Analyst: Innovation and pricing key in 2012


The recovery from the recession may have stalled in 2011, but there will be ways for innovative restaurant operators to gain market share during the coming year, said Warren Solochek, vice president of client development for The NPD Group.

Solochek discussed the state of the restaurant industry during the recent webinar, “A Look Back at 2011 and a Look Ahead to 2012.” John Glass, restaurant industry analyst for Morgan Stanley & Co., hosted the event.

Innovation crucial in 2012

Looking ahead into 2012, NPD projects consumers will remain price-conscious, meaning restaurant chains will have to be cautious in the price increases they consider in an environment with high commodity inflation.

“The restaurant industry has done a very good job of sensitizing American consumers to price, and we have done that via a lot of advertising and a lot of promotion that’s been specific to price points,” Solochek said. “That is going to suppress the opportunity that operators are going to have to take across-the-board pricing.”

However, until employment improves, there’s little expectation for industry growth, he said, making business a game of stealing market share in the near term. Along with pricing strategies, menu innovation will remain critical to encouraging new visits, he added.

“Innovation is what will get guests to notice a chain and go there to try something new,” he said. “Otherwise, the consideration set is just the same mish-mash.”

Fast casual will continue to post stronger sales, given its strength in lunch, Solochek said.

“What fast-casual chains are offering truly resonates with consumers,” he said. “It’s not all about price; it’s really about the price-value relationship.”

Restaurants positioning themselves as an affordable option for eating at home can improve their price-value perceptions, Solochek said. He pointed out that quick-service restaurants’ division of traffic shifted toward more off-premise occasions like drive-thru, carryout and delivery in the third quarter of 2011, and the incidence in which those meals were eaten at home increased 3 percent.

“People still don’t want to cook at home and would prefer not to prep,” Solochek said. “You still have to have food that’s portable and that will stay hot. If it’s delivery, it’s got to be delivered within a certain amount of time.”