Steak Economics
In an era where the price of beef soars, driven by the relentless tide of inflation and a surge in beef costs, eateries, especially those famed for their steak offerings, find themselves in a precarious position. The year 2022 witnessed a zenith in beef production, yet the horizon 2024 looms with a forecast of the leanest yield since 2015. This scenario portends escalating prices and a tightening grip on supply. This predicament is further intensified by the protracted timelines required for cattle rearing and the scourge of droughts that ravage the feed resources. Amidst these daunting challenges, the appetite for beef remains undiminished. In response, restaurants are navigating these turbulent waters by pivoting towards more budget-friendly cuts of meat, ingeniously reimagining their menus, and deploying inventive strategies in sourcing. This begs the question: To what extent can steak-centric chains flex their pricing strategies in this fluctuating market landscape?
Summary Thoughts:
- Rising Beef Prices: Do chains have pricing flexibility?
- Reduced Beef Production: Predicted to be the lowest since 2015 in 2024, leading to higher prices and limited supply.
- Breeding and Feed Challenges: Longer cattle breeding times and drought conditions impact feed supply, further complicating beef production.
- Strong Demand: Despite price hikes, demand for beef remains robust.
- Adaptive Strategies: Restaurants offer alternative cuts, resizing portions, and creatively sourcing to manage costs.
- Menu Diversification: Many chains will diversify menus to include a variety of meats and dishes.
- Market Opportunities: Leveraging market fluctuations and supplier relationships to maintain quality and cost-effectiveness.
- Experience Focus: High-end restaurants will emphasize customer experience to justify premium pricing.
Below, we summarize the presentation by Joe Jordan, the president of Domino's Pizza's US Business and Global Services.
We plan to detail the balance of the presentation in the coming weeks.
During its recent Investor Day, Domino's Pizza unveiled a revised outlook for 2024 to 2028, signaling a notable shift in its business projections. Delving into the specifics of this updated forecast, a key highlight is the strength in global retail sales. The company now projects these sales to expand at a rate exceeding 7% annually, excluding foreign exchange impacts. This projection put it at the upper end of the previous long-term guidance, which estimated a 4-8% growth range. Furthermore, Domino's has adjusted its expectations regarding annual net unit growth. The new target is over 1,100 units, reflecting the company's bolstered confidence in its expansion strategy. Lastly, the outlook for operating income growth is equally optimistic. Domino's anticipates this metric to rise by more than 8% each year, underscoring the company's robust financial health and strategic initiatives aimed at sustained profitability.
Below, we summarize the presentation by Joe Jordan, the president of Domino's Pizza's US Business and Global Services. In this presentation, Jordan discusses the company's current standing and achievements and outlines the future strategies and goals under the "Hungry for More" initiative. Overall, Joe Jordan's speech paints a picture of a company with a strong market presence and ambitious growth plans while acknowledging the challenges and risks of rapid expansion and market dynamics.
Critical points from Jordan's speech include:
- Current Status of Domino's: He highlights Domino's as the number one in QSR pizza, with about 6,800 stores and 9 billion in trailing 12-month sales. A notable achievement is the three-year payback period for stores, attributed to lower store build costs and high profitability.
- Market Share Growth: Since 2015, Domino's has grown its market share by 9.4 points, sourcing growth evenly from national competitors, regional chains, and independents.
- Delivery and Carryout Business: The company has focused on strengthening its delivery service and becoming a leader in carryout, which now accounts for half of its transactions.
- Future Growth Strategy: Jordan outlines an aggressive goal of adding another 3 billion in sales over the next five years, focusing on delivery, carryout, and new segments.
- Focus on Food Quality and Innovation: Emphasizing the quality of Domino's food and the potential for innovation in its menu to drive growth and customer satisfaction.
- Operational Excellence: Introduction of new technologies and processes (like Domino's Operating System) to enhance efficiency and consistency in operations.
- Value Proposition and Marketing: Continue national promotions and revamp the loyalty program to cater to a broader customer base, including carryout customers.
- Expansion through Aggregators: Entering the aggregator marketplace is seen as a 1 billion opportunity over the next three years.
- Franchisee Development and Growth: Highlighting the importance of franchisees in Domino's success and plans for store expansion, with a target of 7,700+ stores by 2028.
- Technology Integration: The role of technology in realizing these goals, both in the US and globally.
Half-Off Hypnosis: How Starbucks' 'Festive Thurs-Yays' Lure Us with Discounted Decadence
SBUX traffic has recovered on the back 1/2 of November - the 2-year stack was down (-9.0%) in the first two weeks and ended the month down (-5.5%)
In a gesture of festive generosity to generate traffic, Starbucks has unveiled an offer for its Rewards members, aptly dubbed "Festive Thurs-Yays." This initiative, an extended holiday rendition of their "Yay Day" specials, promises a significant 50% discount, commencing on Thursday, December 7th, and recurring every Thursday for the duration of December. Loyal members can access the coupon for this half-price indulgence directly through the Starbucks app, with the offer standing tall on December 7th, 14th, 21st, and 28th. This promotion, running from noon until 6 pm on these select Thursdays, allows customers to savor a half-off beverage of their choice. This half-off deal spans any beverage, any size, presenting a golden opportunity to experiment with something novel – perhaps one of Starbucks' freshly introduced holiday cold foams. This latest deal arrives hot on the heels of last Thursday's one-day-only extravaganza, where the chain offered a sweeping 50% discount on all drinks.
