In recent months, the headlines have been filled with news about the struggles that restaurants, particularly quick serve and fast casual, have had as a result of price inflation.  To a large extent, this can be traced to the fact that prices for food away from home continue to rise faster than prices for food at home.  In fact, figures from the Bureau of Labor Statistics show the current annual pace of increase being nearly 4 times higher away from home:

Source:  Bureau of Labor Statistics

Consequently, a majority of restaurant operators are reporting declines both in sales and in foot traffic.  As reported by the National Restaurant Association, about 4 times more operators saw lower traffic vs those that saw higher traffic compared to a year ago.

Source:  National Restaurant Association

Another trend that has occurred in the industry since the easing of the pandemic has been a return to dining-in rather than other off-premises options.  Tracking data in the Fast Casual Restaurant category from the MSW TBSM tracking service shows that In-Store dining in June 2024 versus January 2022 has increased by nearly a quarter while all other methods have declined.

Source:  MSW TBSM Tracking Service

TBSM data also shows that these two trends are reflected in the characteristics that fast casual diners indicate are important to them in deciding among restaurant options.  Not surprisingly, price has markedly increased as an important consideration among Fast Casual diners as has location now that more diners are choosing to eat on-premises.  However, the biggest gainer is taste of the food.  So, while many diners are cutting back on how often they eat out and certainly many are looking for value, when they do eat out they are looking for food that they enjoy more than anything else.  All other considerations dropped in importance, with the biggest drops being for mobile apps, kiosks and other technology which are often tied to off-premises dining, as well as for speed & convenience as diners seem to be prioritizing an enjoyable experience at the restaurant of their choice.

Source:  MSW TBSM Tracking Service

Building on this finding, when asked their primary consideration in choosing a Fast Casual restaurant to patronize, taste of food was cited most often by a wide margin.  Price came in second followed by quality/healthfulness and location.

Source:  MSW TBSM Tracking Service

So, which Fast Casual restaurants are thriving in this environment in which many consumers are price sensitive and cutting back on dining out and yet the most important consideration, by far, is taste of the food?  Well, two of the chains that are really flying high are the chicken focused outlets Raising Cane’s and Wingstop.  Both restaurants have a very focused menu.  Raising Cane’s only offers chicken fingers (their chicken sandwich is chicken fingers on bread) and Wingstop is almost entirely focused on chicken wings (with the exception of a successful chicken sandwich that was introduced in 2022).  Neither has joined the trend of having a discount meal option but rather each focuses on doing one thing exceptionally well.

Their successes are revealed in TBSM brand preference tracking data.  In fact, their respective successes in increasing brand preference are nearly mirror images of each other, as the following charts reveal.  From 2022 to 2024, both have substantially increased First Choice preference (percent most preferred brand) and in particular have increased penetration (percent allocating at least one of five choices).

Source:  MSW TBSM Tracking Service

Source:  MSW TBSM Tracking Service

These brand preference trends are consistent with both chain’s actual business results, as each has reported very large (and similar) increases in same-store sales in 2024:

Sources:  Wingstop Press Release; CNBC

The two outlets also share some similarities when looking at the demographic segments with the highest levels of brand preference for each brand.  The following chart shows relative brand preferences (100 = overall preference level) by demographic segment.  Both brands are extremely strong among the age 18 to 34 segment; relatively weak in the Northeast (Wingstop also under-indexes in the Midwest); and stronger among those with children.  One difference, and apparent advantage, is that Raising Cane’s is substantially stronger among heavy users of Fast Casual restaurants.

Source:  MSW TBSM Tracking Service

The success of these two brands demonstrates that even in difficult times it is possible to have enormous success without resorting to value meals or a scramble for new and innovative menu items.  These two brands show that this is possible by having a great concept focused on food consumers love and executed with excellence.

 

In April of 2023, Bud Light beer ran a social media promotion featuring transgender personality Dylan Mulvaney.  The video promoting Bud Light appeared on Mulvaney’s Instagram account and set in motion a boycott of the brand in the U.S. by conservatives, famously promoted by Kid Rock sharing a video of himself shooting up cases of Bud Light.  In the month that followed, sales of Bud Light dropped well over 20%.  In June of 2023, the MSW TBSM tracking service began to measure brand preference in the Light Beer category.  This week’s Chart of the Week looks at how the brand has done in the past year, as well as the changing face of those who continue to prefer Bud Light.

• In June of 2024, MSW again measured brand preference in the Light Beer category (among nearly 500 adults aged 21 to 74). The results show that not only has brand preference for Bud Light not improved, but it actually exhibited a slight decrease over the past year.
• While Quarter 2 sales for Bud Light are not yet available, data from Bump Williams Consulting as cited by Yahoo News on May 10th of this year show Bud Light sales at best have leveled off after a continued slow decline through the end of 2023 after the initial plunge in sales at the beginning of the boycott. As of that time, sales stood at 28.2% below pre-boycott levels.
• In May of 2023, shortly after the boycott had taken hold, the Marketing Accountability Standards Board (MASB) predicted that the Bud Light boycott may not end. MASB’s argument that this was not a traditional boycott (which typically ends quickly), but rather more like a brand divorce, appears at this point to have been an astute prediction.

Our second chart shows how the demographic composition of those preferring Bud Light has changed between the last time we tracked the Light Beer category in 2018 and the current post-boycott tracking waves in 2024. While other influences could be at play over the intervening years, the boycott is surely the major factor influencing the changing face of who prefers Bud Light.

• One of the reasons cited by the brand’s management for promotions like the Mulvaney video was to improve the brand’s position among younger drinkers. Our chart shows that the brand is now skewing more heavily to younger (ages 21 to 34) consumers, but unfortunately this is likely due to the loss of older consumers due to the boycott – especially those aged 35 to 54 (who were previously the brand’s biggest source of preference).
• The brand also is getting a larger share of its brand preference from the Northeast and to a lesser extent in its Midwest stronghold, with far less of its preference being drawn from the western US.
• Bud Light has traditionally over-indexed strongly among consumers with lower income levels. While this is still the case, the brand’s position among these consumers has weakened somewhat versus those with a higher income level.

The MSW TBSM tracking service measures brand preference as one component of the survey.  We collected Brand Preference data for the Casual Dining Restaurant category in both 2019 and 2023.  Included in this competitive set is Red Lobster, which recently declared bankruptcy.  This week’s MSW Research Chart of the Week looks at both Brand Preference and business results for Red Lobster over this time period.

• Many news stories have pointed to the brand’s Endless Shrimp promotion as the reason for the financial trouble leading to Red Lobster seeking bankruptcy protection. Per Newsweek, third quarter company losses of $11 million were “largely attributed to the deal”, due to both the enthusiasm of those partaking in the offer and an unfortunate rise in shrimp prices.
• Other stories blame the real estate sale and leaseback scheme perpetrated by the brand’s previous owners, the private equity firm Golden Gate Capital. This is said to have led to above market rate leases at many Red Lobster properties.
• Both these explanations imply the bankruptcy was due to cost issues. But the evidence suggests there is more to the story.

Our first chart shows that Red Lobster never completely recovered from the carnage inflicted on the Casual Dining Restaurant segment by the COVID 19 pandemic.

• Per data from Technomic, Red Lobster sales revenue in 2022 was still $130 million below the corresponding 2019 pre-COVID figure, despite high rates of inflation (with attendant price increases that would tend to raise revenue even with comparable business activity).
• As a point of reference, Casual Dining competitor Applebee’s realized $290 million more revenue in 2022 versus 2019 and saw continued gains in 2023 (as reported by Statista).

While Red Lobster revenue for 2023 does not appear to be available, other telling information has been reported.

• A document from current CEO Jonathan Tibus indicates that the chain suffered a loss of $76 million during 2023, which dwarfs the $11 million loss attributed to the Endless Shrimp promotion.
• The document further states that Red Lobster has suffered a 30% drop in foot traffic since 2019.
• It is clear, then, that there is more than costs underlying the fall into bankruptcy by this venerable seafood chain which was initially founded in 1968.

This brings us to our second chart, which shows that brand preference for Red Lobster has declined significantly since 2019. Brand preference reflects the strength of the position a brand holds in consumers’ hearts and minds and has been shown to accurately predict market share in numerous studies. Brand preference summarizes a multitude of factors influencing consumer perceptions of a brand – such as value, quality, variety, convenience, service, experience – into one highly predictive metric.

• The large drop in brand preference since 2019 indicates a deterioration of the brand’s perception among consumers. This is reflected in Red Lobster’s tepid sales performance and large decline in guest numbers. While costs are important, the brand’s issues appear to run much deeper than a poorly conceived sales promotion.  While a successful exit from bankruptcy may help improve the brand’s cost structure, the slide in brand preference will need to be reversed in order for the brand to return to consistent growth and profitability.  This will require much more work than even a successful gimmicky promotion.