlanta-based chain’s first standalone New York outpost two years ago.

The Garment District franchise sells more than 3,000 sandwiches a day, often with a side of waffle fries, and generates about $13 million in revenue, Crain’s estimated based on data from Fittipaldi. That means it sees the same revenue as Balthazar, the chic SoHo brasserie where the average check is $70, nearly seven times a typical Chick-fil-A tab.

The company wouldn’t comment on Fittipaldi’s revenue, but his success is clearly drawing a slew of followers. Chick-fil-A has plans to open roughly 12 more restaurants in the city, starting next year with a 5-story, 12,000-square-foot emporium in the Financial District. In September Taco Bell announced plans to triple its current 25-store city footprint, and Five Guys, which has grown to about 20 restaurants here since 2009, will soon be opening another one near Fittipaldi’s Chick-fil-A.

New York City is quickly becoming the capital of fast-food nation. More chains are moving in to replace diners and other independent restaurants forced out by relentlessly rising rents. Although many chains have broadened their menus and are experimenting with fast-casual dining, the bread and butter for most remains fried meat and a hefty soft drink.

“Fast-food chains used to draw a skull and crossbones around New York when they were looking for places to expand,” said Gary Occhiogrosso, who runs consulting firm Franchise Growth Solutions. “Now they all want to be here.”

In 2008 the Center for an Urban Future began tracking the growth of local chain retailers and restaurants, and counted about 5,400 city locations. By last year the figure had grown by more than a third, to 7,300. What struck Executive Director Jonathan Bowles was that one sector was responsible.

“All the growth is in food,” Bowles said.

Today New York is home to 3,419 chain-restaurant locations, according to the Department of Health. Leading the march is Dunkin’ Donuts, which has 596 city stores, a 75% increase since 2008. Over the past four years, meanwhile, the number of independent restaurants has declined by 8%.

Chain ganging
While chains still represent a minority of the city’s 26,546 restaurants and bars, their growth is startling because fast-food purveyors have been a popular punching bag for city officials for more than a quarter century. Former Mayor Michael Bloomberg banned trans fats from cooking oils and forced fast-food restaurants to post calorie counts for all menu items so people could better understand the health implications of what they were eating. Earlier this year the city also required restaurants to post sodium content.

Gov. Andrew Cuomo targeted the industry with legislation raising the minimum wage for fast-food workers until it reaches $15 per hour at the end of next year. And Mayor Bill de Blasio has singled out fast-food companies, claiming they are especially exploitive of their 65,000-strong New York workforce.

“If you want an example of how the 1% have gotten wealthier on the backs of working people, here you have it: the fast-food industry,” he said last year.

So why are these restaurants growing in such a seemingly hostile environment? Turns out, the environment isn’t so hostile after all.

A record 4.4 million New Yorkers are employed, and many want something fast and cheap for lunch. Tourism has doubled in the past 20 years, to more than 60 million, and many visitors look for familiar fare to munch on. And while there appears to be a glut of fast-food restaurants across the country—which experts see as a growing threat to the industry as a whole—New York is still relatively underrepresented. According to the Department of Labor, only 2% of the city’s private-sector employees work in limited-service restaurants, compared with 4% nationally.

“There are some big opportunities for fast food in New York because foot traffic is tremendous,” said David Henkes, a senior principal at consulting firm Technomic. “For the chains, premier locations here are all about showing their colors and strength.”

Those premier locations don’t come cheap, but fast-food joints are well-positioned to pay the rent because many of the busiest locations are company-owned or controlled by large operators. The city’s leading Wendy’s franchisee, for example, is The Briad Group, a New Jersey–based firm with 21 locations in the five boroughs, plus about 60 TGI Fridays and at least two Hilton hotels.

Fast-food restaurants are also expanding to create more locations to distribute their food to home-delivery outfits like UberEats and Seamless, said Nick Colas, co-founder of market analysis firm Datatrek Research. “The best way to get orders quickly to people who use these services is to have restaurants scattered around the city,” he said.

That growth is not only changing city storefronts; it’s also making New York’s traffic worse. Because fast-food restaurants often have little storage space, they require frequent food deliveries, which means more trucks on the streets. Mark Solasz, a vice president at Master Purveyors, a Bronx-based firm that supplies meat to about 400 restaurants, including local chains such as burger spot J.G. Melon, said the only way he can cope with soaring demand is by deploying bigger vehicles. “We’re sometimes doing three deliveries a day,” he said. Last month the mayor responded to the growing crush by announcing a pilot program banning deliveries on the city’s most congested streets during morning and evening rush hours.

At the same time, overall restaurant-industry sales are stagnating, so the name of the game is to seize market share from rivals. The environment plays to the strength of fast-food giants with vast marketing resources and purchasing power. And it helps explain why share prices of McDonald’s and the company that owns Burger King and Popeyes are up 53% and 49%, respectively, over the past 12 months.

In addition, steakhouses catering to the expense-account set have struggled: Del Frisco’s stock is down 2%. “Momentum is really on the side of quick-service restaurants,” Henkes said.

Before the Big Mac
Fast food came to New York relatively late. The first McDonald’s in Manhattan, at the corner of West 96th Street and Broadway, did not open until 1972, seven years after Wall Street bankers took the company public. The response was rapturous.

“A rush of pleasure surges through my body as it makes contact with my tongue,” a Village Voice reporter wrote. “The ecstasy is complete as I swallow the first bite of a Big Mac.”

The thrill didn’t last. In 1974 McDonald’s attempt to open an Upper East Side location was greeted by a group called the Friends of 65th Street, who gathered 15,000 signatures demanding the Golden Arches stay out. The New York Times wrote a disapproving editorial, and McDonald’s slunk away. “For the first time, we were on the defensive,” an executive said, according to John Love’s book, McDonald’s: Behind the Arches.

That was just the beginning of fast-food’s woes in New York. In 1986 McDonald’s agreed to begin disclosing nutritional information after state Attorney General Robert Abrams began investigating how the company marketed its McNuggets. Burger King followed in 1991, under pressure from the Dinkins administration’s Consumer Affairs commissioner, Mark Green. The 2004 movie Super Size Me also caused a big stir by documenting how filmmaker Morgan Spurlock gained 24 pounds after exclusively eating at McDonald’s for a month.

Fast food has long been linked to ill health. But it looks as if calorie postings are not doing much to stem demand. In a study last year, researchers at New York University found that only about 1 in 12 customers chose a healthier option after seeing calorie counts on fast-food menus.

“Dietary changes are more difficult than anything we’ve tackled,” said Beth Weitzman, an NYU professor of public health and policy. “We all really struggle to find what’s right.”

But even as scores of Burger Kings and McDonald’s set up shop in the city, other chains decided coming here wasn’t worth the bother, especially since it was tough to find enough space to accommodate their restaurants’ cookie-cutter formats.

“New York, especially Manhattan, was seen as just too hard,” recalled Lisa Oak, a former executive in charge of real estate at Subway.

But in the 1990s, the sandwich chain took a leap and moved into Manhattan even though it meant squeezing into storefronts as small as 300 square feet. There are now around 140 Subways in Manhattan, plus about another 300 throughout the rest of the city.

“People who lived in the suburbs and worked in the city were waiting for us,” Oak said.

In short order the rush was on, led by upstarts challenging the established chains. In 2003 Chipotle Mexican Grill debuted in Manhattan, and the next year restaurateur Danny Meyer opened the first Shake Shack, in Madison Square Park. In recent years the old warhorses have counterattacked. The number of Popeyes in the city has grown by 60% in less than a decade, to 90. Arby’s, which opened its first New York location in 1980, in Penn Station, expanded into Brooklyn in 2010, and a spokesman said, “We believe Manhattan and the boroughs are prime for future development.” The Checkers burger chain has doubled its footprint in the city over the past five years, according to Bowles’ research, to 37 locations.

Meanwhile, some independent restaurateurs have learned that the best way to fight the big chains is to start their own.

Made to order
In 2012 Danny Hodak opened Taboonette, a fast-food offshoot of Taboon, the full-service restaurant he runs in Hell’s Kitchen. Inspiration came from listening in his car to McDonald’s founder Ray Kroc’s memoir, Grinding It Out.

“I loved systems and finding procedures that solved problems,” Hodak said.

Today Taboonette does great business from its location near Union Square because the kitchen can serve up restaurant-quality kebabs or a falafel dish with a side of rice, salad and a Yemeni hot sauce called zhug in just three minutes. It costs about $13, which is considerably more than what most fast-food outfits charge for meals. With his 900-square-foot space generating $1.8 million in revenue, Hodak plans to start looking for franchisees to spread his concept around Manhattan.

“I feel a real sense of urgency because so much competition is coming,” he said.

Indeed, many fast-food giants are trying to mimic Hodak’s success and capitalize on changing tastes by offering high-end fast food. Several of the Taco Bell restaurants coming to the city will have a cantina format, in which alcohol might be served and diners will be invited to linger. For his part, Hodak plans to take a page from the big players and install a kiosk to take customer orders in a bid to make lines move faster.

Across the city, fast-food restaurateurs are installing automated kiosks at a rapid rate to replace human order-takers, whose wages are rising. At Shake Shack’s 19th and newest location in the city, on Astor Place, customers can place orders only via kiosks, though employees, dubbed hospitality champs, are on-site to help tech-challenged diners use the devices. Automation explains why employment growth at fast-food places has been cut in half over the past year and is running two-thirds below its 2011 rate, according to state Labor Department data.

“While new limited-service restaurants continue to open in the city,” said Andrew Rigie, executive director of the New York City Hospitality Alliance, “employment growth in the sector has increased at a much slower pace since New York started its minimum-wage experiment.”

Demand for kiosks means more work for Alejandro Swaby, director of sales at tech-services firm Cervion Systems. He charges $149 a month to rent a kiosk—”Equal to 15 sandwiches,” he said—and believes the devices have potential beyond fast food. He is talking to full-service restaurants about installing them at their bars to make it easier for diners to order a snack while waiting for a table. Swaby said he much prefers the pizza at Campania on his native Staten Island to any chain’s and sees kiosks as a way to help independent operators maximize profits as fast-food giants muscle in.

“I’m not anti-employee at all,” he said, “I’m pro–independent restaurant.”

The rising minimum wage is also opening doors for Avi Sharon, who runs a produce wholesaler in Long Island City called Adams Apple. After selling commercial time on Howard Stern’s radio show and cars in California, Sharon took over his father’s business serving mom-and-pop stores three years ago and invested $200,000 in machinery that peels onions, dices tomatoes and cuts carrots. He now supplies such fast-food restaurants as Wok to Walk and Maoz Vegetarian, a Mediterranean-themed chain.

“With the minimum wage going up, I figure there’s no way a fast-food place can sell a burger for $2.99 unless they hire someone like us,” said Sharon, who is planning to buy another $400,000 worth of equipment.

Greasy gourmand
Mike Abrusci, 29, is a native suburbanite who likes stopping by the nearest Taco Bell after gigs at comedy clubs before heading to his home in Ridgewood, Queens.

On a recent afternoon at the Union Square location, Abrusci ordered a Crunchwrap Supreme filled with guacamole and potatoes, which he described as “a quesadilla on steroids,” and a 7-Layer Burrito for later. His bill rang up to $14.

Growing up in Central Islip, Long Island, Abrusci and his buddies would hang out at Taco Bell after school. He loves the city and its variety of restaurants, but fast food fits his budget, and hitting the familiar chains has proved reassuring.

“One day I was feeling anxious about being in the city. I went to a Target, walked around and felt better,” he said. “Taco Bell does the same thing for me.”

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Filed under Chicken, Fast Casual, Fast Food, Fries, Growth, Health, Quick Service, Revenue, Sandwiches, Technology, Uncategorized

Coors Light has had a rough year, but not as bad as Bud Light

Dave blog 2

By Greg Trotter
http://www.chicagotribune.com/business/ct-biz-miller-coors-light-beer-decline-20171026-story.html

Coors Light, the second-best-selling beer in the U.S., is having a rough year.

The amount of Coors Light sold in stores in recent months has declined at a faster rate than even its slide of recent years, according to scan data and industry experts. The good news for Chicago-based MillerCoors? At least for now, Bud Light, the top-selling beer in the country made by competitor Anheuser-Busch InBev, is in even steeper decline.

Premium light beer, as it’s called in the industry, peaked in 2007 and 2008. Since then, many American drinkers have turned toward craft beer and Mexican imports; others have drifted into wine and spirits.

Make no mistake: MillerCoors and Anheuser-Busch InBev still sell an enormous amount of light beer in the U.S., just not as much as they once did. Combined, the two beer giants — which sell the vast majority of light beer in the U.S. — are down about 26 million barrels in shipments to wholesalers since 2008, according to figures provided by Beer Marketer’s Insights, an industry trade publication.

“They’re getting hit from all over. They’re really taking a lashing,” said Vince Trunzo, co-owner of Affiliated Marketing, a managing company of about 350 liquor stores in the Chicago area, including Armanetti, Miska’s and Cardinal stores.

Trunzo estimated that sales of premium light beer have been down about 4 to 5 percent a year in his stores. Meanwhile, sales of wine, spirits and craft beer have increased. Customers who used to buy a 24-pack of Coors Light are now getting a 12-pack — along with a sixer of craft beer, Trunzo said.

Trunzo said he’s not devoting any less shelf space to MillerCoors products just because the light beer is in decline.

“MillerCoors has been a good partner for many years. We’re not going to kill ’em because they’re going through a little struggle,” Trunzo said.

MillerCoors executives declined to comment during the quiet period leading up to parent company Molson Coors’ Wednesday earnings release.

But in a recent post on the company blog, MillerCoors noted that Coors Light case volume was down 3.4 percent year-to-date through Sept. 30, according to Nielsen data, compared with Bud Light, which was down 5.7 percent over the same period. Chief Marketing Officer David Kroll called it a “challenging year” for Coors Light in the blog post but said he expected next year to be better because of improved marketing and packaging.

To help offset such sales declines, Anheuser-Busch and MillerCoors have both acquired craft breweries and introduced new brands in recent years. MillerCoors plans to roll out Two Hats, a fruity light beer aimed at millennials, and Arnold Palmer Spiked Half and Half early next year. MillerCoors also recently struck a 10-year deal to import and market Sol, the company’s first Mexican import beer.

There are obvious success stories in MillerCoors’ vast portfolio: Blue Moon keeps rising despite an overabundance of craft competitors. Leinenkugel had one of its best summers ever. Coors Banquet continues to grow. Hamm’s is going great as the hipster beer of the moment.

Still, it’s unclear at this point how MillerCoors will reach its publicly stated goal of revenue growth by 2019 if its two top-selling beers continue their slow descent.

Together, Miller Lite and Coors Light represent about 57 percent of the company’s business, said Eric Shepard, executive editor of Beer Marketer’s Insights.

“The numbers are the numbers. They’re going to have a very, very difficult time making up that volume,” Shepard said.

The future for light beer doesn’t look much brighter in bars and restaurants than it does in stores. On-premises sales of domestic light beer are projected to decrease another 1.2 percent this year, following five straight years of decline, according to data from Beverage Marketing Corp.

One exception to the domestic light beer fizzle: Michelob Ultra Light, owned by Anheuser-Busch, has been quietly blowing up, growing sales by double-digit percentages.

“To some degree, growth of one is coming at the expense of the other. It’s hard to grow two struggling brands in a shrinking category,” David Henkes, senior principal at Technomic, a Chicago-based market research firm, said of Miller Lite and Coors Light.

At Nisei Lounge, a beloved Wrigleyville dive bar, Miller Lite remains the top-beer, said Nisei Lounge beer buyer Pat Odon.

But what’s selling most on draft reflects how times and tastes have changed.

“Consumers at this specific bar have no interest in macro beers on draft, except Miller High Life,” Odon said. “On draft, people want IPA, IPA, IPA.”

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Filed under Alcohol, Beer, Craft Beer, Revenue, Sales & Profits, Uncategorized

Technomic’s Take: The Changing Face of Foodservice Purchasing

Dave_articleBy David Henkes, Senior Principal on August 17, 2017
https://www.technomic.com/newsletters/technomics-take/changing-face-foodservice-purchasing

Independent restaurants have been central to the success of both foodservice distributors and food and beverage companies serving the industry. They are more profitable (mostly due to inefficiencies of the purchase process and pricing practices that aren’t transparent), and their health has been a stabilizing force in an industry where many chains (particularly large casual-dining chains) have struggled to grow as saturation, value issues, competition and lack of differentiation have impacted their success.

However, while independents are generally healthy (relative to the rest of the industry), distributors and manufacturers cannot assume that these operators will continue to drive incremental profitability. As costs increase at the operator level, due to commodity swings, labor costs, rent and other input costs that continue to rise, operators are increasingly looking for options that are perceived to save them. As a result of this changing nature of foodservice purchasing, Technomic estimates that there is $1 billion to $2 billion in additional manufacturer profitability at risk over the next five years. This will be driven by the following:

Penetration of GPOs is continuing across all foodservice segments, but critically we see that many GPOs are now focused on growing share within the independent restaurant segment. Recent Technomic research indicates that nearly 14% of independent operators are active within GPOs and a larger number than ever before are considering joining in the near future.

While chains don’t have the same growth trajectory that they did several years ago, they continue to add units, and smaller midsize chains continue to excel. Most of these operators negotiate directly and receive contract pricing, further reducing the profitability of the market place.

Most major noncommercial segments (not only healthcare, but colleges, B&I, etc.) are heavily driven by contract pricing. For most of these segments, actual discretionary purchases that are not part of a GPO or foodservice management firm contact amount to 10% or less of their purchases.

These dynamics have several major implications for the foodservice industry, most notably:

  • Distributors and manufacturers have less leverage as chains and group purchasing organizations become power buyers. To a large degree, the growing nature of contracted procurement in foodservice has prompted many of the mergers and acquisitions over the past several years.
  • Distributor economics don’t work as well with contracted business. Most of this is cost plus and distributors, who covet the higher profitability of the true independent operator, need to become much more efficient in terms of logistics and drop sizes in an environment where the margin is generally under 10%.
  • GPOs have taken their negotiated prices meant for certain customers and have extended them into adjacent operator segments, often without manufacturer or distributor approval, further suppressing margins throughout the value chain.
  • The nature of the operator sales call, particularly for manufacturers, changes to one where they are not truly selling their products or solutions, but working to ensure compliance with a contract. It also impacts the fees and compensation that manufacturers are willing to pay to brokers and distributors, given that manufacturers often perceive selling to a GPO account to be less valuable to the manufacturer than bringing in a higher-margin independent account.

Technomic predicts that over 70% of the foodservice purchases will be contracted within the next five years (up from about 65% today) and the industry needs to be prepared as this shift continues. Margins, which have already been compressing over the past several years, will continue to tighten, and forward-thinking companies should strategically address this as part of longer range strategic planning and work to manage the change proactively to ensure the continued health and strength of the business. To do so, Technomic recommends that companies:

Fully understand the sales and volume incrementality of GPO and other contract business relative to the lower overall margin.
While lower margin, contracted business can be desirable if it provides incremental sales or volume opportunities. Manufacturers and distributors must understand and view GPOs and other contracted business in light of strategic priorities and which segments, products and entities will drive growth. While often lower margin, contract business can benefit distributors by increasing drop size and giving primary distributors a bigger share of purchases.

Understand and expand upon your leverage.
Contracted business is often viewed negatively because of the perceived loss of control of the operator. However, understanding key leverage points is critical, particularly for manufacturers to create pull at the operator level to avoid the commodity trap.

Audit contract compliance.
Another reason that GPOs and other contracted business is often viewed negatively is due to compliance and the complex nature of the purchase. Auditing and managing trade-spending programs, understanding true cost to serve and having dedicated personnel to oversee contract compliance are all best-in-class methods of reducing the leakage of funds that can have a negative impact on profitability.

Construct proper guardrails to ensure that higher margin business remains profitable.
Contract pricing should only be used for the entities for which that pricing is intended; manufacturers and distributors must ensure that guardrails are in place to avoid price-extendibility, where favorable pricing based on the contract is offered to other operators.

Realize that sales force realignment may be necessary.
As the industry heads toward higher share of contracted business, the nature of the sales call is changing. This may necessitate deployment of sales as activities change from demand creation to driving compliance.

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Why Hasn’t McDonald’s Gotten Rid Of Artificial Additives In The Big Mac’s Special Sauce?

It seems like every day we hear about yet another fast food chain that’s cleaning up this or that menu item to appeal to health-conscious consumers, and McDonald’s is no different: only last week, the Golden Arches announced 100% antibiotic-free McNuggets, and that it would remove high fructose corn syrup from its buns. But there’s still one popular item on its menu that contains a slew of artificial preservatives, and that same HFCS: the Big Mac’s special sauce. What gives?

The trend these days is all about simplifying recipes and cutting down the ingredients lists, but as The Street points out, McDonald’s famous “special sauce,” which is slathered on every Big Mac, has a whopping 32 ingredients.

Included in that list is high-fructose corn syrup and as many as five artificial preservatives, including potassium sorb ate and caramel color. Those are the kinds of additives one might have expected in the 1980s, but not in the current food mood guided by health-conscious consumers.

The Street cites an insider who says McDonald’s is looking for ways to improve its ingredients across its menu, but there’s not going to be a cleaner special sauce that’s free of artificial ingredients coming anytime soon. And when asked by The Street if HFCS and preservatives would be removed from special sauce this year, a McDonald’s spokeswoman echoed the company’s press release from last week regarding the changes to its buns and McNuggets.

So why not jump on the healthy bandwagon and just ditch all that stuff? One reason could be the iconic status of special sauce, experts say, which plays a large part in making the Big Mac the Big Mac. The company might not want to risk ticking off dedicated customers if they get the reformulation wrong, for example.

“I suspect that they’re working to make sure the flavor profile doesn’t change on that sauce,” Technomic Advisory Group Senior Principal David Henkes told The Street. “Making menu items healthier is important, but for such an important part of the menu as the Big Mac, I’m sure they want to make sure it’s right.”

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