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June 2007
Coffee, Fast Food Lead In Europe
By: Jennifer Hicks

With a stylish logo, separate entrances and upscale interi-ors, the McCafé concept is benefiting from the strength of the McDonald s brand while developing its own strong fol-lowing in Germany.

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Worldwide McDonald’s revitalization and Germany-based chain growth dominated the agenda when more than 1,300 international foodservice pros gathered for the Int’l. Foodservice Forum in Hamburg, Germany , on March 8. Convening for the 26th time, the Forum welcomed attendees from 14 countries for the top event held prior to the six-day Internorga exhibition.

The day kicked off with a data-packed presentation by Forum host Gretel Weiss, editor of FoodService Europe & Middle East, who reviewed market opportunities and growth concepts in Germany and the wider European market. Fast-food, full-service and coffee-bar operations throughout Germany saw huge revenue jumps in 2006 and promise to be the leaders throughout this year, she said.

“There’s booming growth in professional foodservice in Germany and Europe ,” Weiss said as she began her overview of current trends and up-and-coming concepts. Armed with ’06 sales and development data, she told attendees there’s been a consumer shift in regard to foodservice, with Europeans wanting “to feel like they’re living in luxury when they go out. This was not the case five years ago.” As a result, consumers are spending more money away from home on higher-end products .

Last year was the best year for the Top 100 chains in Germany since the 1995, Weiss said, with revenues for the group soaring 7.6%. The same group returned revenues of just 4.6% in ’05. For McDonald’s alone, ’06 was its best year in Germany since ’99, she added. The Top 10 chains in Germany by revenues now include McDonald’s, LSG, Burger King, Tank & Rast, Nordsee, Metro, Karstadt, Aral, Ikea and Movenpick. Meanwhile, of the full Top 100, some 14% are global players.

For ’07, Weiss said that takeaway, home delivery, snacks, events catering, fast food and of course coffee bars will have the best prospects for growth in Germany . In the last category, she noted, Starbucks plans to break the 100-unit mark in Germany this year, and coffee bars in general are seeing enormous expansion and excellent performance.

Generating serious competition in this segment is McDonald’s Corp. with its McCafé concept, which now touts 213 units in Germany and plans to add 159 this year. As the number two coffee chain in the country, McCafé has developed quickly by choosing existing McDonald’s sites to expand, and then creating separate spaces that utilize upscale décor and casual ambience to draw coffee drinkers. The result: a popular brand extension that has pushed Starbucks into the fourth spot among German coffee chains. (The number one spot is held by Hamburg-based Tchibo.)

The McCafé approach—attaching itself to a well-known brand but surprising the consumer with an upscale feel and competitively priced, quality coffee drinks—meshes with the current German mindset as it relates to coffee, said Weiss. “The brand is everything in coffee bars, and when it comes to this drink, lifestyle choices equate with brand choices.”

McDonald’s Innovates Overseas

Later in the day, Bane Knezevic, president and CEO of McDonald’s Deutschland and well as president of the Western Div. of McDonald’s Europe , took the podium to review his company’s recent performance and development plans. Looking back on the rapid growth of the ’90s, Knezevic explained that by ’00, the Oak Brook, Ill.-based company had become a global giant but had made some mistakes along the way.

“We had forgotten our customer and focused on our number of restaurants,” said Knezevic, who joined McDonald’s as a London-based management trainee in ’88. “Along the way we had bought other concepts but forgotten our core competencies, and our first quarterly loss in ’02 showed that.”

The message from consumers, Knezevic said, was that McDonald’s had become old-fashioned. So the worldwide team began to redevelop the brand as “a destination of choice as well as an icon of modernity, while maintaining convenience,” he said.

Initiatives currently underway include McDonald’s positioning itself as a company focused on social responsibility, healthy food choices and education of children. On the food side, the company is moving to reduce fat content and adopt trans-fat-free practices. And low-sugar drinks are coming to Germany this year, Knezevic added.

In addition, McDonald’s has embarked on a renewal of European store design. The goal is to create a lounge-like ambience, said Knezevic, and half of Germany ’s 1,276 stores will be redone this year. “It’s a bold move for us and our franchisees, and it’s a unique design you would not expect from McDonald’s,” he said.

 Other forum speakers included Klaus Welter, of Munich ’s Arena One, who discussed the challenges of executing foodservice for the World Cup Championship last year at the Allianz Arena, also in Munich . Citing foodservice sales of 1 billion euros during the month-long World Cup, Welter explained the unique challenges of events catering.

Selling faster is the only way to more profit, he said, so Arena One implemented a cashless system and set up scattered kiosks that averaged a transaction time of 13 to 15 seconds during game half times.

The next Int’l. Foodservice Forum will be held the day before the 2008 Internorga event, scheduled for March 7-12 in Hamburg .

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