Changewave Research: Consumer Restaurant Spending

ChangeWave Research: Consumer Restaurant Spending

Restaurant Spending Report

Survey Shows Continuing Improvement in Restaurant Spending

Paul Carton and Mike Wrobel

Overview:A recent ChangeWave survey found continued momentum for U.S. consumer spending, including an improvement in spending on restaurants.

This report focuses onthe results of two ChangeWave surveys conducted inFebruary (n=1,122) and March (n=2,501) that looked at a wide range of consumer dining habits – including which types of restaurant chains have momentum going forward. ChangeWave Research is a service of 451 Research.

An Uptick in Restaurant Spending

For the second month in a row we’re seeing an improvement in restaurant spending, with 13% of consumers now saying they’ll spend more money at restaurants over the next 90 days – up 1-pt from February.

Only 24% say they’ll spend less money at restaurants going forward, a 2-pt improvement.

Frequency of Dining Out. More than1-in-5 respondents (21%; down 2-pts) now say they expect to dine out More Frequently over the next 90 days, while 18% say they’ll dine out Less Frequently – a 3-pt improvement.

Reasons for Dining OutMore Frequently: Among those consumers who expect to dine out More Frequently over the next 90 days, 55% say it’s because they’ll be Traveling More. Another 13% say it’s because the Economy is Improving – a 9-pt improvement from previously and a positive sign for the overall economy.

Reasons forInflation Top Reason for Dining Out Less.Among consumers who plan to dine out Less Frequently over the next 90 days, 29% say it’s because they’re Saving More Money (down 3-pts) and 21% say it’s because of Reduced Income (down 9-pts).

Note that the percentage citing a General Increase in Cost of Living (29%) has remained unchanged butHigher Energy Costs (20%) has jumped a whopping11-pts.

Consumer Willingness to Spend: The average amount of money respondents are willing to spend per person when dining out is increasing. Willingness to spend on Dinner out ($19.92) has reached a new high, as has willingness to spend onLunch out ($10.41).

Looking at menu items with momentum, respondents say they’ll spend more money on Seafood (+10; up 6-pts) and Chicken entrees (+2; up 3-pts) over the next 90 days.

Restaurant Categories

We asked respondents which types of restaurants they'll be eating out at more or less often over the next 90 days, and we found the higher-end categories– Upscale/Fine DiningRestaurants (Change in Net Difference Score = +4),High End Casual Restaurants (+4), and Moderate Casual Restaurants (+3) –showed the most improvement.

Other the other hand,Quick Casual/Family Restaurants (-3) and Fast FoodRestaurants (-2) showedslight declines.

Individual Restaurant Chains

We also asked respondents which individual restaurant chains they'll be spending more vs. less money at over the next 90 days – and a handful of chains stood out from the rest:

WithinUpscale/Fine Dining, Ruth’s Chris (-1) is showing a 2-pt uptick from previously.

High End Casual:Here we’reseeing an increase for P.F. Chang’s (+6; up 3-pts) – their 3rd consecutive survey of improvement.

On the other hand, within Moderate & Quick Casual Restaurants, Applebee’s (+4) has experienced a 3-pt decline, as has fellow Dinequity (DIN) restaurant IHOP (+2; down 3-pts).

And in Fast Food Restaurants, Wendy’s (+5) has fallen 2-pts since previously, even asStarbucks (+4; up 3-pts) shows clear signs of momentum going forward.

Coffee Buying Trends

Three-in-ten respondents (29%) say they typically buy fresh brewed coffee from a coffee shop or restaurant, and 13% of this group say they’ll spend More Moneythere over the next 90 days – up 1-pt – while just12% say they’ll spend Less – a 7-pt improvement from previously.

In terms of specific coffee shops, there has been little change since our previous November 2011 survey. We note that Starbucks (Net Difference Score = 0; Unchanged) remains at their all-time high in a ChangeWave survey.

Coffee Brewed at Home: Starbucks (29%; up 2-pts) also remains the top 'brew at home' coffee brand while Folgers (16%; down 1-pt) ranks second.

Interestingly, Green Mountain (11%; up 1-pt) is now tied with Kirkland (11%; up 1-pt) for third – even as Maxwell House (10%) has fallen 7-pts since the previous survey.

Single-Serve & Instant Coffee: Nearly one-in-five respondents (19%) say they’ve purchased Single-Serve coffee (such as Pods, T-Discs and K-cups) over the past 6 months, down 1-pt from their recent high.

Purchases of traditional Ground or Whole Bean coffee (77%) are alsodown 1-pt from previously – while Instant coffee (17%) such as VIA or Nescafé have risen 1-pt.

Brands of Single-Serve & Instant Coffee:Among those who have purchased Single-Serve or Instant coffee over the past 6 months, Green Mountain (28%) remains the top brand. Moreover, Keurig (27%; owned by Green Mountain) and Newman’s Own (19%; partnered with Green Mountain) also remain near or at recent highs.

Importantly, in November the first Starbucks K-cups became available, and they are brewed in Keurig coffee machines. Since that time, Starbucks K-cups share has tripled to 12% currently vs. 4% in the previous survey. This strongly suggests that Green Mountain and its Keurig K-cup coffee machines are continuing their stranglehold on the single-serve coffee market, bolstered by partnerships with Starbucks and other momentum coffee producers such as Newman’s Own.

Bottom Line.With overall consumer spending continuing to improve, the current survey finds restaurant spending is on the increase despite concerns over rising prices at the pump.

Higher-end restaurants(i.e., Upscale, High-End Casual and Moderate Casual) are showing the most momentum going forward, with Quick Casual and Fast Food lagging. And in the coffee market, Starbucks and Green Mountain continue to stand out from the rest of the competition.

While the overall spending environment for restaurants is looking up, there are warning signs on the horizon that will need to be watched closely. A March ChangeWave consumer survey found that among consumers changing their habits due to rising gas prices, Eating Out Less was the top change reported. We will be closely monitoring the effects of rising gas prices on restaurant spending in the weeks ahead.

Summary of Key Findings

The ChangeWave Research Networkis a group of 25,000 highly qualified business, technology, and medical professionals in leading companies of select industries—credentialed professionals who spend their everyday lives working on the frontline of technological change. ChangeWave surveys its Alliance members on a range of business and investment research and intelligence topics, collects feedback from them electronically, and converts the information into proprietary quantitative and qualitative reports.

Table of Contents

Summary of Key Findings...... 7

The Findings...... 9

(A) Overall Restaurant Spending Trends...... 9

(B) Restaurant Categories ...... 14

(D) Coffee Buying Trends...... 17

ChangeWave Research Methodology...... 22

About ChangeWave Research...... 22

I. The Findings

Introduction: A recent ChangeWave survey found continued momentum for U.S. consumer spending, including an improvement in spending on restaurants.

This report focuses on the results of two ChangeWave surveys conducted in February (n=1,122) and March (n=2,501) that looked at a wide range of consumer dining habits – including which types of restaurant chains have momentum going forward. ChangeWave Research is a service of 451 Research, LLC.

(A) Overall Restaurant Spending Trends

An Uptick in Restaurant Spending.For the second month in a row we’re seeing an improvement in restaurant spending, with 13% of consumers now saying they’ll spend more money at restaurants over the next 90 days – up 1-pt from February.

Only 24% say they’ll spend less money at restaurants going forward, a 2-pt improvement.

Will you be dining at restaurants more frequently, less frequently, or about the same amount over the next 90 days as you did during the previous 90 days?

Current Survey Feb ‘12 / Previous Survey Nov ‘11 / Previous
Survey
Feb ‘11 / Previous
Survey
Nov’10 / Previous
Survey
Feb ‘10 / Previous Survey
Nov ‘09
More Frequently Than Previous 90 Days / 21% / 23% / 23% / 27% / 20% / 21%
Less Frequently Than Previous 90 Days / 18% / 21% / 18% / 18% / 19% / 20%
Same Amount as Previous 90 Days / 59% / 56% / 58% / 54% / 60% / 57%
Don't Know / 1% / 1% / 1% / 1% / 1% / 1%

Frequency of Dining Out.More than1-in-5 respondents (21%; down 2-pts) now say they expect to dine out More Frequently over the next 90 days, while 18% say they’ll dine out Less Frequently – a 3-pt improvement.

For those who will be dining at restaurants more frequently over the next 90 days, what are the primary reasons why? (Choose No More Than Three)

Current Survey Feb ‘12 / Previous Survey Nov ‘11 / Previous Survey Feb ‘11 / Previous Survey Nov ‘10 / Previous
Survey
Feb ‘10 / Previous Survey Nov ‘09
Traveling More / 55% / 44% / 48% / 43% / 53% / 43%
Less Time to Cook at Home / 25% / 23% / 23% / 23% / 23% / 25%
More Special Events / 25% / 46% / 25% / 48% / 20% / 43%
Restaurants Offering Better Value / 16% / 15% / 20% / 19% / 19% / 20%
Economy is Improving / 13% / 4% / 16% / 10% / 11% / 11%
Not Trying to Save as Much Money / 9% / 6% / 10% / 10% / 8% / 5%
Increased Income / 8% / 7% / 14% / 9% / 13% / 10%
Increased Entertainment Budget / 7% / 5% / 7% / 6% / 4% / 7%
Less Concern About Job Security / 6% / 5% / 6% / 7% / 9% / 4%
General Decrease in Cost of Living / 1% / 1% / 1% / 1% / 2% / 2%
Other / 11% / 14% / 9% / 10% / 11% / 9%

Reasons for Dining OutMore Frequently:Among those consumers who expect to dine out More Frequently over the next 90 days, 55% say it’s because they’ll be Traveling More. Another 13% say it’s because the Economy is Improving – a 9-pt improvement from previously and a positive sign for the overall economy.

And for those who will be dining at restaurants less frequently over the next 90 days, what are the primary reasons why? (Choose No More Than Three)

Current Survey Feb ‘12 / Previous Survey Nov ‘11 / Previous
Survey
Feb ‘11 / Previous
Survey
Nov’10 / Previous
Survey
Feb ‘10 / Previous
Survey
Nov ‘09
Saving More Money / 29% / 32% / 32% / 32% / 33% / 32%
General Increase in Cost of Living / 29% / 29% / 27% / 30% / 22% / 25%
Rising Food Costs / 23% / 22% / 22% / 15% / 9% / 11%
Reduced Income / 21% / 30% / 25% / 35% / 32% / 36%
Higher Energy Costs / 20% / 9% / 12% / 8% / 5% / 8%
Reducing Debt / 17% / 21% / 21% / 25% / 29% / 32%
Traveling Less / 16% / 13% / 14% / 15% / 18% / 15%
Restaurants are Too Expensive / 16% / 17% / 17% / 15% / 15% / 18%
General Concerns About the Economy / 15% / 18% / NA / NA / NA / NA
Recent Purchase of Big Ticket Item(s) / 7% / 9% / 7% / 4% / 8% / 4%
Investing More Money / 7% / 3% / 8% / 6% / 9% / 4%
Job Security Concerns / 5% / 6% / 9% / 9% / 9% / 12%
Other / 13% / 11% / 14% / 12% / 14% / 13%

Reasons forInflation Top Reason for Dining Out Less.Among consumers who plan to dine out Less Frequently over the next 90 days, 29% say it’s because they’re Saving More Money (down 3-pts) and 21% say it’s because of Reduced Income (down 9-pts).

Note that the percentage citing a General Increase in Cost of Living (29%) has remained unchanged but Higher Energy Costs (20%) has jumped a whopping 11-pts.

For each of the following meals, please estimate the average amount you and/or your family are currently willing to spend per person while eating out at restaurants.

Breakfast / Lunch / Dinner
$3 or Less Per Person / 7% / 1% / 0%
$4-5 Per Person / 23% / 7% / 1%
$6-8 Per Person / 33% / 26% / 3%
$9-11 Per Person / 14% / 28% / 8%
$12-15 Per Person / 4% / 20% / 19%
$16-20 Per Person / 1% / 6% / 21%
$21-25 Per Person / 0% / 2% / 19%
$26-30 Per Person / 0% / 1% / 10%
More Than $30 Per Person / 0% / 0% / 12%
None/Don't Eat This Meal Out / 9% / 3% / 1%
Don't Know/NA / 9% / 6% / 5%
Consensus Estimate: / $6.79 / $10.41 / $19.92

Consumer Willingness to Spend: The average amount of money respondents are willing to spend per person when dining out is increasing. Willingness to spend on Dinner out ($19.92) has reached a new high, as has willingness to spend on Lunch out ($10.41).

For each of the following menu items, please tell us if you think you'll spend more money, about the same amount, or less money over the next 90 days compared to the previous 90 days.

Current Survey (Feb 2012)

More Money / Less Money / Net Difference Score / Same Amount of Money / No Money
Seafood Entrees / 18% / 8% / +10 / 60% / 10%
Chicken Entrees / 10% / 8% / +2 / 68% / 9%
Alcoholic Beverages / 5% / 15% / -10 / 52% / 24%
Soft Drinks / 2% / 19% / -17 / 39% / 35%
Steak Entrees / 7% / 17% / -10 / 57% / 14%
Smoothies/Frappes / 2% / 13% / -11 / 17% / 61%
Appetizers / 4% / 21% / -17 / 46% / 23%
Desserts / 2% / 29% / -27 / 30% / 33%
Coffee/Tea / 5% / 10% / -5 / 67% / 14%
Tapas/Small Plates / 4% / 11% / -7 / 34% / 43%
Other / 1% / 1% / 0 / 4% / 8%

Looking at menu items with momentum, respondents say they’ll spend more money on Seafood (+10; up 6-pts) and Chicken entrees (+2; up 3-pts) over the next 90 days.

Change in Net Difference Score – Current Survey (Feb 2012) vs. Previous Survey (Nov 2011)

Current Survey Net
Difference
Score
(Feb '12) / Previous Survey Net
Difference
Score
(Nov '11) / Change in Net Difference Score
Seafood Entrees / +10 / +4 / +6
Chicken Entrees / +2 / -1 / +3
Alcoholic Beverages / -10 / -12 / +2
Soft Drinks / -17 / -19 / +2
Steak Entrees / -10 / -11 / +1
Smoothies/Frappes / -11 / -12 / +1
Appetizers / -17 / -18 / +1
Desserts / -27 / -28 / +1
Tapas/Small Plates / -7 / -6 / -1
Coffee/Tea / -5 / -3 / -2

(B) Restaurants Categories

We asked respondents which types of restaurants they'll be eating out at more or less often over the next 90 days, and we found the higher-end categories – Upscale/Fine DiningRestaurants (Change in Net Difference Score = +4), High End Casual Restaurants (+4), and Moderate Casual Restaurants (+3) – showed the most improvement.

Other the other hand, Quick Casual/Family Restaurants (-3) and Fast FoodRestaurants (-2) showed slight declines.

Change in Net Difference Score – Current Survey (Feb 2012) vs. Previous Survey (Nov 2011)

Current Survey Net
Difference
Score
(Feb '12) / Previous Survey Net
Difference
Score
(Nov '11) / Change in Net Difference Score
Upscale/Fine Dining Restaurants – $25 or More Average Per Person (e.g., Ruth's Chris Steakhouse, Morton's) / -12 / -16 / +4
High End Casual Restaurants – $16-25 Average Per Person (e.g., Outback Steakhouse, Cheesecake Factory) / -5 / -9 / +4
Moderate Casual Dining Restaurants – $11-15 Average Per Person (e.g., Chili's, Applebee's, California Pizza Kitchen) / +5 / +2 / +3
Quick Casual/Family Restaurants – $6-10 Average Per Person (e.g., Panera Bread, Corner Bakery, Chipotle, Friendly's) / +2 / +5 / -3
Fast Food Restaurants – $5 or Less Average Per Person (e.g., McDonald's, Wendy's, Taco Bell) / -6 / -4 / -2

Other the other hand, Quick Casual/Family Restaurants (-3) and Fast FoodRestaurants (-2) are showing slight declines.

We also asked respondents which individual restaurant chains they'll be spending more vs. less money at over the next 90 days – and a handful of chains stood out from the rest:

Within Upscale/Fine Dining, Ruth’s Chris (-1) is showing a 2-pt uptick from previously.

High End Casual: Here we’reseeing an increase for P.F. Chang’s (+6; up 3-pts) – their 3rd consecutive survey of improvement.

On the other hand, within Moderate & Quick Casual Restaurants, Applebee’s (+4) has experienced a 3-pt decline, as has fellow Dinequity (DIN) restaurant IHOP (+2; down 3-pts).

And in Fast Food Restaurants, Wendy’s (+5) has fallen 2-pts since previously, even as Starbucks (+4; up 3-pts) shows clear signs of momentum going forward.

(D) Coffee Buying Trends

Do you typically buy fresh brewed coffee from a restaurant or coffee shop (including cappuccinos, frappucinos, lattes, and/or iced coffees)?

Current Survey Feb ‘12 / Previous Survey Nov ‘11 / Previous
Survey
Feb ‘11 / Previous
Survey
Nov‘10 / Previous
Survey
Feb ‘10 / Previous Survey
Nov ‘09
Yes / 29% / 28% / 28% / 27% / 27% / 30%
No / 71% / 72% / 72% / 73% / 73% / 70%

Three-in-ten respondents (29%) say they typically buy fresh brewed coffee from a coffee shop or restaurant.

Overall, do you think you'll spend more money at coffee shops over the next 90 days, less money, or about the same amount compared to the previous 90 days?

Current Survey Feb ‘12 / Previous Survey Nov ‘11 / Previous Survey
Aug ‘11 / Previous
Survey
May ‘11
More Money / 13% / 12% / 9% / 12%
Less Money / 12% / 19% / 25% / 19%
About the Same / 70% / 65% / 63% / 67%
Don't Know/NA / 4% / 4% / 3% / 2%

Coffee Spending – Next 90 Days: Currently, 13% of this group say they’ll spend More Moneythere over the next 90 days – up 1-pt – while just 12% say they’ll spend Less – a 7-pt improvement from previously.

We want to learn more about where you will be purchasing fresh brewed coffee over the next 90 days. For each of the following places, please tell us if you plan to purchase coffee more often, about the same amount, or less often over the next 90 days compared with the previous 90 days.

Current Survey (Feb 2012)

More Often / About the Same / Less Often / Current Survey Net
Difference
Score (Feb '12) / Change
in Net Difference
Score / Will Not Purchase Coffee Here
Barnes & Noble / 1% / 17% / 3% / -2 / +1 / 57%
Caribou Coffee / 1% / 10% / 2% / -1 / 0 / 66%
Dunkin' Donuts / 2% / 22% / 5% / -3 / -1 / 51%
Krispy Kreme / 0% / 4% / 2% / -2 / 0 / 70%
McDonald's / 8% / 35% / 6% / +2 / -1 / 36%
Panera Bread / 3% / 23% / 5% / -2 / 0 / 50%
Peet's / 2% / 12% / 3% / -1 / -1 / 63%
Seattle's Best / 1% / 15% / 3% / -2 / -1 / 60%
Starbucks / 10% / 56% / 10% / 0 / 0 / 16%
The Coffee Bean / 1% / 9% / 3% / -2 / -1 / 64%
Tim Hortons / 3% / 11% / 3% / 0 / -1 / 63%
Local Convenience Stores (e.g., Wa-Wa, 7-Eleven) / 2% / 20% / 4% / -2 / +1 / 53%
Local Coffee Shops / 6% / 45% / 5% / +1 / -1 / 30%
Brewing Coffee at Home / 23% / 59% / 2% / +21 / -6 / 5%

Over the next 90 days, which of the following brands of coffee - if any - do you plan on purchasing to brew at home? (Check All That Apply)

Current Survey Feb ‘12 / Previous Survey Nov ‘11 / Previous
Survey
Feb ‘11 / Previous
Survey
Nov ‘10 / Previous
Survey
Feb ‘10 / Previous
Survey
Nov ‘09
Starbucks / 29% / 27% / 27% / 28% / 28% / 27%
Folgers / 16% / 17% / 17% / 19% / 20% / 20%
Green Mountain / 11% / 10% / 10% / 11% / 8% / 10%
Kirkland (Costco Brand) / 11% / 10% / 16% / 9% / 13% / 12%
Maxwell House / 10% / 17% / 12% / 15% / 16% / 9%
Dunkin' Donuts / 10% / 11% / 11% / 8% / NA / NA
Peet's / 8% / 5% / 6% / 6% / 6% / 6%
Seattle's Best / 8% / 4% / NA / NA / NA / NA
Trader Joe's / 7% / 7% / 7% / 7% / 7% / 8%
Kona / 6% / 7% / 6% / 4% / 7% / 5%
Nescafé (Taster's Choice) / 6% / 4% / 4% / 5% / 4% / 6%
Millstone / 5% / 5% / NA / NA / NA / NA
Eight O'clock / 4% / 8% / 7% / 5% / 6% / 8%
Newman's Own / 4% / 4% / 3% / 3% / 4% / 4%
Gevalia / 4% / 2% / 5% / 6% / 4% / 4%
Allegro (Whole Foods Brand) / 3% / 1% / NA / NA / NA / NA
Member's Mark (Sam's Club Brand) / 2% / 5% / NA / NA / NA / NA
Do Not Brew Coffee At Home / 4% / 4% / 3% / 4% / 4% / 4%
Other / 24% / 21% / 19% / 21% / 21% / 25%

Coffee Brewed at Home:Starbucks (29%; up 2-pts) also remains the top 'brew at home' coffee brand while Folgers (16%; down 1-pt) ranks second.

Interestingly, Green Mountain (11%; up 1-pt) is now tied with Kirkland (11%; up 1-pt) for third – even as Maxwell House (10%) has fallen 7-pts since the previous survey.

Which of the following types of coffee have you purchased over the past 6 months to brew at home? (Check All That Apply)

Current Survey Feb ‘12 / Previous Survey Nov ‘11 / Previous Survey
Aug ‘11 / Previous
Survey
May ‘11 / Previous
Survey
Feb ‘11 / Previous
Survey
Nov ‘10 / Previous
Survey
Aug ‘10 / Previous
Survey
May ‘10
Single-Serve (e.g., Pods, T-Discs, K-Cups) / 19% / 20% / 18% / 16% / 20% / 13% / 14% / 11%
Instant (e.g., VIA, Nescafé) / 17% / 16% / 17% / 12% / 11% / 15% / 14% / 13%
Ground or Whole Bean (e.g., canned, bagged) / 77% / 78% / 72% / 75% / 79% / 76% / 77% / 77%
Other / 1% / 1% / 1% / 1% / 1% / 2% / 1% / 1%

Single-Serve & Instant Coffee: Nearly one-in-five respondents (19%) say they’ve purchased Single-Serve coffee (such as Pods, T-Discs and K-cups) over the past 6 months, down 1-pt from their recent high.

Purchases of traditional Ground or Whole Bean coffee (77%) are also down 1-pt from previously – while Instant coffee (17%) such as VIA or Nescafé have risen 1-pt.

And for those who have purchased single-serve or instant coffee, which brand of coffee did you choose? (Check All That Apply)