Facing the Era of Weakonomy

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How to secure stable growth in the face of an era of ‘Weakonomy’? A common concern among food-service players throughout Europe. Foodservice operators from Germany, Great Britain, Poland, Portugal, and Saudi Arabia share their knowledge and strategies for counteracting difficult economic environments

Our Questions

Q1 Major lessons learnt in 2013? What has been easier, what harder than expected? Important steps taken?
Q2 Looking ahead: biggest challenges & opportun-ities for your company in the next 2-3 years?
Q3 How do you get prepared to cope with both?
Q4 Achieving further growth: Your strategic priorities/targets 2014ff?

Drew O’Malley, Division President Central Europe, AmRest (Burger King, KFC, La Tagliatella, Pizza Hut, Starbucks), Wroclaw, Poland
“2013 has been an incredible roller coaster – with swings literally from month to month in our results, to a large degree a reflection of the turbulence going on in the markets and consumers’ minds. I think one of the major learnings for us has been on finding innovative ways to provide value without discounting our core offerings. This is no easy trick, but it has forced us to expand our efforts around menu innovation and to be thoughtful about where and how to take pricing as food costs continue to rise. On the flip side, it’s been a great year for hiring talent – we’ve brought in a handful of terrific business leaders across a number of areas in the business, so we’re thrilled about that.

No one is expecting Central Europe to return to the growth rates of 15-20 years ago, and most of Europe looks like it’s headed for a long slog of slow growth, what David Bosshart called the ‘weakonomy’ at the 14th European Foodservice Summit. I think that instantly becomes the biggest challenge – how do you achieve new and innovative ways to find growth in such an environment? Certainly one of our key challenges to make this happen is around establishing stronger emotional connections of our customers with our brands – to create true brand loyalty and lower the risk of switching as new entrants come into the market. We do this very well with Starbucks but need to dig deeper in some of our other brands. Social and digital play a huge role here, for sure, but it’s really about identifying every touchpoint our customers have with our brands, both in-store and out-of-store, to look for opportunities to enhance that relationship.

How do we get prepared? Well – it’s always a sad moment in one’s life when you move out of your brands’ target demographic! For me, being in my 40’s means that I need to ensure we have thought leaders in our business who can lead our efforts around social, digital, CRM, and other technology affecting our business. I’m on Facebook about once every six weeks, so that’s clearly not me. As mentioned earlier, we have had success this year in bringing in great talent in those areas, which I believe remains the essential ingredient. We are in the midst of refining our strategy here, and I am very excited about the opportunities we have in front of us.

Am Rest continues to be a growth business, and aggressive expansion is part of our DNA. Just last week we opened eight restaurants in a two-day span, which I don’t think we’ve ever done before. One of our priorities is around enhancing the science of our methodology in site selection, to ensure that the new restaurants we are building continue to generate high returns, especially as our market penetration deepens. We are also looking for innovative ways to get closer to our customers across a variety of channels, understanding their expectations and getting their feedback on their experi-ences in our restaurants to better serve them. We are serving nearly 3 million customers a week across Poland, Czech, and Hungary, so that’s of no small import-ance. At the end of the day, if you can nail the in-restaurant experience and provide an outstanding customer experience with great consistency, everything else falls into line.”

www.amrest.eu

Ali Al Rakban, Managing Director, ALFA (Al Faisaliah Group), Riyadh, Saudi Arabia

“Saudi Arabia’s labour market is getting more difficult to operate in successfully. With the country’s push to get the private sector into a Saudization program, the issue of expat visas, a traditional source of the food industry’s workforce, has been slowed dramatically. This is likely to be the biggest challenge in 2014 and the coming years.

On the other hand, ALFA sees big opportunities in the constant growth of the -local population with its ever greater purchasing power and increasing habit of eating meals outside the home. This is a huge opportunity for our group to target an employment programme that presents the food industry as offering both an interesting first job to new entrants and great potential career opportunities in the longer term.

ALFA has already initiated a hospitality training centre for Saudis to address this.

Having enjoyed several years of healthy double-digit sales and traffic growth recently, ALFA, with 18 foodservice outlets in operation throughout the Saudi Kingdom to date, will continue to build on this momentum with new menu innovations and an on-going restaurant renovation programme. ALFA also has an aggressive expansion plan for its -existing fullservice, casual dining concepts (Steakhouse, Piatto), as well as for its newly introduced fast-casual entrants (Firegrill, Piatto Pronto), both inside the KSA and in neighbouring GCC countries.” www.alfaisaliah.com

David Campbell, CEO, Wagamama Ltd, London, UK

“2013 has been a good year for Waga-mama, with 19 new restaurants opened – mainly in our core UK market, but also in our USA owned business and Rest Of The World franchise business.

At the same time as we have been expanding we see a market where more and more people are opening more and more restaurants. It’s becoming ever more competitive. Especially within the branded restaurant sector where supply is exceeding demand, which means to grow sales in the existing estate; and new locations you have to work smarter and harder than ever before. The second effect of this oversupply is that good, new sites are hard to find, but in this regard Wagamama’s unique offer is a big benefit.

Another challenging aspect of the market that is fun to deal with, is that the lines between traditional sectors of the market – casual, fast casual, fast food – are all blurring … and even beyond these core categories. From a consumer’s standpoint I don’t think they care … so as an industry we had better get used to it!

Looking ahead – challenges and opportunities? Let’s start with pricing. One of my predecessors, some years ago, took Wagamama out of discounting. We should long be in his credit. At the time it was a brave move, but the right one. We have never looked back. We, of course, look at pricing to continue to deliver value but we are not creating false volume by giving it away. I have yet to find anyone who doesn’t discount and thinks they should, but I know many who want to get off the discount treadmill! I think that tells the story.

The standards and quality of our industry continue to grow every year – which is something to be very proud of. However, today I think this means that in most markets, and absolutely in highly competitive markets like London, good food is just a ‘given’ – if you don’t deliver you won’t get a second chance to win that customer across.

In the same vein, I think if you accept good food is a ‘given’ then you have to spend a lot of time focusing on all the other elements of the consumer experience – starting from the time they first look you up online.

Finally, however much money and however clever we all are at creating great restaurants, and however brilliant our food is, the Number 1 most important part of our business is people. Every single one of the almost 4,000 people who are part of the Wagamama family worldwide is critical to our success and it is up to us, as management, to make sure we create a great place for our people to work and to keep staff retention as high as possible.

We spend an increasing amount of time thinking about people – and I think that is very important. Turnover, or lack of staff retention, is bad for any business in many ways and so we are constantly looking for ways to improve that. Not just in creating a business where people who are good are recognised and successful, but starting with smarter recruiting. We also spend money ensuring that all our General Managers and Head Chefs get together for two days at least once a year for us to talk about how we can all grow our business. A focused organisation does wonders for the bottom line!

Wagamama wants to be the best pan-Asian restaurant brand in the world. Food is front and centre of that. We are lucky in that what the culinary genius that is Alan Yau created was not only brilliant when he created Wagamama in 1992, but that the brand and food is more relevant today than it ever has been before. It’s beholden on us to look after that legacy and evolve it over time. So for example, we see more Korean influences coming through.

On food, like everything else, you need to be focused but it’s also important to look after the next generation. That’s why we were very excited when the Soil Association voted Wagamama the best menu for children in terms of choice and quality – these children are tomorrow’s customers, plus if we keep them happy we tend to find their parents like us too!
In terms of 2014, four things that we’re focusing on are:

1. Digital. It’s more relevant today than ever, and it’s not just something to put on a business plan but to really get engaged with in all aspects of our business. Of course, social is very important, but also operationally we are rapidly moving everything digital. The iPad isn’t yet 4 year’s old – that surprises a lot of people – but almost 22 years ago Wagamama had PDAs for ordering. We have no intention of being anywhere other than at the front of the digital age.

2. Sustainability. I’d like to think we are a good corporate citizen, and sustainabil-ity is an important part of being a good citizen. It’s something we talk about with all our business partners. So, for example, how do we create more environmentally friendly packaging for our growing take-out and delivery business?

3. Who Are We? As I’ve said the lines between the various restaurant sectors are blurring. We see this as an opportun-ity rather than a threat. Historically we haven’t looked too far outside of our ‘trad-itional’ restaurant format, but when we have gone outside it’s been a great success – for us and our partners: Wagamama in Harvey Nichols in Knightsbridge, London; and the most excellent Wagamama at BAA/British Airways T5 at Heathrow, London. In 2014 I think we’ll be looking at some exciting new ideas.

4. Global Ambitions. We will continue to grow in the UK in 2014, and the USA is a big priority for us, but there are also many more opportunities globally. In terms of new business, in 2014, we are focused on markets to the west of line from Moscow to the Middle East (roughly).”
www.wagamama.co.uk

Hiltrud Seggewiss, Executive Board (Chair), Nordsee Holding, Bremerhaven, Germany

“For me personally, 2013 was an extremely exciting business year. -Naturally I had already been very familiar with the franchise business before I started at Nordsee, but this year I became thoroughly immersed in the company’s core business, namely sales. Before that I had been on the financial side of the business. The result was a wealth of information pertaining to how Nordsee was to orient itself in future. Among other things, I was made very much aware of the topics of customer loyalty and staff. By visiting a large number of companies I was made to realise once again just how important it is to have good customer relations. The crucial interface is between the staff and the guest.
Addressing potential franchise partners has shown a positive development: the number of applicants has risen significantly since 2012. So we can pick the most suitable persons.

It is difficult to attract good trainees. Since 2012 we have attached greater importance to personnel marketing and are investing considerable sums in apprenticeship schemes and advanced training. This summer we signed the Diversity Charta, thus committing ourselves for the long term and underlining how much we appreciate our staff. After all, in the next few years, we want to rank among the top employers. Incidentally, our franchise partners are also benefiting from this commitment.

Purchasing power in Germany and the significant part nutrition plays are naturally quite important prerequisites for the success of our company. The increased awareness of quality and freshness when it comes to food will also continue to impact positively on Nordsee. For example, we are very strongly committed to sustainability and are planning to issue our first sustainability report in 2014. What is the point, however, of sustainable purchasing and sustainable businesses if our employees are unable to communicate these ideas to the customer?
We are very pleased to observe a great deal of continuity both among guests and employees, showing loyalty and trust that have existed over many years, and a solid customer base. Experience has shown that we can achieve the best customer loyalty by having our front players address them personally in the restaurants. Our prime strategic aim, both now and in future, is to continue to improve the quality of this means of contact and ultimately that of our employees, and in this way bind them to us as well. It is very important that our staff, especially those serving at the buffets, project an image of self-confidence and make it clear that we at Nordsee are well positioned. Also, there is the exciting question, which crops up again and again, of how to get our branches to adopt new ideas. Here, as it were, the focus is on the trustful relationship with our employees and with our regional and branch managers as the key figures.

For 2014 we are striving for a moderate growth of up to 2% (like for like). Of course we also take every opportunity offered for (expansion and) growth. Nordsee definitely wants to get bigger. We are witnessing good developments in all three sales segments. The take-away business especially is showing signs of strong growth and is attracting more customers, as well as new ones. So we think there is a good chance of this creating a knock-on effect and of the restaurant business being given an extra boost at the same time.” www.nordsee.com

Francisco Carvalho Martins, CEO, Portugalia Restauração, Lisbon, Portugal

“Portugal has been going through a particularly difficult period since 2011, when the country had to seek for international financial help. As a consequence, sales tax in the restaurant industry was increased from 13 to 23%, making it even harder to cope with an already very difficult situation. Consumption has been severely affected and the restaurant industry had to reinvent itself. In the case of Portugalia we underwent a massive cost cutting project that included layoffs, a new software programme to better control the food cost and we managed to renegotiate most of our rentals. We have seen a very positive reaction from our staff as well as a very positive clients’ reaction to our new promotions.
The biggest challenges and opportun-ities for our company in the next 2-3 years will be to succeed with its inter-national project that will start in the former Portuguese colony Macau in 2014, to stimulate consumption in the Portuguese market and to successfully launch a new Food Service division dedicated to sports and musical events.

As far as the project in Macau is concerned, we have been training four of our best staff members to move them to Macau for a long period of time. We have set up a Joint Venture with a local partner and have been preparing the entrance in that market place for a year prior to the official launch, now scheduled for the first quarter 2014.

Growth in our market place for 2014 will be a major challenge, mainly due to the difficult economic conditions that will remain throughout the year. We are working on several initiatives such as a new loyalty card, new digital solutions and a special training programme for our store managers focusing on staff motivation and sales. We will also increase the client base of a Corporate Card Programme launched during 2013 that has been very successful. In addition, we are developing a new low cost concept, aiming specially at the increased number of foreign visitors in Lisbon.” www.portugaliarestauracao.pt

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