A story that really grew legs earlier this year, based on the May report from leading independent strategic market research firm Euromonitor (http://nnw.fm/zJB60), clearly illustrates how China’s massive consumer market has rapidly processed the clean food trend that took years to sweep through Western markets. The shift toward healthier alternatives by a large percentage of fast food and casual dining consumers is likely also related to the accessibility of information that has come with ubiquitous internet access all over the planet. The implications of all this for the industry, however, irrespective of the component architecture of causes, is strikingly unambiguous: serious changes toward healthier menu options have become vital.
Fast food giant McDonald’s (NYSE: MCD), which opened doors in China back in 1987 and has grown to over 2,200 locations, as well as Yum Brands (NYSE: YUM), the operator of KFC and Pizza Hut (7,200 locations), are both shedding Chinese footprint. Yum’s market share alone has declined 17 percent since 2012 (MCD lost around 2.7 percent), resulting in strategic divestment of 20 percent of its overall position to a Chinese company, a vector also being pursued by MCD. Consumers want healthier and heartier meals now. This is perhaps the core driver behind the success of outfits like Panera Bread Company (NASDAQ: PNRA) and Chipotle Mexican Grill (NYSE: CMG), as well as 2015 IPO Shake Shack (NYSE: SHAK), which, while not quite as focused on healthier options, definitely speaks to the same consumer sentiment about real food value.
The time has come to seriously start building a portfolio of promising, investor-accessible fast casual and even fast food companies who understand where the industry is headed and have been able to successfully capitalize on the trends, and not just with lackluster, after-the-fact menu alterations the way MCD has done, a decision which has (unsurprisingly) failed to win over increasingly savvy consumers. It makes sense to look at companies who have flipped the script and started from scratch with a new model, operators who understand not just the underlying trends, but the full spectrum of logistical issues as well. Issues like cultivating brand awareness and an identity early on that will have real staying power, or shrewdly setting up the entire model from the get go to really succeed when it comes to securing optimal locations that are heavily trafficked and/or are geographically localized to premium target demos.
Giggles N’ Hugs (OTCQB: GIGL) is one to watch in this arena, with its unique restaurant concept that fuses together high-end organic food and healthy, cutting-edge play/entertainment for children, a model which has already proven itself by becoming extremely successful in Southern California at some of the high end malls the company brilliantly likes to target for maximum traction – both with the general public and a growing retinue of A-list celebs. This is an extremely important kind of passive celebrity branding that costs GIGL nothing, yet (especially for SoCal folks) resonates hugely with target demos.
Some 15 percent of all ads last year featured high profile celebs (http://nnw.fm/o99xD), and whilst most companies must navigate the choppy waters of picking the right kind of celebrity that parallelizes their brand, secure endorsements via huge payouts, or gift celebrities their products in mere hopes that they will thereby gain attention – GIGL simply has to do what it does best: open the doors every morning to one of the finest organic casual dining, “Gymboree” playspace experiences available anywhere on earth. And it just so happens to be the perfect place for birthday parties, which GIGL does masterfully, with themed and specially catered parties that have live entertainers and actors/staff dressed up as the kid’s favorite cartoon star, comic book super hero, or other, similar thematic constructs.
Fast casual is the sector sweet spot, too, as this entire clean food trend comes to a boil globally, with the segment showing a 10.4 percent sales uptick last year compared to 2014 (http://nnw.fm/A6lpr). Even the largest consumer foodservice market on Earth, China, saw sales grow 9.5 percent year over year to $617 billion. The GIGL story is really something to look at, with tightly-knit partnerships between the company and some of the world’s largest mall operators helping to ensure its longer-term franchise success, as well as a brilliantly executed and highly unique model. By the way, this is a model that can work anywhere on the planet. This versatility is something for investors playing the long game to think about with GIGL, especially considering the baseline receptivity in Asian markets to this kind of family-centric dining concept.
Learn more by visiting www.gigglesnhugs.com
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