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Fast-food brands work to make value messages stand out

Value scores hold steady for sandwich segment, but fluctuate for burgers, pizza

When aggressive advertising of $5 subs, $10 pizzas and $1 double cheeseburgers results in a surge of copy-cat offers from competitors, quick-service chains' value messages can get lost in the crowd.

According to consumer perception data from New York-based YouGov's BrandIndex, which tracked the average “value” score of several foodservice segments from the beginning of January to the start of August, industry sectors with consistent value offers among its leading chains have held their reputations for value steady among consumers.

In other segments with rampant discounting, like pizza, Mexican food and hamburgers, value perceptions have fluctuated much more this year and in some cases are trending down from highs at the start of 2010.

Ted Marzilli, BrandIndex senior vice president, said quick-service brands continue to effectively market their discounts and promotions but run the risk of having their offers copied or drowned out.

“Price messaging is very easy for consumers to understand,” Marzilli said. “It’s not something you have to prove, as opposed to saying the food quality’s improved. The only danger is that with so many folks in this sector putting out value messages, it could get confused. Customers may start to ask, ‘Whose promotion was that?’ They may start to lose focus on who’s delivering what.”

Subs can’t sink

As a segment, sub sandwich chains consistently are leading all players in average value scores, calculated by surveying consumers on whether each specific brand offers a good deal and subtracting negative responses from positive ones. The sub segment’s average score began at 45.7 out of 100 on Jan. 4, and it ended at 45.5 on Aug. 3, rising to a high of 49.2 in the interim.

Similarly, the chicken segment’s value scores were relatively unchanged, though starting at a level much lower than that for subs. The chicken sector’s average value score began at 27.2 at the start of January and ended down slightly at 25.7 on Aug. 3, fluctuating between 23.9 and 28.4.

Marzilli noted that the value index for sub shops perennially tops the charts among all foodservice sectors, due mostly to Subway’s sustained success in value perceptions from the $5 foot-long subs. Quiznos has taken aim at Subway effectively for a long time with sandwiches costing between $2 and $5, but the latter’s pioneering offer and its well-known jingle still stand out, he said.

“When folks see a brand like that and think they’re getting a reasonable deal, those value scores are sticky at the top of the pack,” he said. “Barring any catastrophe, that’s a great position to be in for Subway.”

Dealing and reeling

Some chains in recent weeks have said that discounting put them in less than optimal positions financially, however. Carrols Restaurant Group, one of the nation’s largest Burger King franchisees, said heavy discounting made their restaurants less profitable in the second quarter, while Einstein Noah Restaurant Group cited traffic-driving promotions for declines in revenue and earnings in its second quarter.

Burger chains’ average value score fell to 38.5 on Aug. 3 from 42.6 on Jan. 4, ranging from a high of 44.2 to a low of 37.4. The Mexican segment, including heavy advertiser and discounter Taco Bell and steadier fast-casual brands like Chipotle or Qdoba, had its scores fall in the spring before rebounding in the summer. That sector fell from a start of 35.7 to 33.4 at the beginning of August, reaching a high of 36.8 in late January and a low of 27.3 in mid-April.

Pizza chains, especially the industry’s big three of Pizza Hut, Domino's and Papa John's, have promoted discounts heavily this year, and the segment’s average value score rose slightly from 30 at the start of 2010 to 30.8 at the beginning of August. The scores fluctuated between 24.3 and 32.5 over those seven months. The segmentwide discounting didn’t favor any one brand, Marzilli noted.

“On the one hand, it may be hard to get your message through, but if everybody’s doing it, it could be like the incoming tide that lifts all boats,” Marzilli said. “Whether people think about Papa John’s or Domino’s first for pizza, they’ll find a promotion at any pizza store.”

Easing off the gas pedal

Papa John’s said during its most recent earnings conference call, however, that it had ended its promotion for a $10 large pizza — its answer to Pizza Hut’s $10 any-size-pizza offer and Domino’s promotion of two medium, two-topping pizzas for $5.99 each — more than six weeks ago.

Marzilli could not project how that would affect Papa John’s value perceptions, but he said that the chain would have to consider that in addition to the fact that the higher average tickets would go straight to its bottom line.

“If people realize they’re paying a little more for premium products and are OK with it, then the brands may be OK, especially if their quality scores are going up if their value scores are going down,” Marzilli said.

Even as value scores fluctuate among the more aggressive discounters, Marzilli said, as long as they stay as positive as they have been in recent years, quick service should continue its recent good run.

“The scores are all positive and significantly above zero,” Marzilli said. “All of these sectors are doing reasonably well. The recession played toward value and lower-price brands, and everyone in this sector enjoys that.”

Contact Mark Brandau at [email protected].

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