Domestic beef marketing: Cashing-in on Australia’s love affair with coffee

Jon Condon, 15/05/2014

While the domestic food service market has a reputation for being a relatively stable space, with little opportunity for substantive changes in red meat penetration, there are segments within the food service spectrum which are growing rapidly.

The booming coffee scene across Australia is a case in point.


MLA domestic marketing manager Lachie Bowtell

Take this writer’s local neighbourhood as an example. During a recent morning walk down leafy Oxford Street, Bulimba, in Brisbane’s inner southeast, I counted no less than 16 outlets selling coffee, within a distance of perhaps 400 metres. Add another couple of nearby streets, and the number goes well beyond 20. The same thing is happening right across Australia.

Most have a light meals menu, and herein lies a solid opportunity for further food service sector penetration for beef.

Forecaster IBISWorld published a recent study suggesting that the coffee shop boom across Australia is eating into fast-food operators’ market share.

“The market for convenient takeaway meals has become a battleground between small independent cafes and the fast-food heavyweights,” IBISWorld’s report said.

“Fierce competition between cafes and fast-food services industries continues. Cafes are encroaching on the traditional territory of fast-food operators, offering a wider variety of ready-to-eat options for consumers on the go.”

The $15.3 billion Australian fast-food services industry continues to dwarf Australia’s cafes and coffee shop industry, estimated to be worth $4.2 billion. Nevertheless, $4.2 billion in sales is still a very big number, and cafes are expected to expand by 3.7pc again in 2013-14 compared with 2.8pc for fast-food operators.

“Fast-food operators have sought to steal ground back from cafes in the coffee market by introducing premium coffee options. However, rising health consciousness is working against them, as consumers increasingly opt for cafes over fast-food restaurants,” IBISWorld’s report said.

“More consumers are living their lives on the run by trying to pack more into their already busy schedules. While such a trend would usually spell profit for fast-food vendors, Australia’s booming coffee culture has diluted their success.”

The popularity of coffee has encouraged cafe operators to offer a range of complementary meals, allowing busy consumers to grab a sandwich, a slider or a steak sandwich with their usual coffee.

This broader scope of operations has increased convenience for consumers and provided an attractive option for people consumers who are now spoiled for choice when lunchtime ticks around.


Quality appreciation

An appreciation of coffee and fine food has permeated the Australian food scene and consumers have become more discerning. In parallel, consumers are demanding higher quality food options and are increasingly willing to pay a premium for them.

The trend towards gourmet eating has boosted the popularity of cafes, with the typical cafe spread often perceived as ‘fresher’ and ‘healthier’ than that of fast-food outlets.

Fast-food providers have responded with their own ranges of gourmet options, (example: McDonald’s Grande Angus burger) focusing on higher-quality ingredients and special menus. Higher quality meals and the emergence of more gourmet fast-food providers have supported growth for the fast-food services industry.

But while fast-food operators have made efforts to improve quality, they have been unable to shake their unhealthy image. With obesity and diabetes frequently discussed in media reports, consumers are becoming increasingly health conscious.

“Fast-food operators have borne the brunt of this negative media, while cafes have benefited from their healthier image,” IBISWorld’s report said.

“Meanwhile, healthier eating has bolstered the cafes and coffee shops industry. With food items often carrying higher margins, increased food sales at cafes have significantly boosted industry revenue. Some fast-food operators have benefited from this trend, including Subway, which has marketed the health benefits of its products. However, Subway is the exception, with most traditional fast-food operators feeling the pinch and looking to introduce healthier menus.”

IBISWorld expects the café/coffee shop industry to continue its strong performance, wrestling market share away from fast-food providers, while consumers are likely to continue to opt for convenience, and high-quality and healthier options.


MLA zeroes in on the ‘caffeine fix’

Beef Central quizzed Meat & Livestock Australia domestic regional manager Lachie Bowtell about the trend discussed above during the recent regional managers’ marketing briefing in Dalby.

“We see there is an opportunity for beef and lamb in the further development of the lunch trade overall, with coffee shops being a significant part of that opportunity,” Mr Bowtell said.

But the coffee shop/café space it’s not as empty as some might think. MLA’s research shows that beef has 97-98 percent penetration on the menus of pubs, clubs, hotels, motels and restaurants, while the coffee shop/café segment is only marginally less, at 90pc. But it is conceded that that might include only one red meat item, in some cases only a burger pattie, or a steak sandwich.

Having said that, MLA is devoting some resources to the ‘café culture’ as an area for further development.

For example, funds have been spent on highly targeted advertising in café/coffee industry magazines and trade journals, pushing items like MLA’s ‘Masterpiece’ concept products. It has also taken booth space at coffee industry trade shows, where thousands of café owners catch up on latest industry developments and opportunities.

“Currently the coffee culture is a really strong sandwich market, but we need to go further,” Mr Bowtell said. “But it’s specialised. Most have very limited kitchen space, so it needs to be largely pre-prepared, or heat-and-serve.”

He had doubts about whether the proliferation of coffee shops would have any real impact on the fast food sector, however.

“I really don’t think this will present a challenge, shorter-term, at least, as the only real challenge will come from ‘chains’ in this sector, and this has met with only limited success in the Australian market – Coffee Club being the exception.”

Using Lachie’s Coffee Club reference as an example, we had a quick look at the chain’s menu, online (click here to view). It contains a surprising number of red meat related items, given the style of venue, and perhaps even more so, a high degree of sophistication.

This week’s offer includes three variations of eye fillet with red wine jus, steak sandwiches, beef nachos, gourmet beef burgers, beef fajitas and Philly cheesesteak rolls. Duplicate that offer across every premium coffee outlet in Australia and an enormous opportunity emerges.

Coffee Club continues on a rapid growth curve, as the nation’s largest chain. It has a stated aim of opening a new store every fortnight for the next five years and is targeting 500 stores across Australia by 2020.

“While we see strong opportunity in this café segment, there are still plenty of opportunities available to us in fast food chains,” Mr Bowtell said.

“We’re working with a number of them at the moment, to secure more menu options and variety in beef and lamb offerings.”



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