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International Top 25: 5 key insights on global chains

Costa Coffee sales growth stands out, while C-stores rule in Japan

The top 25 foodservice companies based outside North America have largely outperformed the global foodservice industry since 2010.

The largest, most dominant companies from Japan and the U.K. are driving growth by expanding to new markets, with Japan’s largest convenience-store chains leading the way.

However, emerging markets such as China, South Africa and Mexico are also producing companies with greater international influence, a trend that is likely to continue over the next few years.

Take a look at five key insights from the International Top 25:

Photo: Ben Pruchnie/Getty Images

Costa Coffee soars

In 2015, few international brands performed better than Costa Coffee. After increasing sales 20 percent year-over-year to surpass $1.8 billion, Costa Coffee became the fifth-largest brand based outside North America.

Explosive growth in 2015 was fueled by unit expansion, including a net increase of 304 global locations.

Much of the growth was in China, Costa Coffee’s second-largest market, where sales rose 14 percent in 2015. The company has ambitious plans to double its unit count in China by 2020.

Growth is also facilitated by Costa Coffee’s increasingly diverse portfolio of formats. In addition to standard coffee shops, the company operates self-service Costa Express units, an on-the-go coffee concept called Costa Pronto and Costa Fresco, a “food-led” concept.

Mister Donut faces new challenges

Not all major international brands fared so well. Osaka, Japan-based Mister Donut fell six places in the International Top 25 on a 1.3-percent sales decline in 2015 and a net loss of 50 units.

Mister Donut faces stiff competition at home from convenience stores with increasingly versatile foodservice offerings. For example, 7-Eleven added a more healthful doughnut to its menu in 2015. C-stores increasingly compete against chains like Mister Donut for the quick-service breakfast daypart, and have better adapted to Japan’s sluggish market conditions with more diversified offerings.

At the regional level, Mister Donut has steadily lost market share since 2011 to U.S.-based concepts such as Dunkin’ Donuts and Krispy Kreme, both of which have expanded rapidly across the region over the past five years.

C-stores outperform all other formats

Undoubtedly, the fastest-growing, highest-value foodservice chains are actually the foodservice components of convenience stores. In fact, the top three international foodservice brands are all Japan-based — but very global — convenience-store chains, including 7-Eleven, Lawson and Family Mart, respectively.

C-stores are mixed-format spaces with particularly broad appeal, one-stop shops offering a blend of on-trade and off-trade goods that service multiple dayparts. C-stores leverage a growing global demand for convenience in all things, especially in fast-paced urban environments where eating on the go is common.

Foodservice offerings from C-stores are particularly well developed in Japan, and are typically higher in quality and more varied than C-stores in many developed Western markets. Japanese C-stores commonly serve healthful and complete meal options, such as bento boxes, ramen, salads and sandwiches, and increasingly offer in-store dining spaces.

Japanese companies spread their influence

Some of the largest, most dynamic companies outside North America hail from Japan: Eleven of the top 25 international chains are Japanese.

However, a bevy of macroeconomic factors, including an aging population and a steady decline in disposable income among middle-class consumers, has contributed to a slowdown of growth at home.

Consequently, sales in Japan are expected to rise an average 0.8-percent annually to 2020, and local companies are looking elsewhere for growth. As a result, Japan’s largest foodservice conglomerates are expanding their brands to new markets, targeting high-growth Asian markets such as China and Southeast Asia to fuel profits.

For example, Zensho Holdings opened 126 international outlets of the popular Sukiya chain of Japanese-style beef-bowl restaurants in 2015, including 77 units in mainland China, 13 locations in Taiwan, and eight restaurants in Indonesia, according to the Nikkei Review.

Flush with cash, Japan’s largest conglomerates are ripe for acquisitions that will expand their influence across Asia and further afield.

More chains to watch

While Japan and the U.K. continued to produce the largest and most dynamic foodservice companies outside North America, other notable players stood out in 2015.

Chief among them is Jollibee, based in Pasig City, Philippines, an increasingly global quick-service chain specializing in burgers, chicken, pasta and Asian-style desserts. Given its massive popularity at home, Jollibee has found success by targeting markets where Filipinos live abroad, mostly in North America, the Middle East and Southeast Asia.

Nando’s, the South African chain serving Afro-Portuguese-style chicken, is another player to watch, having increased its global unit count by 29 percent, reaching 1,064 restaurants since 2010. Nando’s fast-casual format and unique cuisine have widespread appeal, especially with consumers in developed markets.

Interestingly, both Jollibee and Nando’s operate outlets in North America, and represent an increasing amount of international companies looking to North America for growth with concepts they are confident will resonate with consumers.

Stephen Dutton is a consumer foodservice associate in Euromonitor International’s Chicago office. Contact him at [email protected].

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