JOLTS
It is still solid but slowing
According to BLS, there were approximately 1.020 million job opportunities in the combined restaurant and lodging sector on the last working day of August. Even though it was the 29th month in a row with at least 1 million openings, the number was still much lower than the all-time high levels reached in 2021 and 2022. This indicates a slowing in the worker demand, even if job postings were still above the monthly average for 2019 of 875,000 opportunities.
The Accommodation and Food Services YoY decline was -16%, and the 2-year slowed 700ps to -19%. Looking at the 2-year stack ROC, we last approached these levels in October 2008 and March 2020.
Consumer TRENDS
The Intuit CEO and others had some interesting comments about current Gen leverage. If the core CMG Consumer is leveraged and is now facing paying off student loans, what about sales for the balance of 2023? I hope the new Carne Asada LTO is as successful as the last time!
"And I would say, on the consumer front, we've seen credit scores compared to last March, they're down about 13 points. Credit cards are up, the balances are up about 30%, and the balances that are up the most is Gen Z. Their balances are up 45%. Now, the job market is strong. So these folks all have jobs, but there's clearly a strain in the environment based on inflation. So net-net, more robust consumers and small businesses than they were pre-COVID, but the environment is having an impact on them." - Intuit (INTU) CEO Sasan Goodarzi
Generation Z (Gen Z), born between the mid-1990s and the early 2010s, is becoming increasingly influential in the restaurant industry. As they become a more significant part of the workforce and earn more disposable income, they represent a significant portion of the consumer base. Having grown up with digital technology, this tech-savvy generation places a premium on online ordering, apps, and digital payments. Their dining preferences are shaped by global exposure, leading to a penchant for diverse cuisines and flavors. Moreover, Gen Z is deeply concerned about sustainability, ethical sourcing, and health, often seeking restaurants aligning with these values. Lastly, the power of social media cannot be understated with this demographic. As CMG reminds us, a robust online presence, especially on platforms like TikTok and Instagram, combined with a unique dining experience, can be a significant draw for Gen Z patrons.
Other quotes from some recent conference calls about Gen Z (was a study recently released about Gen A and Gen Z?):
- "By 2030, 45% of the workforce is going to be Gen Alpha and Gen Z. These are folks that have grown up with technology. The only way in which they know what to do is using technology and getting help through a digital avenue." Intuit (INTU) CEO Sasan Goodarzi
Generation Alpha, the cohort following Generation Z, is generally considered to have started in the mid-2010s. Most demographers and researchers mark the beginning of Gen Alpha around 2010 or 2011. This generation will continue until the mid-2020s or until around 2025. They are the first generation to be fully raised in the 21st century and are expected to be the most technologically immersed and diverse generation yet.
- "By 2030, Gen Z will make up 20% of the global workforce to attract this generation's top talent and new customers, it's important that we represent their values and beliefs and sustainability is a top priority." Erika L. Alexander Chief Global Officer-Global Operations, Marriott International, Inc.
- "According to recent studies, Gen-Z and millennials make up approximately 40% of the global workforce, and this is set to rise to about 60% by 2030." Agatha Donnelly Compass Group Plc
- "We are paying attention to the lower FICO consumer, where there are cracks. And we saw that in the fed numbers, savings are down. Um, They're. Yeah, they're very low at the moment. And I think some of the, the excess savings from, uh, the, the COVID years. I'm getting close to depletion." - Citigroup CEO Jane Fraser.
DNUT's Big shift
The new focus on one brand is a net positive for DNUT.
DNUT has announced that it is considering strategic options for Insomnia Cookies, including a potential all-cash sale. Krispy Kreme acquired a majority stake in Insomnia Cookies in 2018 and forecasts revenues of around $230 million for the fiscal year 2023. This decision aims to enhance shareholder value and allow Krispy Kreme to concentrate on producing and distributing fresh doughnuts daily. Mike Tattersfield, the CEO of Krispy Kreme, stated that the acquisition of Insomnia Cookies aimed to bolster their e-commerce and digital capabilities and support the cookie company's domestic and international expansion. With the objectives achieved, it's time to explore the next strategic move for both entities. Krispy Kreme has grown significantly, operating in 37 countries and offering fresh doughnuts through almost 13,000 access points daily. The company's plans include expanding to over 75,000 points by entering 3-5 new countries annually and exploring new avenues like quick-service restaurants. Since its acquisition in 2018, Insomnia Cookies has experienced rapid growth. The brand, known for delivering warm cookies throughout the day and late into the night, now operates in three countries with over 250 bakeries. It has been a frontrunner in digital marketing and e-commerce, with 45% of its revenue from digital channels. The company has also seen impressive capital returns in recent years.
Another CMG Technology Investment
So far, the two focus areas for CMG are new grills, making guac, and the make line.
Chipotle has announced that it will begin testing a new automated digital makeline, termed a "cobot" (a combination of collaborative robot and human interaction), at its Chipotle Cultivate Center in Irvine, California. This system was designed by robotics company Hyphen, which Chipotle invests in. Chipotle's cobot is a dual-layered system: a human-operated line on top and an automated makeline below. The automated system caters only to digital orders and focuses on bowls. About 65% of Chipotle's digital orders are bowls or salads, allowing the human staff to concentrate on other tasks. The aim is to enhance capacity, especially during peak times. The goal is for the new makeline to produce approximately 350 bowls per hour. Chipotle's chief customer and experience officer, Curt Garner, emphasized the company's commitment to using robotics to enhance the human potential of their workforce and improve the dining experience for customers. The goal is for the automated digital makeline to be the focal point of all of Chipotle's digital kitchens. Additionally, Chipotle will be testing another robotic system called Autocado at the Cultivate Center.
