Cooking (and eating) lab-grown chicken
New York (CNN Business)Restaurants have had a tough couple of years, with the pandemic, soaring ingredient prices and labor shortages. Now they have another problem: Gen Z isn’t all that interested in dining out.
According to a recent survey from market research company NPD Group, people between the ages of 18 and 24 ordered from (or at) restaurants 218 times on average between February 2021 and February 2022. When Gen Xers were that age, in 2002, they patronized restaurants 284 times apiece in a year. And when Millennials were that age they went to or ordered from restaurants 244 times in the course of a year.
That’s not great for restaurants, which want to hook young consumers and turn them into life-long customers.
“The earlier you can engage with a consumer, the more potential you have for building loyalty and building frequency over the course of more years,” said Robert Byrne, director of consumer and industry insights at the restaurant consulting firm Technomic. It’s hard to develop loyalty “once somebody’s past that window,” he said.
Young consumers are maintaining the same pandemic habits as consumers in other demographics, but face even more constraints. To try to get them excited about restaurant food, operators are instating loyalty programs and partnering with young stars — and may have to lower prices.
Why fewer young consumers are dining out
Like other consumers, some young employees are spending more of their workdays outside of the office. Without regular daily commutes, demand for restaurant meals can wane, said David Portalatin, NPD’s food industry advisor. Plus, a lot of people learned how to cook during the pandemic, and they’ve held on to that skill. “Those are the kinds of things that have made it a little bit more challenging to generate customer traffic at restaurants.”
And let’s not forget inflation and record high gas prices, which are hurting people’s wallets.
Younger consumers have even more constraints, he noted, such as more spending on tech, apparel and other items.
“The smart phone has been attached to them probably since they were kids,” Portalatin said. “That brings along with it all kinds of what we call ‘committed consumption,’ whether that’s streaming services, or gaming, or other things that you’ve already committed a certain monthly amount of your budget to.”
NPD sees this as a short-term problem caused by temporary habits created amid the pandemic, as well as those macroeconomic pressures. “We expect the restaurant industry will ultimately recover all of its pre-pandemic traffic volume,” Portalatin said.
But some restaurant operators are nervous about what this change in buying habits portends for future sales, said R.J. Hottovy, head of analytical research at Placer.ai, which tracks restaurant visits. They’re wondering if “they have to change the ways they go about things,” he said.
And some restaurants are bucking the trend.
Wings and donuts
Chicken wing restaurants like Wing Zone and Wingstop and donut shops including Winchell’s, Yum Yum Donuts and Shipley Do-Nuts get more visits from Gen Z consumers than other spots, according to Placer.ai, which uses census data to help determine the age of customers visiting US restaurants.
Between 13 to 18 percent of visitors to these locations are between the ages of 18 and 24, according to Placer.ai’s research. Typically, just about 10% of US retail visitors are in that demographic, Hottovy said.
Food items like donuts and wings tend to be more popular with young people, Hottovy noted. But brands can still attract Gen Z customers “even if you’re not in those categories that skew well to a younger audience,” he said.
In addition to building a brand that resonates with younger customers, good value helps, he said.
According to NPD, 18- to 24-year-old consumers consider price to be the most important factor when choosing which restaurants to try. And to drive more traffic to their stores, restaurants may have to start offering more deals, Hottovy said — even if it hurts their margins.
Other companies are using different tactics to try to bring young shoppers into the fold.
Loyalty programs, celebrity meals and discounts
Restaurants love online loyalty programs because they can use them to learn their customers’ preferences and market to them directly, and, of course, increase loyalty. They’re also a way to reach young consumers where they’re already spending a lot of their time: On their phones.
“The Gen Z audience definitely is more active on mobile devices than other generation groups,” said Hottovy, and companies like Chipotle (CMG), McDonald’s (MCD) and Starbucks (SBUX) have all been “revamping” their programs accordingly.
Others, like IHOP, have taken a pun-ful approach. The chain’s loyalty program is called the International Bank of Pancakes, and customers earn PanCoins when they spend money through the app. They find rewards in the app’s Stack Market.
In addition to loyalty programs, restaurants are also teaming up with celebrities and influencers to get young consumers excited about their food.
McDonald’s, in particular, has had a lot of success with its “famous orders platforms,” or meals that contain a celebrity’s favorite orders. The burger chain has partnered with Saweetie, BTS and others on the limited-time offers.
Such offerings “definitely skew more towards the Gen Z and younger audiences,” said Hottovy. Since McDonald’s launched the concept, other chains like Burger King (and even Coca-Cola (KO)) have followed suit. Burger King joined forces with singer-songwriter Lil Huddy, among others, on special meals. Coca-Cola tapped DJ Marshmello to help it develop a new limited-edition flavor.
Source: Read Full Article