By Steve Rowen, Managing Partner
February 2, 2010
As the global population continues to increase in size, industrial activity and overall consumption, the need for more environmentally sound practices is becoming increasingly more evident. For consumers, such practices are done for 2 reasons: to behave responsibly (primary), and to save money (secondary, and in some cases, customers are actually willing to spend more if they believe the product they are buying is better suited at achieving their primary goal).
For most businesses, this order is reversed: cost savings come first, and ethically-responsible benefits are a value-add. Yet for a brand, there is a third and additional reason to enact “greener” practices, and as should be the case with any forward-thinking brand initiative, it is centered wholly on the customer: the ability to align the brand with a message of environmental-responsibility may present tremendous opportunity to gain customer loyalty from green-minded consumers. At a time when wallets are tight, this is no small feat.
As a result of this brand-alignment opportunity, there is a vast amount of noise bombarding brands about how they can “tell a green story” to their customers. Beginning in 2008, RSR launched a line of benchmark studies to cut through that noise. By questioning retailers directly about their actions and intentions, we’ve been able to gain a better understanding of the “real-world” green practices being employed today, and which of those practices are proving to be most effective in driving down cost, reducing waste and consumption, and building the eco-savvy brands that attract new business.
This year, we extended our field of study and conducted a report explicitly on restaurant retailers to find out how their green business challenges and opportunities compare. It publishes February 10th, and will be available at that time by following this link. Why restaurants? In theory, restaurant retailers have similar business models to general retailers: both are customer-facing, both survive on predominantly discretionary spending, and both compete against opponents who offer essentially similar products; the intangible aspect – the emotional connection to the brand - is a key component of the customer’s decision of where to dine. Does a restaurateur’s environmental commitment play a role in that decision? As we found out quickly, restaurant operators who are already performing the best, sales-wise, believe that answer to be a resounding “yes.”
Restaurant retailers immediately validate what general retailers have told us; the green conversation is happening in virtually every restaurant organization, regardless of size, location, cuisine, or business model. Fifty-eight percent of the total respondents identify green initiatives as a strategic initiative within certain departments of their organization, while only 6% of the overall respondent pool identify green as a non-starter.
Further, when viewed in aggregate, restaurateurs tell us their top motivation to take on green initiatives is the ability build an environmentally-friendly brand to the consumer (66%, Figure 1). We expected to see this emerge as a top motivator, as general retailers have increasingly been becoming motivated by brand alignment as the years progress. However, restaurant retailers do surprise us by pointing to ethical obligation (63%), and the potential to be viewed as industry leaders (also 63%) as top motivators, as well. We delve much more into their reasoning in the Opportunities section of the report.
Source: RSR Research, February 2010
It is worth noting that when viewing these motivations by restaurant performance those restaurants with the worst sales performance care more about cost reduction (68%) than do the best performers (41%). Lagging performers also cling to the notion that “hope is an actual strategy” at a disproportionate rate: only 27% of well-performing retailers look to green initiative to generate new revenue opportunities, vs. 48% of poor-performers. Lagging restaurateurs, seeing fewer guests in their dining rooms, hope in vain that greener practices will cut their costs and increase their top lines to supplant poor business strategies. Yet these same restaurateurs are far less likely to be taking the required steps to be fill those dining rooms or even become more environmentally-savvy.
We also asked about how long eco-conscious initiatives have been in play. While recycling raw materials earns top honors from the overall response pool (51% have been recycling for more than 1 year), restaurateurs also have significant traction in promoting eco-friendly items and ingredients in store (45% have been at it longer than 1 year, another 12% have starting do so in the past 12 months). The best performing restaurateurs are even more aggressive about the importance of telling the menu’s green story to diners: 54% of Winning Restaurants have been promoting eco-friendly items and ingredients for more than a year, compared to only 30% of lagging restaurants. In continuation of that theme, Winning Restaurants are also more apt to utilize operations that openly feature greener processes (such as ethically sourced products and delivery): 44% of Winners have been featuring these processes for more than a year, compared to only 18% of the worst performers.
Perhaps the most interesting data points are those projects which currently hold restaurant organizations’ budget. At 23%, energy regulation in stores and facilities is the clear leader, a statistic worth echoing: nearly 1 out of every 4 restaurant organizations plans to invest in energy regulation systems this year.
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