Better Burger Boom Well Done?

Technomic says segment has reached maturity, saturation point

Published in CSP Daily News

BurgerFi (CSP Daily News / Convenience Store Petroleum)

CHICAGO -- Burger chains have finally reached maturity as limited-service burger segment sales contracted in 2013. Although the burger chains in the 2014 Technomic Top 500 Chain Restaurant Report tallied U.S. sales of more than $72 billion, they recorded nominal growth of only 1.2%. Adjusting for price inflation, the segment's sales declined. Overall units increased by only 1%, to 42,853 locations.

Quick-service burger chains accounted for $69.7 billion in sales but increased only 0.9% in sales volume with weak U.S. performance from McDonald's (whose sales are up just 0.7%, to $35.9 billion), Wendy's (up 1%, to $8.8 billion) and Burger King (down 1% to $8.5 billion).

Some brands demonstrated strong sales growth, including Culver's (8%), In-N-Out Burger (6%) and Freddy's Frozen Custard & Steakburgers (42%). Growth for Culver's and Freddy's has been supported by the consumer appeal of their frozen custard, while In-N-Out Burger continues to provide a simple menu, good quality and a strong value price point.

Fast-casual better burger chains continued to generate strong sales growth of 10.4%; however, their $2.4 billion in sales represents only 3.3% of Top 500 ranked burger chains. Five Guys Burgers & Fries continues to lead the segment with sales of $1.1 billion, but the chain's slowing growth (5% in 2013 compared to 14% in 2012) illustrates the segment's maturity as larger metropolitan markets hit saturation.

Smashburger is gaining ground with sales growth of 32%, to $214.9 million, and 54 new stores in 2013.

Strong U.S. sales growth continues from smaller, regional chains like Habit Burger Grill (35%), Shake Shack (40%) and BurgerFi (178%).

Better-burger brands provide high-quality protein, toppings, sauces and buns combined with "craveable" french fries and strong beverage platforms including craft beer, wine and customizable soda.

"Consumer demand for health and wellness will drive success for brands that differentiate by quality, and innovation efforts will continue to drive impulse visits for trial," said Darren Tristano, executive vice president of Technomic Inc., Chicago.

Tristano added that burger blends, such as the ground beef and ground bacon mixture at California-based Slater's 50/50, will present new flavor profiles. Non-beef alternative proteins as well as gluten-free and high-quality buns will become standard fare on menus, giving consumers more customization options. Although American consumers' demand for burgers will not decline, the biggest shift will occur in where they indulge themselves with a burger.