Fast food companies in Australia and New Zealand continue to face pressure from multiple sides, as rental rates squeeze company margins, technology trends push the need for digital innovation both in-store and online, health and ethical trends drive menu changes, and fast casual brands cannibalise sales from traditional quick service restaurants (QSRs). The fast food landscape continues to evolve and players are hard-pressed to keep up.
Fast food in New Zealand
During 2014, fast food value sales in New Zealand grew by 6% to reach NZ$2.3 billion, nonetheless, transaction growth was much lower at 1% over the same period. Average spend per transaction for fast food increased by 5% in 2014, rising to NZ$9.90. Growth in average spend per transaction was due to a range of issues, including rising labour costs and the introduction of premium menu offerings. Lower transaction growth was partly due to consumer concerns around health and ethical issues, and fast food operators have responded by introducing new menu items (e.g. gluten-free pizzas) and instituting changes in their supply chains, such as McDonald’s New Zealand vowing to stop using eggs from caged chickens by the end of 2016.
McDonald’s adapts to attract non-conventional customers
McDonald’s Australia’s new anti-marketing campaign showcases McDonald’s stores being frequented by people who would never have previously eaten there. With the tagline “How very unMcDonald’s”, the campaign promotes McDonald’s new “Create Your Taste” menu, whereby consumers use touch-screen kiosks to create their own burgers from more than 30 ingredients. The Create Your Taste menu demonstrates that fast food operators are leaving no stone unturned in attempting to engage customers. Furthermore, New Zealand is only the third country after the US and Australia to release Create Your Taste, with the campaign having been rolled out in less than 10 outlets in New Zealand so far.
Fast casual challenges the traditional QSR
Another recent trend in the QSR space is the emergence of fast casual brands, such as Burger Fuel and Mad Mex. Fast casual straddles both fast food and casual dining, and is characterised by high quality ingredients (e.g. fresh, handmade food), healthy / ethical positioning, ordering at the counter and speedy service. Average spend per transaction for fast casual tends to be higher than fast food overall, at NZ$14.30 in New Zealand during 2014, with the fast casual category growing by 5% to reach NZ$450 million over the same period. The fast casual trend is more developed in Australia, driven by the launch of brands such as Guzman y Gomez, Grill’d, Salsa’s Fresh Mex Grill, Soul Origin, Zambrero and Schnitz. The emergence of fast casual brands in Australia aligns with a push by shopping centres to revamp their food offerings. Indeed, shopping centres are increasingly using food as a point of differentiation in the shopping experience, and higher quality fast casual offerings fit well within this strategy. Nonetheless, should more traditional QSRs begin to make store design and menu changes like McDonald’s, the line between fast casual and traditional QSR is likely to become blurred in the future.
This article originally appeared in FMCG Business.