Breakfast Trends in the U.S. Foodservice Market provides unique insights into consumers’ evolving relationship with the breakfast daypart

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The recession is reshaping how consumers interact with the restaurant industry, and the breakfast daypart is no exception: value pricing remains at the forefront of menu strategies, as growing guest checks often takes a backseat to generating guest traffic. However, unlike the lunch and dinner dayparts, breakfast benefits from long-term untapped guest traffic potential, and it can generate healthy margins, factors that are drawing major new players into the market.

Packaged Facts’ Breakfast Trends in the U.S. Foodservice Market estimates that breakfast daypart restaurant sales reached $37.2 billion in 2009, and forecasts that they will reach $37.0 billion in 2010 and $37.7 billion in 2011. While these figures may appear tepid at first glance, when viewed against the backdrop of lower overall restaurant sales, the breakfast daypart has fared relatively well, taking share from lunch and dinner. In the final analysis, we believe that near-term challenges will give way to long-term opportunity.

Breakfast Trends in the U.S. Foodservice Market provides unique insights into consumers’ evolving relationship with the breakfast daypart, helping restaurant operators position their brands—and menus—for consumers today and tomorrow.

Table Of contents

Chapter 1: Executive Summary
Scope and Methodology
Scope
Methodology
Macroeconomic Analysis
Fast Facts
Restaurant Usage & Outlook Tracker
Fast Facts
Share of Stomach: Sales Analysis
Fast Facts
Breakfast Trends, Innovations & Strategies
Fast Facts
Breakfast Restaurant Selection Analysis
Fast Facts
Breakfast Menu Selection Analysis
Frequent Coffee Drinkers: Custom Usage, Attitudes and Behavior Drilldrown
Breakfast on the Menu: Restaurant Brand Analysis
McDonald’s
Breakfast strategy: sales growth = guest count growth
Breakfast menu mix
Other snippets
Burger King
Refocusing on breakfast
Other snippets
Wendy’s
Wendy’s reenters breakfast wars with premium QSR differentiation
Starbucks
Recession strategy pays dividends
Brand extensions: VIA and Seattle’s Best
On the food and coffee front
Bob Evans
On the menu: off-premises growth, remodeling, and quickening service
Menu trends
Breakfast in a big way
Cracker Barrel
Menu item innovation
Other snippets
Denny’s
Recession challenges: region, lower-middle income demographic and late-night
2009-2010 breakfast menu strategy
$2 $4 $6 $8, who do we appreciate?
Other moves

Chapter 2: Macroeconomic Analysis
Restaurant sales show life, but we believe positive news is transitory
Restaurant industry rebound still not in cards
February, March and April 2010 food services & drinking places sales sequentially improve
May advance sales point to grocery growth
Graph 2-1: Non-Adjusted Monthly Sales, 12-Month % Change, Grocery Stores & Food Services and Drinking Places, 2009-2010
Packaged Facts’ Consumer Restaurant Tracker: Gloomy Near-Term Outlook
In-home breakfast and dinner trend remains significant
Graph 2-2: Consumer Restaurant Tracker: Current Behavior: A Top Line View
Looking ahead: Saving & grocery spending trumps limited service and full-service restaurant spend
Graph 2-3: Consumer Restaurant Tracker: Next 3 Months: A Top Line View
National Restaurant Association index contracts after transitory spike
Graph 2-4: Restaurant Performance Index, 2006-2010
Macroeconomic factors affecting restaurant sales
Consumer confidence still in a trough
Present Situation Index decreases as perceptions of business conditions, job prospects darken
Expectations Index dips as job prospect optimism dims
Unemployment picture stabilizes
Some perspective
Graph 2-5: Unemployment Rate and Consumer Confidence: 2007-2010
Unemployment rate not one-size-fits-all
Disparity in unemployment rates by education level
Young adults, minorities and men also find harder going
Graph 2-6: Unemployment Rate, Selected Demographics, 2007-2010
Graph 2-7: Unemployment Rate, by Race/Ethnicity, 2007-2010
How can increasing personal savings and reducing the debt burden be bad?
Transitory Spring 2010 restaurant benefit driven by reduced savings
Chipping away at the debt burden
Graph 2-8: Consumer Debt Burden, 2000-2010
Graph 2-9: Savings Rate & Debt Service Ratio & Financial Obligations Ratio, 2007-2010
Unemployment and GPD forecast
Slow employment rebound to coincide with slow rebound in consumer spending
Graph 2-10: Unemployment and GDP Forecast, 2010-2012
Stock & housing declines deflate household wealth; rebound to record 2006 levels a long way off
Q1 2009 to Q1 2010 sees uptick in household wealth, but still $10 trillion off 2006 high
Graph 2-11: Household Net Worth, 2005-2010
Case-Shiller and FOMC housing pessimism
Q2 2010 summary equities analysis
Graph 2-12: Wealth Effect: Wilshire 5000 and Case-Shiller Index: 2007-2010
Food at home maintains pricing edge
Graph 2-13: CPI: Food at Home vs. Food Away from Home, 2005-2010
Farm value comes back down to earth
Graph 2-14: Market Basket of Farm Foods, Annual % Change, 2006-2010
Food inflation forecast revised downward
Food CPI returns to positive annual growth rate
Proteins on the upswing
Dairy prices normalize
Fruits and vegetables
Other

Chapter 3: Restaurant Usage & Outlook Tracker
Note on reading charts
Packaged Facts’ Consumer Restaurant Tracker: at-home food spend trumps out-of-home spend
February 2010 trend continues in June 2010
Graph 3-1: Consumer Restaurant Tracker: Current Behavior: A Top Line View
Looking ahead: Consumers more likely to save & spend on groceries than spend at restaurants
Graph 3-2: Consumer Restaurant Tracker: Next 3 Months: A Top Line View
Eating breakfast at home had significant traction
Students, 18-24s and parents more likely to eat breakfast at home
Graph 3-3: Consumer Restaurant Tracker: Present Behavior: Eating Breakfast at Home
Restaurant breakfast users as likely as restaurant goers in general to eat breakfast at home
Graph 3-4: Consumer Restaurant Tracker: Present Behavior: Eating Breakfast at Home, Restaurant Breakfast Users
Higher-income versus lower-income fast food, family restaurant and coffeehouse breakfast users
Graph 3-5: Consumer Restaurant Tracker: Present Behavior: Eating Breakfast at Home, Restaurant Breakfast Users, HH Income Splits
Planned spending on fast food appears grim
Graph 3-6: Consumer Restaurant Tracker: Future Behavior: Fast Food Restaurant Spending
Intended full-service spend lacks promise
Graph 3-7: Consumer Restaurant Tracker: Future Behavior: Full-Service Restaurant Spending
Intention to save money remains high
Graph 3-8: Consumer Restaurant Tracker: Future Behavior: Saving Money
Restaurant breakfast users more likely to plan higher fast food and full-service spending
Graph 3-9: Consumer Restaurant Tracker: Future Behavior: Restaurant Spending, by Restaurant Breakfast Type
Restaurant usage and usage frequency
Overview
Graph 3-10: Mean Restaurant Usage in Last Month, by Restaurant Type, 2010
Graph 3-11: Restaurant Usage in Last Month, by Restaurant Type, 2010
18-34s drive guest counts
Graph 3-12: Mean Restaurant Usage in Last Month, by Restaurant Type, 2010, by Age
And exhibit higher usage
Graph 3-13: Restaurant Usage in Last Month, by Restaurant Type, 2010, by Age
HH income
Graph 3-14: Mean Restaurant Usage in Last Month, by Restaurant Type, 2010, by HH Income
Graph 3-15: Restaurant Usage in Last Month, by Restaurant Type, 2010, by HH Income
Employment status
Graph 3-16: Mean Restaurant Usage in Last Month, by Restaurant Type, 2010, by Employment Status
Graph 3-17: Restaurant Usage in Last Month, by Restaurant Type, 2010, by Employment Status
Restaurant breakfast use
Breakfast day part accounts for less than 10% of all usage
Graph 3-19: Day Part Usage on Last Visit, 2010
Restaurant breakfast use in past month
Graph 3-20: Restaurant Breakfast Usage in Last Month, Type of Restaurant, 2010
Gender bias?
Graph 3-21: Restaurant Usage in Last Month for Breakfast, 2010, by Gender
Food retail may be siphoning sales from younger restaurant goers
Graph 3-22: Restaurant Usage in Last Month for Breakfast, 2010, by Age
HH income: Fast food as the great equalizer
“Great coffee”: aspiration or reality?
Graph 3-23: Restaurant Usage in Last Month for Breakfast, 2010, by HH Income
Employment status: sense of routine and daily obligation
Graph 3-24: Restaurant Usage in Last Month for Breakfast, 2010, by Employment Status
Appendix: Consumer Survey

Chapter 4: Share of Stomach: Sales Analysis
Market size and overview
Flat sales—but read between the lines
Near-term challenges
Long-term outlook
Growth factors
Full-service caveat
Graph 4-1: Limited-service and full-service breakfast sales, 2005-2011
Breakfast daypart traffic growth outpaces industry
Fast food/QSR segment accounts for 80% of breakfast daypart purchases
Restaurants sales trends by daypart
Consumer food expenditure trends suggest migration to food at home spend
Graph 4-2: Consumer Food Expenditures, 2005-2008
Breakfast share of spend increases by 11% during 2005-2008
Graph 4-3: Meals Away From Home Expenditures, by Daypart, 2005-2008
Spending on breakfast away from home, by region
Graph 4-4: Breakfast Away From Home Expenditures, by Region, 2008
Spending on breakfast away from home, by age
Graph 4-5: Breakfast Away From Home Expenditures, by Age, 2008
Spending on breakfast away from home, by income
Graph 4-6: Breakfast Away From Home Expenditures, by Income, 2008
Spending on breakfast away from home, by race/ethnicity
Graph 4-7: Breakfast Away From Home Expenditures, by Race/Ethnicity, 2008
Daypart meal spend analysis
Breakfast meal spend approaches that for lunch at fast food & family restaurants
Graph 4-8: Consumer Restaurant Meal Spend, by Daypart and Restaurant Type, 2010
Breakfast meal spend, fast food versus family restaurants
Graph 4-9: Breakfast Meal Spend, Fast Food Versus Family Restaurants, Selected Demographics
Meal spend by daypart, fast food restaurants
Graph 4-10: Meal Spend by Daypart, Fast Food Restaurants, Selected Demographics

Chapter 5: Breakfast Trends, Innovations & Strategies
Fast food/QSR pushes breakfast value envelope
Extreme affordability strategy extends to breakfast
McDonald’s $1 value menu to pressure competition
Burger King addresses breakfast challenges
A subversive BK Breakfast Muffin
BK Breakfast Bowl for under $3
Seattle's Best-branded coffee program
Wendy’s to reenter breakfast wars
Subway rolls out nationwide breakfast program
Fast casual breakfast players results a mixed bag
Au Bon Pain grows breakfast year-over-year
Einstein Noah and Panera Bread tread water
Atlanta Bread does breakfast to the tune of 20% of sales
Other fast casual breakfast moves
Family restaurants push everyday value
Full-service value menus
Value in portion size
Convenience trends
All-day breakfast
Breakfast catering
Customization
I said, “Coffee!”
Coffeehouses embrace value bundling
And Starbucks cashes in on mid-tier Seattle’s Best
Sandwiches rule the breakfast menu
Health on menu
Dunkin’ Donuts sprinkles health onto the menu
Chick-fil-A adds yogurt parfait
A comforting healthful breakfast
Fruits and smoothies

Chapter 6: Breakfast Restaurant Selection Analysis
Note on reading charts
Breakfast restaurant selection influencers
Overview: coffee, routine and low price significantly shape restaurant breakfast decision
Graph 6-1: Breakfast Restaurant Selection Influencers, 2010
Restaurant selection: convenience influencers
Gender: men = linear routine; women = task balancing routine?
Graph 6-2: Restaurant Selection: Breakfast Convenience Influencers, by Gender, 2010
Age: work life holds the key
Graph 6-3: Restaurant Selection: Breakfast Convenience Influencers, by Age, 2010
HH income breeds breakfast routine
Graph 6-4: Restaurant Selection: Breakfast Convenience Influencers, by HH Income, 2010
Employment status
Graph 6-5: Restaurant Selection: Breakfast Convenience Influencers, by Employment Status, 2010
Urban, Suburban, or Rural location
Graph 6-6: Restaurant Selection: Breakfast Convenience Influencers, Urban, Suburban, Rural, 2010
Restaurant selection: breakfast menu item influencers
Gender: women more likely to have value orientation; men as inclined to want healthful offerings
Graph 6-7: Restaurant Selection: Breakfast Menu Influencers, by Gender, 2010
Age: younger patrons seek a difficult balancing act
Graph 6-8: Restaurant Selection: Breakfast Menu Influencers, by Age, 2010
HH income: healthy options and small portions
Graph 6-9: Restaurant Selection: Breakfast Menu Influencers, by HH Income, 2010
Employment status
Graph 6-10: Restaurant Selection: Breakfast Menu Influencers, by Employment Status, 2010
Restaurant selection: breakfast cost threshold influencers
Gender: women more likely to gravitate to lower price points
Graph 6-11: Restaurant Selection: Breakfast Cost Threshold Influencers, by Gender, 2010
Age: $3 is a hit across the board
Graph 6-12: Restaurant Selection: Breakfast Cost Threshold Influencers, by Age, 2010
HH income
Graph 6-13: Restaurant Selection: Breakfast Cost Threshold Influencers, by HH Income, 2010
Employment status
Graph 6-14: Restaurant Selection: Breakfast Cost Threshold Influencers, by Employment Status, 2010
Restaurant selection: breakfast dinein partner influencers
Gender: it’s a work thing
Graph 6-15: Restaurant Selection: Breakfast Dine-in Partner Influencers, by Gender, 2010
Age: 65+ not interested in eating alone
Graph 6-16: Restaurant Selection: Breakfast Dine-in Partner Influencers, by Age, 2010
Restaurant selection: breakfast takeout partner influencers
Gender
Graph 6-17: Restaurant Selection: Breakfast Takeout Partner Influencers, by Gender, 2010
Age
Graph 6-18: Restaurant Selection: Breakfast Takeout Partner Influencers, by Age, 2010
Employment status
Graph 6-19: Restaurant Selection: Breakfast Cost Threshold Influencers, by Employment Status, 2010

Chapter 7: Breakfast Menu Selection Analysis
Note on reading charts
Menu selection influencers, by daypart
Graph 7-1: Menu Selection Influencers, by Daypart, 2010
Breakfast restaurant menu selection influencers, by demographic
Gender
Graph 7-2: Breakfast Menu Selection Influencers, by Gender, 2010
Age
Graph 7-3: Breakfast Menu Selection Influencers, by Age, 2010
HH income
Graph 7-4: Breakfast Menu Selection Influencers, by HH Income, 2010
Employment status
Graph 7-5: Breakfast Menu Selection Influencers, by Employment Status, 2010
Urban, suburban, or rural location
Graph 7-6: Breakfast Menu Selection Influencers, by Rural/Urban/Suburban, 2010

Chapter 8: Frequent Coffee Drinkers: Custom Usage, Attitudes and Behavior Drilldrown
Frequent coffee drinkers
Graph 8-1: Frequent Coffee Drinkers: Selected Demographics
Importance of breakfast to frequent coffee drinkers
Bring on better coffee
Graph 8-2: Importance of Breakfast, Frequent Coffee Drinkers, Selected Demographics
Restaurant types visited by frequent coffee drinkers
Coffeehouses maintain an edge on fast food
Graph 8-3: Restaurant Types Visited for Breakfast, Frequent Coffee Drinkers, Selected Demographics
Restaurant selection factors, mean restaurant use and average spend
It’s all about the coffee
More coffee means more coffeehouse visits—but not fast food visits
Coffee drinkers help enrich coffers
Graph 8-4: Restaurant Breakfast Selection Factors, Mean Restaurant Use, and Average Spend, Frequent Coffee Drinkers

Chapter 9: Breakfast on the Menu: Restaurant Brand Analysis
Note on food lifestyle segmentation charts
McDonald’s
A $7.5 billion breakfast behemoth rolls dice on high-volume, low-ticket breakfast
Breakfast strategy: sales growth = guest count growth
Breakfast menu mix
Core customers: Convenience and Ease and Weekend Cooks
Graph 9-1: McDonald’s Usage Frequency Analysis, Food Lifestyle Segmentation
McDonald’s core low- and high-frequency users
Graph 9-2: McDonald’s Core Demographics: Low- and High-Frequency Users
McDonald’s by the numbers
Graph 9-3: McDonald’s by the Numbers
Burger King
Barbell strategy
Reinvigorating breakfast
Brunch in testing stage
Longer breakfast hours
Convenience and Variety on a Budget
Graph 9-4: Burger King Usage Frequency Analysis, Food Lifestyle Segmentation
Burger King core low- and high-frequency users
Graph 9-5: Burger King Core Demographics: Low- and High-Frequency Users
Burger King by the numbers
Same-store sales dip during nine months ending March 2010
Graph 9-6: Burger King by the Numbers
Wendy’s
2009-2010 strategy: “Real” food at a real value
Coming up in 2010 and 2011
Wendy’s reenters breakfast wars with premium QSR differentiation
Local pricing
Acquire or be acquired?
“Food Lifestyle” segmentation groups a blend of McDonald’s and Burger King
Graph 9-7: Wendy’s Usage Frequency Analysis, Food Lifestyle Segmentation
Wendy’s core low- and high-frequency users
Graph 9-8: Wendy’s Core Demographics: Low- and High-Frequency Users
Wendy’s by the numbers
Graph 9-9: Wendy’s by the Numbers
Starbucks
Recession strategy pays dividends
Menu pricing strategies and customer incentives
Pricing and bundling
Brand extensions: VIA and Seattle’s Best
Rewards, technology and new retail formats
On the food and coffee front
Core Starbucks users a relatively healthful bunch
Graph 9-10: Starbucks Usage Frequency Analysis, Health Attitudes
Graph 9-11: Starbucks Usage Frequency Analysis, Food Lifestyle Segmentation
Starbucks core low- and high-frequency users
Graph 9-12: Starbucks Core Demographics: Low- and High-Frequency Users
Starbucks by the numbers
Graph 9-13: Starbucks by the Numbers
Bob Evans
On the menu: off-premises growth, remodeling, and quickening service
Menu trends
New on the menu
Breakfast in a big way
Emphasizing value for money
Bob Evans by the numbers
Graph 9-14: Bob Evans by the Numbers
Cracker Barrel Old Country Store, Inc.
Restaurant operations
Retail operations
2009-2010 strategy: couponing, promotions & Seat to Eat
Menu item innovation
Guest count demographics
Reformed Traditional users may look to Cracker Barrel to meet them halfway on health
Graph 9-15: Cracker Barrel Usage Frequency Analysis, Food Lifestyle Segmentation
Cracker Barrel core low- and high-frequency users
Graph 9-16: Cracker Barrel Core Demographics: Low- and High-Frequency Users
Cracker Barrel by the numbers
Graph 9-17: Cracker Barrel by the Numbers
Denny’s
Recession challenges: region, lower-middle income demographic and late-night
2009-2010 breakfast menu strategy
Build Your Own Grand Slam continues to deliver
But other rollouts round out the menu
2010 shift to everyday value supported with LTO entrees
$2 $4 $6 $8, who do we appreciate?
Post-Super Bowl free Grand Slam promotions continue
Convenience moves
Courting older consumers and students
Weekend Cooks help drive sales
Graph 9-18: Denny’s Usage Frequency Analysis, Food Lifestyle Segmentation
Store-made, per-cooked meal cross-tie?
Graph 9-19: Denny’s Usage Frequency Analysis, Food Competition
Denny’s core low- and high-frequency users
Graph 9-20: Denny’s Core Demographics: Low- and High-Frequency Users
Denny’s by the numbers
Graph 9-21: Denny’s by the Numbers
Appendix on food lifestyle segmentation charts

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