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by EOS Intelligence EOS Intelligence No Comments

Infographic: Social Media-fueled Restaurants: How Instagram Has Impacted the Restaurant Industry

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Instagram has infiltrated the restaurant business, pushing it to be more photogenic, colorful, and trendy. With several Instagrammers and restaurants posting pictures of beautifully crafted meals every day, food has become an integral part of social networking. Restaurants have picked up on this trend and are focusing on becoming more ‘Insta-friendly’ or ‘Instagrammable’ by modifying their décor, lighting, and food presentation. From rainbow colored unicorn food and drinks to galaxy donuts, all are crafted keeping Instagram in mind. Physical spaces are being designed to bait Instagrammers, with expectation to inspire them to take maximum photographs and share them on social media.

With social media playing a crucial role in decision-making for diners, whether it is choice of food or restaurant, Instagram has become an indispensable tool for digital marketing for restaurants helping them to drive business and increase awareness.

Social media restaurants

Social media restaurants

  • Location of restaurants (refer to the infographic):
    • Bellota – A Spanish cuisine bistro in San Francisco, USA
    • Media Noche – A casual dining restaurant in San Francisco, USA
    • Peal’s Finest Tea – A tea café in Los Angeles, USA
    • Seamore’s – A casual seafood restaurant chain across New York, USA
    • Comodo – A casual dining restaurant in New York, USA
    • Pez Playa – A beach-front bar and casual dining restaurant in Mallorca, Spain
    • Dirty Bones – A casual dining restaurant chain across London, UK
    • Sonic – A drive-in fast-food restaurant chain across the USA
    • Zizzi – Italian casual dining restaurant chain in the UK and Ireland
    • Chili’s – American casual dining international restaurant chain
    • Starbucks – American/international coffeehouse chain
by EOS Intelligence EOS Intelligence No Comments

Artificial Intelligence Finds its Way into Your Favorite Fast Food Chain

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The idea of robots replacing humans has always seemed like talks of the future, however, it is not as distant as it seems, especially when it comes to the fast food industry. The fast food market, which is characterized by cut-throat competition and high share of low-skilled jobs, has recently been swept by a technology wave. Leading players, such as Domino’s, Starbucks, or KFC, are investing heavily in artificial intelligence (AI) to increase efficiencies and differentiate themselves in this overly crowded industry – some are integrating it with their back-end operations while others with the consumer interface. However, with investments in technology increasingly becoming an industry trend, the question remains if AI will provide the competitive edge to these players or are consumers yet not quite ready to lose the human touch.

Artificial intelligence has been the buzz word for some time and the fast food industry is also catching on the wave. With some market leaders claiming to be as much a technology company (owing to huge technology budgets) as a food business, these players are incorporating AI in several verticals to improve operational efficiencies and elevate consumer experience.

The wave of AI adoption is particularly prominent in the US market, where labor costs are increasing significantly, hence AI is being seen as a tool to reduce costs in the long run. Just recently, in the beginning of 2017, minimum wages have been increased in 19 states and will reach US$13.50/hour in Washington state and even US$15/hour in California by 2022 (the minimum wages in 2017 stood at US$11 and US$10.50 for Washington state and California, respectively).

Apart from the need to control costs, the interest in AI is driven by the fact that it provides food business with great advantage – the use of AI helps companies gather valuable data about customer choices, flavor trends, etc., and use this information effectively.

Leading players, such as Domino’s, Starbucks, KFC, and CaliBurger, have already started using AI is different verticals of their businesses to not only reduce costs but also to remain one step ahead of the changing consumer expectations.

Domino’s

Domino’s can be easily slated as one of the most aggressive fast food players when it comes to adoption of technology. The company has embraced AI in several aspects of its operations aiming to smoothen both the ordering and the delivery sides of the business.

In early 2017, Domino’s launched an AI-based technology called the DRU (Domino’s Robotics Unit) Assist, which enables consumers to order a pizza on the app using their voice. The in-app AI assist, which was built in partnership with natural language company, Nuance, converses with customers in a human-like manner and discusses orders, menus, ingredients, store locations, and operating hours.

Along similar lines, the company has also launched its Facebook messenger bot, wherein customers can converse with the bot on the messenger app to learn about menu options, discount offers, and also order food. In addition, Domino’s is in the process of launching its ‘Domino’s Anywhere’ feature, through which customers can drop an exact location pin using GPS (as in case of Uber) when ordering pizza thereby facilitating delivery at various locations, such as parks, and other public places without providing an exact address.

Simultaneously, the company is also using AI to automate the delivery process. In November 2016, in New Zealand, Domino’s partnered with Flirtey, a drone company, to undertake the first commercial delivery of food by a flying drone. While this technology is largely futuristic for mass adaptation, the company is focusing on land-based autonomous delivery vehicles to deliver pizza to customers’ doorsteps. This technology went to trial in June 2016 in Australia and in 2017 in Germany, while the company plans to roll it out in the Netherlands for customers within the one-mile radius by the end of 2017. The technology, which is provided by Starship Technologies (a European start-up), has GPS tracking, computer vision and object detection capabilities, and can travel within a three mile radius, carrying up to 10kg weight for a cost as low as US$1.32 (£1).

McDonald’s

McDonald’s is one of the recent players to blend fast food with technology. The company stated that its investments in technology are to be one of its key strategies in 2017, calling it the ‘Experience of the Future’ strategy. As per its plans, McDonald’s aims to replace cashiers with self-ordering kiosks in 2,500 of its restaurants by the end of 2017 and in another 3,000 restaurants by the end of 2018. The cost of each kiosk is estimated at about US$50,000-60,000.

In addition to this, the company plans to roll out mobile ordering across 14,000 US locations by the end of 2017. Mobile ordering will not only ease the ordering process but also help the company gain access to valuable customer data, which in turn can be used to recommend additional dishes and personalized deals. McDonald’s has already launched mobile ordering in Japan and received a positive response with customers using the app ordering about 35% more than usual.

Since 2015, the company has also been rolling out digital menu displays across its stores in the USA as well as globally. They use AI to highlight weather-appropriate options. This feature has resulted in increased sales by 3-3.5% in Canada.

Starbucks

Starbucks has also developed an artificial intelligence program to improve customer ordering experience. The program, which is known as the Digital Flywheel program, links itself with the accounts of Starbuck Reward members and makes order suggestions based on order history, weather conditions, time of day, weekend/workday, and other such factors. In addition, it brings additional convenience to the ordering process for the Reward program members, who can order directly from push notifications or text message and collect their ready order from a nearby Starbucks.

Moreover, embracing the voice computing trend, the company has launched an AI-based ordering system on its app that allows customers to order and pay for their orders using voice. The company has also launched a ‘Starbucks Reorder Skill’ for users of the Amazon Alexa app, wherein users who have linked their Starbucks account to their Amazon Alexa account can re-order their usual drink (at one of the last 10 visited Starbucks stores) by simply saying “Alexa, order my Starbucks”. However, this service is currently limited to the order of the users’ usual designated drink instead of ordering anything off the menu.

Starbucks has made significant investments in technology on a continuous basis, having invested close to US$275-300 million in its partners and digital initiatives globally in 2016, an increase from an investment of US$145 million in 2015.

KFC

While most quick service restaurants players are using technology to elevate their app-based ordering experience, KFC in China is taking a different route to join the AI bandwagon. In April 2016, KFC (in collaboration with Baidu, China’s leading search engine) launched a robot-run restaurant in Shanghai called Original+. The restaurant is run by a robot named Dumi, which takes customer orders and is smart enough to handle order changes and substitutes. While the robot can understand the three main dialects of Mandarin spoken in China, it cannot distinguish other dialects and accents. The payment at the outlet is made through smartphones via mobile payment systems.

The collaboration opened another AI-enhanced café in Beijing in December 2016, wherein customers take pictures of themselves with a machine, which then recognizes the users face, sex, age, and mood, along with analyzing the time of the day to recommend suitable meal options and completes the ordering process. Moreover, upon revisit, the machine recognizes the user and shows order history as well as dining preferences to quicken the order process. However, unlike the Shanghai restaurant, this restaurant also offers the traditional ordering process. While these may seem futuristic, the company has expressed its plans to open more smart restaurants in the country.

CaliBurger

Apart from market leaders, smaller players, such as CaliBurger, are also investing heavily in technology in both the front and back end of their operations. The California-based burger chain has brought AI into their kitchens through the use of AI-enabled robot, called Flippy, which is capable of cooking/flipping burgers and placing them on the bun. The robot, which was launched in March 2017 in the chain’s Pasadena, California outlet is created by Miso Robotics, a pioneer in the robotics for restaurant business. The concept is currently in test run and if successful, it is expected to be rolled out in early 2018 with expansion plans to more than 50 outlets worldwide by 2019.

EOS Perspective

It remains no secret that most leading and few niche smaller players are turning to AI to elevate their service levels in this competitive industry. Companies which have traditionally not taken the digital route up till now are also joining the technology bandwagon. Pizza Hut, which has always been one step behind Domino’s with regards to technology deployment, has invested US$12 million in technology in Q2 2017 towards improving its digital and delivery services. The chain plans to invest US$180 million in a technology overhaul by the end of 2018.

It can be expected that at this stage of technology development most of the automation will be successfully implemented in the customer-facing side of the business, and will comprise technologies such as bots and voice recognition that can be integrated into apps and other ordering mediums. This not only helps consumers by easing the ordering process but also helps companies gather valuable data about customer preferences and ordering trends, which in turn can be used for providing complementing recommendations and thereby increasing sales. While AI-enhanced ordering and payment may be the path of the future, it will be far-fetched to say that it will eliminate the need for humans in this side of the industry altogether. With increased sales due to AI-based ordering, the need for humans will remain, however, their role may evolve from ordering to management.

The adoption of AI or automation at the food preparation and delivery end, on the other hand, still seems a little futuristic. While several players, such as Domino’s and CaliBurger, have started investing and launching this technology, the wide application of it seems distant. This is especially true in the food preparation tasks, due to an increasing trend towards customization of orders and the growing use of complex ingredients to cater to niche audiences that require dairy-free, vegan, gluten-free, or other such options. Till the time robots that can handle such complexities are developed, these jobs will largely be conducted by humans with maybe automating the easier aspects of the process (such as flipping the burgers). Moreover, with the fast changing consumers’ needs it will be hard for robotics companies to preempt the trends and develop robots that can match the required skill sets both now and in the future.

That being said, the use of AI by the restaurant industry is definitely on the rise and while we may not know the extent to which it will take over the current operations, we can definitely be sure that this is increasingly becoming the point of focus as well as innovation in this highly competitive space.

by EOS Intelligence EOS Intelligence No Comments

Starbucks – Expanding in Asia

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With more than 25,000 outlets operating in 75 countries, Starbucks is rightly said to be the premier retailer of specialty coffee globally. With the mission to “establish Starbucks as the premier purveyor of the finest coffee in the world”, the brand continues to rapidly expand its retail operations by opening stores in new markets, particularly with focus on Asian countries. Starbucks has already captured a solid customer base in China and Japan, and it is aiming to expand in other parts of the region, especially in India. While partnerships with local players have been beneficial to the company’s expansion strategy, Starbucks uses an interesting mix of product localization ideas to suit consumer preferences and local tastes to make a mark in the land dominated by tea drinkers.

With plans to open 12,000 new outlets globally over a span of five years, out of which nearly half are to be opened in the USA and China, Starbucks is planning to take its chain to a total of about 37,000 outlets globally. Asia is increasingly important to Starbucks’ growth strategy. As of 2016, the company operated 6,443 stores in 15 countries in the China/Asia Pacific (CAP) region that includes Australia, Brunei, Cambodia, China, India, Indonesia, Japan, Malaysia, New Zealand, Philippines, Singapore, South Korea, Taiwan, Thailand, and Vietnam. Potential for growth in this region is great, not only measured in the number of stores, but also in per store revenue – the CAP region currently accounts for 25.7% of Starbucks stores count, but generates around 14% of the company’s revenue.

 

Starbucks – Expanding in Asia by EOS Intelligence

Starbucks follows a two-pronged approach to grow its business in the Asian markets (and other emerging regions). The first tactic of approaching these markets is to partner with regional players to have an easy access. For instance, the coffee maker entered the Japanese market in 1995 with a 50-50 joint venture with Sazaby League, a major Japanese retailer and restaurateur, and in 2014, Starbucks took over the full ownership of its Japanese operations. Similarly, the first Starbucks coffee store that opened in India in October 2012 was in alliance with Tata Global Beverages, Indian non-alcoholic beverages company and a subsidiary of Tata Group. These partnerships allowed to company to get a strong entrance to the local markets, navigate through diverse market environments, and to fulfill regulatory requirements imposed on foreign investors by local governments (which otherwise would leave Starbucks unable to tap these high-potential markets).

The second tactic that Starbucks has successfully implemented in most Asian markets was to tweak its menu to suit the tastes of the local population. Considering that since its inception, Starbucks has been synonym for coffee, adjusting the menus to suit tea-drinking consumer tastes without diluting the brand has surely been challenging. Although the Asian tastes evolve and more consumers start to drink coffee, basing the menu on coffee beverages alone would be a risky move. One of the moves Starbucks did to accommodate the local preferences was the 2016 launch of ‘Teavana’ line of tea beverages for Asian countries that includes matcha and espresso fusion, black tea with ruby grapefruit and honey, and iced shaken green tea with aloe and prickly pear, flavors not typically found in the company’s western stores.

Starbucks’ strategy in the region seems to be paying off. As of December 2016, in China, Starbucks store was said to be opened every 15 hours, making it the company’s fastest growing market, the highest revenue generator in the region, as well as the second largest market globally in terms of stores count. Overcoming challenges of reaching out to consumers with heterogeneous tastes in this vast country, partnering with local players, and creating a menu that suits the taste buds of local consumers have been a game changer for the coffee brewer in mainland China.

Japan is another key market for Starbucks in Asia. The company was able to successfully tackle the Japanese market, as it chose to focus on providing excellent customer experience to better resonate with Japanese culture that emphasizes traditional etiquettes and personal respect. Starbucks outlets in Japan do not ask for the customer name while placing order as privacy is highly valued in Japanese culture. To fit in the local culture, Starbucks in Japan has come up with the ‘concept stores’ that offer products based on local needs. Starbucks has the one of a kind ‘black apron-only’ store boosting of certified coffee experts in Japan.

India, a relatively new addition to the company’s Asian portfolio of markets, might turn to be a problem child for Starbucks. Since entering the Indian market, the company has been trying to take full advantage of the opportunities lying in the increasing income of the middle class population in India. Having opened more than 80 outlets in less than four years since inception, Starbucks in India (known as Tata Starbucks Private Limited) seems to be on an extension route in the Indian subcontinent. But with retail figures saying the opposite, with only 10 new stores in 2016 up against average of 25 stores in last three years and a few closed over infrastructure mishandling, the picture does not look very positive. India’s devotion to tea is a hard nut to crack for Starbucks, and while the company followed its standard move to include tea beverages in local stores, they do not always suit local tastes, as they differ greatly from chai that majority of Indians are used to and love. The scenario in south India might seem more favorable, as the locals have been accustomed to drinking coffee since long before Starbucks came to the country. But the local preference if for traditional filtered coffee, very different from anything on Starbucks’ menu, and bulk of it is consumed at home. With not much being said about the opening of new stores in the near future in any regions of the country, Starbucks in India needs to realign its strategic move to be able to see persistent growth.

EOS Perspective

While many enterprises fail to understand the impact of consumer behavior and preferences over the success or failure of a business, Starbucks offers a finely tailored customer experience to its consumers. For the most part, the company has managed to combine its exciting American flair with the underlying values of the Asian cultures to create a localized, unique experience.

With continuous and consistent expansion of its store base by adding stores to higher growth markets, Starbucks aims at standing as one of the most recognized coffee brands in China and Japan, and increasingly in other CAP countries. In those regional markets, where Starbucks has achieved the greatest success, China and Japan, the company’s efforts to offer consumers new coffee (and non-coffee) flavors in a variety of forms, across new categories have led to Starbucks’ continuous strong performance, and over time translated to acceptability of the American coffee-brewer in the lands of tea drinkers.

However, the coffee brand’s take off in India has been bumpy. The company has less than 100 stores in India, incomparably fewer than its competitor, Café Coffee Day, which has more than 1,500 outlets across the country. In terms of geographic spread in India, Starbucks has till now only concentrated on opening its stores in the largest metro cities, where to some extend it could justify its products’ high pricing (for local market standards). But in order to be successful, the chain needs to reach consumers in tier 2 and tier 3 cities, and appeal to them with more affordable products by marginally compromising on product prices (yet still remaining elitist, as it stands no chance to appeal to the clientele of traditional tea-corner stands which offer a cup of hot tea or coffee for virtually a fraction of Starbucks products price). If the company ensures expansion beyond tier 1 cities, continues to launch new stores offering localized products, it should be able to reap benefits of the rising income of the fast-expanding middle class largely interested in the foreign-feel-like experience and social statement that visiting Starbucks offers them along with their tall Frappuccino.

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