Study: Consumers will pay more for premium items even in harsh times

CHICAGO Just as a new consumer study revealed that customers still are willing to pay more for “higher quality” menu items when they dine out, even with today’s economic pressures, Taco Bell introduced this week its highest-priced burrito.

Taco Bell said its new limited-time Triple Steak Burrito with three servings of carne asada steak is the highest price burrito on its menu, retailing for a franchisor-suggested price of $3.99. The new item is 69 cents more than the Grilled Stuft chicken burrito at $3.30, the next most expensive item. Most Taco Bell burritos are priced at $1.99 or less.

Greg Creed, Taco Bell Corp. president on Tuesday told attendees of the Multi-Unit Foodservice Operators conference in Washington, D.C., that the item has 4.5 ounces of steak, more than most meat-based menu items at Taco Bell. The new item also features carne asada steak instead of the more typical seasoned ground beef. Taco Bell is operated or franchised by Louisville, Ky.-based Yum! Brands Inc., which also franchises the Pizza Hut, KFC and Long John Silver’s brands.

The new item is an example of what many industry observers call the barbell technique — a menu strategy that focuses both on premium, higher priced items and lower-priced, value-centric offerings. The strategy has been used successfully by many quick-service outfits like CKE Restaurants Inc.’s Carl’s Jr. and Hardee’s, Burger King and McDonald’s. Analysts cite the technique as one initiative that has helped quick-service chains post positive guest traffic, as it provides offerings both for consumers who are less effected by economic pressures as well as value items for customers watching their spending.

A new study released Tuesday by Technomic Inc. appears to support the premise of the barbell strategy. Following an online survey of more than 2,000 people in May, Technomic concluded that though consumers are dining out less often, when they do visit restaurants they seek value for their money and will pay more for premium items, even amid the economic downturn forcing many to rein in spending.

The report found that 61 percent of consumers said they would spend more for a higher quality sandwich that contained premium meat. For premium cheese in the sandwich, 41 percent would spend more; and for premium bread, 34 percent said they would pay more.

Ninety one percent of those surveyed said they were dining out less often, especially at full-service restaurants, but only 32 percent said they are buying less expensive items when eating out, and only 19 percent said they were ordering smaller amounts or portions.

“Consumers are spending less on dining out and feel they have to allocate restaurant spending more wisely,” said Darren Tristano, Technomic’s executive vice president. “Restaurant operators must offer a strong value equation to compete successfully for those dollars.”

The study also found that most consumers understand that many restaurant operators have been forced to raise prices because of macroeconomic conditions. Seventy five percent of those surveyed attributed higher menu prices to increases in fuel costs and food inflation and only 25 percent said they believed restaurants were raising prices because they wanted to make more money.