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Current Position:Home » News » Frozen & Deli Food » Topic

Sonic not shaken by new competition

Zoom in font  Zoom out font Published: 2014-06-13  Views: 27
Core Tip: Among challenges quick-serve restaurants now face in a post-recession environment is competition from a new set of foes, said Sonic Drive-In during a June 11 presentation at the Piper Jaffray Consumer Conference in New York.
Among challenges quick-serve restaurants now face in a post-recession environment is competition from a new set of foes, said Sonic Drive-In during a June 11 presentation at the Piper Jaffray Consumer Conference in New York.

“One of the things that looks very different versus what it looked like before the recession began, was different sort of competitors attacking that Q.S.R. business,” said Cliff Hudson, chairman, president and chief executive officer of the Oklahoma City-based chain. “We think about ourselves working to steal share from each other, but the biggest share-stealing that has been occurring the last (several) years has been fast-casual taking meals from Q.S.R., and convenience stores taking drinks and lighter meals on the run and cheaper meals from Q.S.R., particularly morning business, particularly drink business, but convenience stores generally stealing business.”

To compete against the fast-casual segment, Sonic has focused on improving its product pipeline across day parts, with new entrees, ice cream, side orders and beverages.

“We are in a better position with made-to-order food to combat that fast-casual piece, and, in fact, doing that now with our entrees growing disproportionate to where they have been historically,” Mr. Hudson said. “But we have stepped up the quality of those quite a bit, and doing so quite intentionally, not just coming on with a chicken sandwich, but a line of chicken products so that we have a very different platform versus what we had several years ago.”

Sonic’s defense against the convenience channel has included a beverage promotion during the morning day part, when the chain said it had lost business in recent years.

“(We are) seeing our morning business really pick up from a traffic standpoint,” Mr. Hudson said. “(In) March, April, May, seeing the food breakfast piece pick up quite a bit. And then the nice thing that we are seeing, and this does go back to this intrusion on the business and the loss of a customer: it is not just a day part piece; it is a customer piece when, if they stop using you and going to fast-casual or stop using you and going to convenience stores, as we look at credit card transactions, we are not just seeing traffic pick up nicely that we might start losing to a morning customer in that way.”

Sonic also has evolved its approach to value, now offering more premium products at higher price points.

“Complete change in our value proposition in terms of how we go about selling that to a customer,” Mr. Hudson said. “And we have seen that improve materially since, well, let’s say, over the last four years before the recession, in spite of the fact that we used to have a $2.99 chicken sandwich, and now the higher end is $4.29 chicken sandwich, and is a much better chicken sandwich. In spite of the fact ice cream products higher end, sandwiches higher end.”

Sonic has adopted a laddered pricing model, with opportunities for customers to “trade up” to the next price point across the menu board.

“We have done this with sandwiches, we have done this with sides, we have done this with desserts,” Mr. Hudson said. “And it has worked quite effectively.”

The combination of initiatives not only has positioned Sonic to rival its new opponents in fast-casual and convenience stores, but also to compete against its peers in the Q.S.R. arena.

“McDonald’s (is) losing steam versus where it was three and five years ago, so they are not sucking all the air out of the room for the rest of us,” Mr. Hudson said. “In our own case, I think getting our value proposition much better positioned versus where it was before the recession. And, as this shift has occurred where the fast casual and the convenience stores I think, as I said, we really do believe we are better off, better positioned than our competitors to combat that.”

 
 
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