French consumers serve as a striking example of the opportunities available for fast food operators able to marry affordable products with a compelling story of service and quality.

While overall foodservice spending fell in 2009, fast food operators in France did very well indeed in 2009, with sales continuing to expand, as French consumers continued to seek out good quality food at an affordable price.

The ongoing evolution of French foodservice in a recessionary environment offers key insights for operators across the developed world, with behavior shifts among French consumers mirroring those seen in a number of other markets. Intensely concerned with tradition and authenticity, yet also hungry for value and convenience, French consumers serve as a striking example of the opportunities available for fast food operators able to marry affordable products with a compelling story of service and quality. While fast casual chains have certainly prospered in this environment, standard fast food chains have also made real gains, with McDonald’s in particular maintaining its dominance, in part due to a heavily upgraded outlet and menu presentation.

Recession Spurs Renewed Quest for Value
France was not spared the effects of the global downturn in 2009, with French GDP falling nearly 3% in real terms. Consumer foodservice spending was hit hard, falling by 1.5%, yet the impact was not equally distributed--while cafes/bars saw sales fall nearly 8%, and sales through full-service restaurants were off by more than 3%, quick-service categories actually did quite well, with 100% home delivery/takeout and street stalls/kiosks up nearly 5%. Fast food operators had an outstanding year, with sales expanding a full 8%. Price undoubtedly played a role here--chained fast food operators were quick to slash prices and run promotions, while higher-priced, often independent cafe and full-service restaurants were in many cases unable to adjust as quickly and saw sales fall, as a result. Likewise, chained fast food restaurants took full advantage of the cut in the value-added tax (VAT) rate for restaurants, which was lowered to 5.5%, quickly passing on reduced costs to consumers in the form of lower prices. Full-service restaurants were, in the main, slower to respond, often relying on a lower VAT to shore up margins, while maintaining prices--a strategy which did not help traffic. 2009 also saw the emergence of several operators competing almost entirely on price, a strategy typified by Goutu, a startup chain offering a range of sandwiches for under $3 (in U.S. currency), with most retailing for about $1--all in a clean, no-frills environment.

That said, the overriding theme in 2009 was one of value, a term which encompasses far more than simply low prices. While French consumers undoubtedly cut back on fine dining and lengthy business lunches, ample demand remained for quick-service options which, while still low-priced relative to other categories, went well beyond bargain-basement, one-Euro menus and other offers. Sales through fast casual outlets grew by nearly 10%, taking sales in the category past $825 million, while burger fast food was up 7%, with average spend per transaction actually growing, surpassing $19,  in the $6.5 billion category. Sales through Groupe Holder’s Paul, France’s leading fast casual chain, surpassed $382 million on 11% growth, as consumers continued to respond to the bakery chain’s upmarket traditional positioning, which heavily emphasizes the chain’s historic roots as a family-run French bakery.  Fast casual chains, such as Exki, Cojean and Jour, also expanded in 2009, albeit from much smaller bases, all with a relatively premium presentation centered on fresh ingredients and contemporary outlet designs.

A Quick-service Future
In many respects, the recession simply accelerated trends which have long been in evidence in French foodservice--the dismal performance of cafes/bars in 2009 continues a steady decline which has been underway for nearly a decade. The strong performance of fast food is likewise a continuation of a longer-term trend, which the increased price-sensitivity brought by the recession has only reinforced. While premium fast casual chains are projected to continue gaining share, demand for convenience at an affordable price has lifted sales through all fast food chains--McDonald’s and KFC both posted impressive gains in 2009, while Subway nearly doubled sales, as French consumers responded to the sandwich chain’s combination of low prices and fresh ingredients.

Thus, while broadly speaking, fast food is the place to be in French foodservice, there is a wide range of concepts and market segments where operators can make their mark;  chains able to sustain a message of premium quality are expected to do particularly well. While it is possible to grow sales with a primarily low-price message, there is significant appreciation for outlets able to offer some combination of quality, history, local sourcing and attractive outlet design. The much-publicized success of McDonald’s in France, for instance, owes much to a large-scale outlet redesign campaign, as well as heavy use (and heavy promotion) of local, French ingredients and menu items. The drive for convenience is expected to gain steam going forward, and chains able to tie this to a credible image of quality, even at comparatively higher price points, should do well. pf