gri-Food Trade Service

Fast Food Industry: Keeping up with the Changing Lifestyle1

July !11
Senen "# $eyes
Senior %anage&ent Specialist
Center for Food and 'gri (usiness
"niversity of 'sia and the )acific
Fast food or *uic+ service restaurants have co&e a long way since 1,1 when -hite
Castle. the first fast food ha&/urger chain. sold /urgers at five cents apiece and ended
its first day with a "S01#23 profit#
'rgua/ly. '4- was the first fast food restaurant having sold the first frosty &ug of '4-
root /eer for one nic+el in 1,1,# In the )hilippines. Tropical 5ut 5a&/urger is reputedly
the first ha&/urger chain dating /ac+ to 1,63#
'fter al&ost ,! years fro& the sale of the first ha&/urger and root /eer. the glo/al fast
food &ar+et has grown to over "S0!1 /illion in total revenues in !!,. with growth of
1#1 percent. according to 7ata&onitor# 8n the local front. total fa&ily e9penditure for
food consu&ed outside the ho&e reached )h)1,6 /illion. accounting for si9 percent of
the total fa&ily e9penditure. /ased on the !!, Fa&ily Inco&e and :9penditure Survey
;FI:S< ;Ta/le 1<# :ating-out spending has accounted for a growing share of the
e9penditure pie over the past two decades fro& less than four percent in 1,,1# The
a&ount has &ore than dou/led since the start of the &illenniu& in !!! fro& )h),!
/illion to )h)1,6 /illion in nine years# 's a share of food spending. it e9panded fro&
11#3 percent to 1=# percent#
Ta/le 1# 7istri/ution of Total Fa&ily :9penditure. )hilippines. various years Ite& !!!
!!1 !!6 !!,
Total :9penditure ;)h) /illion< 1.2,=#1 .!1>#3 .361#=
1.1,#
Food :9penditure ;percent of total< =1#6 =1#1 =1#= =#6
Food :9penditure ;)h) /illion< 2># >2># 1.!3,#6 1.1>!#1
Food consu&ed at ho&e ;percent of total< 1>#6 12#2 13#3 16#3
Food consu&ed at ho&e ;)h) /illion< 6,#3 26>#! ,1!#6 1.1>1#,
Food consu&ed outside the ho&e ;percent of total< 3#! 3#= 3#> 6#1
Food consu&ed outside the ho&e ;)h) /illion< >,#2 11!#1 1=,#1 1,6#=
Source: ?ational Statistics 8ffice ;?S8< - FI:S !!!. !!1. !!6. !!,
Fast food chains /elonging to (usiness-orld@s Top 1!!! corporations registered
average growth of ten percent in gross revenues over the past several years# Aross
revenues in !!, reached al&ost )h)2! /illion. led /y Jolli/ee Foods Corporation
;Figure 1<#
Figure 1# Aross $evenues of Fast Food Chains in the Top 1!!! Corporations. !!3-
!!, ;)h) &illion<
Figure 1: 7escription of this i&age follows#
:9pand: 7escription
Source: (usiness-orld Top 1!!! Corporations in the )hilippines. various issues
Ten years ago. there was an esti&ated 3!.!!! restaurants in the country# The nu&/er of
restaurants. /ars. canteens. and other eating and drin+ing places has since grown to
al&ost ,.!!!. /ased on the !!3 'nnual Survey of )hilippine (usiness and Industry#
Fast food chains have /een a large part of this growth not only in ter&s of the nu&/er of
stores /ut also in the continuous develop&ent of variety and product offerings#
:9pansions and 'c*uisitions
Jolli/ee re&ains to /e the leading fast food chain in the country. growing fro& over =!!
stores in !!1 to over 6!! stores in !1! ;Ta/le <# It continues to e9pand overseas with
21 international stores in si9 countries. e9cluding its Bonghe King and 5ongChuangyuan
stores in China. which nu&/er around !!# Jolli/ee@s early ac*uisitions at the turn of the
&illenniu& included piCCa chain Areenwich. Chinese fast food chain Chow+ing. and
/a+ed goods co&pany 7elifrance# To capture other industry seg&ents. it later ac*uired
/a+eshop $ed $i//on and recently. chic+en /ar/ecue chain %ang Inasal# These other
/rands have grown over the years and have also opened stores in other countries.
particularly. for Chow+ing and $ed $i//on#
Ta/le # ?u&/er of Stores of %aDor Fast Food Chains Fast Food Chain ?u&/er of
)hil Stores !!1 ?u&/er of )hil Stores!1! Co&panyE$e&ar+s
Jolli/ee F=!! 61 Jolli/ee Foods Corporation
Areenwich G!! 6 'c*uired /y Jolli/ee in 1,,=
Chow+ing 16= =!6 'c*uired /y Jolli/ee in !!!
$ed $i//on n#a# 13 'c*uired /y Jolli/ee in !!3
%ang Inasal n#a# 1,! ;!11< 'c*uired /y Jolli/ee in !1!
7elifrance n#a# 1 Franchise ac*uired /y Jolli/ee in 1,,3 and sold in !1! to
CafeFrance
%anong )epe n#a# 1! ;!11< Stopped in !11H stores to /e used for other
Jolli/ee /rands
%c7onald@s 13 ,1 Aolden 'rches 7evelop&ent Corp#
)iCCa 5ut >= 136 )hilippine )iCCa. Inc#
Sha+ey@s ,3 111 International Fa&ily Food Services. Inc#
KFC 2> 31 ;!11< $a&car Food Aroup
Aoldiloc+s n#a# 1! Aoldiloc+s (a+e Shop. Inc#
-endy@s => , -en)hil Corporation
Kenny $ogers 2 =! ;!11< $oasters )hilippines. Inc#
Source: Food and 'gri (usiness %onitor. 8cto/er !!1H Co&pany we/sitesH ?ews
articles
8ne testa&ent to the windows of opportunity and growth in the industry is the rise of
%ang Inasal. the country@s fastest growing /ar/ecue fast food chain. which after only
eight years. is already 1,! stores strong as of July !11# 7espite the presence of
industry giants and having /een esta/lished first in the Iisayas. %ang Inasal has shown
that there is enough roo& for new players given the right product at the right price# 's in
the past. Jolli/ee sensed an opportunity and ac*uired a controlling share of %ang Inasal#
8n the other hand. Jolli/ee sold its 7elifrance /usiness unit and stopped operations of
its carinderia-inspired food chain %anong )epe stores. which will eventually /e
converted to its other /rands#
8wing to the popularity of coffee shops and the Filipino@s growing penchant for drin+ing
coffee. Jolli/ee also entered the coffee shop /usiness through a Korean-/ased
restaurant /rand. Caffe Ti-a&o# It was launched in !1! and has already three /ranches
offering gelato and coffee in a casual dining for&at# %c7onald@s %cCafe ca&e a decade
ahead in the coffee /usiness as a strategy to gain &ar+et share and offer a less
e9pensive /ut *uality coffee e9perience#
%ost of the other &aDor players in the industry have also e9panded led /y )iCCa 5ut.
%c7onald@s. and Sha+ey@s# So&e Jolli/ee and %c7onald@s stores in %etro %anila are
undergoing renovation to i&prove store appearanceEi&age and /etter serve its
custo&ers# Chic+en co&pany KFC slowed down partially due to the effects of the 'sian
financial crisis to the $a&car Aroup /ut it has since recovered# In !!>. $a&car
ac*uired To+yo To+yo. the country@s leading Japanese fast food chain# $a&car also
owns the &aster franchise of %ister 7onut in the country which has over a thousand
shops nationwide#
)roducts. Iariety. and Ialue-addition
The &aDor traditional types of fast food chains are still the ha&/urger chains. chic+en
houses. piCCaEpasta parlors and Chinese food chains# 5owever. other fast food chains
are catching up li+e the donut chains. coffee shops. /ar/ecue houses. /a+eshops and
Filipino food chains#
-hile the food offerings in fast food stores are essentially within the type for which the
chain was esta/lished. the availa/le products are already a &i9 of food ite&s wherein
the /anner product &ay not /e the &ost popular# Jolli/ee@s Chic+enDoy. for instance. &ay
/e as popular if not &ore popular than its Bu&/urger# It also has Filipino dishes li+e /eef
tapa ;s&o+ed /eef<. longganisa ;local por+ sausage<. and crispy /angus ;&il+fish<#
Chow+ing. a Chinese fast food. has also Filipino food li+e /oneless /angus. +ang+ong
;water spinach<. longganisa. /eef tapa and halo-halo# %c7onald@s. a /urger chain. also
has longganisa in its &enu# $oasted chic+en chain Kenny $ogers. for its part. offers
other food ite&s for the health conscious li+e roast chic+en. healthy plate. high protein
&eal. high fi/er &eal. low calorie &eal. grilled chic+enEsausageEfish &eals. and
vegeta/le salads# KFC. )iCCa 5ut. Sha+ey@s. and -endy@s also have vegeta/le salads in
their &enu# -endy@s was first to offer a salad /ar and the first fast food to enter into a
&e&orandu& of agree&ent with the 7epart&ent of 5ealth in support of its 5ealthy
Lifestyle Ca&paign#
There is also continuous new product develop&ent li+e KFC@s 7ou/le 7own ;all-&eat.
no-/un sandwich<. -endy@s shri&p sandwich and /aconator. Chow+ing@s Chinese-style
fried chic+en. and Jolli/ee@s crunchy chic+en /urger. sweet and sour &eat/alls and
chic+en nugget crunchers# )art of product develop&ent is seasonal offerings especially
during Lent. when people try to fast and a/stain fro& &eat# So&e products that co&e
out at this ti&e are tuna pie and fish twister#
8ther than the product &i9 and variety. fast food chains also offer afforda/le alternatives
for the /udget-conscious# The price of the /udget ite&s can range fro& a low of )3#!!
for a (urger %c7o or apple pie. )1,#!! for Jolli/ee@s /eef with &ushroo&s and rice to a
high of )>,#!! for KFC@s -ow Sulit %eal of 1-piece chic+en. rice. and regular drin+
;Ta/le 1<#
Ta/le 1# Ialue for %oney Food Ite&s. July !11 Co&pany (udget Food Ite&s )rice
;)h)<
Jolli/ee $ice %eal 1,ers. Ialue %eals 1,#!! J 33#!!
Chow+ing Ialue Kings. Co&/o Kings ,#!! J >2#!!
%ang Inasal Sulit %eals. (ulilit %eals =,#!!
%c7onald@s Ialue %eals. %cSaver %eals. :veryday %cSavers 3#!! J 33#!!
KFC -ow (urger. -ow Sulit %eals 1!#!! J >,#!!
Aoldiloc+s Sarapinoy %eals =,#!!
-endy@s Super Ialue %enu 12#!! J 6#!!
Source: Co&pany we/sitesH internet search
8ver the years. fast food chains have also added a new value to their relationship with
loyal custo&ers with the use of patronage cards# So&e of these cards include Sha+ey@s
)iCCanatic Supercard. )iCCa 5ut@s )al& card. 'ngel )iCCa@s )rivilege card. and
%c7onald@s %idnight card# For the piCCa chains. the card allows the custo&er to /uy one
/o9 of piCCa and ta+e one /o9 for free# 8n the other hand. the %idnight card allows
custo&ers to get free ite&s on orders fro& 1:!1 a& to 1:3, a&# The pro&otions are
valid only within a prescri/ed period#
' Still Arowing Industry
' nu&/er of factors and strategies. /oth e9ternal and internal to the fast food industry.
are contri/uting to its continuing growth#
()8s
The growth of the /usiness process outsourcing ;()8< industry has enhanced the
eating out ha/its in the country as ()8 co&panies have a =E2 wor+ schedule# %aDor
fast food chains have adapted to this changing lifestyle with a =E2 restaurant /usiness
hours in strategic locations close to the ()8s# %c7onald@s and -endy@s were one of the
pioneers in the =E2 delivery service# Aiven the co&pany we/sites. there is also the
facility of ordering on line and following fast foods in Face/oo+ and Twitter#
LocationsThe e9pansion of &alls and super&ar+ets around the country is another plus
factor for the fast food industry# The on-going and planned 'yala. )uregold. $o/insons.
Shopwise and S% esta/lish&ents will /e providing the space and foot traffic for the fast
food chains@ e9pansion#
)ricing
Ialue pricing or value &eals will continue to /e a strategy for fast food chains. as
surveys still indicate low prices as a reason for choosing a fast food restaurant# 'nother
price proposition is the unli&ited rice pro&otion of so&e stores li+e %ang Inasal. To+yo
To+yo. and recently. Tropical 5ut#
%ovie tie-ins
'nother strategy to sti&ulate fre*uent store visits is the fast food tie-in pro&otion of hit
&ovies with the offering of li&ited edition gadgets. collecti/les. and food ite&s li+e
Captain '&erica in Jolli/ee and 7un+in@ 7onuts and Transfor&ers in KFC# %c7onald@s is
also offering Coca Cola can glass collecti/les#
(randing
Fast foods also use a sort of K&ultiple-/randingK to draw &ore custo&ers /y offering a
large nu&/er of ite&s where/y several fast food chains are located side /y side# This is
the case of Jolli/ee /eside Chow+ing. Areenwich. and $ed $i//on# Chains li+e the
$a&car group have also started co-/randing where a %ister 7onut +ios+ is in a KFC
store#
(an+ tie-ups
's a &eans to increase patronage of credit cards. co&panies li+e the (an+ of the
)hilippine Islands. (anco 7e 8ro. and %etro/an+ have tied-up with so&e fast food
stores where custo&ers can redee& pro&otional free/ies /ased on a&ount charged to
their credit card# The fast food stores include Jolli/ee. Chow+ing. %ang Inasal. (acolod
Inasal. Aoldiloc+s. Areenwich. and )iCCa 5ut# This win-win sche&e is e9pected to
enhance repeat usage for credit card co&panies as well as increased fast food store
visits#
Ialue propositions
To co&plete the custo&er@s dining e9perience and enhance the perception of value.
so&e fast food stores provide newspapers and free -i-Fi internet connection# %any
chains are also re&odeling their facilitiesH e9panding their selection of desserts.
/everages. snac+s and /rea+fast ite&sH adding grilled ite&sH reducing fat and sodiu&H
and catering to custo&ers with dia/etes or gluten intolerance# So&e chains. particularly
in developed countries. are also catering to a /roader range of custo&ers with halal-only
or +osher food in their &enu# %aDor co&panies have also set up foundations which
i&ple&ent their corporate social responsi/ility initiatives#
)rospects
There is a lot of opti&is& and positive outloo+ as e9pressed /y &aDor players# Jolli/ee
Foods Corporation has revised its target upwards in !11. and plans to open 16! stores
in the country across all its /rands# The co&pany is loo+ing at a 1-13 percent growth
for the year with e9pected /ris+ sales and lower raw &aterials cost. and provided there
will /e no &aDor spi+es in inflation and petroleu& prices# %ang Inasal for its part is
targeting to hit 3!! stores /y !1# %c7onald@s is planning to /uild !-1! stores every
year in the ne9t five years#
The trend of eating out spending and fast food e9pansion as a vehicle to growth will
continue as long as there is fierce co&petition in the wor+place# The drive towards
co&petitiveness with longer wor+ing hours and no ti&e for ho&e coo+ing coupled with
the people@s continuing desire for new fast food concepts will allow innovative and
progressive food chains to prosper# ' downside to this is the changing eating ha/its.
which so&e researches suggest has led to an unhealthy lifestyle# 5owever. fast foods
have /een &ade aware of this situation and are starting to offer healthier options#
$eferences:
Fa&ily Inco&e and :9penditure Survey. !!!. !!1. !!6. and !!,# ?ational
Statistics 8ffice# /usiness#in*uirer#netE&oneyE/rea+ingnewsEviewE!1!!,!>-
,11>=EJolli/ee-selling-7elifrance
findarticles#co&EpEarticlesE
www#awrestaurants#co&E
www#census#gov#phEdataEsectordataE
www#chow+ing#co&E
www#goldiloc+s#co&#phE
www#greenwich#co&#phE
www#ha&/urgers#phE
www#Dolli/ee#co&#phE
www#+ennys#co&#phE
www#+fc#co&#phE
www#&anginasal#co&E
www#&ar+etresearch#co&EproductE
www#&cdonalds#co&#phE
www#&isterdonut#phE
L1M )u/lished in the July !11 issue of the Food and 'gri (usiness %onitor. a &onthly
&agaCine of the "niversity of 'sia and the )acific@s Center for Food and 'gri (usiness.
)asig City. )hilippines
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