The fast food industry could take a lesson from beers
Tom Dougherty, CEO – Stealing Share
31 August 2011
The smaller brands have an opportunity, but changes must be made
It’s an interesting time in the fast food industry. There are more outlets than ever and the industry is growing. In addition, the foodservice research company Technomic released a report that smaller brands, such as Five Guys and Shake Shack, are eating into the big retailers’ market share.
Yet, the big three – McDonald’s, Wendy’s and Burger King – still make up 75% of US burger sales.
“McDonald’s is still the most powerful brand in the fast food industry and, with a few exceptions, the smaller brands have taken hold of the much smaller audience of “I’ll try it” that is not as brand loyal.”
So how do we interpret this? To me, the fast food industry mirrors what the beer market has been going through for years, starting with the emergence of microbrews. At that time, the big three in beers – Budweiser, Miller and Coors – reacted with panic by introducing their own kind of specialty beers, without completely entering into the microbrew space, and flooding the marketplace with marketing and advertising.
They have since adjusted by buying out many of the microbrews and, more importantly, giving more meaning to their own brands. (Well, Budweiser does. And, BTW, you’d be surprised how many microbrews are owned by Budweiser and its parent company, InBev.)
Microbrews also deluded themselves into thinking they had found a meaning in the marketplace that was previously untapped. What they found, though, was that the microbrew drinker had a completely different brand face than those who drink one of the major American lagers. They are not brand loyal, but like to try what’s new. That means, while they may prefer Boulevard or Shiner Bock, they will try another microbrew if it isn’t available at that time.
The Bud drinker, meanwhile, will leave if the establishment has no Bud.
That is the case here with fast food burgers as well. McDonald’s is still the most powerful brand in the fast food industry and, with a few exceptions, the smaller brands have taken hold of the much smaller audience of “I’ll try it” that is not as brand loyal.
In the beer industry, most of the microbrews did not take advantage of its entry into the market, as their market share is still less than 5% in 2010. (The microbrew industry has grown a bit, but that’s because more microbrews are entering the market. The individual brands aren’t growing so much as they are cannibalizing each other.)
With few exceptions, like Fat Tire and Samuel Adams (although, most microbrewers don’t consider Sam one of them), they never bothered to develop a brand. Instead, they just got clever with names like Moose Drool.
Meanwhile, the largest brand in the market, Budweiser, continues to hold more than 50% market share – practically a monopoly – by having the most meaningful brand in the market.
For the smaller burger brands such as Smashburger and Mooyah Burgers and Fries, they will have limited growth in the future if they don’t develop a brand that captures the highest emotional intensity in the fast food industry. They will be deluded into thinking that the McDonald’s and Wendy’s of the world won’t react and their better burgers will eventually win.
As a microbrew drinker and a fan of Five Guys, I’d like to see those smaller brands decide they want to grow up and adopt meaningful brands that go beyond clever and are about who the customer is instead of what they offer. If they do, they can truly transform the market. If not, they will find the growth of the individual brands plateauing and the big three continuing to survive successfully.
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