Starbucks Corp. in April launched a new line of coffee-flavored ice cream in supermarkets. While used largely in the past as a marketing tool, supermarket placement is now being counted on as an additional revenue stream at a time when restaurant traffic is down.
Indeed, many are putting more marketing punch behind such efforts. Last month, Starbuck's coffee-shop patrons were handed coupons containing such grocery-store deals as $1 off ice cream and $1 off 10-ounce packages of Starbucks brand coffee.
"If consumers are coming in less frequently, they can still treat themselves at home," Greg Price, vice president of global consumer products at Starbucks, told The Wall Street Journal.
Among other chains, Burger King plans to sell Apple Fries, originally developed for its restaurant kid meals, in 10,000 grocery stores nationwide this fall. California Pizza Kitchen in March began shipping microwaveable Flatbread Melts sandwiches to supermarkets through a licensing arrangement with Kraft Foods. Grocers have been selling Dunkin' Donuts coffee since 2007, Taco Bell hard tacos and beans since 1995, and White Castle burgers since 1987. For retailers, restaurant brands offer immediate brand recognition.
"If people can save a few dollars and save some time by eating at home, these types of familiar brands... make it easier and more cost-effective," Meghan Glynn, spokeswoman Kroger, told the Journal.
The downside of these deals, according to the Journal, is that new brands can confuse consumers already bombarded by choices and many chains are trimming SKUs. Many restaurant brands also carry higher-price tags than similar items.
But name recognition can drive success. As the recession deepened, grocery sales of frozen California Pizza Kitchen pizza increased 19.6 percent last year to $159 million. Kraft pays California Pizza Kitchen an annual royalty, which last year amounted to $6.6 million. While a faction of the chain's overall revenues, it's all profit because Kraft covers R&D and advertising costs.
"Our comparable restaurant sales are down," said California Pizza Kitchen co-chief executive Rick Rosenfield. "People are trading down to supermarkets and we're softening the blow by being there for them."
Discussion Questions: Do you expect to see more restaurant brands on grocer's shelves in the future? Who benefits more - grocers or restaurants - from restaurant brands reaching grocery shelves?