Gen Y, Health-Conscious Diners Key Opportunities

eating out

In an improving but still very difficult food service environment, younger adults, along with consumers focused on healthier eating options, represent key "sweet spots" for driving restaurant traffic and sales, according to a new report from Packaged Facts.

Restaurant users ages 18 to 34 exhibit strong usage and dining frequency patterns across restaurant segments, and Gen Y's (ages 25 to 34) with household incomes of $50,000+ are the most promising cohort within that broader age range, according to trends identified by the research company's Consumer Restaurant Tracker service and detailed in its "U.S. Foodservice Landscape 2010: Restaurant Industry and Consumer Trends" report.

Those 18 to 24 spend the most on a restaurant per-meal basis and have the largest party sizes, resulting in 25% higher-than-average total spend per visit, the tracking data show.

Relatively affluent Gen Y's are the group that indicated the strongest restaurant patronage behaviors during the past three months, as well as the group showing the strongest intentions to dine out or purchase restaurant food in the next three months, according to Packaged Facts. In fact, this group was found to be more than twice as likely, compared to U.S. consumers on average, to indicate that they will go out to dinner "just to enjoy themselves" and will buy more restaurant delivery/take-out, in the coming three months.

Environmentally friendly practices and a desire for novelty were found to be very strong factors in influencing restaurant choices during the past three months among the broader young-adult crowd, and particularly among the Gen Y's.

Similarly, healthy eaters -- along with "technology-savvy" diners -- spend more per visit and have larger party sizes. Diners who say that they "won't eat food unless it is fresh," for example, spend about 25% more per party than average.

The hitch: Although more than half of consumers say that they "love to eat healthy," fewer than a third report actually eating "very healthy." Still, while healthy items actually influence the restaurant choices of relatively few, nearly a third report that a healthy item on the menu has influenced their ordering selection while in a restaurant in recent months.

According to the firm's analysts, two strategies will be particularly important to operators going forward. These include offering new menu items to create brand attachment among consumers who are not historically loyal to a brand, and driving higher frequency among existing customers by offering promotions targeted to their interests (including revamped loyalty programs, which are particularly popular among young adults and the health-conscious). To protect profit margins, a growing number of operators will offer "mix and match" promotions that pair lower- and higher-margin menu items, they add.

Packaged Facts also cites sustainability practices and online/mobile ordering capabilities as being increasingly critical to success.

In response to the demand for new menu items and environments, particularly among younger adults, major chain operators are implementing "aggressive reimaging" strategies -- with Darden, for example, converting significant numbers of Red Lobster units to "Bar Harbor" formats and testing a remodeling program for Olive Garden, the analysts note.

However, they also note that restaurants are still not providing sufficient choice for consumers who "really do enjoy healthy foods."

While some industry prognosticators are predicting at least a slight overall increase in restaurant sales for this year, based primarily on growing momentum late in 2010, PF is projecting a 2% decline, followed by a 2% increase in 2011.

Full-service restaurant sales are forecast to be most affected in 2010, declining 4% before increasing 1% in 2011. Limited-service restaurant sales are forecast to decline 1% in 2010 but rise 2% in 2011.

As a whole, the indicators do not yet point to a significant shift in consumers' recession-driven propensity to eat more at home to save money, and grocery retailers' more competitive pricing has made at-home dining even more attractive to many, according to Packaged Facts. The researcher's tracking shows total grocery sales up by 4% between February 2009 and February 2010.

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