Limited Service Restaurants and the Dessert Explosion
“Ice cream is expected to decline by 1% as consumers move more toward single portion varieties or shift toward foodservice or other outlets for ice cream desserts.” – Euromonitor International (Packaged Food Report, November 2014)
While desserts such as cakes, pies and ice cream volumes are flattening and faltering in the groceries, they are thriving in what is known as the limited service or LSR foodservice venues. Wise marketers and product development teams with dessert companies should consider exploring the LSR world with unique concepts and flavors.
Most of us frequent LSRs on almost a daily basis without defining them as such and they may include ice cream and frozen yogurt, smoothie, juice, tea, snack and baked good shops. In fact, 47 percent of us visit one of the aforementioned shops at least once a month.
The LSR world is extensive so we will touch on the highlights and invite you to explore this world more extensively. This post will emphasize desserts but obviously opportunities abound for other introductions.
LSR by the Numbers
From 2009 to 2014, total LSR sales rose 22.7 percent from about $175 billion to $205 billion. We project $230 billion in such sales by 2019. When people buy a dessert in an LSR, 60 percent of them state that they will sit there and eat it at least some of the time, 56 percent said they will take their food home with them some of the time, so portability is important whatever the concept may be.
What are the LSR operations most frequently visited? Ice cream shops are the most popular places to buy desserts at 24 percent; frozen yogurt and Smoothie shops run at a virtual tie of about 17 percent and 16 percent respectively. Baked goods, such as cupcakes and cookies, have a following of about 14 percent of the total, followed by the general “snack shop” venue, such as caramel popcorn (13 percent), with tea shops in last place at 9 percent. Overwhelmingly, at 73 percent of the time, people come to the stores in person and place their dessert orders inside of the store.
It is very important to note that regardless of the venue, respondents have increased the amount they visit specialty concepts (22 percent), increased the number of items purchased per visit (20 percent), and increased the amount spent per visit (25 percent). In terms of gender, men are somewhat more likely than women to eat their purchases in the restaurant and men are more likely to eat their purchases in the office than are women. One point of general agreement is that 63 percent of consumers like seasonal flavors such as pumpkin-spice, egg-nog, lemonade and the like.
What do customers want?
What do consumers of desserts look for in their LSR purchases? The question presents an interesting conundrum for product developers as customers are virtually split. Forty-five (45) percent want “affordable options” by couponing or in combination with other offerings such as beverages, while 45 percent want freshness and quality of ingredients! The break-out in regard to healthy ingredients is interesting; younger Millennials and Baby Boomers feel somewhat more strongly about this than older Millennials and Gen-X.
Below those priority items, 36 percent want variety and 31 percent desire the ability to customize their choice.
Dessert choices and buying patterns in LSRs do change from region to region (another point marketer’s need to research). Customers in the Midwest are more “on the go” rather than in-store and they are big on authentic and seasonal flavors. In the Northeast, customers order to go in-person, seek freshness, and order food and drink together, while in the South there is greater price sensitivity and customers are not as inclined to add healthful ingredients as a function of customization. Finally, the West has a seasonal focus with a desire for healthy and authentic ingredients.
The limited service restaurant holds promise for the dessert category while other channels are showing declines. It is a worthy avenue of exploration for innovative marketing teams and product developers.