Peek No : 2
July 3, 2003

Hello!

America is big. And everyone knows that.

But did you know that we spend more than $400 billion at restaurants?

Is that big? If it’s more than 6 times the GDP of many Asian countries, it must be really big.

Dining in restaurants accounts for 4% of the US gross national product, and more than 40% of all money spent on food. And as we will spend more time working and find less time for cooking at home, eating out is bound to get bigger.

In this issue, Marketspeek takes a close look at a big industry getting bigger.

All Farm Products Index

U.S. Farm Prices remained unchanged in June from the previous month but were up by 8.2% from the last Year. The preliminary All Farm Products Index of Prices Received by Farmers in June is 106. The preliminary All Farm Products Index is up 8 points (8.2 %) from June 2002. Higher prices for cattle, lettuce, hogs, and broilers have offset the downward movement of prices of peaches, potatoes, sweet corn, and broccoli.

Housing Market Index (HMI)

Housing Market Index (HMI) rose to 62 in June from 57 in May. The month's overall HMI rose due to improvement in the builders' evaluation of the current month's home demand, the outlook and the traffic.

Business Conditions Index (BCI)

Sentiment in New York City got a bit worse in June. The New York City Business Conditions Index (BCI) stood at 226.7 in June - a 1.3% decline from its May level. But there was a modest improvement in the current outlook. The current outlook stood at 43.1 in June from 38.3 in May. The six-month outlook touched 62.5; its highest level since July 2002.

Chicago PMI

Chicago PMI business index reading for June stood at 52.5. This is slightly higher than May's 52.2.

Happy Peeking!

Editorial Team
Marketspeek
Executive Editor - Dr. Sharon Livingston
Editor - Vijay
 Fortnight Focus

Restaurants - America

  • The restaurant sector had an economic impact of around $1 trillion in 2002.
  • This estimation is based on the allied relationship of this sector with industries like agriculture, transportation, wholesale trade, and food manufacturing.
  • The total direct sales registered by this sector stands at $426.1 billion.
  • The number of locations is fast approaching the 10 million mark, providing employment to 11.7 million people.
  • Commercial restaurant services are expected to register a turnover of $ 310 billions in fiscal 2003 as against 296 billions in fiscal 2002.

Vital Statistics

  • On an average, the restaurant industry registers sales of nearly $1.2 billion per day in 2003.
  • The turnover of the sector is expected to grow by 4.5% in 2003.
  • The average annual expenditure on food (away-from-home) hovers around $850 per person.
  • The compounded annual growth rate (CAGR) posted by the sector stands at 7.2%. The last 30 years have been considered for the CAGR computation.
  • August is the most desired month of the year and Saturday remains the most desired day in the week for dining out.

   Analysis - Restaurant Sector

  • The margins of the business have become more predictable. The graph below depicts the behavior of costs in the industry

  • Since the biggest cost ingredient is cost of food sold, achieving economies of scale matters a lot. An increase in bargaining power over food and beverage suppliers can significantly increase margins.
  • Ethnic restaurants (featuring specific cuisines) are growing rapidly. In the long term, ability of a restaurant to specialize and excel in a specific cuisine, rather than a comprehensive cuisine, will become the key aspect for success.
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 Wish I were

Dave Gold is the king of extreme value. He has another name - the deep-discount retailer. Gold founded the 99 Cents Only Stores chain and the initiator of the 99-cent lifestyle.

Gold opened his first "99 Cents Only" 20 years ago near the Los Angeles International Airport. Since then there was no looking back.

The logic behind the 99 Cents title, in his words, is:
"Whenever I sold wine or cheese for $1.02 or 98 cents, it never sold out. The moment I put a 99 Cents sign on anything, it was gone in no time. I realized it was a magic number. I thought, wouldn't it be fun to have a store where everything was good quality and everything was 99 cents?"

But his strategy helped Gold make it to the Forbes 400 list for 2002. Gold has arrived in style. He now has 142 stores , no corporate debt, and an estimated personal fortune of $650 million.

Gold's warehouse is a pleasure to watch. A beehive of workmen in electric carts roll through countless cartons marked with Gerber, Sanyo, GE, Kraft and Del Monte.

The secret for Gold's success:

  • Detect an empty slot in the market place and position your offerings innovatively.
  • Be loyal to your positioning and never, ever deviate from it.
  • Organic growth consolidates your business, no matter whatever you sell.

http://www.fortune.com/fortune/smallbusiness/marketing/articles/0,15114,459639,00.html

http://www.thesunlink.com/redesign/2003-02-27/business/84636.shtml

http://www.chron.com/cs/CDA/ssistory.mpl/front/1958887

http://seattlepi.nwsource.com/business/109690_cheapstore22.shtml
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 BrandFact
The Los Angeles Police Department uses a special computer program called HITMAN. HITMAN stands for "Homicide Tracking Management Automation Network," and aids police in solving murders.
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This Fortnight that Age

June 25th 1867 - The first barbed wire was patented by Lucien B. Smith of Ohio.
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 Make us Work 4 you

Our research team will be glad to work on a research assignment for you. Download the proposal requisition form and commission our cost-effective secondary research services.

Click here for proposal requisition form.
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 Insight
The world is moving so fast these days that the man who says it can't be done is generally interrupted by someone doing it.
-- Elbert Hubbard
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If you are looking to subscribe to our Executive Editor - Dr. Sharon Livingston’s newsletter on primary research and projective techniques, send a blank email to marketspeek@executive-solutions.com
Disclaimer
The information presented in this Newsletter is not based on any primary research undertaken exclusively for this purpose; it is based on secondary sources of information, as current as the researchers were able to collect from the sources. However, should any specific client need up-to-date information on this (or any other) segment, they may commission Executive Solutions to do such research.