October 2009 Project #13127

1. Food Industry. Facts. Insights. Consulting. Parties Off-PremiseOpportunities for Growth Through Social Catering Occasions Prepared by: October 2009 Project #13127 No part of this publication may be reprinted, redistributed or put into an electronic or information retrieval system without prior permission of Technomic.

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11. I. Introduction

12. Study Background • From box lunches and party platters to parties complete with off-site food preparation, catering is one of the fastest growing segments of the foodservice industry. Faced with declining guest traffic, operators in all segments are eying the double-digit sales growth reported by chains that have invested the resources in developing this business. • Technomic’s 2007 study (LOOP: Large Orders Off-Premise) examined off-premise catering opportunities with the business and medical/pharmaceutical representative markets. • A brief consumer survey conducted by Technomic for the 2008 Trends & Directions Conference revealed there is also substantial opportunity for off-premise catering with the consumer market for personal entertaining and social occasions. These early findings highlighted an opportunity for chain restaurants to increase their share of this business. • To provide actionable insights and information regarding these opportunities for revenue growth to chain restaurant operators and retailers with foodservice offerings, Technomic launched this in-depth study into consumer usage and preferences for off-premise catering options from Limited-and Full-Service chains, independent caterers and foodservice retailers (e.g., supermarkets, warehouse clubs.) 12

13. Study Objectives • This study was designed to provide operators with an in-depth analysis of the key usage patterns and drivers for social catering occasions. • The primary information objectives of this study are to provide participants with: • Understanding of the size of the opportunity • In-depth quantitative and qualitative decision-maker insights relating to catering by restaurant and retail operators for consumer social occasions • Identification of best practices elements (promotion, sales and execution) that can be adopted for creating or enhancing a profitable restaurant or retail off-premise catering program 13

14. Study Methodology – Detail Analysis and Reporting Qualitative Consumer Research Quantitative Consumer Research Operator Interviews Secondary Research • To meet the study goals, Technomic conducted a 5-phase methodology: 14

15. Study Criteria and Definitions • Survey participants were screened to ensure they met the following criteria: • Regular users of restaurants, using full-service and limited-service restaurants at least once a month • Purchasers of meals/platters from a retailer, restaurant or both within the past 60 days • Definitions used throughout the survey to clarify retail segments are as follows: • Retailer - supermarket, warehouse club, convenience store • Other retailer - specialty food store such as Honey Baked Ham or mass market retailer such as Wal-Mart • Participants were also instructed to limit their responses to the social (not business) events for which they had purchased prepared foods for a group of 6 or more people. In addition, the following instruction was given “ Throughout the survey, when we use the term “prepared foods”, we are referring to party platters/trays, hors d’oeuvres, large quantity/family style entrees, desserts, etc. fora group.” • Respondents were grouped into light, medium, and heavy usage categories based on their stated annual catering behaviors. The groups reflect the following patterns: • Light – less than 12 occasions per year • Medium – 12-23 occasions per year • Heavy – more than 24 occasions per year 15

16. II. Off-Premise Catering Business Opportunity

17. Social Catering Market Assessment • Technomic estimates that the total market for prepared foods for social catering events is $33.3B in retail sales equivalent (RSE) terms – or operator sales to consumers. The full service restaurant segment represents approximately $12B - or 35% - of the market followed next by limited service at $11.2B and 33% of the market. Traditional fast food operators comprise the largest proportion of LSR catering sales at $9.7B and Quick Casual represents approximately $1.5B. Independent caterers ($6.1B) and supermarkets ($3.5B) account for 18% and 10%, respectively. Social Catering Market Sales(in B) 2008 Total RSE*: $33.3B Retail $4.6 14% LSR $11.2 33% *Retail Sales Equivalent – operator sales to patrons Source: Technomic, Inc.

18. Home Entertainment Patterns • Pointing to increased catering opportunities for restaurants and retailers, almost 4 in 10 respondents report they entertained at home more often last year (36%) and also anticipate continuing this trend next year (40%). Approximately half of respondents have maintained their previous frequency of entertaining friends and family at home over the past year (51%) and expect to continue this pattern next year (53%). Despite the current economic environment, only 13% reported entertaining at home less often. Entertaining at Home, Compared with a Year AgoBase = 1,000 Entertaining at Home, Over the Next YearBase = 1,000     Significantly higher than other group(s): Men  Women 18-34  35-54 55+ Q: Compared with a year ago, would you say you have been entertaining at home…Q: Looking ahead over the next year, do you think you will entertain at home… 18

19. III. Catering Users and Usage

20. Respondent Demographics • Participation in the POP quantitative survey was qualified by visits to either full service or limited service restaurants on a “once a month” or more frequent basis and the use of catering at either a retail or restaurant within the past 2 months. 1,000 consumers qualified and completed the survey. Gender and age demographics shown below indicate that social catering users are younger and equally divided between male/female GenderBase = 1,000 AgeBase = 1,000 18-34 56% Average Age: 36 20

21. Social Occasion Recency • At the time of the survey, just over two-thirds (67%) of respondents reported having had a personal catering occasion for which they purchased prepared food within the past month with similar numbers reporting within the past two weeks (33%) and 2-4 weeks ago (34%). Almost one in four (22%) had an occasion 4-6 weeks ago. Note: Participation in the study required having had a personal catering purchase within the previous 60 days. Last Personal Catering OccasionBase = 1,000 Q: When was the last time you purchased prepared food for a personal social event? 21

22. Types of Social Catering Occasions • While a majority of social occasions for which people buy prepared foods are family functions (71%), holidays (57%) or adult birthday parties (53%), the chart below clearly shows that there are a wide variety of occasions that include prepared foods. Respondents indicated considerably more informal events than formal ones. Younger consumers were more likely to have held formal cocktail and dinner parties than other groups. Types of Social Catering Occasions Base = 1,000              Significantly higher than other group(s): Men  Women 18-34  35-54 55+ Q: For what types of personal social events do you purchase prepared foods (such as party platters/trays, hors d’oeuvres, large quantity/family style entrees, etc.)? (select all that apply) 22

23. Specific Holiday Catering Occasions • Among consumers who reported buying prepared foods for holidays, the most popular occasions were: • Christmas 66% • Thanksgiving 61% • Fourth of July 53% • New Year’s Day 48% • New Year’s Eve 47% • Easter 47% Holiday Catering Occasions Base: Purchased prepared meals / platters for holiday(s) = 566      Significantly higher than other group(s): Men  Women 18-34  35-54 55+ Q: For which holiday(s) have you purchased meals/platters for groups of 6 or more? 23

24. Average Number Overall Catering Events by Month • On a month by month basis, there are some seasonal “peaks” in catering, although the changes are not dramatic – in December (the “busiest” month) consumers will typically have 2.8 events for which they buy prepared food and in March (the “slowest” month) they will have 1.9 events. • Peak periods are greatest during May, June and July and then again in November, December and January. Average Number of Catering Orders per month*Base = 1,000 Q: Please enter the number of times each month (on average) you buy meals/platters for these types of occasions in a typical year. * All catering occasions combined 24

25. Average Number of Occasions by Month Above average # of events • The table below shows a summary of the types and average number of events that are held over the course of a year. Higher numbers illustrate “peak” periods for certain types of events (e.g., January is a popular month for cocktail, dinner, sports and community activities). Average Number of Catering Occasions by Month Base = varies by occasion *bar mitzvah, graduation, retirement party, wake, etc. **for tailgating or to watch on television Q: Please enter the number of times each month (on average) you buy meals/platters for these types of occasions in a typical year. 25

26. Average Number of Catering Orders by Month Above average # of events • The table below illustrates the average number of occasions the different user groups will have in a given month for which they purchase a prepared meal. The annual basis (overall) is 2.3 events per month. This ranges from less than 1 event per month for light users to 9 per month for heavy users, indicating a steady revenue opportunity for restaurants and retailers who become part of the consideration set. Average Number of Catering Orders per month*Base = 1,000 Q: Please enter the number of times each month (on average) you buy meals/platters for these types of occasions in a typical year. * All catering occasions combined 26

27. Average Number of People at Social Events • More than half (55%) of consumer occasions are for fewer than 15 people and slightly more than a third (35%) will include 9 guests or fewer. One in five consumers do report purchasing items for larger groups, which include 30 or more guests. Average Number People at Catering Events* Base = 1,000 Q: Generally speaking, how many people (on average) are at each of these events? * All catering occasions combined 27

28. Number of Guests at Catered Events • The table below illustrates the average number of guests invited to specific occasions throughout the year. Most occasions tend to include 10 to 16 people overall, with the exception of life passage events, potlucks, showers and church activities which are typically larger events. Number Guests at Catering Events Base = 1,000 *bar mitzvah, graduation, retirement party, wake, etc. **for tailgating or to watch on television Q: Generally speaking, how many people (on average) are at each of these events? 28

29. Average Amount Spent (Per Person) • As expected, the amount spent per person (on average) will vary by the type of occasion with more formal events costing more (i.e., $28 for a formal dinner party and $5 for a potluck event). Informal dinners will typically be $11 less than a formal one, with an average of $17 per person. • There are 9 types of occasions that fall within the $10-14 per person range including informal cocktails and holidays to luncheons or kids’ parties. • *Respondents were asked to provide an average amount they spent (either in total or per person depending on how they responded to the “mindset” question). For those responding “total cost”, a per person average was calculated based on the average number of people they had at that specific type of event (asked earlier in the survey). Average Amount Spent Per Person* Base = 1,000 Q: How much do you usually spend (in total/per person) for these types of events? 29

30. Last Event: Daypart • The majority of social occasions for which consumers purchased prepared foods were either afternoon (but not lunch) (36%) or evening (31%) events. Approximately 1 in 4 were for either lunch (21%) or brunch (4%). Last Event: Time of DayBase = 1,000    Significantly higher than other group(s): Men  Women 18-34  35-54 55+ Q: For what time of day did you purchase the food for this occasion (regardless of how long the event lasted)? 30

31. Last Event: Daypart by User Group • There is some variation in the time of day for which user groups held their last social occasion. Medium and heavy users were more likely to host “all day” affairs (although the overall incidence of these occasions was low at 3%). Light and medium users were more likely to have afternoon or evening occasions (versus lunch ones) while heavy users reported similar frequencies of lunch, afternoon and evening events. Last Event: Time of DayBase = 1,000 Q: For what time of day did you purchase the food for this occasion (regardless of how long the event lasted)?  Significantly higher at 90% confidence level 31

32. Last Event: Daypart by Venue Category • Supermarkets and club stores were much more likely to be the source of food for afternoon or evening occasions (compared with other dayparts). Other retailers were most often used for afternoon occasions (44%). Full service restaurants were noted for some afternoon (27%) events but close to half (48%) were evening occasions. Fast casual operators were used more often than others for brunch (9%) occasions but also showed balanced utilization for lunch (28%), afternoon (32%) or dinner (23%) events. Fast food restaurants were used mostly for afternoon (35%) or evening (34%) activities. Last Event: Time of DayBase = 1,000 Q: For what time of day did you purchase the food for this occasion (regardless of how long the event lasted)?  Significantly higher at 90% confidence level 32

33. IV. Sourcing and Decision Drivers

34. Catering Sources • Across all occasions, consumers report preferring to use supermarkets and warehouse clubs for 1 out of 4 specific types of occasions. However, the restaurant category as a whole is preferred for a higher percentage of occasions (28%) than either supermarkets or warehouse clubs. The type of restaurant preferred was evenly divided between full-service restaurants and limited-service (including fast food and fast casual) restaurants. Other retailers (e.g., Honeybaked Ham, Walmart, etc.) were noted for 16% of occasions and FSR and LSR (combined) were noted for 14% of occasions each. Independent caterers were only selected for 6% of occasions. Catering Sourcescalculated based on net occasions Q: From where are you most likely to purchase meals/platters for six people or more? (by each occasion) 34

35. Number of Prepared Food Purchases from Category (Past Year) • On an overall basis, consumers reported an average of 5.2 occasions per year for which they purchase prepared foods at restaurant and retail segments. Warehouse clubs and supermarkets lead with 9 and 8 purchases per year, respectively. Of the restaurant segments, limited service restaurants benefit from an average of 4.8 fast casual and 4.6 fast food party platter orders. Number of Prepared Food Purchases from Venue Over the Past Year (Average) Base = 1,000 Q: How many times over the past year have you purchased prepared food from (insert brand) for other types of occasions? 35

36. Single Source vs. Multi-Source for Prepared Foods • On an overall basis, 71% of consumers reported picking up all of the food for their occasion in one place rather than going to a few different places. At the user group level, heavy users were significantly more likely to economize their purchases at one place (76%) while medium users were more likely to use multiple sources (34%). Number of Venues UtilizedBase = 1,000     Significantly higher than other group(s): Men  Women 18-34  35-54 55+ Q: Did you buy the food for this occasion from one place or did you go to a few different places?  Significantly higher at 90% confidence level 36

37. Most Likely Source of Catering for Occasions: Supermarket • Supermarkets were identified as the source most frequently used for prepared foods in 25% of overall occasions. • While the channel represents approximately 20-25% of the top occasions held, supermarkets were noted most frequently for potluck occasions (39%). Other occasions that outpaced the overall average (representing 28% of each type of occasion) were informal dinners, informal cocktail parties and kids’ general (non-birthday) parties. % of Catering Occasions Most Likely Sourced At SupermarketsBase = varies by occasion Q: From where are you most likely to purchase meals/platters for six or more people? Select the one resource you are most likely to use for each occasion. 37

38. Past Use of Supermarkets for Catering • Given the high regional fragmentation of the grocery/supermarket channel, the heavy use of “other” supermarkets for past catering occasions is not surprising. Kroger (21%) and Publix (16%) were the supermarkets most often noted for past use by respondents in this segment. • Similarly, it is not surprising that there is tighter alignment between the response patterns for brands “ever used” and “used last.” As most communities will have only a handful of supermarket brands present to choose from for everyday shopping and catering needs, we expect to see smaller ranges between the “ever used” and “last used” responses. Past Use of Supermarkets for CateringBase = 201 Have Used for Catering in PastUsed Last Occasion Q: Please look at the list of Supermarkets. Where have you ever purchased prepared meals/platters from? (select all that apply) 38

39. Most Likely Source of Catering for Occasions: Warehouse Club • Warehouse clubs were identified in 26% of overall occasions as the source used most often for prepared foods for social events. • Club stores represent a greater share of business for church or community events (38%), sports events (31%), informal cocktail parties (31%), “other” events (30%) and family functions (28%). • The channel is used least often for luncheons (17%) and formal dinners (17%). % of Catering Occasions Most Likely Sourced At Warehouse ClubsBase = varies by occasion Q: From where are you most likely to purchase meals/platters for six or more people? Select the one resource you are most likely to use for each occasion. 39

40. Past Use of Wholesale/Club Stores for Catering • Both Costco (53%) and Sam’s Club (49%) have been used in the past by close to 1 in 2 consumers who had used a club store for their last catering occasion. BJ’s was noted by 13% as having been used in the past. This is not surprising given the limited number of retailers in this segment and the broader distribution of both Costco and Sam’s Club. • As noted with supermarkets, it is not surprising to see such tight usage patterns between “used in past” and “used last” responses for club stores. This is perhaps even more true in the club channel where consumers pay for memberships. As such, we expect that most who have visited the brand would also have used it for their last purchase. Past Use ofWholesale / Club Stores for Catering Base = 199 Have Used for Catering in PastUsed Last Occasion Q: Please look at the list of Wholesale / Club Stores. Where have you ever purchased prepared meals/platters from? (select all that apply) 40

41. Most Likely Source of Catering for Occasions: Other Retailers • Other retailers were noted as the “most likely” source for 16% of occasions. • Holidays (25%) and bridal or baby showers (21%) are the two types of occasions that stand out for this channel, with most other occasions falling within the 14-17% range. • Other retailers were noted less often for luncheons (11%), formal dinners (10%) and other events (6%) % of Catering Occasions Most Likely Sourced At Other RetailersBase = varies by occasion Q: From where are you most likely to purchase meals/platters for six or more people? Select the one resource you are most likely to use for each occasion. 41

42. Past Use of Other Retailers for Catering • Among consumers who used an “other retailer” for their last social catering occasion, 73% indicated they had purchased a platter from Wal-Mart in the past and Wal-Mart was the “other retailer” source for just under half (49%) of last social occasions. • Honeybaked Ham (39%) and Super Target (27%) were also noted as frequent sources for prepared foods in the past. Honeybaked Ham was used by 20% of the consumers who purchased from “other retailers” for their last occasion. Past Use of Other Retailers for CateringBase = 175 Have Used for Catering in PastUsed Last Occasion Q: Please look at the list of Other Retailers. Where have you ever purchased prepared meals/platters from? (select all that apply) 42

43. Most Likely Source of Catering for Occasions: Full Service Restaurants • Full Service Restaurants were indicated as the most likely source for 16% of occasions. • This segment was identified as the source for 36% of formal dinners (this penetration is more than double the next closest source for formal dinners which is warehouse clubs at 17%). Full service restaurants are also used frequently for adult birthdays (20%), formal cocktail parties (19%) luncheons (17%) and life passage events (16%). • Respondents indicated lower use of full service restaurants for sporting events (7%), kids’ general parties (6%) and church or community events (5%). % of Catering Occasions Most Likely Sourced At Full Service RestaurantsBase = varies by occasion Q: From where are you most likely to purchase meals/platters for six or more people? Select the one resource you are most likely to use for each occasion. 43

44. Use of Full Service Restaurants for Catering • Among respondents who used a full service restaurant for their last catering occasion, past use of the restaurant for catering platters was fairly high for • Olive Garden 44% • Applebee’s 36% • Chili’s 33% • TGI Friday’s 28% • Not surprisingly, perhaps, highly specialized menus (e.g., Famous Dave’s) and chains with fewer units have lower penetration of catering orders in this sample. • Usage patterns for the most recent occasion tend to follow past usage patterns. Use of Full Service Restaurants for CateringBase = 162 Have Used for Catering in PastUsed Last Occasion Q: Please look at the list of Full Service Restaurants. Where have you ever purchased prepared meals/platters from? (select all that apply) 44

45. Most Likely Source of Catering for Occasions: Fast Casual Restaurants • Fast casual restaurants were noted by respondents as their “most likely” source for 7% of overall occasions. • Events for which the segment appears to be more heavily used are luncheons (17%) and informal dinners (10%). They are also chosen slightly more often for adult birthdays (9%), bridal or baby showers (9%) and informal cocktail parties (9%). • Fast casual restaurants are less likely to be used for formal cocktail parties (2%), life passage events (4%) formal dinners (4%) or kids’ birthday parties (4%). % of Catering Occasions Most Likely Sourced At Fast Casual RestaurantsBase = varies by occasion Q: From where are you most likely to purchase meals/platters for six or more people? Select the one resource you are most likely to use for each occasion. 45

46. Past Use of Fast Casual Restaurants for Catering • Panera (52%) is the fast casual restaurant most frequently identified as having been used in the past by respondents who used a fast casual restaurant for their last social catering occasion. • Boston Market (36%) and Chipotle (26%) were the next two most often cited brands used, followed by a large group of restaurants used by 9-16% of respondents in this segment. • Most recent occasion patterns tend to follow overall usage patterns; Panera and Boston Market were the two fast casual restaurants noted most often as the source of prepared foods for the last occasion. Past Use of Fast Casual Restaurants for CateringBase = 137 Have Used for Catering in PastUsed Last Occasion Q: Please look at the list of Fast Casual Restaurants. Where have you ever purchased prepared meals/platters from? (select all that apply) 46

47. Most Likely Source of Catering for Occasions: Fast Food Restaurants • Fast food restaurants were identified as the most likely source for 7% of occasions (overall). • This segment is heavily over-represented in kids’ general parties (20%), kids’ birthdays (18%) and sporting events (14%) and slightly higher than normal for luncheons (11%). • Fewer respondents report using fast food restaurants for holidays (2%), bridal or baby showers (3%), life passage events (3%), formal dinners (3%) or informal (3%) or formal (3%) cocktail parties. % of Catering Occasions Most Likely Sourced At Fast Food RestaurantsBase = varies by occasion Q: From where are you most likely to purchase meals/platters for six or more people? Select the one resource you are most likely to use for each occasion. 47

48. Past Use of Fast Food Restaurants for Catering • Subway (63%), KFC (60%) and Pizza Hut (55%) are the fast food restaurants most often noted by consumers as brands they had used in the past for catering orders. • One in four who had used a fast food restaurant each indicated they had purchased bulk orders from Subway (23%) and KFC (24%) for their last occasion. Pizza Hut and Dominos were mentioned by 1in 10 respondents in this group. Past Use of Fast Food Restaurants for CateringBase = 126 Have Used for Catering in PastUsed Last Occasion Q: Please look at the list of Fast Food Restaurants. Where have you ever purchased prepared meals/platters from? (select all that apply) 48

49. Most Likely Source of Catering for Occasions: Independent Caterers • On an overall basis, independent caterers were identified as the prepared food source for 6% of occasions. • These specialty operators are most likely to be utilized in formal cocktail party (20%) or dinner (16%) settings. Approximately one in ten reported using them for showers (10%) or life passage events (12%). • Independent caterers tend to be used less than other sources for kids’ general (1%) or birthday (3%) parties, sporting events (2%) or potlucks (2%). % of Catering Occasions Most Likely Sourced At Independent CaterersBase = varies by occasion Q: From where are you most likely to purchase meals/platters for six or more people? Select the one resource you are most likely to use for each occasion. 49

50. First Choice: Venue vs. Food by Occasion • On an overall basis, consumers will first choose the venue and then select the food 6 times out of 10. • This tends to hold true for most occasions with slightly higher “venue first” selections for • Life passage events • Dinners (formal and informal) • Church / community events • There are no occasions for which more than half of consumers report selecting the food first, but this process is slightly more balanced for • Informal cocktails • Kid’s birthdays • Holidays • Potlucks • Sports events • Family functions Venue Selection Decision Process(All Venues Combined)Base = 1,000   Significantly higher than other group(s): Men  Women 18-34  35-54 55+ Picked the place firstPicked the food first Q: For this last (fill in recent social occasion) for which you purchased prepared foods did you? 50