Restaurant brands are open for business on grocery shelves
CPGs want consumers to dine in with P.F. Chang's frozen meals, Nestlé's California Pizza Kitchen line and other offerings
At Nestlé, the world's largest food company has a venerable niche in the frozen pizza space. Its portfolio of well-known brands such as DiGiorno, Jack's and Tombstone has given it more than 40% market share in the U.S., far outpacing its nearest competitor.
But its most unique pizza offerings might be found in a brand whose name it doesn't even own.
Nestlé, which licenses the California Pizza Kitchen brand from the privately held restaurant chain, sells a lineup of 21 frozen pies at retailers nationwide, including many of CPK's classics such as BBQ Chicken and Margherita.
While the partnership gives Nestlé valuable insight and widens its pizza offerings to include consumers craving more adventurous flavors in their pies, it also comes with a roster of unparalleled responsibilities different from other brands in the company's sweeping global portfolio.
"Unlike other brands that we have at Nestlé, this is one where we really take the lead from the restaurant," Chris Flora, California Pizza Kitchen's marketing manager for Nestlé, told Food Dive. "It's imperative that you are lockstep with them to understand what's working, what’s not working, where focus areas are and honestly just knowledge sharing. They have an incredible insight to have consumers coming to their restaurants in real time, asking questions, trying to tailor their meals or pizzas in a certain way. It’s incredible to have that real-time learning that we can then incorporate into the brand for Nestlé."
Flora, who talks with his counterpart at CPK every other week, said Nestlé works closely with the company and its chefs to mirror as much as possible the crust, toppings and flavor profile of the pies to what is served at the restaurant. Before a new product is launched in stores, Nestlé will do a head-to-head taste test between the frozen and restaurant pizzas to gauge the quality of the proposed offering.
The two companies are constantly sharing information, with Nestlé telling CPK what it sees in frozen pizza sales at the store level. The restaurant chain divulges up-to-date information on the latest food trends it sees with consumers. After CPK successfully launched a cauliflower crust nationwide in early 2018 at its restaurants, Nestlé worked to develop its version of the pizza, which hit store shelves a few months later.
"The beauty of having this licensed brand in the restaurant is restaurants are able to move much more swiftly and nimbly than a lot of other companies, and they’re able to test things out, and in some ways it serves as a test market launch for us," Flora said. "As a licensed brand, we try to leverage any tailwind that they generate so that we can acknowledge that in the rest of marketplace as we launch something commercially."
'Why does licensing even make sense?'
Big food companies such as Nestlé, Conagra Brands, Post Holdings and Kraft Heinz are increasingly turning to restaurant brands to complement their own portfolios — and it seems nearly every restaurant chain is more than willing to work with them.
A walk through the grocery store reveals a shopping list full of restaurant-branded products including Arby's Seasoned Curly Fries, TGI Friday's Potato Skins, Red Lobster Cheddar Bay Biscuit Mix, P.F. Chang's Coconut Curry with Chicken & Noodles and Taco Bell tacos and sauces. There's also Cheesecake Factory's Grand Cheesecake selection, McDonald's ready-to-drink McCafé Frappes and Olive Garden's Italian salad dressing, among countless other offerings.
“There are a lot of them out there right now. Everyone is trying to get the customer and it’s hard. If you are going to start a brand ... why does licensing even make sense? It’s faster, let’s face it. Because you have that brand recognition, you don’t need to go spend the amount of media to build it.”
GlobalIcons, a California company that helps businesses expand the reach of their products through licensing deals, estimated 90% of restaurant brands in the grocery aisle have entered the retail market during the last six years alone — a trend that shows no sign of abating. In a 2015 study, GlobalIcons found sales of these products totaled $4.4 billion, and that restaurant brands in stores have exploded from fewer than 10 in 2000 to more than 50 at the time of the report.
“Everyone is trying to get the customer and it’s hard," Jeff Lotman, CEO of GlobalIcons, told Food Dive. "If you are going to start a brand ... why does licensing even make sense? It’s faster, let’s face it. Because you have that brand recognition, you don’t need to go spend the amount of media to build it.”
The reason for the growth centers on factors that have universally benefited grocers, restaurants and food manufacturers.
Restaurants, once hesitant to lose revenue by selling their products in stores, recognized licensing wouldn't cannibalize their own sales and would actually increase the overall value of their brand. Chains that license their brand have posted an average 1%-2% increase in same-store-sales in markets where the products are sold, according to GlobalIcons.
For retailers, restaurant brands provide another way to differentiate themselves from competitors and attract customers to stores, especially if they have an exclusive or limited-time offering.
At Ahold Delhaize, whose banners include Food Lion, Giant/Martin's and Stop & Shop and grocery delivery service Peapod, the company includes both national and local restaurant brands in the product mix at stores. Giant/Martin's added products from Macaroni Grill, Arby's, Red Robin and Checkers this year. At Peapod, the grocery delivery company has a "best of" list of restaurant-quality food products found locally in cities such as Lou Malnati's deep dish pizza in Chicago and Carousel Cakes in New York.
Erin DeWaters, a spokeswoman with Ahold Delhaize USA's services unit, said Peapod executives found that restaurant brands are popular purchases. Peapod, she said, plans to expand its partnerships with local establishments and increase the assortment of available restaurant products it offers.
"Restaurant brand products promote frequency and larger baskets." DeWaters said.
CPG manufacturers, which have struggled with declining sales amid changing consumer preferences and consumption habits, have elevated the quality and taste of food they offer, especially in the suddenly hot frozen sector. They've also recognized that with a new brand potentially costing millions of dollars to develop, it makes sense to leverage an already recognized entity — one for which consumers already have an idea of the food quality and taste.
Brittany Weissman, an analyst at Edward Jones, told Food Dive that despite some looming risk, a restaurant brand can help a CPG company expand its offerings in a particular segment, often giving it a way to add a premium product to the lineup.
"(Food manufacturers) have been selective with the ones they do own and for now it makes sense,” Weissman said. "On the flip side, if something is not right with the restaurant, if something (happens) that damages their reputation, then suddenly that brand is also at risk for the seller in the store."
Some food companies have found that taking a brand from the restaurant to the grocery can be a challenge.
Conagra acquired P.F. Chang's skillet meals in 2012 from Unilever, but struggled for years to create a taste-worthy, restaurant-quality product that could compete with other single-serve microwaveable meals on the market selling for around $2 each. Ryan Clark, Conagra's president of refrigerated and frozen, told Food Dive that several prototypes that succeeded on taste would fall short as they adjusted the ingredient mix to get to a lower price point.
But as consumer tastes changed, shoppers now value quality in the frozen foods they purchase, and often are willing to pay more for it. The shift finally opened up a market for P.F. Chang's single-serve microwaveable meals, and Conagra debuted a line of products in 2018 that retail for $4.49.
"That's a big change from five years ago, when the marketplace was still looking for low prices first, quality second," Clark said. " Now, it's made a flip where it's a combination of price and quality. There's a tradeoff there to making better quality items."
Food delivery threats loom
While CPG companies and restaurants remain optimistic about the future of branded restaurant products, platforms such as Uber Eats, DoorDash and GrubHub, which deliver restaurant food directly to consumers, could reduce the grocery store's dependence on promoting dining establishments, some analysts say. Shoppers also have more choices now in the supermarket, with meal kits and prepared options siphoning consumers away from restaurant brands they once purchased.
Food delivery companies are "going to change the nature of how (restaurants) brand extend beyond their physical stores into the home where the only way they could do it before was through the frozen or the packaged food route," David Donnan, a senior partner of consumer and retail practice of A.T. Kearney, a global strategy and management consulting firm, told Food Dive. "It's opening up a new level of innovation for them."
Donnan said for years restaurants depended on grocery stores and other retailers as the primary alternative to get their food to consumers. He forecast that the number of restaurant-branded products in stores will decline, noting that most segments in the supermarket are already posting flat or minimal growth. In addition, he said as more consumers move to fresh and natural products, a restaurant-branded frozen item doesn't have the same appeal.
"Creating a product, innovating on it, creating the packaging, doing all the food safety, getting all the approvals, it's a lot of work to put a product into the frozen food aisle that may or may not sell well," he said. It all comes down to "what is your brand message from the restaurant and how does the grocery store reinforce that brand message and provide an incremental amount of revenue as well."
Growing while protecting the brand
For now, big food companies are doubling-down on restaurant brands. Kraft Heinz is among the biggest food companies to tap into the restaurant space through a spate of partnerships with Taco Bell and most recently Benihana. But few restaurant brands have been as successful and generated the market-longevity on retail shelves as TGI Fridays, a partnership that Heinz first entered into in 2000 with frozen snacks.
Caio Santos, head of marketing at Kraft Heinz's frozen business, told Food Dive that having a well-known brand like TGI Fridays with the backing of the restaurant arm helps complement the CPG giant's other big-name offerings like Bagel Bites, Ore-Ida and Cool Whip. Restaurant-branded products also allow Kraft Heinz to devote more marketing budget toward its lineup of billion dollar brands and to promote smaller ones like its recent Super Bowl ad for its frozen dinner line Devour.
"If you think about how many people they can have in a week on the restaurant and how many households we can reach by selling product at retailers, yes, we’re increasing the awareness of their brand in the home and they do their part by putting it on TV and also getting the consumer to realize that the brand is out there."
Head of marketing, Kraft Heinz's frozen business
Kraft Heinz also garners immediate benefits from the efforts of TGI Fridays, like nationwide advertising campaigns for the restaurant. The CPG giant has access to the restaurateur's production methods and ingredient suppliers for reproducing its most popular items, including bar-friendly favorites mozzarella sticks, potato skins and chicken wings. TGI Fridays signs off on every product before it hits stores.
The TGI Fridays lineup has been a bright spot for Kraft Heinz even as the rest of its portfolio has suffered from a consumer shift toward natural and better-for-you products. In the last two years, TGI Fridays has posted double-digit growth, Santos noted, as the brand has benefited from innovation, a move to improve quality and a broader industry swell of demand from millennials and other time-crunched consumers for everything frozen.
"If you think about how many people they can have in a week at the restaurant and how many households we can reach by selling product at retailers, yes, we’re increasing the awareness of their brand in the home. And they do their part by putting it on TV and also getting the consumer to realize that the brand is out there," Santos said in an interview. "It’s mutually beneficial” for Kraft Heinz and TGI Fridays.
After spending the first three decades confined to the red-and-white striped restaurant, TGI Fridays started carving out a prominent niche in the grocery store by striking licensing deals starting with Heinz and Inventure Foods (now part of Utz Quality Foods) in 2000 for frozen appetizers and salty snacks. It has since added other partners to the fold to produce TGI Fridays sauces/dressings/marinades, ribs, malt beverages and ready-to-drink spirits.
Kathleen Schloth, vice president of TGI Fridays' global supply chain, said the food landscape has changed dramatically since the restaurant chain started in 1965. The Dallas-based franchise realized two decades ago that it needed to find other ways to feed consumers and keep its name recognized in other channels or risk losing out to competitors. Schloth said the company's presence in the grocery store gives it a way to stay top of mind and connect with consumers in areas where they can't easily get to one if its 424 U.S. establishments.
"The more you can get me in front of the guest, because the guest is just inundated with information all day, every day. And when we look to promote virtually, whether it’s online or just traditional media, the fact that you can go to the grocery store and you see our logo up and down the aisles, I think it can only reinforce the relevancy of the brand,” Schloth told Food Dive. "Our goal is to be in every aisle in the grocery store."
Despite its seemingly broad licensing aspirations, TGI Fridays has stayed true to its roots as a place to socialize and hang out by introducing retail products that correlate with this image and the perception that people have of the restaurant. Not every launch has been a success. A push into the narrow and ultra-competitive dessert space with mini cakes, whoopie pies and parfaits in 2015 produced mediocre results. The line was pulled after a year.
Undeterred, TGI Fridays is moving forward with new launches. Frozen burger patties and single serve frozen meals will hit the market this month. Its Long Island Iced Tea, Blackberry Long Island Iced Tea and Moscow Mule malt beverages in cans were introduced late last year. The restaurant also is considering refrigerated dips and non-alcoholic drinks, and maybe even a return to desserts.
"The key is to make sure that we’re not degrading or giving a negative view of the Fridays brand. Not every single effort is a win, so we have to stick with what we know,” Tres Whitley, director of supply chain and licensing, strategic sourcing with TGI Fridays, said in an interview. "Brand protection is the number one priority for us.”
Lotman with GlobalIcons said frozen foods have been a popular choice for restaurant brands because it's convenient, people are accustomed to seeing these products in this section and it's easy for grocery stores to swap out one product and replace it with another.
The restaurant branded barrage is unlikely to ease up anytime soon, he said, with the deli and refrigerated sections among the next untapped space ripe for restaurant brands to infiltrate — think Panera soups or ribs from Dickey's Barbecue Pit. Consumers who enjoy a cup of broccoli cheddar or a plate of pulled pork covered in BBQ sauce, for example, could have their favorite restaurant meal regardless of where they decide to buy or consume it.
"The people that shop at grocery do so for an entirely different meal occasion, and this allows them to enjoy what they love about this restaurant in their home," Lotman said.
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