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Fast Food Sourcing: Pricing, Premium Ingredients and the Future

Posted by Alan Riney

Apr 29, 2016 12:00:00 PM

Premium fast food ingredients

Could the end of the ubiquitous dollar menu be nigh? Consumers, treated to an embarrassment of riches when it comes to dining out, aren't just focused on their wallets anymore. The artisanal food movement, anti-GMO sentiment and other food sourcing trends are compelling those in procurement to stay on top of their game and one step ahead of the competition. It's no longer about just adding a slice of cheese to a burger, it's about sourcing an ethically made cheddar that's not only affordable, but a favorite in focus groups as well. Once hyper-focused on cost at the expense of nearly everything else, the fast food supply chain is evolving — if only to keep pace with the customers it serves. 

Value, Party of 2+

Cost will likely always be an outsized factor in fast food purchasing decisions at the customer level, but that doesn't mean that rock bottom is the only solution. Many larger QSR companies, such as Wendy's and Burger King, are rolling out fast food bundle meals rather than presenting a list of individual dollar-range items to corner the value market. These low-cost meals aren't far off from their full-priced meal counterparts, but the concept of several food items for $5 or less is proving to be a big win with consumers anyway thanks to the addition of premium touches, like the applewood smoked bacon on Wendy's 4-for-$4 burger.

From QSR-Plus and fast casual segments on through to full casual chains, a value menu that pairs premium items with a restaurant’s more typical fare is building positive, consistent sales that support overall growth and future ingredient experimentation.

Specialty For Sale?

Going premium isn't the Hail Mary it once was, but it does require a very specialized supply chain. Many independent producers are already in the process of adapting to the demand cycle by learning how to accurately forecast yield to meet it. Unfortunately, while some have the expertise and capital to weather the intense storm of QSR-level fulfillment, many smaller suppliers are unable to meet fast food demands. It's not unheard of for larger producers to court buyouts of these small producers once they catch the eye of the QSR marketplace, as was the case in Purdue's acquisition of Chipotle's pork supplier Niman Ranch in 2015. Popular fast casual and QSR-Plus restaurants like Chipotle and Chik-Fil-A are betting a great deal on the specialty ingredients and rigorous sourcing of their menu items to help them climb to the top of the category, so they're understandably cautious about protecting and locking down proprietary nodes in their fast food supply chain.

Quality Is Not For Sale

It's not illogical to imagine that customers demanding low prices would accept a cut in quality, but the sales numbers indicate that it's probably not going to happen. The textures, tastes and nutrition of even dollar menu items are still up for scrutiny — often via highly visible sources like social media pictures, hashtags and other online mentions. Monica Watrous of Food Business News cautions that low-fat and low-calorie ingredients alone are not going to cut it with today's QSR or QSR-Plus consumer: organic-origin and natural foods are what's currently winning the day.

In a nutshell (sustainably-sourced, of course), consumers want to know where their food came from and how it was created, not just what it tastes like, before they'll come back for seconds or talk up your brand. Stay transparent in your customer-facing communication and listen to the reactions of your customers: no matter what conclusions become apparent, you'll end up on the right track for successful sourcing.

The average fast food supply chain has the basics of sourcing down pat — speed, accuracy and cost, all balanced out to ensure maximum profit at the counter. Looking forward, the real question for the QSR and QSR-Plus segments will be how skillfully they are able to weather the vagaries of organic crops and livestock, the additional care required for transporting some specialty ingredients, and looming scarcity in specialty markets. It's a movement that requires taking a step beyond the numbers that typically drive a supply chain, and occasionally, a leap of faith that investing in consumer-perceived "healthy" ingredients will pay off in volume what it promises in edible ethics.

How Quick-Service Restaurants Can Find Balance

Written by: Alan Riney

Topics: Food Service, Supply Chain, QSR