While retailers are battling the restaurant industry for "a greater share of stomach" on the supermarket periphery, they are finding that restaurant brands are a boon to business in the grocery aisle.
The number of restaurant brands on supermarket shelves has increased in the last few years, and retailers agree that this trend will continue. Some of the more well-known brands, such as Taco Bell, Starbucks, Chi Chi's, White Castle, TGI Fridays and TCBY are widely available across the country, while other items from local restaurants may be available only locally, or in retailers that carry a wide variety of specialty food.
Name recognition of restaurant brands drives sales in the supermarket, and consumers are often willing to pay a premium price to enjoy some of their favorite restaurant foods at home. From the retailer perspective this is good news, since restaurant brands add excitement to the grocery aisle and increase foot traffic, especially when a restaurant enjoys a good reputation locally.
"The trend toward restaurant brands is increasing, from what we've seen on the retail level," said Lisa McCue, spokeswoman for Grocery Manufacturers of America, Washington, D.C. "If you've got a good brand at the restaurant level, it's a win-win situation," she said. McCue went on to explain that it can take months or years to develop brand recognition, but with a restaurant brand, where the restaurant is widely known, there will be instant recognition on the supermarket shelf and strong sales.
"We are eating out more and we occasionally translate the experience that we get at a restaurant to home. The expectation of the consumer is that quality is going to be the same, and he or she will pay a premium for that," McCue explained.
Scott Silverman, vice president of specialty foods at Rice Epicurean Markets in Houston, Texas, agreed that restaurant brands will increase in supermarkets. His stores often feature specialty items from famous restaurants locally as well as in other parts of the country.
"New items are the lifeblood of the supermarket industry. If we buy just from [large manufacturers], we'd be dead in the water because they don't create trends," Silverman said.
Silverman expects to sell 2,000 pies from one local cafe, at $17 a pie, during the holiday season. Some other restaurant items at Rice include pasta sauces from Patsy's and jellies from Sarabeth's Kitchen, both in New York, and salsas from Coyote Cafe.
In addition, Silverman said Rice will probably begin carrying a new mainstream restaurant line, Boston Market, which is currently in test markets in Texas and on the West Coast. Michael Doherty, general manager for communications at Heinz Frozen Food Co., Pittsburgh, the makers of the new frozen-food line, told SN that Heinz expects to have 16 items in national distribution by February of next year. Items include single-serve home-style meals, meat and poultry items and side dishes. Heinz acquired the right to license Boston Market trademarks from Boston Chicken this year.
"H.J. Heinz Co. is excited about this line and its potential, and has made the investment to accelerate the launch so that it will be the most successful in the company's history," Doherty said.
Doherty says that another part of the appeal of a restaurant brand like Boston Market is convenience, since there is not always time to stop at a restaurant, or there may not be a restaurant conveniently located. In addition, the variety in the new line creates menu options for each family member. Doherty says Heinz is already thinking about how the product line may be expanded in the future into the grocery aisle.
One restaurant brand that has gained widespread national distribution in supermarkets is Taco Bell, which was acquired by Kraft from Frito-Lay in 1996. Currently there are 27 items in the line, with six new items launched this year, according to Tim Calkins, category business director for Kraft Foods, Glenview, Ill.
The Taco Bell line has done well, partly because Taco Bell is the number one trademark in Mexican food, said Calkins, with 60% of consumers visiting a Taco Bell restaurant once every three months. However, the eating-out experience is quite distinct from preparing a Taco Bell meal at home, Calkins says.
Kraft has tapped into the restaurant's equity, Calkins explained, but has also focused on positioning the Taco Bell products as easy meal solutions. To this end, Taco Bell promotions are also tied in with other products from Kraft, such as cheese and sour cream.
"Taco Bell has been a positive force for the whole [Mexican] category," Calkins said. "We've expanded the category and driven its growth and we are growing much faster than the category." This year Kraft expects to make $100 million on the Taco Bell line. Kraft is also the distributor of Starbucks coffee in supermarkets, which will have a presence in 70% of retail grocery stores by February of next year, according to Tracy Haffner, senior brand manager for the Starbucks business at Kraft, Tarrytown, N.Y.
The Starbucks business has exceeded expectations, according to Haffner, and has grown the superpremium category in grocery stores. Moreover, Starbucks restaurants has expanded its business overall, and grocery distribution has had a very positive effect on the brand, Haffner said.
Retailers for the most part have been cooperative about using Kraft's racking system for Starbucks, which merchandises the products.
"The racking system takes Starbucks' retail store image and message into the grocery store," said Haffner, and also allows the coffee to be displayed in an organized fashion. "One thing that's important with restaurant brands is the consumer's perspective," Haffner said. "People must feel they are getting the very same product at the grocery store as they would in the restaurant. You have to validate you are offering the same product," she said. The racking system and a new package design, which visually does a better job of tying the grocery item to Starbucks restaurants, are part of that strategy of validation.
Some additional benefits of carrying a restaurant brand like Starbucks is the incremental foot traffic from consumers who come into the grocery store to purchase that particular product, according to John Fuller, category sales planning manager for Starbucks at Kraft. "They are Starbucks consumers, but it's more convenient to buy grocery products at the grocery store rather than stop in at a Starbucks," he said.
Rich Savner, spokesman for Pathmark, Carteret, N.J., also said that consumers appreciate the convenience of buying a favorite restaurant brand at the grocery store.
"They don't have to make a different trip for the same item in what is a routine destination for them each week," he said. Savner noted that although restaurants are competitors with supermarkets for home meal replacement options, supermarkets will continue to examine the feasibility of carrying restaurant brands if it is in the grocer's best interest to do so. Pathmark, for example, carries White Castle hamburgers, Chi Chi's salsas, Starbucks coffee, and Taco Bell meal components.
"There's a certain mystique with restaurant foods," Savner said. "They are seen as tasty and appealing, and the natural projection is that consumers will find the same taste in store-bought products. Consumers are willing to try those products if the restaurant enjoys a good reputation."
Brian Nichols, director of category management at Marsh Supermarkets, also carries many restaurant brands, including Taco Bell, Chi Chi's, TGI Friday's, and White Castle. He said that the TGI Friday's items, which are fairly new, are doing well. Marsh is also evaluating the new Boston Market line.
Marsh sometimes promotes restaurant brands together in an ad block, Nichols said: for example Taco Bell and Chi Chi's are promoted together on a quarterly basis. He agreed that restaurant brands will increase in the future and said "anything that we can capture from restaurants is good for our business."
Lamb's Market, in Wilsonville, Ore., does not carry too many mainstream restaurant brands, since it is an upscale supermarket, but according to Jim Olsen, grocery buyer, the 34-store chain did take on Boston Market products, which "are doing okay and seem to have a good following.
"People are familiar with the products and the name. With name recognition you get better movement," he said.
Another upscale restaurant brand that has begun to infiltrate the supermarket is The Cheesecake Factory, headquartered in Calabasas, Calif. Currently, the restaurant's cakes are being sold in the bakery section, in a freezer unit, in Ralphs and H.E. Butt grocery stores.
Nonetheless, the restaurant is taking its time in expanding supermarket ventures, explained Max Byfuglin, executive vice president.
"Some people believe exposure in the supermarket can beef up a customer's experience at the restaurant, but some people think these purchases may be a disappointment and take some of the excitement out the restaurant," he said.
