Fast-Food Market New Zealand, Essay Example

Introduction

Current estimates show that the fast food market in New Zealand is growing; McDonald is also growing in response (Fuatai, 2013; Euromonitor, 2014). However, because of the persistent shift towards health and wellness fast foods, McDonald’s has come up with broader variants of health foods, which, however, record low sales because of the lack of effective advertising targeting the new set of consumer segment (Euromonitor, 2014). This indicates that the company will have to increase brand awareness among its target consumers (the young people). This paper explores the problems and opportunities McDonald’s faces.

Background

The fast food market in New Zealand is growing. This is reflected by the growth of key industry players in the fast food sector, such as McDonald’s Restaurants. According to Euromonitor (2014), the fast food market is New Zealand’s most dynamic consumer food category. It is also strongly established. As Euromonitor’s (2014) statistics show, consumers in New Zealand embrace the fast food culture for casual mealtimes, as well as consumption of snacks. The food outlet in the country showed consistent growth of about 8% in 2013, to reach 4,050 from the previous 3,752. During the period, additional 298 fast food outlets opened during the year.

In 2013, McDonald’s Restaurants were the best performing companies in the fast food sector. Despite this, its value of share declined by 1% to reach 17%. On the other hand, the number of restaurants McDonald’s owns remained stagnant. The value of its sales also declined a little because of the persistence of dollar deals, meal deals, and family meal deals. The three constitute McDonald’s offerings at discounted prices (Euromonitor, 2004). They led to a fall in the ‘spend per transaction.’ Among the positive results of McDonald’s in 2013 included the launch of Georgie Pie. McDonald’s purchased the rights to this iconic New Zealand brand after it closed down. Consequently, McDonald’s launched the Georgie Pie brand into six extra outlets. Additionally, McDonald’s introduced health food alternatives of Real Choice salads in a bid to launch healthier products from its menu. This appealed to the growing base of health conscious consumers, which brought a new set of the target market (Fuatai, 2013). To set its footprint in the health food category and to advertise itself as a healthy chain, the company launched the website “Our Food, Your Questions” in 2013. This was in response to the many criticisms of being an unhealthy chain.

Still, some of McDonald’s products were not successful. At the same time, the company removed some products from its range of product line because of low sales. Among them includes the premium lamb burgers it had introduced in 2012, which made substantially low sales between 2012 and 2013.

Situation analysis

According to a survey by Nielsen (2015), the global consumer confidence fell globally in the fourth quarter of 2014, ending with an index score of 96. This represented a fall of 2 points index from the preceding quarter. A similar trend was witnessed in Asia Pacific where the consumer confidence fell by 3 points in the fourth quarter of 2014 to reach 106.  A fall of consumer confidence could have indicated a fall in sales in the fast food market. However, a rise in consumer income led to a higher demand for fast food products (D’Costa, 2013).

The consumer price index further shows that more expenditure on food was the second highest in 2014, after housing and household utilities. In particular, there was an increase in the relative significant of restaurant meals and fast foods to 4.35% in 2014 from 3.96% in 2011 (Statistics New Zealand, 2014).

Statistics by Euromonitor (2014) have further indicated that fast food makes up the largest constituted of the food service market and is growing rapidly in the entire Asia Pacific. Globally, the food service industry was approximated at $US2.5 trillion in 2013. Asia Pacific took largest share of $US1.1 trillion. Indeed, the major growth engine of the food service industry is the fast food sector, which made up about 70% of the entire sales of fast foods in 2013. This indicates that the food service market is currently undergoing unprecedented growth. The trend indicates an opportunity for players in the industry – among them McDonald’s (D’Costa, 2013).

Additionally, as the population in Asia Pacific continues to get affluent, studies indicates that a rise in demand for fast foods is imminent from the fast food restaurants. This is specifically so since more consumers are willing to pay more for quality. Indeed, the emergent nouveau riche populations of New Zealand, China and Singapore are anticipated to be major growth drivers of the fast food sector (D’Costa, 2013).

Across the entire Asia Pacific region, Australia and New Zealand are categorized as the more mature fast-food market in the region. In New Zealand, the general consumption of fast food is tremendously rising, relative to its small population. For instance, in 2013, consumption of fast food in New Zealand was projected to have averaged between two and 3kgs of fast food per person each year. This amounted to per capita expenditure of between $US1200 and $US1500. Multinational food chains search as McDonald’s continued to dominate, ahead of JFC, Starbucks.

An additional opportunity is showed by the increase of Asians immigrating into New Zealand. This has created a rising demand for Asian street food, particularly in major towns in New Zealand. At any rate, the key trends signaling opportunities in the fast food sector in New Zealand increased. For instance, visitor arrivals from China increased by 96% in February this year compared to February last year (Statistics New Zealand, 2015).

A shift towards the health and wellness fast food is a critical cause for concern. Because of the forceful internal competition, intensifying global concerns regarding food safety in addition to the health safety concerns on food nutritional value and hygiene, the fast food sector faces challenges into profitable opportunities for the players in the industry, including McDonald’s. With nearly 3,000 established fast food outlets in New Zealand, the country’s fast food market faces pressure to offer healthier food alternatives. This comes even as the fast food restaurants are confronted with pressure to keep the prices constant.

In fact, despite such a trend, a stimulus persists to offer healthy fast food options to ensure consumer loyalty. Indications by Statistics New Zealand (2014) show that most Australians went for consumer products that were relatively cheaper in preference to the products that were relatively expensive in 2014. This shows that players in the fast food industry had to reduce their prices. Even as most fast food restaurant currently provides ‘healthy’ variants, there has been concern among consumers over their standards. At the same time, more of these variants go unnoticed due to poor advertisement strategies (D’Costa, 2013).

An addition pressure is the call for players in the industry to offer cost-effective, healthy options. Indeed, more chains like McDonald’s have to offer meals for a low price of about $1 ($US 0.8). Still, going the healthy way is at present the successful alternative to stop stagnation, specifically because of huge health campaigns to curb cardio vascular disease and obesity in the country. In 2010, McDonald’s became the first player in the industry to partner with the celebrated acclaimed Weight Watchers campaign.  It provided a combination of three meals to customers with Weight Watchers Points, which is determined using fat and fiber, food’s calories, and content.

Most fast food player also tend to leverage the youth market segment.  Because of the low-cost options and the strong brands, the fast-food restaurants in New Zealand have selected to center on attracting the youth – who are the most profitable segment of the market. Current trends show that as more people in New Zealand move to live, study and work in the urban places, the sector takes advantage of the youth as its key consumer segment. In the case of McDonald’s, the company has gained a reputation for being the key employer for students in New Zealand, which has enabled it to retain its youthful customers, as a result seeing to it that a large proportion of consumers  also emanate from its employee base. By focusing on the youths, and constantly reducing prices serve the needs of students and youth on a budget, McDonald’s has successfully become a high volume market for fast foods (D’Costa, 2013).

Prospects

A review by Euromonitor (2014) has showed that polarisation will persist in the fast food in value terms. This follows the trends by fast food restaurants in New Zealand to offer deals among other packages. Still, the massive debut premium food offerings, on the other hand, at a higher price will offer some financial prospects. At the same time, players in the sector are likely to increase an offering of healthier alternative like salads and wraps. Euromonitor (2014) also predicts that expansions of menus to offer more variety of desserts and drinks will be realized by the year 2015. Additionally, more fast food restaurants are likely to focus on disclosing nutritional and ingredients information, in addition to whether products have low carbohydrates or are gluten- and are fat-free. These are likely to be contained in food menus and brochures to informer customers.

Management problem

Based on the above analysis, McDonald has a poor advertisement strategy targeted at the youth, who are the targeted market segment. Additionally, poor advertisement strategies have meant that the company fails to reach new consumer segment, who prefer health and wellness foods. Pricing is also a problem since despite maintaining low prices the company has failed to realize a growth of customer base. The company has also been slow to introduce more health and wellness foods and match it to demand. This is compounded by the fact that the increased number of Asians immigrating into New Zealand signals a need for greater diversity in the food sold.

Research Problems

• Fast food restaurants must sell at low cost as consumers tend to buy consumer products that are relatively cheaper in
• A shift towards the Health and Wellness fast food brings into profitable opportunities for the players in the industry, including McDonald’s. This comes even as the fast food restaurants are confronted, with pressure to keep the prices constant price.
• A stimulus persists to offer healthy fast food options to ensure consumer loyalty.
• An addition pressure is the call for players in the industry to offer cost-effective, healthy options.
• Poor marketing strategies mean that more consumers are unaware of the variants of health foods in the market.

Research objectives

• Determine whether fast food restaurants must sell at low cost will bring in more consumers and ensure brand loyalty.
• Examine whether fast food restaurants should start producing the health and wellness food will bring in more revenues and maintain customer loyalty.
• Determine the effective marketing strategies that fast food restaurants should use to target the youths and the new segment of health and wellness consumers.

Research questions

• Will selling at low cost bring in more consumers and ensure brand loyalty?
• Will selling of health and wellness food bring in more revenues and maintain customer loyalty?
• What effective marketing strategies can fast food restaurants use to target the youths and the new segment of health and wellness consumers?

Conclusion

Current estimates show that the fast food market in New Zealand is on persistent growth. McDonald is also growing in response. However, because of the persistent shift towards health and wellness fast foods, McDonald’s has come up with broader variants of health foods, which, however, record low sales because of the lack of effective advertising targeting the new set of consumer segment.

References

D’Costa, N. (2013). New Zealand’s fast food industry – a trend analysis. Food Technology. Retrieved: <http://www.foodtechnology.co.nz/content/new-zealands-fast-food-industry-trend-analysis/>

Euromonitor. (2014). Fast Food in New Zealand. Euromonitor International. Retrieved: <http://www.euromonitor.com/fast-food-in-new-zealand/report>

Fuatai, T. (2013). Fast-food nation – takeaway sales soar. The New Zealand Herald. Retrieved: <http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=10894207>

Nielsen (2015). Q4 2014 Consumer Confidence Report. Retrieved: <http://www.nielsen.com/us/en/insights/reports/2015/q4-2014-consumer-confidence-report.html>

Statistics New Zealand (2014). Consumers price index review: 2014. Available from www.stats.govt.nz.

Statistics New Zealand (2015). Chinese New Year Brings More Visitors. Retrieved: <http://www.stats.govt.nz/browse_for_stats/population/Migration/IntTravelAndMigration_MRFeb15.aspx>