euromonitor fast food restaurants briefing

A NEW ERA OF GROWTH AND COMPETITION: GLOBAL CONSUMER FOODSERVICE IN 2015 AND BEYONDAugust 2015

INTRODUCTION

GLOBAL PERFORMANCE

THE WAY FORWARD

COMPETITIVE LANDSCAPE

REGIONAL HIGHLIGHTS

CASE STUDIES

Euromonitor International PASSPORT 3CONSUMER FOODSERVICE: A NEW ERA OF GROWTH AND COMPETITION - GLOBAL

CONSUMER FOODSERVICE IN 2015 AND BEYOND

Disclaimer

Much of the information in this

briefing is of a statistical nature and,

while every attempt has been made

to ensure accuracy and reliability,

Euromonitor International cannot be

held responsible for omissions or

errors.

Figures in tables and analyses are

calculated from unrounded data and

may not sum. Analyses found in the

briefings may not totally reflect the

companies opinions, reader discretion is advised.

Global consumer foodservice

in 2015 can be characterised by

strong growth at the global

level, with significant

competitive challenges in major

markets. Operators struggled

with changing consumer

preferences, macroeconomic

pressures, and the constant

threat of new and mounting

competition, particularly from

local operators. Nonetheless,

2015 was also a year of new

opportunitiesnew long-term growth markets, new growth

categories, and new demand

drivers in key markets.

Scope

INTRODUCTION

This report covers new product development and new concepts in all categories of global foodservice.

All values are in US dollars, at fixed 2014 exchange rates, unless otherwise specified.

Historical value data are expressed in current terms; forecast data are expressed in constant terms.

Consumer Foodservice by Type

100% Home

Delivery/ Takeaway

Cafs/ Bars

Full-Service Restaurants

Fast Food

Self-Service

Cafeterias

Street Stalls/ Kiosks



Key finding Insights

Steady growth,

with local

turbulence

Global growth at the highest level is steady, showing an improvement over previous years.

However, these figures camouflage very real challenges facing operators in nearly every

major market, from the fast-casual shift in the US to the rise of powerful local competitorsand demand for local cuisinein key emerging markets.

Long-term

prospects have

shifted

Global growth prospects have changed along with competitive conditions. China offers very

real opportunities, but they are strongest in local cuisines rather than in formerly dominant

growth categories like chicken and burger fast food. Operators are now re-evaluating their

long-term strategies, focusing on a broader range of long-term targets in Latin America,

Asia Pacific, and the Middle Eastern Gulf States.

High value is

paramount

One strategy that has become somewhat universal across regional barriers is the need to

offer high-value in every category and at every price-point. The pursuit of value is now a

key demand driver in emerging and developed markets alike, as consumers limited by

price-sensitivity, macroeconomic pressures, or low disposable incomes seek to make the

most of each of their dining purchases.

Local cuisine is

up next in

chains

Demand is growing for chained versions of local cuisines, creating powerful long-term

opportunities in some of the most important markets. This has created a challenge for

leading multinational operators which have built their positioning on international appeal.

Online, mobile,

delivery for all

Global consumers are also universally looking for more convenience and more simplicity

when it comes to dining out. Online ordering, mobile payments, and delivery service are

coming to play integral roles in the dining experience, a trend that will only accelerate.

Key insights in 2015 consumer foodservice

INTRODUCTION

INTRODUCTION

GLOBAL PERFORMANCE

THE WAY FORWARD


REGIONAL HIGHLIGHTS

CASE STUDIES



The global consumer foodservice industry grew to over US$2.7 trillion in annual sales in

2014, recording its most successful year of

growth in recent history. 2014 saw real terms

growth increase to over 2%, with a further rise

projected for 2015.

This strong top-line growth camouflages some more interesting shifts in growth happening

beneath the surface. While China is still very

important in regards to the global foodservice

landscape, current terms growth in the market

continues to slow, remaining in the single-

digits in 2014, at just under 9%.

As operators have looked beyond the largest markets in Asia Pacific, much stronger growth

ha been seen in Latin America and the Middle

East and Africa, based on more stable local

economies and international investment. After

learning their lesson in China, operators are

seeking out more diverse international

expansion opportunities, particularly in

markets that are in the earlier stages of

chained foodservice development.

-1.0

-0.5

0.0

0.5

1.0

1.5

2.0

2.5

3.0

0

500

1,000

1,500

2,000

2,500

3,000

% g

row

th

US

$ b

illio

n, co

nsta

nt 2

01

4 r

sp

Global Consumer Foodservice Sales and Growth 2009-2015

Foodservice Value % Growth Year-on-year

Global growth gains momentum through 2015

GLOBAL PERFORMANCE



While traffic growth has been strong in emerging markets, ongoing stagnation in

developed markets has conspired to keep

value sales growth in check in recent years.

Value growth did accelerate in 2014, to just

over 2% in constant terms (5% in current

terms); however, growth in sales is still slower

than growth in outlets and transactions by a

significant degree.

The decline in sales per transaction has been driven by a number of trends, both in higher

and lower income markets. As more and more

lower income consumers in emerging markets

begin eating out on a regular basis, average

transaction value has moved steadily

downward. At the same time, the median

global consumer has steadily become younger,

with a lower average income and an eagerness

to try new concepts within the constraints of

affordability.

As a result, the quest for value has become a global imperative, with nearly every consumer

looking to save at a range of price points.

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

5.0

2009-2010 2010-2011 2011-2012 2012-2013 2013-2014

% g

row

th

Global Consumer Foodservice Growth 2009-2014

Transactions Outlets Value

Value growth strengthens but still lags behind outlets and traffic

GLOBAL PERFORMANCE



Asia Pacific remains the epicentre of the global foodservice industry, contributing 41% of total spending and double that of the next largest region. Asia Pacific is home to more than half of the global population,

and while income levels remain modest on average, dining out is a very important part of the social

landscape. This is particularly true in China, where a wide variety of affordable dining options can be found,

even in relatively small villages. As a result, per capita traffic levels are quite high compared to other

markets with similar levels of income.

That said, the fastest growth opportunities have moved elsewhere. Latin America and the Middle East both saw double-digit value growth in 2014, albeit from much smaller bases. Both have become important long-

term growth targets for multinational chains, which are looking to diversify their holdings. The lack of well-

developed traditional informal eating-out cultures in both regions (as opposed to fine dining) has provided

scope for rapid expansion in many markets, as international chains flock to satisfy rising demand.

0

2

4

6

8

10

12

14

16

0

200

400

600

800

1,000

1,200

Asia Pacific North America Western Europe Latin America Middle East andAfrica

Eastern Europe Australasia

% v

alu

e g

row

th

US

$ b

illio

n

Consumer Foodservice Value Sales and Growth by Region in 2014

Foodservice Value in 2014 % Growth 2013/2014

Asia Pacific leads in size, while Latin America dominates growth

GLOBAL PERFORMANCE



0 2 4 6 8 10 12 14 16

India

Peru

Sweden

New Zealand

Brazil

UAE

China

South Africa

Vietnam

Venezuela

% y-on-y growth

Fastest Growing Major Markets in Constant Terms 2013/2014

As chained operators attention moves toward emerging markets for strategic reasons, the balance of global growth is shifting in terms of share as well. China is not only the largest foodservice market, but it is

growing its share significantly each year, despite any slowing in its growth rate. Meanwhile, every

developed market among the top 10 is losing ground nearly as quickly.

It follows that the fastest growing major markets heavily favour emerging regions, each of which offers opportunities for global chains.

The balance of growth shifts even further toward emerging markets

GLOBAL PERFORMANCE

Largest Foodservice Markets by Value in 2014

Market Value % Share Change

China 560,431 20.7 0.7

USA 506,217 18.7 (0.4)

Japan 204,073 7.5 (0.3)

Brazil 144,606 5.3 0.3

India 102,773 3.8 0.2

Spain 99,755 3.7 (0.2)

Italy 98,239 3.6 (0.3)

UK 93,080 3.4 (0.2)

South Korea 72,618 2.7 -

France 63,672 2.3 (0.2)



Category growth in 2014 told a complex story, highlighting shifting growth patterns in some of the

largest global markets. While street stalls/kiosks

and fast food quick, affordable, informal and

typically inexpensive options were still among the

fastest growing categories, full-service restaurants

outperformed fast food for the first time since 2010.

As with nearly all things global foodservice, this shift can be traced back to China. In 2014, full-

service restaurants grew faster than in 2013, by

9%, while fast food faltered, due to a number of

high-profile food safety and public relations

scandals. While these scandals had particularly

strong consequences for the largest chains, they

also undermined public trust in chained fast food

as a whole.

Outside China, fast food continued to outperform full-service. Along with very high growth rates in

street stalls/kiosks, these figures serve to reinforce

the idea that consumers all over the world, both in

higher and lower income areas, are being drawn to

lower price points, a high value positioning and

more flexible formats.

0 2 4 6 8 10

Cafs/Bars

100 % HomeDelivery/Takeaway

Self-ServiceCafeterias

Fast Food

Full-ServiceRestaurants

Street Stalls/Kiosks

% y-on-y growth

Global Foodservice Value Growth by Category 2013/2014

Global Excluding China

Category growth highlights quick and affordable in most marketsGLOBAL PERFORMANCE



Standalone outlets continue to be the dominant presence in global foodservice, at 76% of 2014 value. However, the global share of non-traditional locations is growing, increasing from less than 21% to 24%

over the last decade. This growth has been led by retail locations, which are popular both in developed and

emerging markets. In the former, such locations keep costs low by requiring less extensive build-outs and

often smaller footprints. They also allow chains additional expansion opportunities in markets nearing

saturation. In developing countries, retail locations are in high demand as developments like shopping malls

offer higher security, clean conditions, in some cases air conditioning, and a social, high-traffic

environment. These locations also allow operators to reach a large pool of potential consumers, as they

often serve as gathering spaces patronized by customers from a large surrounding radius.

In 2014, value through retail locations grew by 8%, with their strongest growth in Latin America, and the Middle East and Africa. Travel locations followed with 7% growth, while standalone lagged at 5%. Leisure

locations were the only non-traditional outlet type to trail behind standalone outlets in value growth, at 5% in

2014.

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Asia Pacific

Australasia

Eastern Europe

Latin America

Middle East and Africa

North America

Western Europe

Foodservice Value by Region and Location Type 2014

Standalone Leisure Retail Lodging Travel

Growth by location shows favour for non-traditional outlets

GLOBAL PERFORMANCE



Non-traditional service channels have been growing in popularity, as consumers seek out ways to maximise convenience and save time in

their busy schedules. The home delivery, takeaway and drive-through

channels all grew faster than dine-in in 2014 value terms, with home

delivery leading the group with 11% sales growth worldwide.

Delivery, in particular, has become a major source of focus and momentum in higher income foodservice markets, as technology has

brought unprecedented levels of access for both consumers and

restaurant operators.

This has been due in part to more widely available order-receiving technology, especially through sites like GrubHub and JustEat, but also

through access to internet-connected devices. In the highest demand

markets, such as the US, this has even led to the development of an

entirely new industry of third-party delivery businesses. These include

services like PostMates, DoorDash and UberEats, which pick up food

from restaurants and deliver it to consumers for a fee, as well as

virtual restaurants, which deliver meals without any real bricks-and-

mortar presence, and services like Blue Apron and Hello Fresh which

deliver ingredients for a home-cooked meal.

While many of these services benefit smaller operators which do not have the resources to fund their own delivery fleets, it has also helped

bring delivery to chains in unlikely categories. PostMates will begin a

delivery partnership with Starbucks in the US in late 2015.

0 5,000 10,000 15,000 20,000

Colombia

Germany

Brazil

Mexico

India

Japan

UK

SouthKorea

China

USA

US$ million

Top 10 Home Delivery Markets by Value 2014

Demand for delivery service is increasing exponentially

GLOBAL PERFORMANCE



While every global market has its own unique conditions, there have been steadily increasing similarities between what higher income, urban consumers all over the world are looking for from their dining

experiences. This has been driven by two main factors, the first being greater awareness of global trends

through the spread of internet connectivity, entertainment and social media culture that celebrates the

sharing and discussing of restaurant experiences. The second is greater access to those experiences,

through the spread of chained foodservice and rising incomes, that make purchasing them possible.

As a result, the kinds of experiences being sought out by consumers in New York and London are now closely mirrored by those in Mexico City, Tokyo, Shanghai and So Paulo. These consumers want distinct,

high-quality dining experiences that are worth talking about with friends and on social media. They want to

feel good about the value they are getting for their money. They are interested in freshness, variety of

cuisines, simplicity in preparations and flexibility in formats. Finally, they are interested in convenience and

affordable luxury, in whatever forms those two benefits may take.

While these wealthier, urban consumers are not the mass consumers in most markets, they nonetheless represent a particularly lucrative and vocal group that indicate where mass-market trends may be headed

over the long term.

New Experiences

High Quality and Value

FreshnessSimplicity

and FlexibilityConvenience

Affordable Luxury

Consumer preferences have become surprisingly universal

GLOBAL PERFORMANCE



Global growth was very strong in 2014, reaching a high of 5% with

even stronger rates expected in

2015. That said, growth for many

individual operators especially

leading fast food chains has

been challenging, as the global

growth story has been shifting

rapidly and decisively beneath

their feet. While China and the

US still offer very real

opportunities, the majority of

global growth has moved

elsewhere to Latin America,

the Middle East and Southeast

Asia. At the same time demand

has also shifted in the most

developed markets, as higher

income consumers change their

habits and seek out more

innovative options.

Steady global growth with

shifting dynamics

Other consumer preferences are shifting as well,

necessitating an evolution in

global strategies even for the

largest chains. With the need

for high value has come a

need for improvement in every

part of the dining experience.

Consumers are constantly

seeking out newer, more

interesting and more exciting

foodservice experiences, and

they want those experiences

to live up to their expectations

on every level. Ingredient

quality is as important to

consumers in China as it is in

the US and in Brazil, and

consumers extend that level of

care to evaluating every part

of the dining experience.

Better, healthier, more

modern, more convenient

Consumers all over the world are demonstrating a decisive change

in preferences. Those in higher

income, more developed regions,

such as North America and

Western Europe, have emerged

from years of macroeconomic

struggles with a new baseline

price sensitivity that demands

maximum value for all of their

foodservice purchases. In

emerging markets, a high-value

positioning is also very

appealing, as many consumers

still view chained foodservice as

an occasional indulgence rather

than a practical everyday

purchase. As a result, lower

priced, higher value categories

are gaining global share albeit

at a range of actual price points.

Opportunities are moving to the

value end of the spectrum

Key takeaways for current strategy

GLOBAL PERFORMANCE

INTRODUCTION

GLOBAL PERFORMANCE

THE WAY FORWARD


REGIONAL HIGHLIGHTS

CASE STUDIES



2014 was a strong year for global foodservice overall, but that is not necessarily indicative of

growing momentum. Rather, foodservice growth is

expected to continue at a moderate pace as key

emerging markets mature.

While value growth will continue at a rate of about 2-3% in constant terms, outlet growth and

transactions growth are both expected to slow.

This will be due in part to slowing growth in Asia

Pacific, where the double-digit growth seen over

the last decade is nearing its limits. In China, in

particular, the already vast outlet base means that

large-scale net outlet gains over the forecast period

are unlikely.

That said, this steady, stay-the-course growth and short-term improvement camouflages significant

internal upheaval in many key markets. Chained

foodservice continues to make share gains based

on advantages in marketing, site selection and

outlet design, and modern, convenient, highly

versatile categories like fast food continue to

outperform more traditional categories, like cafs

and bars/pubs.

2.0

2.2

2.4

2.6

2.8

3.0

3.2

3.4

2014/2015 2015/2016 2016/2017 2017/2018 2018/2019

% y

-on

-y g

row

th

Consumer Foodservice Growth Forecast 2014-2019

Transactions Value Outlets

Long-term growth will be steady, with no booming recovery

THE WAY FORWARD



Asia Pacific will contribute the majority of global growth over 2014-2019, with 56% of absolute foodservice value growth. China will be a major driver of that growth, despite the countrys more difficult recent market

conditions. Many other markets, including India, Vietnam, South Korea and Indonesia, will see absolute

value growth of over US$5 billion between 2009 and 2014.

Latin America will continue to be a strong source of growth as well, though the Middle East and Africa will offer the highest rate of increase, at an annual average of over 4% in constant terms. This will be driven in

large part by international operators investing heavily in key markets in the Middle Eastern Gulf states, as

well as ramped-up investment in early growth-stage markets in Sub-Saharan Africa by operators looking to

maximise their long-term growth opportunities.

Notably, a mild recovery in Western Europe will see the region bouncing back from many years of declining sales, though on the individual market level, competition for that growth will still be fierce.

0

0.5

1

1.5

2

2.5

3

3.5

4

4.5

0

50

100

150

200

250

Asia Pacific North America Latin America Middle East andAfrica

Western Europe Australasia Eastern Europe

% C

AG

R

US

$ b

illio

n

Foodservice Sales Growth Forecast by Region 2014-2019

Absolute value growth 2014/2019 % CAGR 2014-2019

Growth opportunities are still a regional game

THE WAY FORWARD



A look at projected growth in transactions per capita suggests room to grow in some key markets. For example, while China is already

the largest foodservice market in sales terms, transactions per capita

are expected to increase by a margin of 16 transactions by 2019.

While the markets largest cities are becoming quite saturated with

options, and top-line growth has slowed, there are still hundreds of

millions of lower income consumers in China who will soon be seeing

foodservice become more readily available. Growth in the country will

undoubtedly continue over the long term, though not at the sky-high

rates it once experienced. This growth will extend to other countries

in Asia Pacific as well, including Vietnam, which will show the largest

transactions per capita increase in the world over 2014-2019.

The pace of expansion in some Latin America markets is expected to be similarly impressive. Transactions in Chile and Peru will expand

by more than 20 per capita over 2014-2019. While much of this

demand will be served by very low-priced local players, such growth

suggests opportunities for chained players, which need to begin

building a presence now in order to invest in long-term growth.

Spain will also see a sizable increase over the forecast period, as economic recovery finally comes to the downtrodden market.

Consumers are beginning to feel more comfortable spending on non-

essential purchases, and are making much more frequent trips to

restaurants, in accordance with traditional Spanish culture.

0 50 100 150 200 250

Thailand

Ireland

South Korea

South Africa

Bulgaria

Portugal

China

UAE

Spain

Peru

Chile

Vietnam

Biggest Gains in Foodservice Transactions

Per Capita 2014/2019

2019 2014

Transactions per capita offer a clear view of untapped demand

THE WAY FORWARD



Global value will continue flowing toward fast food, with the category expected to see US$107 billion in new value over 2014-2019. This is being driven by consumer preferences shifting toward the more flexible, more

informal and more value-driven dining, resulting in strong growth in low-priced, limited-service categories in

developed and emerging markets alike.

That said, full-service categories are also gaining some momentum, based on rising demand in key markets in Asia Pacific and Latin America. Higher income consumers in China, Brazil and Mexico, among

others, are also seeking out chained full-service experiences that offer a cosier and more social alternative

to fast food. In particular, this trend is benefiting premium casual dining chains, such as the Cheesecake

Factory, Outback Steakhouse and PF Changs. It should be noted that more than half of the full-service

growth expected will come from China alone; however, the trend is apparent in many emerging markets.

-10

10

30

50

70

90

110

130

150

Australasia Asia Pacific Eastern Europe Latin America Middle East andAfrica

North America Western Europe

US

$ b

illio

n

Absolute Value Growth by Region and Category 2014-2019

Full-Service Restaurants Fast Food Cafs/Bars Street Stalls/Kiosks 100% Home Delivery/Takeaway Self-Service Cafeterias

Growth continues in quick and casual, but full-service is on the rise

THE WAY FORWARD



Largest Regional Opportunities by Absolute Value Growth

Region CategoryGrowth 2014-2019

(US$ mn)

Asia PacificAsian Full-Service

Restaurants132,683

Asia Pacific Asian Fast Food 24,310

North America Burger Fast Food 12,640

Latin AmericaOther Full-Service

Restaurants9,007

Latin America Bars/Pubs 8,251

North AmericaBakery Products Fast

Food7,757

North AmericaOther Full-Service

Restaurants7,050

Asia Pacific Chicken Fast Food 6,104

Asia Pacific Street Stalls/Kiosks 5,847

North AmericaNorth American Full-

Service Restaurants5,656

Local specialities will drive growth over the forecast period, particularly in Asia

Pacific, where growth in Asian concepts

will dwarf absolute value increases in all

other categories.

This represents a challenge for international operators. While there is still

plenty of room to grow in categories like

burgers and fried chicken, the potential

opportunity in serving local demand for

local cuisine is substantially greater, and

localisation of foreign brands can only go

so far.

At the same time, the quality and appeal of local chains in key markets continues

to grow, and local franchise partners are

increasingly experimenting with their own

local brands. What this means is that the

era of un-challenged growth for

international chains based heavily on

the appeal of global brands and premium

outlets is likely to be over.

Growth opportunities by size highlight a challenge for multinationals

THE WAY FORWARD



Largest Regional Opportunities by CAGR

Region Category% CAGR

2014-2019

Australasia Juice/Smoothie Bars 12.7

Latin America Juice/Smoothie Bars 11.6

Asia PacificPizza Full-Service

Restaurants11.5

Middle East and Africa Burger Fast Food 9.5

Middle East and AfricaPizza 100% Home

Delivery/Takeaway9.2

Australasia Latin American Fast Food 7.5

Eastern EuropeConvenience Stores Fast

Food7.0

Middle East and Africa Ice Cream Fast Food 7.0

Middle East and Africa Bars/Pubs 6.6

Asia Pacific Other Fast Food 6.2

Middle East and Africa Specialist Coffee Shops 6.2

A look at the fastest growing categories paints a more nuanced

picture, highlighting changes in

consumer behaviour and preferences.

From this view, it is clear that limited-

service categories are still rapidly

gaining momentum as global

consumers continue seeking out more

casual, flexible dining experiences,

and new cuisines to try.

Even more so than any particular category, though, the Middle East and

Africa stands out as the most

significant opportunity, showing high

growth rates in multiple formats and

cuisine types. This will be driven in

part by seemingly unquenchable

demand for premium international

brands, thriving dining-out cultures in

key markets like the UAE, and eager

investment from global operators

looking to diversify their presence

beyond China and Latin America.

While opportunities by rate show strength in modern formats

THE WAY FORWARD



0% 50% 100%

Asia Pacific

Australasia

Eastern Europe

Latin America

Middle East and Africa

North America

Western Europe

Standalone vs Non-Traditional: Share of Sales Growth by Region 2014-2019

Standalone Non-Traditional

0

0.5

1

1.5

2

2.5

3

3.5

4

0

10

20

30

40

50

60

70

Retail Travel Lodging Leisure

% C

AG

R

US

$ b

n

Absolute Growth and Growth Rate by Location Type 2014-2019

Absolute Value Growth 2014/2019 % CAGR 2014-2019

Non-traditional locations will continue to edge their way toward a larger share of global growth. While the transition is gradual, the share of standalone locations is predicted to decline from 76% of global

foodservice sales in 2014 to 75% in 2019.

The shift will be most noticeable in Western Europe, Eastern Europe, and the Middle East and Africa, where non-traditional locations will be responsible for more than 50% of value growth. In Western Europe,

this will be the result of operators looking to retail and travel locations as new expansion targets in overly

saturated markets. In Eastern Europe and the Middle East and Africa, such locations represent a converse

opportunity: in markets where the local foodservice industry is earlier in its development, shopping malls

and transportation hubs offer secure, high-traffic, high-prestige locations with access to higher income

consumers. Such developments are now perceived to be valuable launching pads for new concepts, with

maximum visibility for the most lucrative segments of a new markets population.

Retail and travel locations will continue to claim share

THE WAY FORWARD



Demand for online and mobile ordering and payments, as well as for increasingly convenient and accessible options for delivery, will continue to grow. In the most developed markets, operators are

experimenting with new ways technology can play a role in the dining experience for takeaway, delivery

and even dine-in customers. Some are experimenting with redefining the dining-in experience entirely,

replacing traditional servers with interactive touchscreens in full-service, or using kiosks and mobile phones

to replace counter ordering in fast food. Fast-casual dining chain Panera Bread so far offers the best

example, in which the chain is experimenting with Panera 2.0 outlets, designed to better serve modern

consumers. Customers can order online before they arrive, from touchscreen kiosks at the counter, from

traditional cashiers, or even from mobile phones while sitting at a table in the dining room.

On the customer side, this has meant that consumers are loosening up their expectations for what the experience should look like when they go to a restaurant, not just at a wider range of formats but also for a

wider range of occasions. This opens the door for operators to experiment even further with what it means

to be a restaurant, including going to such extremes as meal delivery services and even virtual restaurants,

which serve only delivery occasions and have no outlet at all. While this extreme is still very much a niche

trend, confined to major cities in higher income markets, the key takeaway is that technologys role in

foodservice is growing, and it will continue to become even more central to the experience by 2019.

Online and Mobile

Ordering

Online Ordering

Hubs

In-store Technology

Third-Party Delivery Services

Virtual Restaurants

Online, mobile and delivery demand will affect the entire industry

THE WAY FORWARD



The changes in global growth prospects may appear limiting,

but in reality they have simply

diversified. Rather than all of the

long-term opportunities being

concentrated in a handful of

markets, there are now very real

opportunities to be had in a range

of markets, categories and price

points. Latin America is still

seeing rapid growth, and the

Middle East has become a centre

for expansion for premium

international chains. Asia Pacific

offers plenty of opportunities

beyond China, including in higher

income markets like South Korea.

Meanwhile, China still offers very

real opportunities, including some

of the largest in the world in

absolute value terms.

The growth story has changed,

but opportunities still abound

Demand for online and mobile ordering, mobile payment and

convenience-based services like

delivery are coming to play a

larger role in the foodservice

landscape all over the world.

Technology has changed the

accessibility of such

programmes, making them as

much a possibility in early-stage

emerging markets as in mature

ones, and it has also changed

consumer expectations when it

comes to what they are looking

for from a dining experience.

Operators now have greater

demands on them when it

comes to such services, but

they also have greater creative

leeway when it comes to finding

new ways to implement them.

Online, mobile and delivery is

the universal future

One of the largest long-term growth opportunities in global

foodservice is in local cuisines

in emerging markets. While

there is still plenty of demand for

burgers and fries in Asia Pacific

and Latin America, consumers

who are seeing their incomes

rise and gaining more frequent

access to chained foodservice

are also driving demand for

chained foodservice versions of

their own local favourites. Asian

fast food and Asian full-service,

in particular, will offer a

combined US$167 billion in new

foodservice growth over 2014-

2019. Multinational chains are

scrambling to capture this

demand, but so far it remains

largely untapped.

Consumers want chained local

experiences too

Key takeaways for long-term growth

THE WAY FORWARD

INTRODUCTION

GLOBAL PERFORMANCE

THE WAY FORWARD

COMPETITIVE ENVIRONMENT

REGIONAL OPPORTUNITIES

CASE STUDIES



Chained consumer foodservice value is growing faster than independent with two very notable, and seemingly opposing,

exceptions: Asia Pacific and North America. In both of these

regions, the independent segment outpaced chains in 2014, albeit

for very different reasons.

In Asia Pacific, strong growth in Chinas dominant independent segment was enough to boost growth at the regional level, while

continued difficulties for leading chained concepts similarly

dragged down chained rates. It is notable that both segments in

China have seen slowing growth in recent years, but independents

saw a small growth improvement in 2014 that put them ahead.

In North America, the independent segment outperformed chains for the first time in over a decade, due to an unusually strong year.

Many factors contributed to this, including steadily building

momentum since the economic recovery, which has finally trickled

down to smaller and medium sized businesses. In addition,

interest among consumers in higher quality, more authentic dining

experiences has favoured independent outlets and boutique

chains (those with fewer than 10 outlets, which are counted

among the independent segment). Finally, especially strong

headwinds facing the largest chained players have dampened

growth in the chained category as a whole, significantly narrowing

the performance gap that has been widening for years.

-5 0 5 10 15 20 25

Western Europe

North America

Middle Eastand Africa

Latin America

Eastern Europe

Australasia

Asia Pacific

% growth

Chained vs Independent Consumer Foodservice Value

Growth in 2014

Independent Chained

The independent segment outperforms chains in two key regions




But growth by category highlights room to grow in fast food


A look at chained and independent growth in value terms shows a clearer picture of where the opportunities still lie. Despite its slowdown, fast food saw by far the largest value increase in sales for

chains 2014, at more than US$20 billion. Asia Pacific, Latin America and North America each contributed

around US$5 billion to that figure, though Latin Americas contribution was by far the most meaningful in

strategy terms. Chained fast food in the region grew by 22% in 2014, the result of strong investment by

international players looking to balance their global presence, and rapid expansion by local giants like Alsea

and FEMSA, which are fighting to get ahead of external competitors.

Chained street stalls and kiosks had the strongest performance among chained categories in rate terms, increasing by US$1.2 billion at an annual rate of 12%. 90% of this increase came from Asia Pacific and

Latin America, where chained street stalls have become a powerful way to reconcile the high appeal of

branded concepts with the lower prices and more accessible format desired by lower income consumers.

0 10 20 30 40 50 60 70 80

100% Home Delivery/Takeaway

Cafs/Bars

Full-Service

Fast Food

Self-Service Cafeterias


US$ billion

Global Absolute Value Growth by Category 2013/2014

Chains Independents



Growth was moderate to strong among the top 10 companies in 2014, led by 7-Eleven parent Seven & I Holdings at 10%. More notable than the strongest performance was the weakest. McDonalds Corp saw

just 3% value growth, alongside similar growth in outlets, citing declining guest counts, overly complicated

menus, operational inefficiencies and difficulties with declining public brand perception.

Top 10 Global Foodservice Companies by Value

CompanyValue (US$

mn)Outlets

Sales Growth

2013/2014 (%)

Outlet Growth

2013/2014 (%)

McDonalds Corp 91,605 41,767 2.8 3.4

Yum! Brands 45,811 42,463 4.8 3.6

Restaurant Brands International 24,994 18,555 6.6 3.0

Seven & I Holdings Co Ltd 21,415 55,138 10.3 5.3

Doctors Associates Inc 20,691 43,027 7.6 4.8

Starbucks Corp 19,097 21,371 9.2 7.5

Wendys Co, The 10,618 6,672 4.3 1.0

Dunkin Brands Group Inc 9,557 18,694 3.5 2.6

Dominos Pizza Inc 8,995 12,660 9.1 8.4

Darden Restaurants Inc 8,574 2,221 2.4 1.8

Moderate growth for leading chains, with one exception




The fastest growing global chains are concentrated in Asia Pacific, and overwhelmingly favour low-priced, limited-service concepts. Four of the top 10 concepts are convenience stores, and most are value players

which compete heavily on price. For example cnHLS is building its business based on the idea of offering

high-quality fast food from a Chinese company, at more competitive prices than Western chains.

Fastest Growing Global Chains in 2014 With Sales Over US$100 million

Brands Value (US$ mn)% Growth

2013/2014

Domestic

MarketPrimary Category

Ediya Espresso 372 40 South Korea Specialist Coffee Shops

CU 457 38 South Korea Convenience Stores Fast Food

GS25 646 37 South Korea Convenience Stores Fast Food

Grido 190 30 Argentina Ice Cream Fast Food

Coco 182 27 Taiwan Street Stalls/Kiosks

cnHLS 658 24 China Chicken Fast Food

Chay Si Ba Mee Kaew 149 22 Thailand Street Stalls/Kiosks

ampm 158 21 USA Convenience Stores Fast Food

Bobs 875 19 Brazil Burger Fast Food

Family Mart 4,418 17 Japan Convenience Stores Fast Food

The fastest growth chains are in Asia Pacific




2014 and 2015 have been extremely challenging for both McDonalds and Yum! Brands, with the leading

two global operators battling serious problems in their

most important markets.

McDonalds continues to struggle with changing consumer preferences in the US, seeing same store

sales falling consistently every quarter as consumers

seek out more exciting, higher quality dining

experiences, particular in fast casual dining.

Even within traditional fast food, McDonalds appears to be losing customers to newer players like Five

Guys and Chick-Fil-A, both of which have been

expanding rapidly on a positioning of a better fast

food experience at a similarly low price.

These challenges also extend to China, where consumers continue to shy away from both chains

after a string of supplier and food safety scandals

undermined public trust.

Even high-growth stalwart Subway saw consistently declining growth rates throughout the review period,

as rapid outlet growth in key emerging markets

becomes less sustainable.

0

2

4

6

8

10

12

14

16

2009/2010 2010/2011 2011/2012 2012/2013 2013/2014

% v

alu

e g

row

th

Global Annual Value Growth Among Top Three Brands 2009-2014

McDonald's KFC Subway

Performance of top chains continues to stall




While some of these results can be attributed to a generally difficult environment, it is notable that many

other chains among the top 10 have fared better despite

facing similar headwinds. Starbucks continues to ride the

wave of the global coffee shop boom, posting

consistently strong comparable-store sales both in the

US and internationally. This is despite unrelenting

competition from up-and-coming local chains in India,

South Korea, Colombia and many other key markets,

and a growing swell of smaller, third wave coffee shops

fighting for share.

Burger King has also enjoyed steady expansion, particularly in Latin America, while 7-Eleven has soared

into the double-digits driven by rising demand for

extreme convenience and extreme value in fast food.

Taken together, it is clear that the industry has reached a turning point, in that consumers in the largest markets

are more discerning than ever, and the models which

worked during the global recession are seeing rapidly

diminishing returns. Those chains that have adapted

quickly and found new paths to growth are reaping the

rewards, while those resistant to change have fallen

behind.

More flexible brands have found a way through the storm


0

2

4

6

8

10

12

14

16

2009/2010 2010/2011 2011/2012 2012/2013 2013/2014

% v

alu

e g

row

th

Annual Value Growth Among Chains Ranked 4th-7th 2009-2014

7-Eleven Starbucks

Burger King Pizza Hut



North America and Asia Pacific were the only two regions to

show faster growth in the

independent segment in 2014.

In North America, this was due

to an unusually strong year for

independents, as a result of a

number of consumer-driven

trends, while in Asia Pacific this

was due to substantial growth in

Chinas very large and rapidly

expanding independent full-

service restaurants category.

The common thread in both of these regions was that leading

chains were also facing

significant hardships, with

McDonalds and Yum! Brands

being forced to make major

strategic changes.

Major regions proving

challenging for chains

The Asia Pacific region is home to many of the fastest growing

chains in 2014. The top three

chains came from South Korea,

including the locally-owned

Ediya Espresso, which opened

nearly 400 new outlets in 2014.

Convenience stores fast food also had a particularly strong

showing among growth leaders,

including chains from South

Korea and Japan. These chains

have found rising demand for

very low-priced, very convenient

foodservice options that can

serve as alternatives to other

limited-service categories. Retail

foodservice in general has seen

rapid growth, gaining share over

other location types.

The fastest growing chains are

in Asia Pacific

These struggles at the highest levels have opened up the

playing field somewhat and

provided an opportunity for

lower ranking chains. In burger

fast food, for example, Burger

King, Wendys and fast casual

chains like Shake Shack have

been able to navigate the

difficult consumer environment

in the US more successfully,

quickly adapting to new

preferences.

In Asia Pacific, a large number of modern, fast-growing and

well-funded local operators are

rising up to take on international

leaders. These chains are

finding immense opportunities

for long-term growth in Asia and

beyond.

Now is the time for middle-tier

players to take chances

Key competitive takeaways


INTRODUCTION

GLOBAL PERFORMANCE

THE WAY FORWARD


REGIONAL HIGHLIGHTS

CASE STUDIES



Projected increases in Asia Pacific indicate steady, strong yet not booming growth across

the region. While China continues to lead, the

projected absolute growth in constant terms

over 2014-2019 is expected to be 21% less

then that seen from 2009-2014. This reflects

both a maturing Chinese market and real

headwinds facing the industry

While every Asian market is expected to continue growing, the days of dizzying, 20%

or more growth year after year appear to be in

the past. Newcomers should be prepared for

a sustained, years-long ramp up before

gaining significant scale. This is particularly

true in markets like Indonesia and Vietnam,

where small independents will lead growth for

the foreseeable future.

Notably, there are plenty of opportunities to be had beyond emerging markets. For

example, the more mature South Korean

market will still see US$3.7 billion in new

value in the chained segment, led by its

booming specialist coffee shops category.

Forecast Growth by Market in Asia Pacific 2014-2019

Market

Chained

Growth

2014/2019

(US$ mn)

Independent

Growth,

2014/2019

(US$ mn)

Total CFS

% CAGR,

2014/2019

China 20,836 121,622 4.6

India 845 16,546 3.2

Vietnam 627 6,677 6.9

South Korea 3,745 3,180 1.8

Indonesia 1,333 5,390 3.4

Thailand 2,281 1,056 2.8

Japan 4,905 2,474 0.2

Malaysia 1,466 347 3.2

Taiwan 621 908 1.5

Philippines 865 222 2.0

Hong Kong,

China360 361 1.1

Singapore 211 228 1.0

Major Asian markets will offer steady but moderate growth

REGIONAL HIGHLIGHTS



Category-level opportunities highlight a region-wide shift

REGIONAL HIGHLIGHTS

Slowing economic growth in many of Asias largest markets has led consumers across the region to cut back on luxuries including consumer foodservice. This is particularly true in China, where the high end of

the market has been hit particularly hard by a national anti-corruption drive, forcing many operators to pivot

aggressively towards the mass market. The push for value can also be seen in markets like South Korea,

Taiwan, India and long-suffering Japan, where a consumption tax rise in 2014 put an end to the mini-boom

seen in 2013. All told, decades of booming, export-led growth in many Asian markets have given way to a

more muted demand environment, led by value-conscious domestic consumers.

As with all discussions of Asia Pacific, this comes with the caveat that slowing growth does not mean no growth at all. Strong growth in fast food and other value-focused categories will offer opportunities, heavily

favouring those concepts that offer real value at an array of price points for a range of income levels.

0 20 40 60 80 100 120 140 160

Full-Service

Fast Food




Cafs/Bars

US$ billion

Projected Absolute Growth by Category, China vs Rest of Asia Pacific 2014-2019

China Rest of Asia Pacific



While much of the talk of China has focused on the negative aspects of the market slowing growth,

consumer spending cut-backs, and anti-

extravagance sentiments that are stunting growth

in the premium segment it is important not to lose

sight of the long-term picture, and the larger role

China is still playing in terms of the global growth

story. Alongside this narrative of China losing some

of its significance as a growth target is the strong

indication that China still offers the largest long-

term potential value increase in global foodservice

over the forecast period.

Within the context of Chinas recent growth rates, opportunities there look less appealing; however,

relative to all other markets and freed from the

harsh comparison of its own historic successes

China is still a very real, and very lucrative long-

term opportunity.

While China may not be the opportunity it once was, it is still one of the primary engines driving

foodservice growth at the global level, and it

cannot, and should not, be ignored.

Those players looking to grow in China will not succeed without a change in strategy that reflects

current preferences. Chinese consumers are now

less concerned with iconic Western brands and

more concerned with quality in every part of the

experience. As a result, 2014 saw fast food losing

momentum to specialist coffee shops, cafes and

even full-service, as consumers sought out

healthier food and cosier environments.

Consumers also looked beyond Western cuisine and sought out other kinds of international dining

experiences, particularly Korean food. This has

also been driven by growing interest among young

people in Korean culture as a whole, including

music and other entertainment

Chinese consumers are eager for the same convenience- and experience-based services

growing all over the world, including online and

mobile ordering and payments, third-party delivery

services, and social media involvement within the

dining experience. This has led to opportunities in

all of these areas, especially for services that

combine these benefits in new ways.

China in 2015: What is the way forward for chains?

REGIONAL HIGHLIGHTS



Latin America is set to continue to be a primary long-term target

for international chains. 2014

was a year of new entrances, as

operators scrambled to gain a

foothold in all of the regions

major markets and some

minor ones, as well.

Brazil remains far and away the largest market and the most

important driver of growth, but

many other countries offer

opportunities for expansion as

well.

Soaring incomes and rapid poverty reduction in Peru,

Colombia, Venezuela and Brazil

have created growing demand

for more varied offerings, while

the number of consumers able

to afford regular eating out has

expanded by millions over the

last decade.

It is important to remember, however, that Latin America is a diverse region necessitating highly localised strategies. For example in

Argentina, high inflation in 2013 and 2014 affected consumer

confidence and dampened spending, while putting strain on

restaurant operators, which are struggling to remain profitable. At the

same time, Argentinean consumers are looking to make healthier

dining decisions and maximise the quality of their foodservice

purchases, all within the context of price sensitivity. This has

translated to momentum for chained bakery fast food concepts and

French bakery-caf chains that emphasise high quality and premium

experiences at relatively low cost.

0

2

4

6

8

10

12

0

5

10

15

20

25

30

35

Brazil Mexico Chile Peru Colombia Venezuela Argentina

% g

row

th

US

$ b

n

Foodservice Value Growth by Market 2014-2019

Absolute Value Growth 2014/2019 % CAGR 2014-2019

Latin America demand surges ahead, offering diverse opportunities

REGIONAL HIGHLIGHTS



Given how much expansion in Latin America has been concentrated on lower income consumers, it is no surprise that informal options are

expected to lead growth. Fast food will see the strongest growth

region-wide, at a 4% CAGR in constant terms, with self-service

cafeterias following closely behind. Self-service cafeterias growth can

be attributed entirely to Brazil, where kilo restaurants continue to

see strong growth as high-quality, affordable dining options. Such

outlets serve local cuisine at very low prices and by weight, and are

made up almost entirely of independent operators.

This leads to a broader insight about Latin America in general, in that growth in many markets may be strong, but much of it will continue to

be claimed by independent operators at the low end of the pricing

scale. Over 2014-2019, only 21% of the total value growth in

foodservice will go to chained players, with some markets, like Chile,

seeing a share as low as 10%.

This does not mean that chains cannot find growth; rather, competition will remain strong from local, informal options, such as

Brazils small bakeries or Mexicos network of street stalls. Instead of

displacing such options, chains will remain a complement to these

operators in the medium term. As a result, chains must recognise that

while there is clearly demand for indulgence, as well as variety and

more premium experiences, consumers also have plenty of readily

available options, and a balanced, high-value positioning is key.

0% 25% 50% 75% 100%

Brazil

Mexico

Chile

Peru

Colombia

Venezuela

Argentina

Absolute Value Growth Distribution in Major Latin

America Markets 2014-2019

Full-Service

Fast Food

Cafs/Bars




Yet again, growth favours value-focused concepts and formats

REGIONAL HIGHLIGHTS



Local concepts, local cuisines are the next chained frontier

REGIONAL HIGHLIGHTS

Amidst the competition from independents, there has also

been a clear pattern of

investment in locally-owned

chains and concepts featuring

local cuisine. In the most notable

example, Mexico saw two of its

largest operators investing in

such chains in 2013 and 2014.

Alsea acquired casual dining

chain VIPs, while FEMSA

purchased Latin American fast

food chain Gorditas Dona Tota.

Other local operators have also

developed their own concepts,

such as Grupo Gigantes full-

service Toks chain.

These moves reflect both the growing power of local players

and demand for chained

versions of local favourites, a

trend which is expected to

continue over the long term.

Largest Locally Owned Brands in Latin America 2014

Brand Global Brand Owner

2014

Value

(US$ mn)

Growth

2013/2014

OXXO FEMSA 883 14%

Bobs Brazil Fast Food Corp 875 19%

Habibs

Al Saraiva

Empreendimentos

Imobilirios e Participaes

Ltda

865 13%

Giraffas Restpar Alimentos Ltda 427 18%

Arturos PAICA Arturo's CA 403 70%

VIPs Alsea 386 4%

Norkys Grupo Norkys 294 15%

Spoleto Grupo Trigo 293 26%

Restaurante

SanbornsGigante SA de CV, Grupo 234 6%

Toks CPQ Brasil S/A 233 5%



Despite the well-publicised struggles of leading operators much of which has been blamed on

generally difficult market conditions the long-

term prognosis for growth in North America is

strong. Consumer foodservice value in the

region is expected to grow at an average annual

rate of 2% over 2014-2019, more than three

times faster than the average rate of growth in

constant terms seen during the previous five

years. This is the result of the continued

recovery, which has sent average transactions

per capita soaring past pre-recession levels.

Within that recovery, dynamics at the market level have changed. Consumers have more

options than ever, and a residual concern for

value has left behind increasingly discriminating

preferences. The idea of an appealingly

utilitarian foodservice experience no longer

exists for the majority of higher income

consumers, and in its place is the constant need

for more, better and more highly varied at all

times. This means that opportunities abound,

but successful strategies have changed.

160

165

170

175

180

185

190

195

Tra

nsa

ctio

ns p

er

ca

pita

Foodservice Transactions per Capita in North America 2005-2019

0.0

0.5

1.0

1.5

2.0

2.5

3.0

2014/2015 2015/2016 2016/2017 2017/2018 2018/2019

% g

row

th

Foodservice Growth in North America 2014-2019

Value Transactions Outlets

North America growth will be surprisingly steady

REGIONAL HIGHLIGHTS



Fast food accounts for six of the top 10 fastest growing categories in North America over 2014-2019, reflecting both ongoing consumer demand for value, and continued innovation and investment in the space.

Leading the way is fast-casual dining, which continues to be the focal point of growth in the US. The

premium yet value-focused category is expected to add US$9.9 billion in new value between 2014 and

2019, a full 32% of the total increase expected in fast food. To put the significance of this figure in context,

fast-casual dining claimed just 9% of fast food sales in North America in 2014.

Other fast-growing categories are expected to benefit from demand for both affordable luxury and simplicity in preparation methods, menus and formats. This includes both Asian and Latin American fast food, which

offer fresh yet adventurous takes on Mexican, Chinese, Japanese and Southeast Asian cuisines.

0

1

2

3

4

5

6

7

8

9

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

Fast-Casual ConvenienceStores Fast

Food

LatinAmericanFast Food

Asian FastFood

LatinAmerican

Full Service

Bars/Pubs SpecialistCoffeeShops

BakeryProducts

Fast Food

Asian Full-Service

Burger FastFood

% g

row

th

US

$ m

n

Fastest Projected Growth Categories in North America by Rate 2014-2019

Absolute Value Increase 2014/2019 % CAGR 2014-2019

Led by surging demand for fast-casual dining

REGIONAL HIGHLIGHTS

Note: Fast-casual is calculated separately from the breakdown of total fast food by cuisine type; all sales through fast casual are also attributed to other by type categories



Sub-Saharan Africa is one of the most important regions for very long-term foodservice growth, and

many chained players have tentatively started to

expand in the most promising markets beyond the

comparatively mature South Africa. Subway, for

example, now has multiple outlets in Kenya, while

Yum! Brands KFC has a presence in over a dozen

sub-Saharan markets.

That said, over 2014-2019, MENA markets will contribute the vast majority of sales in the region,

with the most significant contributions coming from

the wealthy states in the Gulf Cooperation Council

(GCC). The latter group alone is expected to reach

US$46 billion in annual foodservice sales by 2019,

nearly double the Sub-Saharan total.

Luckily for global chains, the GCC is also particularly conducive to international chained

growth, offering strong infrastructure, high incomes

and a wide array of potential local franchise

partners. However, along with these conditions

comes fierce competition, not just from local

operators but from every operator looking for the

next big thing in international growth.

0

10

20

30

40

50

60

70

80

90

100

2014 2015 2016 2017 2018 2019

US

$ b

illio

n

Foodservice Sales in MENA vs Sub-Saharan Africa 2014-2019

MENA Sub-Saharan Africa

Middle East and Africa growth is all about the Middle East for nowREGIONAL HIGHLIGHTS



Taken together, the Gulf states represent the 16th largest foodservice market in the world, with much

higher forecast value growth rates than any market

of similar size. This places the market comfortably

alongside Indonesia and Venezuela in terms of

size, with growth closer in speed to smaller

markets like Vietnam or Peru.

The GCC states also differ from other high growth markets in one very distinct and very important

area: disposable income. The GCC collectively has

much higher disposable income averages than

other key emerging markets, and much stronger

forecast growth rates than other wealthy markets.

While income inequality is significant in the region,

there is nonetheless enormous potential for growth

in the same modern chained concepts currently

enjoying brisk expansion in markets such as the

US and the UK. Adding to these benefits, some

key metropolitan areas like Dubai have particularly

strong demand for chained foodservice, due to

local social life revolving around high-end shopping

malls that double as dining districts and leisure

centres.

-1

0

1

2

3

4

5

6

0

10,000

20,000

30,000

40,000

50,000

60,000

% C

AG

R

US

$ m

n

Foodservice Value and Growth in the GCC and Similarly Sized Markets

2014-2019

Sales in 2014 Forecast CAGR 2014-2019

GCC markets are the ideal emerging developed growth targetsREGIONAL HIGHLIGHTS



Growth has slowed and the years of double-digit growth are over, most notably in China; however, opportunities still exist

Success will come from a lengthy, sustained effort Price-sensitive consumers mean value-oriented categories have the strongest prospects

Asia Pacific

Diverse conditions at the market level mean strategies must be highly localised As in Asia Pacific, value-focused categories are most conducive to long-term success Demand is strong for local cuisines, even in the chained segment, and many powerful

local operators are already investing in local chains

Latin America

Leading chains struggled in North America in 2014, most notably McDonalds However, beyond the headlines, North America had a strong performance Fast casual growth was very strong, demonstrating a long runway for growth for the right

concepts

North America

The Middle Eastern Gulf states are a major expansion target for all multinational operators The region offers a unique blend of significant growth opportunities, higher income

consumers, a strong dining-out culture and highly experienced local franchise partners

Middle Eastern and Africa

Key regional takeaways

REGIONAL HIGHLIGHTS

INTRODUCTION

GLOBAL PERFORMANCE

THE WAY FORWARD


REGIONAL HIGHLIGHTS

CASE STUDIES



Chained full-service in China

Modern bar-style hot pot marries traditional benefits with modern amenitiesXiabu Xiabu

Chained burger fast food in the US

Clever positioning finds national growth amidst fierce competition in a crowded category

Shake Shack

Online ordering and delivery hub in Egypt

Illustrates demand for delivery even in less developed markets along with the logistical challenges that can get in the way

Engezni

Third-party online restaurant delivery service in the US

Part of the new tier of companies growing in response to demand for even more convenient and accessible delivery options

PostMates

Asian fast food from Japan, expanding to Latin America

Capitalising on demand for Asian foodservice experiences at value pricesSukiya

Specialist coffee shops in South Korea

Finding opportunities for growth in more mature, higher income markets in Asia Pacific

Ediya Espresso

Six brands illustrating global trends and challenges

CASE STUDIES



Up-and-coming chain Xiabu Xiabu exemplifies the opportunity in China for locally owned but

thoroughly modernised concepts that serve

demand for traditional cuisine with a twist. The

chain competes in Asian full-service restaurants,

which offers one of the largest long-term growth

opportunities in the world in absolute value terms.

Hot pot is very popular in China, and it is a fiercely competitive segment populated by both

chained and independent concepts that compete

strongly, based on price.

Amidst this, Xiabu Xiabu has managed to offer something a little different, a bar-style hot pot

that offers individually customisable bowls of

broth, rather than the typical communal bowl.

This blend of the modern and traditional appeals

to Chinese consumers love of the social dining

experience, while still catering to young peoples

desire for greater control of their own dining

experience. It offers the social benefits of a full-

service concept with the customisability of fast

casual combining to create a very appealing

package.

Xiabu Xiabu also emphasises the quality of its ingredients, which is a powerful differentiator amidst a

landscape of discount competitors. With this

positioning, Xiabu Xiabu has experienced an explosive

growth trajectory, growing at an average annual rate

of 40% in value and 34% in outlets over 2009-2014. In

early 2015, the company filed for an initial public

offering (IPO), undoubtedly with plans to fund even

broader expansion across China and beyond.

Local Cuisine

Modern Format

Social Dining

Custom-isability

Ingredient Quality

Xiabu Xiabu finds chained full-service success in China

CASE STUDIES

Success

Factors



Shake Shack helps to answer the question of where all of the demand for traditional fast food could be going. Some of it is dispersing to other categories and cuisines entirely, especially Latin American and

Asian fast food, but much of it is staying right within the burger fast food category albeit with changing

allegiances. Shake Shack is yet another of the long line of better burger chains attempting to gain

international success, and it has taken some promising steps toward this goal.

Shake Shacks appeal to modern restaurant consumers does not stop at its service model. The chain has placed itself at the intersection of some of the strongest consumer trends in developed market foodservice.

Its positioning is not just fast casual, but fresh casual or fine casual, an emerging upper tier populated by

premium fast casual chains as Vapiano, Chipotles Pizzeria Locale and Lyfe Kitchen. In this tier, ingredients

are a major focus, food is prepared fresh in-house, and there are fewer limitations on pricing than would

typically be seen in limited-service formats. It also strikes a balance between wholesome and indulgent

burgers and frozen custard concretes are hardly low-calorie, but they are made fresh and do not include

hormones or artificial ingredients. This balance resonates well with consumers, allowing them to feel like

they are gaining an experience worthy of the cost of dining out, while still feeling good about their purchase.

Shake Shack focuses strongly on ethical issues, checking all of the moral boxes that appeal to millennials, including building outlets with sustainably sourced materials, donating to various causes, and fostering a

community-focused environment, both virtually and within the outlets. To achieve this, Shake Shack has an

active social media presence, chooses locations that can function as community centres and even hosts

group events such as running clubs at some urban outlets.

In 2015, Shake Shack filed a successful initial public offering on the New York Stock Exchange. The company has pledged to open hundreds of outlets within the US (up from 41) and has made steady

progress towards an international presence, with 30 outlets in the Middle East, Russia, Turkey and the UK.

Shake Shack sets its sights on global fresh casual burger demandCASE STUDIES



In Egypt, consumers want delivery and operators want to offer it but the market is lagging in terms

of access to technology. Not all restaurants have a

computer through which to accept online orders,

not to mention the software and computer savvy to

set up such functionality. As a result, some of the

online ordering hubs already operating in Egypt

bridge this gap by offering call centres that take in

online orders from customers via their ordering

hub, then call the restaurants manually to place the

order on the customers behalf. While this is an

effective enough short-term solution, it is inefficient,

expensive and very difficult to scale up. Start-up

hub Engezni seeks to address this problem by

offering an easy to use interface for both

customers and restaurant partners, and providing

tablets with which restaurants can receive the

orders.

Operators have recognised that there is still untapped delivery demand in the US as well, albeit

for very different reasons. While delivery is readily

available through many platforms, consumers are

still not quite satisfied. Delivery can be slow or

expensive, and in some categories, like specialist

coffee shops and fast food, the service is still rare.

As a result, companies like PostMates have emerged to offer even better, even more

convenient and more innovative delivery. The

company is not just a middle-man; rather, they

handle the delivery themselves, picking up and

dropping off orders. This shifts all of the costs of

delivery onto the customer and effectively opens

up the possibility of delivery service to any

restaurant a customer chooses. For example, in

2015, PostMates will begin a delivery partnership

with Starbucks.

One of the more notable aspects of rising delivery demand has been its consistency across markets. While the level of demand varies with income levels and access to the service, consumers across the spectrum of

maturity have demonstrated a growing need for extreme convenience and affordable luxury. However,

varying conditions have meant that catering to this demand has proved far easier in some markets than in

others.

Engezni and PostMates: Two markets, two solutions

CASE STUDIES



Asian fast food is growing rapidly all over the world, most notably (and unsurprisingly) in Asia Pacific itself. However, there is also very real demand for Asian dining experiences in Latin America, where Asian fast

food and Asian full-service are the fastest growing cuisine types within their respective categories.

In particular, there is demand for Asian foodservice that offers options beyond what is already readily available in major cities, such as sushi or Chinese fast food. This has led to new concepts offering

southeast Asian food, riffs on Asian street food, or non-sushi Japanese food concepts such as ramen or

gyudon. Sukiya is one such concept that has begun expanding to capitalise on this growth. Owned by

major Japanese operator Zensho Co, the concept began expanding to Latin America in 2010, with outlets

in Brazil, and in 2014, it began building a presence in Mexico as well.

Sukiya offers many of the benefits typically associated with Asian fast food the perception of healthier cuisine and often, higher quality ingredients, and the promise of bold flavours and a unique dining

experience. However, one of the primary factors driving Sukiyas growth in Latin America is its value

pricing. A meal with salad and a drink at Sukiya in Brazil costs around R420 (US$6.30), similar to the price

of a hamburger at a local Burger King outlet.

Sukiya combines high value and Asian fast food in Latin America

CASE STUDIES



The largest growth opportunities in Asia Pacific are in emerging markets, but there are opportunities in

higher income areas as well. South Koreas

specialist coffee shop category has been growing

rapidly for at least five years, with annual growth

rates consistently well into the double-digits. Over

2009-2014, specialist coffee shops in South Korea

grew by US$1.9 billion in absolute value, even

higher than China. This growth has not been the

result of new coffee drinking demand, but rather

from clever positioning that encouraged changes in

consumer habits.

Coffee consumption has long been high, but consumers have only recently been switching from

low-quality instant coffee to more premium

espresso-based drinks in modern environments

that are conducive to socialising. Starbucks led this

charge and is currently the largest player, with a

19% share; however, Ediya Espresso has been

rapidly rising in the ranks. As of 2009, the chain

accounted for 5% of the market but has since risen

to 13% in 2014. In that year, the chain overtook

local operator Caff Bene to take second place.

While most of the top specialist coffee shop chains in Korea share a similar positioning premium

coffee and bakery goods in a cosy, premium

setting the key to Ediyas recent success has

been outlet expansion. Over 2009-2014, the chain

grew from 229 outlets to 1,265, with nearly 400 of

those outlets having opened in 2014 alone.

More recently, South Korea has seen a boom in more diverse coffee shop and caf concepts,

including themed fruit and dessert cafs.

Cozy environment

Premium Coffee

Rapid Expansion

Competitive Pricing

Social Occasions

Ediya Espresso demonstrates room to grow in South Korea

CASE STUDIES

Success

Factors



Opportunity Evolution through 2019

China for the right player

With the amount of attention given to Chinas slowing growth rates, it has been easy to forget the very real opportunities that still exist in the massive market. Chinas 2014 growth rate of 9% still topped most other major foodservice markets, and it will see the largest

absolute value increase in the world over 2014-2019.

Value

positioning in

Latin America

Latin America offers very strong opportunities, especially in value-oriented segments.

Many local consumers are eager to spend on chained foodservice, but are price-sensitive,

and seeking to maximise the value of each of their dining-out purchases.

Fast casual in

developed

markets

Fast casual continues to show very strong growth in the US, which is expected to continue.

Fast casual appeals to some of the strongest consumer-led trends in global foodservice,

including a higher quality experience, fresh ingredients, simple preparation methods and

strong branding. Amidst major challenges facing fast food leaders, the success of fast

casual points the way forward for new concept innovation.

Local chains,

local concepts

Some of the largest long-term growth opportunities in all of foodservice are actually in local

cuisines, especially in Asia Pacific and Latin America. Consumers are eager to try chained

versions of local favourites, especially at value prices.

Online, mobile

and delivery

Online and mobile channels are becoming integral to the chained foodservice experience,

and this evolution will continue. Delivery is also more popular than ever, and consumers

have demonstrated that they still want more more convenience, more variety and more options for how to get their food exactly how they want it, when they want it and through

the most satisfying experience possible.

Five growth opportunities for the next five years

CASE STUDIES

FOR FURTHER INSIGHT PLEASE CONTACT

RELATED ANALYSIS

Elizabeth Friend

Senior Foodservice Analyst

[email protected]

@ElizabethF_EMI

New Product Development in Consumer Foodservice: Asian Flavours, Freshness,

and Value Above All Else June, 2015

Master Franchisees: The New Power Players in Global Foodservice March, 2015

Beverages in Consumer Foodservice: Tools For Branding, Profitability, and Appeal

December, 2014



This research from Euromonitor International is part of a global

strategic intelligence system that offers a complete picture of the

commercial environment. Also available from Euromonitor

International:

Global Briefings

Timely, relevant insight published every month on the state of the

market, emerging trends and pressing industry issues.

Interactive Statistical Database

Complete market analysis at a level of detail beyond any other source.

Market sizes, market sh

euromonitor fast food restaurants briefing

Documents