Breakfast daypart sales surge could accelerate

Denny’s, IHOP and the many other full-service restaurants that compete with McDonald’s for breakfast business may not have much to fear from the QSR giant’s recent rollout of an all-day breakfast menu. The chain wants to tap pent-up demand, but new data from market research firm NPD/CREST shows much of that demand is already being met by other operations. A breakfast boom is indeed underway; McDonald’s may actually be late in benefitting from it.

NPD’s report, headlined “Breakfast Only Restaurant Daypart with Sustained Visit Growth," examines the breakfast segment from several angles. Its CREST foodservice market research tool tracks customer visits to restaurants, while the SupplyTrack service analyzes case movement of goods through foodservice channels. From either perspective, the breakfast daypart looks good.

CREST numbers show that breakfast and morning meal visits grew by five percent in the year ending June 2015, after rising two percent in the year prior to that. In contrast, the dayparts in which McDonald’s hopes to sell additional breakfast items were stagnant. Industrywide, lunch visits were up just one percent in this period after falling two percent in the prior year. Dinner visits have been flat.

Figures from SupplyTrack, which gathers data on products broadline foodservice distributors deliver to restaurant operators, reflect this increase in breakfast visitation. Case shipments of bacon were up seven percent for the year ending June, 2015. Egg shipments rose five percent, as did those for pancakes.

NPD also keeps track of individual breakfast items customers order at foodservice outlets. In the year ending June, 2015, bacon servings were up two percent after climbing six percent in the prior year; breakfast sandwich orders increased by three percent after having been flat; and pancakes rose seven percent, a big increase from the prior year’s four percent decline. These numbers translate to 1.1 billion servings of bacon during the year, 3.6 billion breakfast sandwiches and 816 million servings of pancakes.

“Growth at the breakfast daypart has been good for the foodservice industry and also led to an increase in distributor sales within key breakfast operator segments,” says Annie Roberts, v.p. of NPD’s SupplyTrack. “As breakfast traffic continues to grow, competition in the breakfast space will require distributors, manufacturers and operators to become innovative in providing quality and value at breakfast.”

With all these numbers trending up, it’s no wonder McDonald’s decision to keep serving key breakfast items all day seems like a no-brainer. Why stop selling them at 10:30 a.m.? Breakfast accounts for 25 percent of McDonald’s U.S. sales but an estimated 35-40 percent of its profits.

The chain’s projections call for all-day breakfast to increase systemwide sales by 2.5 percent and guest counts to climb by 2.3 percent. We’ll have to wait and see whether McDonald’s all-day breakfast produces this much actual growth or if unintended cannibalization of lunch and dinner menu items happens instead:

Given the chain’s marketing expertise and enviable ad budget, you can never count it out.

But at least potential customers seem to be in favor of the idea. According to a 2014 National Restaurant Association survey, seven of 10 consumers say they wished restaurants would serve breakfast all day long. That’s a surprising number, given the wide range of restaurants in both full service (Waffle House, Cracker Barrel, Perkins et al) and quick-service (Dunkin’ Donuts, White Castle, etc.) that already do. All the attention being paid to McDonald’s all-day breakfast push could wind up creating additional business for these restaurants—and could encourage other operators to join the fray.

Contact Bob Krummert at [email protected]