According to a mid-February report in the Wall Street Journal a return to food-price inflation is not too far around the corner. In the article, reporter John Jannarone notes that retailers, including Winn-Dixie and Walmart, are forecasting an end to falling food prices in the months ahead and a near-term return to food-price inflation. The article explains how grocers predict that the rise in prices will likely begin with perishables, such as milk. However, packaged food prices could continue to fall even if raw ingredient costs begin to rise because many manufacturers have locked in lower raw-material prices using hedges.

For restaurant chains also facing rising prices, these predictions signal a need to find effective ways to entice customers into the store especially if customers are opting for prepackaged meals from the grocer. Restaurant chains will need to give consumers new, cost-effective options -even post recession- to lure them into the store.  A time-tested, extremely effective way to do that is with strategic, well-managed Limited-time Offers (LTOs).

LTOs have been essential to keeping restaurant chains competitive in this challenging economy. At COEX 2010 earlier this month, ArrowStream hosted an executive roundtable in which leaders from national restaurant chains discussed their challenges and strategies.  Panelist Glenn Douglas, vice president of supply chain for Einstein Noah Restaurant Group, said that his company plans on managing 10 LTOs per year compared to their usual annual average of four. 

Despite the increased reliance on LTOs to drive traffic and sales, restaurant chains reported serious inefficiencies in the execution of LTOs in ArrowStream’s 2nd Annual Foodservice Industry Survey. Nearly 77 percent of restaurant chains cited problems with LTO demand planning. A majority, 62 percent, said that difficulties in getting the right product in the right store at the right time hurt LTO effectiveness. Another 56 percent revealed that they struggled to successfully predict supply and demand - a critical variable in the effectiveness of LTOs.

Improving the management, forecasting and results of LTOs is one of the best ways for restaurant chains to effectively increase traffic, sales and profits while offsetting food-price inflation when it does return. Well-managed LTOs make restaurant chains happy, gain loyal customers location by location and allow the business to carefully synchronize supply and demand in order to maximize every dollar spent.   

Where does greater LTO effectiveness begin? With supply chain excellence and smart management systems able to deliver real-time visibility that informs, accelerates and improves decision making. And for an industry greatly exposed to some of today’s biggest X factors (commodity prices, weather, political instability, etc.), an investment in greater visibility and insight is an investment in a more flexible and responsive supply chain. What does that mean for you? Two things: lower obsolescence and happier customers. You can put a price on obsolescence but who can put a price on customer satisfaction?

This entry was posted on Thursday, March 18th, 2010 at 11:35 am and is filed under Industry Trends, Restaurant Chains, Supply Chain. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.