Measuring ICT utilization and implementation barriers among ...

REPORT #1 MAY 4, 2016

FOOD SERVICE DIGITAL DIVIDE Measuring ICT utilization and implementation barriers among independent restaurants

PRESENTED BY: A. DURAND & C. GUIGOU ECOLE HÔTELIÈRE DE LAUSANNE Route de Cojonnex 18, 1000 Lausanne 25, Switzerland

METRO CHAIR OF INNOVATION

REPORT #1 – 04.05.2016

HIGHLIGHTS Research Question How independent restaurant can meet the challenge of digital business transformation? Objective Provide independent restaurants and METRO Group with strategic recommendations on how to overcome barriers and embrace opportunities. This report #1 is presenting the secondary research that has been conducted in order to fulfill the research’s objective and carry on with the primary research consisting of a quantitative questionnaire. These highlights will give you a brief version of the following report divided in 2 sections: 1. The profiles of the four European countries we analysed in terms of: a. Macro-environment b. F&B outlets structure c. Digital infrastructures 2. The model of research specific to the HoReCa industry in order to: a. Perform an audit IT of the independent restaurant and, b. Identify and measure digital barriers specific to this industry. This model of research is based on already validated models by previous studies. Through the review of the models studied (see part 10 and 11 in the full report), we were able to identify several dimensions and criteria in order to categorise the restaurants in terms of their technological use. Also, we were able to identify typical barriers to digitalization faced by restaurants. At the end of our primary research led by our research model, we will then be able to understand if there are differences in between the countries and also to base our recommendations on the real situation.

1. GERMANY SWOT ANALYSIS

KEY POINTS •

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Germany has an export-driven economy, which places an even emphasis on services and production. The country offers a stable environment for investors, as well as access to the EU's domestic market. It is also world-renowned for its manufacturing in automotive, mechanical and electrical engineering, as well as chemicals. Real GDP should grow by 1.8% in 2016, up from 1.5% in 2015. Support comes from a rise in wages and employment, additional public spending related to the unusually large numbers of asylum seekers and a modest pickup in exports. Unemployment was 4.6% in 2015 and it will drop to 4.5% in 2016 - a new post reunification low. The government approved a minimum wage of €8.50 per hour in 2015. The move should reduce the degree of wage inequality. Robust growth in employment and earnings coupled with stable prices have given a boost to household spending. Further, the continued inflow of refugees is expected to lead to a noticeable increase in public spending and give strong impulse to construction. Reforms to bolster competition in product markets are underway. Germany’s high score on the long-term orientation variable of Hofstede model shows that it is very much of a pragmatic country. Germans show an ability to adapt traditions easily to changed conditions which could potentially help them to embrace the actual wave of digital transformation. F&B internet retailing saw the fastest growth of all categories in 2015. “Retail foodservice” location continues to have the best growth prospects benefiting from outlet expansion and from stronger consumer confidence in spending.

For full details, cf. Report #1 p. 3 to 27.

2. FRANCE SWOT ANALYSIS

KEY POINTS • The economy is expected to strengthen in the second half of 2015. Real GDP should rise by 1.2% for the year after gains of just 0.2% in 2014. Real GDP is expected to grow by 1.3-1.5% per year during the remainder of this decade. • France’s service sector is large even by the EU’s standards, accounting for 78.5% of GDP. The country’s various financial industries are under strain. Banks are raising their capital levels in order to meet the Basel III requirements. French banks, however, are still heavily exposed to the crisis-ridden countries of Southern Europe. The real value of tourist receipts stagnated in 2014 and an increase of 2.3% is expected in 2015. • France is the premier tourist destination in the EU after Spain and the world’s most visited country. • VAT control reinforced by the French Government. • Consumer spending plays a more important role in France than in other large Eurozone countries. However, high levels of unemployment and inactivity have been a burden on consumer demand. • In the long term, the country’s potential rate of growth could be dragged down by the effects of population ageing. Nonetheless, France remains the world’s tenth most favored destination for FDI and is expected to retain its position in the global rankings in the medium term. • Unemployment was 10.3% in 2014 and it will rise to 10.5% in 2015. Youth unemployment exceeds 25%. Also, more than 80% of recent hires are short-term. A positive step has been to cut taxes on workers with low salaries. Paris plans to introduce laws to simplify the country’s labour rules and encourage companylevel talks between employers and unions on pay, working hours and conditions. • High cost of labour. • Increase in consumer expenditure for catering. • Scoring very high on the Uncertainty Avoidance variable of Hofstede model, suggesting that the French are not very inclined to change.


3. ITALY SWOT ANALYSIS

KEY POINTS • •

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Slow growth of the GDP in 2016. Leading to a stagnating economy. The country is divided into a highly industrialized and developed Northern region, and a less-developed remainder of the country, this situation is a barrier to growth. Unemployment continued to fall at a slow pace in 2015, with a lot of long term unemployed people. The economy should strengthen modestly in the medium term, but real GDP will still grow by only about 1.2% per annum. Youth are not sufficiently educated and a large number are unemployed. Low education investment and brain escape will not be favorable to the economy Ageing of the population will be an issue for the future but could also be a chance for young educated entrepreneurs to become owners of new restaurant concepts. Whilst the economy is stagnating, the disposal income for households decreases as well as the customer expenditure. However, forecasts show an improvement of the situation for the upcoming years. The sector of hospitality will experience one of the highest growths in expenditure. Tourism remains a very good asset for the hospitality industry in the country. With an increased number of companies ceasing operations and a level of trust among customers falling, customers are less likely to spend money on goods and services deemed non-essential.


4. SPAIN SWOT ANALYSIS

KEY POINTS •

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Spain is in its second year of post-crisis economic expansion. Real GDP should increase by 2.8% in 2016 after growth of 3.1% in 2015. An upturn in private investment, improvements in the labor market and a rebound in exports drive the recovery. Private final consumption (in real terms) rose by 3.4% in 2015 with growth of 2.5% expected in 2016. Consumer spending will benefit as private sector deleveraging eases and credit constraints for both firms and households is relaxed. However, gross household disposable income (in real terms) is still more than 8% below its peak in 2009. The unemployment rate was 22.2% in 2015 and it will dip to 20.1% in 2016. This will still be one of the highest rates in the EU. The economy created one million new jobs between the beginning of 2014 and mid-2015 and officials promise another three million new jobs between 2015 and 2020. However, a majority of these jobs are likely to be temporary or part-time. Spain experienced a record number of tourists in 2015. A drop of almost 10% in the number of outlets significantly impacts the restaurant industry, restraining their investment capabilities and capacity to hire staff. They are now slowly recovering. The numerous bankruptcies might lead to new opportunities for chained operators and entrepreneurs to create new outlets. The conjuncture is now favorable for the restaurant industry, which should register positive performance on a regular basis according to the forecast. Which will overcome many barriers to free their investment capacities. The chain operators are threatening independent restaurants in terms of market share. Independents register poor performance due to their low levels of communication power, price competition and chained expansion.


AUDIT IT

The objectives of the Audit IT is to understand the level of digitalization present in independent restaurants, in relation to the key business processes. Meaning to answer questions such as, “who has what technology?” and “how are they using that technology?” Including technology assets, digital usage and attitude toward ICT in Front of the House and Back of the House business processes. We will also measure their web usage among the different media available. This Audit IT will allow us to classify restaurant owners in different categories depending on their level of technological adoption (e.g. innovators, early adopters, majority and laggards).


BARRIERS The objective is to identify and classify the opportunities and barriers of ICT adoption along the value chain for independent restaurants. This will enable us to identify specific recommendations for the HoReCa industry helping them to embrace digital change. Several studies have already researched barriers to implementation of IT in SMEs. We have selected 6 research models that have previously studied the barriers and opportunities of implementing ICT in SMEs. We combined the six models to develop our own, which is specific to the restaurant industry.



REPORT #1 – 04.05.2016

TABLE OF CONTENTS 1

INTRODUCTION ............................................................................................................................................................... 1 1.1

2

3

METRO Chair of Innovation..................................................................................................................................... 1

1.1.1

Context ............................................................................................................................................................ 1

1.1.2

Dual mission .................................................................................................................................................... 1

MAIN RESEARCH.............................................................................................................................................................. 2 2.1

Research question ................................................................................................................................................... 2

2.2

Objectives of the research ...................................................................................................................................... 2

2.3

Research framework ............................................................................................................................................... 2

COUNTRY PROFILE - GERMANY............................................................................................................................................... 3 3.1

Germany – Macro environment .............................................................................................................................. 3

3.1.1

Economic macro environment ........................................................................................................................ 4

3.1.2

Income & expenditure .................................................................................................................................... 6

3.1.3

Tax and regulations ......................................................................................................................................... 7

3.2

Germany – HoReCa industry ................................................................................................................................... 9

3.2.1

Consumer foodservice, 2009-2014 & forecast................................................................................................ 9

3.2.2

Chain vs. Independent outlets ...................................................................................................................... 11

3.2.3

Franchises...................................................................................................................................................... 12

3.2.4

Consumer foodservice by type ..................................................................................................................... 13

3.2.5

Evolution market size by type of foodservice ............................................................................................... 15

3.2.6

Consumer foodservice by type, food vs. Drinks, % value, 2014.................................................................... 17

3.2.7

Structure of the market by location .............................................................................................................. 17

3.2.8

McDonald’s, METRO and restaurant – Geographical distribution ................................................................ 18

3.3

Germany – Technological landscape ..................................................................................................................... 20

3.3.1

Digital consumer – landscape ....................................................................................................................... 20

3.3.2

Top 3 digital trends ........................................................................................................................................ 20

3.3.3

Physical infrastructure ................................................................................................................................... 20

3.3.4

Mobile connectivity....................................................................................................................................... 20

3.3.5

Public connectivity ........................................................................................................................................ 20

3.3.6

Online business participation – one of Western Europe’s e-commerce leaders .......................................... 21

3.3.7

Penetration of smartphones & internet........................................................................................................ 21

3.3.8

Internet retailing in Germany ........................................................................................................................ 22

3.3.9

Network Readiness Index (NRI) – World Economic Forum ........................................................................... 24

3.4

End-consumers...................................................................................................................................................... 26


4

3.4.1

Germany’s culture & values through Hofstede variables ............................................................................. 26

3.4.2

German foodservice consumers ................................................................................................................... 27

COUNTRY PROFILE - FRANCE ................................................................................................................................................ 28 4.1

France – Macro environment ................................................................................................................................ 28

4.1.1

Economic macro environment ...................................................................................................................... 29

4.1.2

Income and expenditure ............................................................................................................................... 30

4.1.3

Tax and regulations ....................................................................................................................................... 32

4.1.4

Impact of tightened tax and regulatory environment on the foodservice industry ..................................... 33

4.2

France – HoReCa industry ..................................................................................................................................... 35

4.2.1

Consumer foodservice, 2009-2014 & forecast.............................................................................................. 35

4.2.2


4.2.3

Franchising .................................................................................................................................................... 37

4.2.4


4.2.5

Evolution market size by type of foodservice – 2009-2014 .......................................................................... 40

4.2.6

Consumer foodservice by type, Food vs. Drinks ........................................................................................... 42

4.2.7


4.2.8

McDonald’s, METRO and restaurant – Geographical distribution ................................................................ 43

4.3

France – Technological landscape ......................................................................................................................... 45

4.3.1

Digital consumer ........................................................................................................................................... 45

4.3.2


4.3.3

Public connectivity ........................................................................................................................................ 45

4.3.4

Online ordering ............................................................................................................................................. 45

4.3.5

Penetration of smartphones & internet........................................................................................................ 46

4.3.6

New payment methods ................................................................................................................................. 46

4.3.7


4.4

End-consumers...................................................................................................................................................... 50

4.4.1 5

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France’s culture & values through Hofstede variables .................................................................................. 50

COUNTRY PROFILE – ITALY ................................................................................................................................................... 52 5.1

Italy – Macro environment .................................................................................................................................... 52

5.1.1


5.1.2

Income and expenditure ............................................................................................................................... 55

5.1.3

Tax and regulations ....................................................................................................................................... 56

5.2

Italy – HoReCa industry ......................................................................................................................................... 57

5.2.1


METRO CHAIR OF INNOVATION 5.2.2

Consumer foodservice by type, Chained vs. Independent, no. of outlets & foodservice value, 2009-2014 59

5.2.3


5.2.4

McDonald’s, METRO and Restaurant – Geographical distribution................................................................ 62

5.3

6

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Italy – Technological landscape ............................................................................................................................. 64

5.3.1

Digital consumer landscape .......................................................................................................................... 64

5.3.2

Market overview ........................................................................................................................................... 64

5.3.3


5.3.4

Physical infrastructure ................................................................................................................................... 64

5.3.5

Mobile connectivity....................................................................................................................................... 64

5.3.6

Home connectivity ........................................................................................................................................ 65

5.3.7

Online business participation........................................................................................................................ 65

5.3.8


COUNTRY PROFILE - SPAIN ................................................................................................................................................... 70 6.1

Spain – Macro environment .................................................................................................................................. 70

6.1.1


6.1.2

Income & expenditure .................................................................................................................................. 73

6.1.3

Business environment ................................................................................................................................... 74

6.2

Consumer foodservice .......................................................................................................................................... 77

6.2.1

Chain vs. Independent .................................................................................................................................. 79

6.2.2


6.2.3

Consumer foodservice by location................................................................................................................ 82

6.2.4

McDonald’s, METRO, Restaurant – Geographical distribution...................................................................... 84

6.3

Spain – Technological landscape ........................................................................................................................... 86

6.3.1

Infrastructure ................................................................................................................................................ 86

6.3.2

Internet ......................................................................................................................................................... 86

6.3.3

Mobile ........................................................................................................................................................... 87

6.3.4

Tablet ............................................................................................................................................................. 87

6.3.5

Internet-retailing ........................................................................................................................................... 87

6.3.6

Network Readiness Index (NRI) ..................................................................................................................... 90

6.3.7

Micro-environment: Technology in the foodservice industry ....................................................................... 90

7

COUNTRY PROFILE - JAPAN .................................................................................................................................................. 93

8

TECHNOLOGICAL CONTEXT AND TRENDS ................................................................................................................................ 94 8.1

Definition and context........................................................................................................................................... 94

8.1.1

Social, Mobile, Analytics, Cloud (SMAC) ....................................................................................................... 96


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8.1.2

Application service provider ......................................................................................................................... 97

8.1.3

Application service provider in the HoReCa industry ................................................................................. 100

8.2

Innovation diffusion & adoption process ............................................................................................................ 103

8.2.1

Diffusion of innovation ................................................................................................................................ 103

8.2.2

Adoption process ........................................................................................................................................ 104

8.2.3

The innovativeness-needs paradox ............................................................................................................. 105

8.3

Adoption process in HoReCa industry ................................................................................................................. 107

8.4

Benefits of digitalization...................................................................................................................................... 114

8.4.1

Benefits of ICT in the restaurant industry ................................................................................................... 116

METHODOLOGY............................................................................................................................................................... 118

9

9.1

Phase 1 ................................................................................................................................................................ 119

9.2

Phase 2 ................................................................................................................................................................ 119

9.3

Phase 3 ................................................................................................................................................................ 119

9.4

Phase 4 ................................................................................................................................................................ 119

9.4.1 9.5

Sample......................................................................................................................................................... 119

Phase 5 ................................................................................................................................................................ 120 AUDIT IT .................................................................................................................................................................... 121

10 10.1

Mapping the HoReCa digital landscape .............................................................................................................. 121

10.1.1

Back of House (BOH) ................................................................................................................................... 121

10.1.2

Front of House (FOH) .................................................................................................................................. 122

10.1.3

Digital strategy on the web ......................................................................................................................... 125

10.2

Model chosen for the Audit IT ............................................................................................................................ 128

10.2.1

Part 1: demographic characteristics ............................................................................................................ 129

10.2.2

Part 2: Current usage of ICT by business process........................................................................................ 130

10.2.3

Attitude towards ICT by business processes ............................................................................................... 134

10.2.4

Business processes ...................................................................................................................................... 130

10.2.5

Web usage ................................................................................................................................................... 135

10.3

Point of Sales (POS) ............................................................................................................................................. 138 BARRIERS & OPPORTUNITIES.......................................................................................................................................... 139

11 11.1

Models from the literature ................................................................................................................................. 139

11.1.1

Model 1 ....................................................................................................................................................... 139

11.1.2

Model 2 ....................................................................................................................................................... 143

11.1.3

Model 3 ....................................................................................................................................................... 145

11.1.4

Model 4 ....................................................................................................................................................... 149


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11.1.5

Model 5 ....................................................................................................................................................... 151

11.1.6

Model 6 ....................................................................................................................................................... 153

11.2

Model chosen to identify barriers and opportunities ......................................................................................... 154

11.2.1

Source.......................................................................................................................................................... 154

11.2.2

Objective ..................................................................................................................................................... 154

11.2.3

Model & dimensions ................................................................................................................................... 154

12

STUDENT BUSINESS PROJECT – METRO CHAIR ................................................................................................................ 156

13

BIBLIOGRAPHY ................................................................................................................................................................. I

14

ANNEXES ....................................................................................................................................................................... III 14.1.1

Definition – Types of foodservice ................................................................................................................... III

14.1.2

Definition – Location of foodservice .............................................................................................................. VI

14.1.3

Network readiness index (NRI)...................................................................................................................... VII

14.1.4

Hofstede’s cultural dimension theory ........................................................................................................... VII

TABLES Table 1 German domestic indicators, 2015 ............................................................................................................................. 5 Table 2 Disposable income per capita & per household, 2010-2015...................................................................................... 6 Table 3 Consumer expenditure, total and on catering, 2010-2015 ........................................................................................ 6 Table 4 Consumer expenditure per household, total and on catering, 2010-2015 ................................................................ 6 Table 5 Tax rate in Germany .................................................................................................................................................... 7 Table 6 Macro-Economic SWOT - Germany ............................................................................................................................ 8 Table 7 Units, Transactions and Value Sales in Consumer Foodservice, 2009-2014 ............................................................... 9 Table 8 Units, Transactions and Value Sales in Consumer Foodservice: % Growth, 2009-2014 ............................................. 9 Table 9 Forecast Units, Transactions and Value Sales in Consumer Foodservice 2014-2019 ............................................... 10 Table 10 Chained vs Independent | Historic | Foodservice Value RSP | % breakdown........................................................ 11 Table 11 Chained vs Independent | Historic | Units/outlets | % breakdown....................................................................... 11 Table 12 Company Shares (Global - Historical Owner) | Historic | Foodservice Value RSP | % breakdown ........................ 12 Table 13 Chain vs Independent by type, No. of Outlets, 2014.............................................................................................. 13 Table 14 Market Sizes by location of Foodservice, % Foodservice Value, 2009-2014 .......................................................... 18 Table 15 Market Sizes by location of Foodservice, No. of outlets, 2009-2014 ..................................................................... 18 Table 16 Possession of smartphones, Households internet access, Penetration rates of consumer electronics by type, Retail value of internet retailing by type, 2010 – 2015 ................................................................................................................... 21 Table 17 Internet Retailing by category: % value growth, 2010-2015 .................................................................................. 23 Table 18 SWOT Analysis – Digital Landscape in Germany ..................................................................................................... 23 Table 19 French domestic indicators, 2015 ........................................................................................................................... 29 Table 20 Disposable income per capita & per household, 2010-2015 ................................................................................. 30 Table 21 Consumer expenditure, total and on catering, 2010-2015 .................................................................................... 31 Table 22 Consumer expenditure per household, total and catering, 2010-2015 ................................................................. 31 Table 23 Tax rate in France, 2016 .......................................................................................................................................... 32 Table 24 Macro-Economic SWOT - France ............................................................................................................................ 34 Table 25 Units, Transactions and Value Sales in Consumer Foodservice 2009-2014 ............................................................ 35 Table 26 Units, Transactions and Value Sales in Consumer Foodservice: % Growth 2009-2014 .......................................... 35 Table 27 Forecast Units, Transactions and Value Sales in Consumer Foodservice, 2014-2019 ............................................ 36 Table 28 Chained vs Independent, Foodservice Value RSP, % breakdown, Year-on-Year Exchange Rates............................ 36 Table 29 Chained vs Independent | Historic | Units/outlets | % breakdown....................................................................... 37 Table 30 Company Shares in Chained Consumer Foodservice: % Foodservice Value 2010-2014 ........................................ 37 Table 31 Consumer Food Service by Type, Chain Vs. Independent, No Of Outlets, 2009 – 2014......................................... 38 Table 32 Market Sizes by location of Foodservice, % Foodservice Value, 2009-2014 .......................................................... 43 Table 33 Market Sizes by location of Foodservice, No. of Outlets, 2009-2014 ..................................................................... 43 Table 34 Penetration rates of Smartphones, Internet, Consumer electronics and Internet retailing, 2010-2015 ............... 46 Table 35: Italy domestic indicators, 2015 .............................................................................................................................. 54


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Table 36: Age Pyramid 2014-2030 ........................................................................................................................................ 54 Table 37: Disposable income evolution 2010-2015 .............................................................................................................. 55 Table 38: Consumer Expenditure evolution 2010-2015........................................................................................................ 55 Table 39: Units, Transactions and Value Sales in Consumer Foodservice 2009-2014........................................................... 57 Table 40: Units, Transactions and Value Sales in Consumer Foodservice: % Growth 2009-2014......................................... 57 Table 41: Forecast units, transactions and value sales in consumer foodservice, 2010-2014 .............................................. 58 Table 42 Chain Vs. Independent Outlets, Foodservice Value Rsp, % Breakdown ................................................................. 58 Table 43 Chained vs Independent| Historic | Units/outlets | % breakdown ....................................................................... 58 Table 44 Company Shares (Global - Historical Owner) | Historic | Foodservice Value RSP | % breakdown ........................ 59 Table 45 Consumer Food Service, Chained vs. Independent, No of Outlets, 2014............................................................... 59 Table 46 Market Sizes, % Foodservice Value, 2009-2014...................................................................................................... 61 Table 47 Market Sizes, Units/outlets, 2009-2014 ................................................................................................................. 61 Table 48: Internet Penetration .............................................................................................................................................. 65 Table 49: Internet penetration .............................................................................................................................................. 88 Table 50 Demographic characteristics ................................................................................................................................ 129 Table 51 Software in use at the restaurant ......................................................................................................................... 131 Table 52 Hardware Implemented........................................................................................................................................ 132 Table 53 Data & network implemented .............................................................................................................................. 133 Table 54 Attitude towards ICT by business processes ......................................................................................................... 134 Table 55 Media Bought ....................................................................................................................................................... 135 Table 56 Media Win ............................................................................................................................................................ 135 Table 57 Restaurant website ............................................................................................................................................... 136 Table 58 Restaurant Apps .................................................................................................................................................... 137 Table 59 Social Media.......................................................................................................................................................... 137 Table 60 Factors influencing EEIT adoption decisions, and the description of the factors as they appear in the survey instrument........................................................................................................................................................................... 140 Table 61 Factors considered as barriers .............................................................................................................................. 141 Table 62 Factors considered as incentives. ......................................................................................................................... 141 Table 63 Access to and use of ICT of a given population. ................................................................................................... 143 Table 64 Factors influencing digital divide in Europe .......................................................................................................... 144 Table 65 Sections, purpose and variables measured .......................................................................................................... 146 Table 66 Common barriers and benefits to ICT implementation ........................................................................................ 150 Table 67 Internet usage by employees (%) ......................................................................................................................... 151 Table 68 Factors to identify and classify the barriers and benefits of ICT adoption ........................................................... 155


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FIGURES Figure 1 Research framework ................................................................................................................................................. 2 Figure 2 Germany in Europe ................................................................................................................................................... 4 Figure 3 Age Pyramid in 2014 and 2030 ................................................................................................................................. 5 Figure 4 Per capita annual disposable income, spending and saving ratio, 2009-2014.......................................................... 7 Figure 5 Value sales in current and constant prices, and Transactions in Consumer Foodservice, 2009-2014 .................... 10 Figure 6 Chained vs. Independent, Foodservice value.......................................................................................................... 11 Figure 7 Chained vs. Independent, No. of outlets ................................................................................................................ 12 Figure 8 Evolution of Market Sizes by Foodservice Value RSP in Germany, 2009-2014........................................................ 14 Figure 9 Evolution market size by type of independent foodservice, No. of outlet, 2009-2014 .......................................... 15 Figure 10 Evolution market size by type of chained foodservice, No. of outlet, 2009-2014 ................................................ 15 Figure 11 Evolution market size by type of independent foodservice, Foodservice value, 2009-2014................................ 16 Figure 12 Evolution market size by type of chained foodservice, Foodservice value, 2009-2014........................................ 16 Figure 13 Split between Food and Drink sales value by type of foodservice, 2014.............................................................. 17 Figure 14 Geographical distribution across Germany of McDonald’s, METRO warehouses and restaurants ...................... 18 Figure 15 Coverage Maps of Germany, 2016 ........................................................................................................................ 22 Figure 16 Germany - Network Readiness Index 2015 ........................................................................................................... 25 Figure 17 France in Europe ................................................................................................................................................... 29 Figure 18 Total unemployment rate vs. youth unemployment rate in France: 2009-2014 .................................................. 30 Figure 19 Per Capita Annual disposable Income, Spending and Savings Ratio: 2009-2014 ................................................. 31 Figure 20 Breakdown of total tax rate in selected countries: 2013 ...................................................................................... 32 Figure 21 Evolution of VAT rate on catering in France .......................................................................................................... 33 Figure 22 Transactions and Value Sales in Consumer Foodservice 2009-2014..................................................................... 35 Figure 23 Chained vs. Independent, Foodservice value........................................................................................................ 36 Figure 24 Chained vs. Independent, No. of outlets .............................................................................................................. 37 Figure 25 Consumer foodservice by type, chain vs. independent, foodservice value, 2009 – 2014 .................................... 39 Figure 26 Evolution market size by type of chained foodservice, No. of outlet, 2009-2014 ................................................ 40 Figure 27 Evolution market size by type of independent foodservice, No. of outlet, 2009-2014 ........................................ 40 Figure 28 Evolution market size by type of independent foodservice, Foodservice value, 2009-2014................................ 41 Figure 29 Evolution market size by type of chained foodservice, Foodservice value, 2009-2014........................................ 41 Figure 30 Split between Food and Drink sales value, 2014 .................................................................................................. 42 Figure 31 Geographical distribution across France of Mc Donald’s, METRO warehouses and restaurants ......................... 43 Figure 32 Network coverage, 2G, 3G & 4G ........................................................................................................................... 47 Figure 33 France - Networked Readiness Index 2015 ........................................................................................................... 48


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Figure 34: Italy in Europe ...................................................................................................................................................... 52 Figure 35: Total Unemployment Rate Vs. Youth Unemployment Rate In Italy: 2009-2014 .................................................. 54 Figure 36: Consumer Food Service, Chained vs. Independent, value, 2009-2014................................................................ 60 Figure 37: Geographical distribution across Italy of Mc Donald’s, METRO warehouses and restaurants ............................ 62 Figure 38: Penetration Rates % households.......................................................................................................................... 65 Figure 39: Retail Value % breakdown .................................................................................................................................... 66 Figure 40: Coverage Maps of Italy, 2016 ............................................................................................................................... 66 Figure 41: Spain in Europe .................................................................................................................................................... 70 Figure 42 Spain domestic indicators, 2015 ........................................................................................................................... 71 Figure 43: Age Pyramid in 2014 and 2030 ............................................................................................................................ 72 Figure 44: Unemployment rate evolution ............................................................................................................................. 72 Figure 45: Household Disposable income and expenditure evolution 2010-2015 ............................................................... 73 Figure 46: Annual disposal income, spending and saving ratio ............................................................................................ 74 Figure 47: Tax rate comparison ............................................................................................................................................. 75 Figure 48 Consumer expenditure on consumer foodservice, 2009-2014............................................................................. 78 Figure 49: Consumer foodservice by type, no. of outlet, evolution 2009-2014 ................................................................... 82 Figure 50: Consumer foodservice by location, foodservice value RSP & Outlets, evolution 2009-2014 .............................. 83 Figure 51: Geographical distribution across Italy of McDonald’s, METRO warehouses and restaurants ............................. 84 Figure 52 Coverage Maps of Spain, 2016 .............................................................................................................................. 86 Figure 53: Penetration Rates % households.......................................................................................................................... 88 Figure 54: Retail Value % breakdown .................................................................................................................................... 89 Figure 55: Internet subscription evolution 2010-2015 ......................................................................................................... 89 Figure 56: Spain Network Readiness Index, Performance Overview .................................................................................... 90 Figure 57: Successive waves of innovation ........................................................................................................................... 95 Figure 58: Application Service Providers 2016 ...................................................................................................................... 98 Figure 59: Application Service Providers Evolution............................................................................................................... 99 Figure 60: Overview: Restaurant & Food Tech 2015 ........................................................................................................... 100 Figure 61: Food Tech & Media Industry 2015 ..................................................................................................................... 101 Figure 62: Diffusion of Innovation....................................................................................................................................... 103 Figure 63: Adoption Process ............................................................................................................................................... 105 Figure 64: Industry Digitalization Index 2012...................................................................................................................... 107 Figure 65: Digitalization index for hotels and restaurants 2011-2012 in index points........................................................ 108 Figure 66: MGI Industry Digitalization Index ....................................................................................................................... 109 Figure 67: Metrics included in the MGI Industrialization Index .......................................................................................... 110


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Figure 68: Industry boundaries are blurring ....................................................................................................................... 111 Figure 69: Food Tech Investment activity............................................................................................................................ 112 Figure 70: Food Tech Investment activity per country, value.............................................................................................. 112 Figure 71: Food Tech Investment activity per country, deals .............................................................................................. 113 Figure 72: Benefits of digitalization..................................................................................................................................... 114 Figure 73: Financial benefits of digitalization ..................................................................................................................... 115 Figure 74: Benefits of the Web for HoReCa ........................................................................................................................ 117 Figure 75 Methodology ....................................................................................................................................................... 118 Figure 76 Sample size .......................................................................................................................................................... 120 Figure 77 Audit IT model ..................................................................................................................................................... 124 Figure 78: Objectives of digital strategy .............................................................................................................................. 125 Figure 79: Digital challenges for HoReCa ............................................................................................................................ 125 Figure 80: Available Media for digital strategy.................................................................................................................... 126 Figure 81: Media Used model ............................................................................................................................................. 127 Figure 82: Research Model ................................................................................................................................................. 128 Figure 83 Software in use at the restaurant ........................................................................................................................ 131 Figure 84 Hardware Implemented ...................................................................................................................................... 132 Figure 85 Data & network implemented ............................................................................................................................ 133 Figure 86 Attitude towards ICT by business processes ....................................................................................................... 134 Figure 87 Business Processes .............................................................................................................................................. 130 Figure 88 METRO Chair, model for barriers - Framework ................................................................................................... 139 Figure 89 Business processes in need of IT support ........................................................................................................... 147 Figure 90 Perceived ICT implementation barriers............................................................................................................... 148 Figure 91 Research Framework ........................................................................................................................................... 149 Figure 92 Barriers to ICT implementation ........................................................................................................................... 152 Figure 93 Entrepreneur’s perspective ................................................................................................................................. 153 Figure 94 Framework to identify and classify barriers and benefits of ICT adoption ......................................................... 154


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1 INTRODUCTION 1.1 METRO Chair of Innovation 1.1.1

Context

METRO Group and Ecole hôtelière de Lausanne (EHL) joined forces to create the METRO Chair of Innovation. Olaf Koch (CEO of METRO AG) and Michel Rochat (Director of EHL) signed the contract on 20th of January 2016. 1.1.2

Dual mission

The METRO Chair of Innovation has a dual mission: 1. Develop research and expand education, and 2. Contribute to sustainable development through Innovation in the Industry. To fulfill this mission, the METRO Chair of Innovation will conduct 3 activities: 1. Main research 2. Strategic Days 3. Student Business Projects The present draft of the final report has the objective to present the first results of the METRO Chair of Innovation in terms of the main research (Activity #1).

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2 MAIN RESEARCH 2.1 Research question How independent restaurants can meet the challenge of digital business transformation.

2.2 Objectives of the research 1. Perform an audit of IT (Audit IT) 2. Identify and measure the barriers and opportunities presented to independent restaurants when implementing ICT 3. Provide independent restaurants and METRO Group with strategic recommendations on how to overcome barriers and embrace opportunities.

2.3 Research framework The different axes that will be developed throughout this research, in order to answer the objectives mentioned above, are as displayed in the research framework. (Figure 1 Research framework): Figure 1 Research framework

Source: Researcher

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3 Country profile - Germany 3.1 Germany – Macro environment GERMANY - MACRO ENVIRONMENT KEY POINTS • • • • • •

Germany has an export-driven economy, which places an even emphasis on services and production. The country offers a stable environment for investors, as well as access to the EU's domestic market. It is also world-renowned for its manufacturing in automotive, mechanical and electrical engineering, as well as chemicals. Real GDP should grow by 1.8% in 2016, up from 1.5% in 2015. Support comes from a rise in wages and employment, additional public spending related to the unusually large numbers of asylum seekers and a modest pickup in exports. Unemployment was 4.6% in 2015 and will drop to 4.5% in 2016 - a new post reunification low. The government approved a minimum wage of €8.50 per hour in 2015. This move should reduce the degree of wage inequality. Robust growth in employment and earnings coupled with stable prices have given a boost to household spending. Further, the continued inflow of refugees is expected to lead to a noticeable increase in public spending and give strong impulse to construction. Reforms to bolster competition in product markets are underway. Germany’s high score on the long-term orientation variable of Hofstede model shows that it is very much a pragmatic country. Germans show an ability to adapt traditions easily to changed conditions, which could potentially help them to embrace the actual wave of digital transformation.

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Germany's population has been falling gently over time. In 2015, its total population stood at 80.9 million, 1.2 million less when compared to the year 2000. This number will continue to fall erratically over the next 15 years. However Germany remains the most populated country of the EU. The total area of Germany is 356,840 km2. The country has common borders with Denmark, France, Poland, the Czech Republic, Austria, Switzerland, Luxembourg, Belgium and the Netherlands (Figure 2). All these countries are part of the Schengen area. Germany continues to offer a highly competitive business environment thanks to the country’s sound and transparent regulatory system, world-class infrastructure, educated workforce and strengthened economic fundamentals. Substantial spending on research and development activities will enhance innovation capacity and thus support economic growth. Nevertheless, investors in Germany still face relatively high taxes and levels of bureaucracy, while skill shortages become an increasing problem. Figure 2 Germany in Europe

Source: http://www.operationworld.org/germ 3.1.1

Economic macro environment

Germany is one of the richest countries in the world, with the highest level of GDP in Europe. The German economy is one of the drivers of the European market, together with France. 3.1.1.1

GDP evolution and influence of the recession

In 2009, Germany experienced its worst recession since the Second World War. The economy rebounded in 2010 and 2011 however another slowdown occurred in 2012 and the first half of 2013, when weak levels of exports and investment brought the economy to a near standstill (Table 1). Growth resumed in the second half of 2013 and in early 2014. However, the pace slowed sharply in the second half of 2014 when exports and confidence were hammered by the Ukrainian crisis and western sanctions on Russia. The period of slow growth continued in 2015. Germany faces a number of problems. The country's huge service sector is highly protected and relatively inefficient. Investment as a share of GDP is lower than for most other large economies. Finally, the country's ageing population is reducing the potential rate of growth (Figure 3).

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Table 1 German domestic indicators, 2015 Domestic Economic Indicators 2010 GDP (Nominal, €bn) Per Capita GDP (€) 32'049 Real GDP Growth Rate (%) 4.10 Inflation Rate (%) 1.10 Population 80'502 Unemployment rate 7.00 (% of economically active population) Source: Statistics Time & Euromonitor, 2016

2011

2012

2013

2014

33'641 3.70 2.10 80'352 5.80

34'295 0.40 2.00 80'328 5.40

35'031 0.30 1.50 80'524 5.20

36'099 1.60 0.90 80'767 5.00

2015 3100 37'360 1.50 0.20 80'948 4.60

Figure 3 Age Pyramid in 2014 and 2030

Source: National statistics/UN The government still faces a number of problems in its efforts to rebuild Eastern Germany. Berlin is committed to transferring roughly €80 billion in welfare and reconstruction funding to the East every year until 2019. Despite these financial transfers, GDP per capita in Eastern Germany in 2013 was still only 66% of that in Western Germany. Unemployment in Eastern Germany is also roughly twice the rate in Western Germany. If Eastern Germany were still a separate country, it would have the world's oldest population with an average age of over 47 years. The move should reduce the degree of wage inequality. Supported by high levels of immigration, employment has reached a post-unification high and Berlin expects to add 170,000 jobs in 2015. Most new jobs, however, will be in the service sector where productivity is low. Germany still faces a looming labour shortage as its working-age population continues to decline.

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Income & expenditure

Germany encountered a relatively high increase of disposable income per household in the last 5 years (+9.9%) (Table 2), which enabled the Germans to increase their saving ratio from 14.6% in 2013 to 15.1% in 2014, whilst being able to maintain and even increase their expenditure towards catering (Table 3, Table 4). This is due to a significant decline in the price of fuel and energy which provided consumers with a sudden and unexpected increase in their disposable incomes. As German consumers are notoriously cautious about spending, they immediately reinforced their savings habit (Figure 4). Table 2 Disposable income per capita & per household, 2010-2015 2010 20'459

2011 21'284

2012 21'739

2013 22'087

2014 22'555

2015 23'088

2013 1'475'511 62'441

2014 1'502'229 65'629

2015 1'541'638 67'019

Disposable income (Euro per capita) Evolution of the Disposable 1.00% 4.03% 2.14% 1.60% 2.12% 2.36% income per capita Disposable income 40'867 42'291 42'953 43'396 44'090 44'917 (Euro per household) Evolution of the Disposable 1.00% 3.48% 1.57% 1.03% 1.60% 1.88% income per household Source: Official statistics, trade associations, trade press, company research, trade interviews, trade sources, 2016. Table 3 Consumer expenditure, total and on catering, 2010-2015 2010 1'372'877 56'477

2011 1'418'510 59'034

2012 1'450'985 60'510

Consumer Expenditure € mn Consumer Expenditure on Catering € mn % consumer expenditure on 4.11 4.16 4.17 4.23 4.37 4.35 catering on total consumer expenditure Source: Official statistics, trade associations, trade press, company research, trade interviews, trade sources, 2016. Table 4 Consumer expenditure per household, total and on catering, 2010-2015 2010

2011

2012

2013

2014

2015

Δ 20102015

Consumer Expenditure 34'066 35'078 35'689 36'002 36'359 37'051 8.8% € Per Household Consumer Expenditure on 1'401 1'460 1'488.30 1'523.50 1'588 1'611 14.9% Catering € Per Household Disposable Income 40'867 42'291 42'953 43'396 44'090 44'917 9.9% € Per Household Source: Official statistics, trade associations, trade press, company research, trade interviews, trade sources, 2016.

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Figure 4 Per capita annual disposable income, spending and saving ratio, 2009-2014

Source: Official statistics, trade associations, trade press, company research, trade interviews, trade sources, 2014 3.1.3

Tax and regulations

Doing Business 2015, ranked Germany 68th out of 189 countries for “Paying Taxes”, down from a 64th position in the 2014 report (out of 189 countries) as it was overtaken by countries which had undertaken reforms in this area. According to research from the Institute for Applied Economic Research (IAW) in Tübingen, Germany, the country’s shadow economy (income and activities that avoid government regulation or taxation) could account for 12.2% of Germany’s total GDP in 2014. While this rate has been declining since 2010, it is likely to rise in the coming years due to the implementation of the national minimum wage in 2015. Germany's markets are comparatively competitive, though regulations in some fields are extensive. Corporate investment has weakened following the expiration of generous depreciation rules. Labour costs are falling due to a drop in non-wage labour costs. Reforms to bolster competition in product markets are underway. An overhaul of the income tax system has reduced the overall tax burden (Table 5). In 2016, the minimum income tax allowance will be raised, child allowances will be hiked and pensions will be increased. Table 5 Tax rate in Germany Total tax rate

48.8% profit

Labour tax and contributions

21.2% of commercial profits

Time

218 hours per year

Payments

9 per year

VAT

19%

VAT on catering

19%

VAT reduced on food sales

7%

Source: Official statistics, trade associations, trade press, company research, trade interviews, trade sources, 2016.

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Table 6 Macro-Economic SWOT - Germany GERMANY – MACRO ENVIRONMENT – SWOT

• •

• • •

STRENGTHS Competitive business environment backed by a transparent, sound regulatory system. Along with a well-educated workforce and good infrastructure. Open policies towards trade and investment. OPPORTUNITIES Improved business and consumer confidence fueled by continued economic growth and low unemployment. High research and development spending towards innovation. Migrants may provide an opportunity if able to successfully integrate into labour markets and local communities (potential to counterbalance the ageing population).

• •

• •

WEAKNESSES Relatively high tax rates with 19% tax applied to catering. Heavy bureaucracy in some areas such as registering a business and paying taxes. THREATS Shortage of skilled workers. Austerity measures may take a toll on infrastructure development and education spending.

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3.2 Germany – HoReCa industry 3.2.1

Consumer foodservice, 2009-2014 & forecast

Overall value sales in consumer foodservice in Germany continued to post a positive performance in 2014, albeit at a slightly slower rate compared with the review period average (Table 7, Table 8). Following the drastic decline in global oil prices which started in June 2014, consumers experienced a significant increase in their disposable incomes. This phenomenon combined with a growing demand for convenience and healthier eating options led to consumers displaying a tendency to spend more on consumer foodservice, particularly on higher-priced premium options, which stimulate the overall turnover. Also, following the increase in levels of disposable income, Germans consumers gained confidence in spending. This is resulted in a greater willingness to pay for premium food items and a growing tendency to eat out more often. As a result, the unemployment rate dropped to 5% of the economically active population meaning that German consumers were facing increasingly busy lifestyles, seeking convenient solutions across FMCG (Fast Moving Consumer Goods). As such, convenience became a key factor driving demand for consumer foodservice solutions. This is especially the case when taking into account the growing number of single households in cities with consumers showing a growing interest in cooking food at home. Overall, value sales growth benefited from the rising number of transactions, but even more so from an increase in the average value per transaction across all channels. This was particularly pronounced in the two best-performing channels, self-service cafeterias and 100% home delivery/takeaway, which also registered the fastest transaction growth, as consumers appreciated the convenience they offer. Table 7 Units, Transactions and Value Sales in Consumer Foodservice, 2009-2014 2009

2010

2011

2012

2013

2014

Units

201,750

199,582

198,040

196,851

195,841

195,154

Transactions (mn)

4,112.3

4,144.3

4,180.0

4,204.9

4,238.9

4,243.9

Value Sales (€ - mn) current prices

38,165.4

38,244.5

38,585.0

38,905.0

39,292.8

39,481.7

Value Sales (€ - mn) constant prices 38,165.4 37,827.0 37,388.2 36,955.9 36,770.8 36,539.8 Source: Official statistics, trade associations, trade press, company research, trade interviews, trade sources, 2016. Table 8 Units, Transactions and Value Sales in Consumer Foodservice: % Growth, 2009-2014 % growth

2013/14

2009-14 CAGR

2009/14 TOTAL

Units

-0.4

-0.7

-3.3

Transactions

0.1

0.6

3.2

Value current prices

0.5

0.7

3.4

Value constant prices -0.6 -0.9 -4.3 Source: Official statistics, trade associations, trade press, company research, trade interviews, trade sources, 2016.

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Figure 5 Value sales in current and constant prices, and Transactions in Consumer Foodservice, 2009-2014

Source: Adapted from Euromonitor, 2016 Whilst low fuel and energy prices are likely to have a positive effect on German spending confidence, the unexpected outcome of the European debt crisis and relative instability of the European banking system simultaneously threaten to result in a more cautious attitude towards spending (Figure 5). This uncertain outlook makes forecasts for fast moving consumer goods difficult. Overall, value sales in consumer foodservice are expected to show a slight declining trend at constant 2014 prices. Whilst transactions are expected to register growth across all channels, the looming economic threats are expected to have a negative impact on the average value per transaction, as consumers are expected to show less willingness to pay premium prices. A decline in the average value per transaction is expected to particularly affect the more conventional channels, which involve higher expenditure, such as full-service restaurants and cafés/bars. Convenience-oriented, more economic channels, such as 100% home delivery/takeaway and self-service cafeterias, meanwhile, are expected to continue to perform well. Table 9 Forecast Units, Transactions and Value Sales in Consumer Foodservice 2014-2019 2014

2015

2016

2017

2018

2019

Δ 2009-2014

Units

195,154.0

194,785.0

194,595.0

194,530.0

194,529.0

194,573.0

-0.30%

Transactions (mn)

4,243.9

4,257.9

4,270.4

4,280.0

4,287.7

4,296.0

1.23%

EUR (million) 39,481.7 39,384.5 39,326.7 39,285.6 39,262.4 39,249.8 Source: Trade associations, trade press, company research, trade interviews, trade sources, 2016.

9,53%

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Chain vs. Independent outlets

The chained restaurants (7% of total outlets) represent 29% of the total sales revenue in the food service sector (Figure 6, Figure 7). In fact, despite the difficulties faced by independent operators, chained players continued to achieve growth by all measures. The main advantage of chained players is their significantly larger financial backing, allowing them to invest heavily in outlet expansion in prime locations, as well as attracting high customer turnover through convincing marketing strategies. The vast majority of consumer foodservice outlets in Germany are run by independent operators, who continued to struggle with the rising costs of lease agreements in 2014. Especially in lucrative city centre locations such as Berlin, Hamburg and Munich, rents displayed a strong tendency to rise over the entire review period and during 2014. This made it increasingly difficult for independent players, who mostly lack sufficient financial backing to operate in premium locations, and resulted in a further decline in the number of independent outlets in 2014. Table 10 Chained vs Independent | Historic | Foodservice Value RSP | % breakdown (%)

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

Δ 2005 -2014 27%

Chained 22.60 23.10 24.60 25.40 26.30 26.80 27.30 27.80 28.40 28.60 Foodservice Independent 77.40 76.90 75.40 74.60 73.70 73.20 72.70 72.20 71.60 71.40 -8% Foodservice Source: Official statistics, trade associations, trade press, company research, trade interviews, trade sources, 2016. Figure 6 Chained vs. Independent, Foodservice value

Source: Adapted from Euromonitor, 2016. Table 11 Chained vs Independent | Historic | Units/outlets | % breakdown Subsector

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

Δ 2005-

Chained Foodservice

5.7

6

6.4

6.7

6.9

7.1

7.1

7.3

7.4

7.4

30%

2014

Independent 94.3 94 93.6 93.3 93.1 92.9 92.9 92.7 92.6 92.6 -2% Foodservice Source: Official statistics, trade associations, trade press, company research, trade interviews, trade sources, 2016. 11


REPORT #1 – 04.05.2016

Figure 7 Chained vs. Independent, No. of outlets

Source: Adapted from Euromonitor, 2016. 3.2.3

Franchises

When compared with other Western European countries, franchising remains at a relatively low level in consumer foodservice in Germany, despite constant growth in the last five years. Joint-ventures (when a foodservice operator partners with a local individual or company, often splitting the ownership, risks and profits) also remained negligible in consumer foodservice in Germany in the last five years, and are not expected to play a significant role in the next five years. Both foreign operators and domestic players continue to offer franchises in Germany. However foreign, usually multinational operators, were responsible for the majority of chained outlets in consumer foodservice, through a combination of franchises and company-owned outlets. The leading brands in terms of turnover remained McDonald’s, Tank & Rast and Burger King. Whilst McDonald’s achieved further share gains due to outlet expansion and successful marketing, Burger King suffered further share losses following outlet scandals, as well as a scandal regarding the hygiene standards in some of its outlets that circulated in the media (Table 12). Table 12 Company Shares (Global - Historical Owner) | Historic | Foodservice Value RSP | % breakdown Companies

2009

2010

2011

2012

2013

2014

1.McDonald's Corp

33.90

34.50

35.10

35.00

34.90

35.30

2.Restaurant Brands International Inc.

-

-

-

-

-

7.80

3.Autobahn Tank & Rast GmbH & Co 7.50 7.30 7.10 7.00 7.00 6.90 KG Source: Official statistics, trade associations, trade press, company research, trade interviews, trade sources, 2016. In Germany, franchising continues to be more apparent in certain channels than others. Franchises perform better in fast food and 100% home delivery/takeaway, when compared to full-service restaurants and self-service cafeterias. Whilst the first two channels mentioned are seen as representing significant benefits to the franchise partners, German consumers prefer independent operators over chains.

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Consumer foodservice by type

The vast majority of consumer foodservice outlets in Germany are run by independent operators, representing 92.56% of the total number of outlets (Table 13). Table 13 Chain vs Independent by type, No. of Outlets, 2014

Consumer Foodservice by Type 100% Home Delivery/Takeaway Cafés/Bars Full-Service Restaurants Fast Food Self-Service Cafeterias Street Stalls/Kiosks

Independent

Chained

Total

% independent outlets

Δ no outlets independent 2009 - 2014

Δ no outlets chained 2009 - 2014

180644

14510

195'154

92.56

-3.78

3.61

5'053

800

5'853

86.33

-5.37

20.66

50'848

2'740

53'588

94.89

-4.99

16.94

85'441

940

86'381

98.91

-4.19

0.75

29'741

7'764

37'505

79.30

2.00

-0.17

663

927

1'590

41.70

-3.63

-4.92

8'898

1'339

10'237

86.92

-9.77

1.90

Source: Official statistics, trade associations, trade press, company research, trade interviews, trade sources, 2016. Busier lifestyles continued to drive consumer demand for quick and convenient food solutions in 2014. This benefited channels such as self-service cafeterias, 100% home delivery/takeaway and convenience stores fast food, which posted amongst the fastest growth in turnover and transactions (Figure 8). The convenience trend was also reflected in the growing share of take-away sales in specialist coffee shops. Another channel to experience rapid growth was juice/smoothie bars, which benefitted from the growing demand for healthy snacking. As shown in Figure 8, the most promising types of independent foodservice in terms of sales value in the last 5 years are Self-service Cafeterias, and Fast Food. On the contrary, independent street stalls/kiosks are encountering some difficulties.

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Figure 8 Evolution of Market Sizes by Foodservice Value RSP in Germany, 2009-2014

Source: Adapted from Euromonitor, 2016

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Evolution market size by type of foodservice

The following figures (Figure 9, Figure 10, Figure 11 and Figure 12) represent the evolution of the market size (in terms of number of outlets, and foodservice value) by different types of independent and chained restaurant between 2009 and 2014. In terms of the number of outlets, we can see in Figure 9 and Figure 10 that independent restaurants are mainly formed of full-service restaurants, whilst chained restaurants are mainly represented by fast-food restaurants. Figure 9 Evolution market size by type of independent foodservice, No. of outlet, 2009-2014

Source: Adapted from Euromonitor, 2016 Figure 10 Evolution market size by type of chained foodservice, No. of outlet, 2009-2014

Source: Adapted from Euromonitor, 2016 15


REPORT #1 – 04.05.2016

When compared with Western Europe (especially France and Italy), eating out is less prevalent in Germany and is often seen as being primarily for special occasions rather than as a regular part of social life. Traditionally, full-service restaurants were the most popular. However, since being introduced to Germany in the 70’s, fast food has become increasingly popular, especially amongst the younger population. Figure 11 Evolution market size by type of independent foodservice, Foodservice value, 2009-2014

Source: Adapted from Euromonitor, 2016 Figure 12 Evolution market size by type of chained foodservice, Foodservice value, 2009-2014


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Consumer foodservice by type, food vs. Drinks, % value, 2014

A distinctive feature of the German consumer foodservice market is the high importance of alcoholic beverages, which are much cheaper compared to many other countries. According to Figure 13, food still remains the main driver in terms of sales value in Germany. Figure 13 Split between Food and Drink sales value by type of foodservice, 2014

Source: Adapted from Euromonitor, 2016 3.2.7

Structure of the market by location

Aside from standalone representing 81.8% of the total foodservice value, leisure is the most valuable location with 6% share of foodservice value (Table 14). Retail location is the only category demonstrating growth both in terms of number of outlets and value (Table 14, Table 15). Increased consumer confidence in spending had a particularly positive effect on sales through retail locations, as consumers were spending more on shopping. However, despite the strong performance of retail location, the largest non-stand-alone locations remained leisure and lodging, as the German market are more inclined to spend on consumer foodservice whilst pursuing leisure activities or travelling. Non stand-alone locations are expected to continue to significantly outperform stand-alone locations over the forecast period, with positive performances in unit, foodservice value and the number of transactions. Retail continues to experience the best growth prospects as they will benefit from outlet expansion, and from the growing number of shopping malls present in the German retail environment. The main future threat to growth remains unfavorable economic developments, especially in light of the unresolved Greek debt crisis, which may have severe repercussions on the European and global financial markets. German consumers are comparatively sensitive to financial shocks responding to such situations with a reduction in spending, which typically first hits non-essential markets, such as consumer foodservice.

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Table 14 Market Sizes by location of Foodservice, % Foodservice Value, 2009-2014 Categories (%)

2009

2010

2011

2012

2013

2014

Δ food service value 2009-2014

Standalone

82.31

82.37

82.32

82.24

82.08

81.87

-0.53%

Leisure

5.84

5.82

5.83

5.86

5.94

6.03

3.25%

Retail

2.97

2.95

3.00

3.03

3.09

3.16

6.40%

Lodging

5.33

5.32

5.29

5.29

5.26

5.27

-1.13%

Travel

3.55

3.54

3.56

3.58

3.63

3.67

3.38%

TOTAL 100.00 100.00 100.00 100.00 100.00 100.00 Source: Official statistics, trade associations, trade press, company research, trade interviews, trade sources, 2016. Table 15 Market Sizes by location of Foodservice, No. of outlets, 2009-2014 Categories

2009

2010

2011

2012

2013

2014

2014 (%)

Δ no outlets 2009-2014

Standalone

169223

167552

166108

164929

163910

163121

83.59%

-3.61%

Leisure

9051

8710

8685

8670

8726

8792

4.51%

-2.86%

Retail

4578

4545

4563

4637

4702

4772

2.45%

4.24%

Lodging

11567

11506

11431

11384

11316

11304

5.79%

-2.27%

Travel

7332

7269

7252

7227

7189

7166

3.67%

-2.26%

Consumer 201751 199582 198039 196847 195843 195155 100% -3.27% Foodservice Source: Official statistics, trade associations, trade press, company research, trade interviews, trade sources, 2016. 3.2.8

McDonald’s, METRO and restaurant – Geographical distribution

In Germany, compared to other western countries, there is a broader geographical distribution of restaurants, reflecting distinctive rural cooking cultures. Figure 14 Geographical distribution across Germany of McDonald’s, METRO warehouses and restaurants

Source: Google Map, METRO webpage, Guide Michelin

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GERMANY – HORECA INDUSTRY – OPPORTUNITIES & THREATS

• •

•

OPPORTUNITIES Consumer foodservice will benefit from rising consumer confidence. The “Hotel and Restaurant” sector was the fastest growing sector in Germany, posting an average annual real growth of 5.1% between 2009 and 2014, led by strong tourism in the country. New restaurant concepts, from Eastern countries, will be developed in Germany to cater for the growing demand created by migrants.

• • •

THREATS Primary threat to growth will be any unfavorable economic developments (e.g. the unresolved Greek debt crisis). Independent operators are struggling, especially with the rising cost of lease agreements since 2014. German consumers are very sensitive to unfavorable economic developments, with foodservice expenditure being the first to be cut.

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3.3 Germany – Technological landscape GERMANY – TECHNOLOGICAL LANDSCAPE – KEY POINTS • • • • • • • 3.3.1

Largest telecom market in Western Europe Home to the second largest e-commerce market in Western Europe German businesses, especially SMEs, have shown a greater inclination towards cloud computing services The government has sought to strengthen e-government development through a number of initiatives, however e-services uptake remains relatively low compared to the regional average Internet retailing increased by 13% in current value terms in 2015 (reaching €36 billion) The trend towards personalized online marketing gains importance Food and drink internet retailing saw the fastest growth of all categories in 2015 Digital consumer – landscape

Competition, proactive regulation and advanced network investments define the German telecom landscape. Consumers in the largest telecom market in Western Europe are avid online shoppers and enjoy widespread access to 4G LTE and digital pay-TV services. Operators are also increasing fibre-optic investment to enhance next generation broadband availability. German companies are increasingly adopting cloud services and the government has promoted e-governance by expanding online services delivery. 3.3.2

Top 3 digital trends

1. Mobile spectrum auctions in 2015 to facilitate nationwide cellular data coverage 2. Fibre-optic investment drives next generation fixed-broadband connectivity 3. Second-largest e-commerce in western Europe 3.3.3

Physical infrastructure

Cloud computing has been gaining momentum in Germany, in keeping with the country’ status as a leading technology adopter and innovator. Global multinationals, such as Amazon, IBM and Fujitsu, offer a wide range of cloud services, although they need to comply with the country’ strict data security laws. 3.3.4

Mobile connectivity

Smartphones and mobile broadband drive m-commerce growth. Germany’s mobile phone penetration stood at 93.2% of total households in 2014 compared to 86.7% in 2009. By 2030, the penetration rate is expected to reach 97.4%. 3.3.5

Public connectivity

Largest Internet user base in Western Europe: - Germany had 65.8 million Internet users in 2014, a 7.5% expansion over 2009. This put the country in the top position in terms of total Internet users in Western Europe in 2014. The Internet user base is expected to increase to 72.2 million by 2030, with a rise of 8.4% over 2015; - The percentage of the total population using the Internet stood at 85% in 2014, up from 79% in 2009. Germany occupied the 13th position in terms of its Internet penetration rate in Western Europe, below Finland, the UK and Switzerland but ahead of Belgium, France and Austria. The penetration rate is expected to increase to 94.3% by 2030. 20


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Online business participation – one of Western Europe’s e-commerce leaders

German companies leverage technology extensively to engage more effectively with consumers and to drive business growth. In 2014, 98.9% of total businesses used computers and 98.9% used the Internet. In 2014, 63.6% of total businesses placed orders online compared to 58.4% in 2009. The proportion of total businesses receiving orders online also increased from 32.1% in 2009 to 37.1% in 2014. 3.3.7

Penetration of smartphones & internet

Germany is one of the countries with the highest rates of internet penetration. In 2014, more than 80% of the German population used the internet (Table 16). With more than two thirds of the population using broadband internet, which is above the EU average. The rollout of 3G and 4G mobile communication networks (Figure 15), combined with the high smartphone penetration, which stood at 88% of households in Germany in 2013, has made omnipresent broadband connectivity a reality in Germany. The parallel development of a rich and diverse array of digital media, e-commerce websites and mobile apps has promoted the use of the internet as a fixture within German consumers’ lifestyles. This led to a rise in popularity amongst Germans to order online especially for 100% home/delivery take away operators. The most popular way of ordering is through third party as it allows the users to pay online easily and securely. Table 16 Possession of smartphones, Households internet access, Penetration rates of consumer electronics by type, Retail value of internet retailing by type, 2010 – 2015 Categories Possession of Smart Phone Categories Percentage of Households with Access to Internet Percentage of Households with Access to Broadband Internet Mobile Internet Subscriptions Share of Mobile Internet Subscriptions to Mobile Telephone Subscriptions

2010 18.80

2011 27.10

2012 40.00

2013 52.50

2014 60.30

2015 64.70

2010

2011

2012

2013

2014

2015

% of households

72.90

77.00

79.00

82.00

84.00

85.60

% of households

70

72.00

75.00

78.00

81.00

83.30

'000

21'200

28'600

33'700

37'000

52'575

61'235

% of mobile telephone subscriptions

24.00

31.50

36.50

37.00

52.80

59.70

% of households

Penetration Rates | Historic | % households Categories Subsector Consumer Electronics Laptops Consumer Electronics Tablets Consumer Electronics Feature Mobile Phones Consumer Electronics Smart Mobile Phones

2012 95.00 15.00 55.00 68.00

2013 90.00 22.00 40.00 88.00

2014 87.00 28.00 29.00 102

Mobile Internet Retailing | Historic | Retail Value RSP excl. Sales Tax | % breakdown Categories Subsector 2011 2012 2013 Internet Retailing Mobile 3.10 4.70 12.60 Internet Retailing Other 96.90 95.30 87.40 Internet Retailing Total 100 100 100 Source: Euromonitor, 2016

2015 84.00 32.00 22.00 109 2014 17.00 83.10 100

2015 19.30 80.80 100 21


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Figure 15 Coverage Maps of Germany, 2016

Source: http://opensignal.com/coverage-maps/GERMANY 3.3.8

Internet retailing in Germany

Internet retailing in Germany has become an integral part of retailing as a whole, as it accounted for a value share of 8% in 2015. As a result, internet retailing can no longer avoid being affected by overall economic development. One of the main trends impacting online retailing is a move toward personalization. Internet pure-players, and also multichannels retailers are working on establishing a unique, emotional yet flexible shopping experience, constantly developing technical solutions with increasingly interactive shopping models. This is possible as internet retailers are taking advantage of substantial consumer information made available to them through what is now called “Big Data”. Although food and drink internet retailing remained at a very low level in terms of actual sales in 2015, it saw the fastest growth of all categories in 2015 (Table 17). This is due to numerous factors. Traditionally, alcoholic drinks, particularly wine, have long been a key feature of online food and drink retailing, with continued growth in 2015. However, in 2015 consumers also increasingly purchased hot drinks such as coffee pods, tea bags and coffee beans. The most important development, however, was that online sales of packaged food were finally picking up in 2015. The German market is deemed ready for online grocery shopping. Multi-channel options are increasingly being demanded by consumers, for browsing, purchasing and returns. Today’s consumers want to decide where, when and how to shop, as well as how to pay. Therefore, it is becoming increasingly important for store-based retailers to combine different sales and marketing channels. Mobile commerce increasingly determines buying behavior. Smartphones and tablets have become constant companions for large sections of the population, particularly for the younger generation. Many consumers are unable to imagine living without their smartphones. With consumers becoming more technology savvy (particularly applicable to consumers in older age groups), restaurant operators will have to react quickly to these changes and adapt, especially improving their presence on the net as well as broadening their delivery and payment options.

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Table 17 Internet Retailing by category: % value growth, 2010-2015 % current value growth, retail value RSP excl. sales tax 2014/15 2010-15 CAGR 2010/15 Total Apparel and Footwear 10.3 11.8 74.8 Beauty and Personal Care 4.9 9.9 60.3 Consumer Appliances 18 15.7 107.7 Consumer Electronics 3.5 13 83.8 Consumer Health 14.7 13.1 85 Food and Drink 38 22.5 176.3 Home Care 7 6.5 36.8 Home Improvement and Gardening 9.6 11.7 73.5 Homewares and Home Furnishings 4.5 7.3 42.4 Media Products 11.8 13.8 90.6 Personal Accessories and Eyewear 7 15 101 Pet Care 3.7 17.7 126.3 Traditional Toys and Games 5.6 9.7 58.9 Video Games Hardware 7.6 9.3 55.7 Other Internet Retailing 26.5 67.7 1,224.7 Internet Retailing 12.7 16.9 118.3 Source: Official statistics, trade associations, trade press, company research, trade interviews, trade sources Table 18 SWOT Analysis – Digital Landscape in Germany GERMANY – SWOT – DIGITAL LANDSCAPE

• •

STRENGTHS Largest telecoms market in Western Europe with expanding 4G LTE (Long Term Evolution) and pay-TV consumption. Second largest e-commerce market in Western Europe.

OPPORTUNITIES • Mobile spectrum auctions in 2015 will enable operators to expand mobile broadband coverage. • Operators are investing in fibre-optics to extend next generation fixed-broadband connectivity. • Online ordering is becoming popular leading to the expansion of 100% home-delivery/take away foodservice. • Food and Drink internet retailing may lead to new concept creation in the foodservice industry. • The German market is deemed ‘ready’ for online grocery shopping. Source: Euromonitor, 2016

• •

• • •

WEAKNESSES Fixed-broadband penetration relatively low among low-income households. E-governance usage lower than regional average, despite government initiatives.

THREATS Slower economic growth can affect telecom investment. Stiff competition in the mobile market can impact revenue growth and capital spending. The foodservice industry must adapt quickly to changes in consumer behavior towards internet retailing.

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Network Readiness Index (NRI) – World Economic Forum

As shown in Figure 16, Germany falls by one position to 13th but maintains its score. Its performance remains very strong, with an excellent Political and regulatory environment (13th) and top-level Infrastructure (13th). The country also boasts one of the highest levels of ICT uptake among businesses (5th) whose capacity for innovation is outstanding (4th). Usage among the population is also widespread (17th), and the number of fixed broadband Internet subscriptions per capita is among the world’s highest (9th). In contrast, the uptake of 3G (or above) mobile telephony is surprisingly low (45 per 100 population, 50th)—almost three times less than in countries such as Japan and Finland. Nevertheless, ICT generates significant economic impacts (9th), with a large share of workers employed in knowledgeintensive jobs (43 percent, 18th worldwide). The country has lost ground in terms of government usage and social impacts (31st), with government online services availability and citizens’ e-participation both decreasing significantly. The renewed government effort in mainstreaming ICTs outlined in the Digital Agenda 2014-2017 bill passed last year, the first-ever in Germany, could reverse the trend. The strategy identifies a number of measures to increase ICT penetration, growth and security, including investment in digital infrastructure, especially in rural areas. Traditional media outlets provided an early motivator for consumers as Germany’s digital content ecosystem began to evolve, between 1995 and 2001. Spiegel Online was created in 1994, followed by Zeit Online, Netzeitung, and others. However, unlike in the United States, the German government stepped in very early to fund some of the country’s content and services development. As the German digital content ecosystem continued to evolve after 2001, social networks such as StayFriends.de (for graduates) and Xing. com (for professionals) proliferated, as did travel sites including HolidayCheck, gaming communities such as GameDeull, dating services such as ElitePartner, e-payment systems such as GiroPay and Sofort, and online shopping services such as bo.com. Along with the interest of media and retailers, the government’s interest remained strong, as evidenced by the development of the Deutschland-Online e-government strategy. From 2007 onwards, as the German digital ecosystem matured, networking, blogging, gaming, entertainment, and shopping services proliferated, and the digital economy was driven by subscriptions for online newspapers, games, streaming, and service, along with online advertising. See annex: 14.1.3 Network readiness index (NRI)

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Figure 16 Germany - Network Readiness Index 2015

Source: World Economic Forum, 2015 25


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3.4 End-consumers 3.4.1

Germany’s culture & values through Hofstede variables

Source: http://geert-hofstede.com/germany.html What is Hofstede’s cultural dimension theory? Hofstede's cultural dimension theory is a framework for cross-cultural communication, developed by Geert Hofstede. It describes the effects of a society's culture on the values of its members, and how these values relate to behavior, using a structure derived from factor analysis. These results will enable us to further understand the cultural drivers of France’s culture relative to others. Definition of the variables is available in the annex Hofstede’s cultural dimension theory. POWER DISTANCE Highly decentralised and supported by a strong middle class, Germany is not surprisingly among the lower power distant countries (score 35). Co-determination rights are comparatively extensive and have to be taken into account by the management. A direct and participative communication and meeting style is common, control is disliked and leadership is challenged to show expertise and best accepted when it’s based on it. INDIVIDUALISM Germany is a truly individualist society. There is a strong belief in the ideal of self-actualization. Loyalty is based on personal preferences for people as well as a sense of duty and responsibility. This is defined by the contract between the employer and the employee. Communication in Germany is among the most direct in the world, following the ideal to be “honest, even if it hurts” – thus giving the counterpart a fair chance to learn from their mistakes. MASCULINITY With a score of 66 Germany is considered a Masculine society. Performance is highly valued. People rather “live in order to work” and draw a lot of self-esteem from their tasks. Managers are expected to be decisive and assertive. 26


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UNCERTAINTY AVOIDANCE Germany is among the uncertainty avoidant countries (65); the score is on the high end, so there is a slight preference for Uncertainty Avoidance. In line with the philosophical heritage of Kant, Hegel and Fichte there is a strong preference for deductive rather than inductive approaches, be it in thinking, presenting or planning: the systematic overview has to be given in order to proceed. This is also reflected by the law system. Details are equally important to create certainty that a certain topic or project is well-thought-out. In combination with their low Power Distance, where the certainty for own decisions is not covered by the larger responsibility of the boss, Germans prefer to compensate for their higher uncertainty by strongly relying on expertise. LONG TERM ORIENTATION Germany's high score of 83 indicates that it is a pragmatic country. In societies with a pragmatic orientation, people believe that truth depends very much on situation, context and time. They show an ability to adapt traditions easily to changed conditions, a strong propensity to save and invest, thriftiness, and perseverance in achieving results. INDULGENCE The low score of 40 on this dimension indicates that the German culture is restrained in nature. Societies with a low score in this dimension have a tendency to cynicism and pessimism. People with this orientation have the perception that their actions are restrained by social norms and feel that indulging themselves is somewhat wrong. 3.4.2

German foodservice consumers

Especially when compared with other Western European countries, such as France and Italy, eating out is less prevalent in Germany, and is often seen as being saved for special occasions, rather than as a regular part of social life. Traditionally, full-service restaurants were the most popular; however, since its introduction to Germany in the 1970s, fast food has become increasingly popular, especially amongst the younger population. A distinctive feature of the German consumer foodservice market is the high importance of alcoholic beverages, which are much cheaper when compared to most other countries. END-CONSUMERS – NEXT STEP The end-consumer’s digital behavior, needs, and trends will be studied throughout the SBP – METRO Chair of innovation. Please see Student Business Project – METRO Chair for more details.

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4 Country profile - France 4.1 France – Macro environment FRANCE - MACRO ENVIRONMENT KEY POINTS • •

• • • • •

• • •

The economy is expected to strengthen in the second half of 2015. Real GDP should rise by 1.2% for the year after gains of just 0.2% in 2014. Real GDP is expected to grow by 1.3-1.5% per year during the remainder of this decade. France’s service sector is large even by the EU’s standards, accounting for 78.5% of GDP. The country’s various financial industries are under strain. Banks are raising their capital levels in order to meet the Basel III requirements. French banks, however, are still heavily exposed to the crisis-ridden countries of Southern Europe. The real value of tourist receipts stagnated in 2014 and an increase of 2.3% is expected in 2015. France is the premier tourist destination in the EU after Spain and the world’s most visited country. VAT control reinforced by the French Government. Consumer spending plays a more important role in France than in other large Eurozone countries. However, high levels of unemployment and inactivity have been a burden on consumer demand. In the long term, the country’s potential rate of growth could be dragged down by the effects of population ageing. Nonetheless, France remains the world’s tenth most favored destination for FDI and is expected to retain its position in the global rankings in the medium term. Unemployment was 10.3% in 2014 and it will rise to 10.5% in 2015. Youth unemployment exceeds 25% and the participation rate is lower than in neighboring countries. Another discouraging trend is that more than 80% of recent hires are short-term. A positive step has been to cut taxes on workers with low salaries. Paris plans to introduce laws to simplify the country’s labour rules and encourage company-level talks between employers and unions on pay, working hours and conditions, However, this will only arise sometime in 2016. High cost of labour. Increase in consumer expenditure for catering. Scoring very high on the Uncertainty Avoidance variable of Hofstede model, suggesting that the French are not very inclined to change.

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With a total area of 551,000 km2 (excluding oversea departments and territories), France is one of the largest countries in Europe. France is a member of the E.U. and has been ever since the Union was founded. The country has common borders with Belgium, Luxemburg, Germany, Italy, Spain and Andorra (all E.U. members and in the Eurozone), as well as Switzerland (Figure 17). Figure 17 France in Europe

Source: PRS Group, 2010 4.1.1


France is amongst one of the richest countries worldwide, and occupies the third place in Europe when considering GDP (Statistics Times, 2016). The French economy is one of the key drivers of the European market, together with Germany. The French business environment benefits from strong institutions, first-class infrastructure; and relatively strong innovation capabilities. However, France is still facing challenges with elevated total tax rates, a highly rigid labour market, and also a weak macroeconomic situation reducing the country’s competitiveness (Table 19). Table 19 French domestic indicators, 2015 Domestic Economic Indicators 2010 GDP (Nominal, €bn) Per Capita GDP (€) 31'841 Real GDP Growth Rate (%) 2.00 Inflation Rate (%) 1.50 Population ‘000 62'765 Unemployment rate (% of 9.30 economically active population) Source: Statistics Time & Euromonitor, 2016

2011

2012

2013

2014

32'651 2.10 2.10 63'070 9.20

32'928 0.20 2.00 63'379 9.80

33'248 0.70 0.90 63'660 10.30

33'357 0.20 0.50 63'929 10.30

2015 2228 33'999 1.10 0.00 64'216 10.40

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The economy is expected to strengthen in the second half of 2015. Real GDP should rise by 1.2% for the year after gains of just 0.2% in 2014. Real GDP is expected grow by 1.3-1.5% per year during the remainder of this decade. France’s high levels of unemployment can be traced back to defects in the labour market (Figure 18). Rigidities in the wage setting system prevent firms from adjusting wages to productivity. France’s notorious 35-hour working week is understandably seen as another barrier but there are loopholes that allow many employers to outmaneuver the law. In reality, the effective workweek for most workers is nearly 39 hours. In addition, productivity per hour slightly exceeds the Eurozone average. A more serious problem however is the high cost of labour. The French youth have been hit particularly hard, with the youth unemployment rate as a percentage of economically active population aged 15-24 reaching 24.5% in 2014 (up from 23.2% in 2009), likely due to a lack of job creation and employers’ preference to employ experienced personnel (Figure 18). Figure 18 Total unemployment rate vs. youth unemployment rate in France: 2009-2014


Income and expenditure

France’s saving ratio is much higher than the European average. In 2014, it was 14.6% of disposable income, and it will dip to 14.4% in 2015. Precautionary savings constitute a major component in these figures (Figure 19). However, we are still able to see that it was 16.4% of disposable income in 2009 and dropped to 14.4% in 2014. In addition, we note that French total consumer expenditure increased by 0.9% in the last 5 years whilst the French expenditure on catering grew by 4.5% in the same period. This could be due to the fact that the French population are saving less and thus are able to spend more on food service (Table 20, Table 21, Table 22). Table 20 Disposable income per capita & per household, 2010-2015 2010 2011 2012 2013 2014 2015 Disposable income (€ per capita) 20'479 20'793 20'801 20'855 20'997 21'204 Evolution of the Disposable income per capita 1.00% 1.53% 0.04% 0.26% 0.68% 0.99% Disposable income (€ per household) 46'261 46'636 46'356 46'172 46'202 46'412 Evolution of the Disposable income per household 1.00% 0.81% -0.60% -0.40% 0.07% 0.45% Source: Official statistics, trade associations, trade press, company research, trade interviews, trade sources, 2016.

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Table 21 Consumer expenditure, total and on catering, 2010-2015 2010 1'088'614

2011 1'113'956

2012 1'130'877

2013 1'142'612

2014 1'149'241

2015 1'165'144

2015

Δ 20102015

Consumer Expenditure € mn Consumer Expenditure on 55'296 56'964 57'248 57'864 58'144 58'841 Catering € mn % consumer expenditure on catering on total consumer 5.08 5.11 5.06 5.06 5.06 5.05 expenditure Source: Official statistics, trade associations, trade press, company research, trade interviews, trade sources, 2016 Table 22 Consumer expenditure per household, total and catering, 2010-2015 2010

2011

2012

2013

2014

Consumer Expenditure 39'179 39'615 39'738 39'746 39'412 39'518 0.9% € Per Household Consumer Expenditure on Catering 1'990 2'026 2'035 2'027 2'044 2'079 4.5% € Per Household Disposable Income 46'261 46'636 46'356 46'172 46'202 46'412 0.3% € Per Household Source: Official statistics, trade associations, trade press, company research, trade interviews, trade sources, 2016 Figure 19 Per Capita Annual disposable Income, Spending and Savings Ratio: 2009-2014

Source: Euromonitor & OECD, 2014

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Tax and regulations

The government’s dominance in major industries continues. Services are more regulated in France than in most other OECD countries, meaning that the sector is growing very slowly. This is especially true for transport, professional services, and retail commerce. As shown in Figure 20, the labour tax and contributions rates in France are amongst the highest in the world, exercising strong pressure on the companies’ ability to employ workers. Payroll taxes – which are among the highest in the world – are being scaled back as part of a drive to restore competitiveness on conditions firms hire and invest. Paris has simplified the current regime of regulations covering worker representation and administrative practices for firms with more than 50 employees. Low skilled workers will also receive tax breaks and reductions in social contributions, worth about €10 billion a year in 2017 (Table 23). Table 23 Tax rate in France, 2016 Total tax rate (% profit)

66.6

Labour tax and contributions (% of commercial profits)

51.7

Profit tax (% profit)

7.4

Other taxes (% profit)

7.5

Time (hours per year)

137

Payments (number per year)

8

VAT (%) 20 Source: Official statistics, trade associations, trade press, company research, trade interviews, trade sources, 2016 Figure 20 Breakdown of total tax rate in selected countries: 2013

Source: World Bank’s Ease of Doing Business Reports, 2013

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Impact of tightened tax and regulatory environment on the foodservice industry

Figure 21 Evolution of VAT rate on catering in France

Source: Euromonitor, 2016 According to Euromonitor, over the review period several taxes and laws affecting consumer foodservice were brought into force. Again in 2014, the tax and regulatory environment was tightened. VAT increased from 7 to 19%, increasing the difficulties certain channels were already facing. For example, the self-service cafeterias had to compete strongly with the packaged ready meals which can be purchased in supermarkets and hypermarkets. The tax and regulatory environment is expected to be even stricter over the forecast period, and the industry is concerned about this evolution, stating it as a major threat to a better performance. According to the INSEE, the consumer price index for all types of restaurants increased by 2.8% from 2013 to 2014. In a gloomy economic context, where consumer purchasing power is down, the increase in restaurant prices has not arrived at a convenient time and is likely to negatively impact the industry turnover. A study conducted in 2014 by the consulting firm, Simon-Kucher & Partners, revealed that more than 40% of respondents are unsatisfied with price/quality ratio and 45% noticed a price increase since January 1st 2014. There are multiple reasons for the price increase: many laws came into effect in 2014, for instance the rise in VAT or the new taxes on mass consumption products. The foodservice operators also experienced an increase in their production costs due to the rise in price of raw materials. Finally, to counter the drop in attendance certain foodservice operators are trying to raise their prices in order to maintain their margin. Indeed since 1 January 2014, VAT increased from 7% to 10% (Article 68 of the law n° 2012-1510), which has had an impact on prices. The new taxes on several mass consumption products have taken effect resulting in increased costs. For instance, on the energy drink market with the "red bull tax" applied in January 2015. The coffee, beer and alcohol markets were also affected, with an increase on the "droits d'accises" in December 2013. This provoked a price increase of 14% and a sales decrease of 8% in 2014 according to professional organisations. Operators need to decide whether to reduce their margins that are already tight, or increase prices which is likely to have a negative impact on consumption. In addition to these findings, a number of legal provisions came into effect in 2014 producing significant side effects to the costs bared by operators. The current waste management laws on the sorting, treatment and management of bio-wastes pursuant to EU Regulation 2008/98/CE have increased their levels of requirements by calling for compulsory waste management actions. The Handicap law of 2005 set the deadline for the implementation of accessibility in all “Establishments Receiving the Public” including foodservice outlets, as of 1st January 2015. 33


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In December 2014, a labelling law from EU Directive N° 1169/2011 became fully enforceable applying specific mandatory rules on markings, in order to improve clarity over the nutritional content of products and protecting consumers from misleading claims. Another important novelty is the enactment of the mandatory “Fait-Maison” designation for foodservice operators as part of the new Hamon law. This designation is only applicable to food items that are prepared from raw ingredients inhouse and sets strict penalties regarding fraud. This label might increase competition and pressure for restaurants. Experts say that to produce 100% "Fait-Maison" products, 20-30% more employees are needed. Therefore, foodservice operators would not be able to tighten their margins indefinitely and would be obliged to increase the price for their clients. The laws stated above, when combined with the law forbidding smoking in public areas of 2008, are another blow for foodservice operators. Also, in December 2015, the “loi de finances” came into effect with a very important clause for the French foodservice industry. As of 2018, every businesses including restaurants should be equipped with a certified POS (“Certification NF”). This is due to the estimation that €17 billion are not currently being paid to the State of France because businesses are suspected of committing fraud with different techniques and in particular through their POS. The main challenge resulting from these legislative requirements is the heavy costs incurred in their implementation. Especially for independent players with less financial resources. For the restaurants, another significant consequence of this increase in administrative and legislative rules is the decrease in the inclination to pursue or start a foodservice business. We observed that the total number of foodservice outlets remained stable over 2014. A factor that may help explain the reduction in turnover for the industry as a whole. Table 24 Macro-Economic SWOT - France FRANCE – SWOT

• • •

STRENGTHS Third largest economy in the EU, favorable geographical positioning and a weak Euro support growth. Excellent infrastructure network is conducive of business activity. Relatively strong capacity for innovation helps increase productivity.

• •

WEAKNESSES High total tax rates increase costs for businesses operating in the country. Rigidity of the labour market makes it difficult for companies to adjust workforce to the economic cycle.

OPPORTUNITIES THREATS Rising adoption technology would support • Stagnant economic growth is feeding social innovation in the long term. tensions and political instability. • Monetary stimulus by the European Central Bank • State intervention in the economy would keep could help support domestic and foreign weighing on foreign investment levels. demand. • High levels of unemployment. Source: Official statistics, trade associations, trade press, company research, trade interviews, trade sources, 2016. •

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4.2 France – HoReCa industry 4.2.1

Consumer foodservice, 2009-2014 & forecast

Consumer foodservice performed slightly better in 2014 in current value terms. Consumer’s disaffection was stronger, but this was balanced by a slower decrease in the number of outlets. Table 25 Units, Transactions and Value Sales in Consumer Foodservice 2009-2014 2009 2010 2011 2012 2013 2014 Units 156,415 152,991 154,483 153,094 151,832 151,436 Transactions (mn) 4,421.1 4,308.2 4,338.5 4,277.2 4,127.4 3,985.7 Value sales (€ - mn) current prices 47,084.8 46,893.1 47,677.0 47,720.8 47,697.2 47,991.6 Value sales (€ - mn) constant prices 47,084.8 46,186.8 45,985.6 45,144.2 44,735.2 44,688.7 Source: Official statistics, trade associations, trade press, company research, trade interviews, trade sources, 2016. Whilst the percentage growth of the value current prices is positive between 2009 and 2014, influenced by the effect of price inflation, the true growth is measured by the value constant prices which is -5.1% (Table 26 and Figure 22). Table 26 Units, Transactions and Value Sales in Consumer Foodservice: % Growth 2009-2014 % growth

2013/14

2009-14 CAGR

2009/14 TOTAL

Units

-0.3

-0.6

-3.2

Transactions

-3.4

-2.1

-9.8


0.6

0.4

1.9

Value constant prices -0.1 -1.0 -5.1 Source: Official statistics, trade associations, trade press, company research, trade interviews, trade sources, 2016. Figure 22 Transactions and Value Sales in Consumer Foodservice 2009-2014

Source: Official statistics, trade associations, trade press, company research, trade interviews, trade sources, 2016. As seen earlier in the macro-environment, consumers are still careful with their expenditure whilst eating out. That led to some food operators not passing the VAT increase into their prices, in order to maintain the level of visits. However, 35


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as a whole the market still saw an overall increase in prices which boost overall value sales (Error! Not a valid bookmark self-reference.). Table 27 Forecast Units, Transactions and Value Sales in Consumer Foodservice, 2014-2019

Transactions '000

2014

2015

2016

2017

2018

2019

3'985'720

3'926'601

3'908'246

3'906'511

3'912'537

3'914'757

Δ 20142019 -1.78%

47'992

48'107

48'239

48'487

48'869

49'113

2.34%

Foodservice Value RSP - € mn Current Prices Units/outlets

151'436 150'628 150'338 150'705 151'388 151'755 0.21% Source: Official statistics, trade associations, trade press, company research, trade interviews, trade sources, 2016

4.2.2


The comparison between the number of outlets of independent and chained restaurants with the foodservice value corresponding shows a significant gap of sales revenue between these two types of operators (Figure 23 and Figure 24). In fact, the chained restaurants (7% of total outlets) represent 29% of the total sales revenue in the food service sector. This could be explained by the prime location of the chained operators, a higher number of seats per outlet than independent restaurants, and the assistance of the chain in terms of management skills and marketing expertise. It is important to note that whilst the number of outlets of independent restaurants decreased by 3% since 2009, their revenue encountered a sharp decline of 12% which potentially shows a strong pressure on independent restaurants, potentially leading to a lower margin. Furthermore, with the number of chains increasing in terms of outlets and revenue, this will lead to an even more pressured environment surrounding the independent restaurants. Table 28 Chained vs Independent, Foodservice Value RSP, % breakdown, Year-on-Year Exchange Rates (%)

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

Δ 20052014

Chained 19.20 20.10 21.70 23.10 25.10 26.20 26.70 27.60 28.20 28.60 49% Foodservice Independent 80.80 79.90 78.30 76.90 74.90 73.80 73.30 72.40 71.80 71.40 -12% Foodservice Source: Official statistics, trade associations, trade press, company research, trade interviews, trade sources, 2016

Figure 23 Chained vs. Independent, Foodservice value

Source: Adapted from Euromonitor, 2016. 36


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Table 29 Chained vs Independent | Historic | Units/outlets | % breakdown (%)

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

Variations 2005-2014

Chained 4 4.2 4.5 4.9 5.4 5.9 6.2 6.6 6.9 7.2 80% Foodservice Independent 96 95.8 95.5 95.1 94.6 94.1 93.8 93.4 93.1 92.8 -3% Foodservice Source: Official statistics, trade associations, trade press, company research, trade interviews, trade sources, 2016

Figure 24 Chained vs. Independent, No. of outlets


Franchising

Although independent outlets account for almost three quarters of overall value sales in 2009, the chains are trying hard to develop a ‘local feeling’. They are in the process of changing their image, focusing on the provision of value for money, health, speed, choice, flexibility, “terroir” and creativity. The independents have much more trouble when trying to adapt their offering. The best example is the overall leader: McDonald's Corp (Table 30) and its shift towards a healthier image, promotional operations and discounts. Other notable successful brands were Subway, KFC, Mezzo di Pasta and La Pataterie in 2009. They all offer accessible prices and have developed their network on franchising, enabling a rapid expansion of the brand. Table 30 Company Shares in Chained Consumer Foodservice: % Foodservice Value 2010-2014 % value

2010

2011

2012

2013

2014

McDonald's Corp

34.4

34.2

33.6

33.7

33.5

Quick Restaurants SA

6.8

6.1

6.2

6.2

6.4

Agapes Restauration SA 6.2 6.5 6.3 6.1 5.7 Source: Official statistics, trade associations, trade press, company research, trade interviews, trade sources, 2016 In 2014, there were 5’100 foodservice operators in France managed under a franchise agreement representing 3% of overall outlets across the country, and 47% of the total of chained foodservice outlets. They accounted for 15% of overall sales value, and 14% of total transactions.

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Franchising is largely used by all types of restaurants as a strategy of expansion. Potential franchisees consider this method as a better way to have their own business, with limited costs required for both promotion and generating brand awareness. They also benefit from the management and network experience of the holding brand/company. In recent years, a newer form of franchise, known as “location-gérance” (lease management), has become increasingly popular. 4.2.4


Whilst independent outlets are predominant in every type of foodservice, with the exception of self-service cafeterias (4.49%) and 100% home delivery/takeaways (48%), the number of outlets for every type is decreasing, apart from fastfood independent restaurants which show an increase of 16%. In 2014 cafés/bars continued to close due to the unfavorable economic context. With low purchasing power, people reduced their visits to these establishments, and were careful about their purchases, largely because the price of food and drinks were high. The increase of VAT, from 7% to 10%, in January 2014 reinforced the difficulties of self-service cafeterias in France. What happened over the review period was that consumers preferred other types of foodservice establishments, notably fast food, which are less expensive, more modern and more adapted to eating quickly and on-the-go. In addition, the unfavorable economic environment continued to lead consumers to be cautious with their expenditure regarding eating outside of the home. With the additional three percentage points of VAT, this channel also competed strongly with the packaged ready meals available in supermarkets and hypermarkets, in particular at dinner (Table 31). The independent sector is facing fierce competition from the number of chained outlets increasing sharply in every type of foodservice. As shown in Table 31 and Figure 25, the two types of foodservice that were most impacted between 2009 and 2014 were the Cafés/bars and the self-service cafeterias for the following reasons: In 2014 cafés/bars continued to close due to the unfavorable economic context. With low purchasing power, people reduced their visits to these establishments, and were careful about their purchases, largely because of the high price of food and drinks. Table 31 Consumer Food Service by Type, Chain Vs. Independent, No Of Outlets, 2009 – 2014 Independent

Chain

Total

Independent outlets (%)

Δ no outlets independent 2009 - 2014


Consumer Foodservice 140564 10872 151'436 92.82 -4.96 27.59 by Type 100% Home 1'046 1'118 2'164 48.34 -8.00 20.22 Delivery/Takeaway Cafés/Bars 40'822 698 41'520 98.32 -12.89 61.57 Full-Service Restaurants 83'677 2'619 86'296 96.97 -3.49 28.32 Fast Food 11'000 4'718 15'718 69.98 16.29 29.30 Self-Service Cafeterias 38 809 847 4.49 -15.56 0.87 Street Stalls/Kiosks 3'981 910 4'891 81.39 7.86 36.43 Source: Official statistics, trade associations, trade press, company research, trade interviews, trade sources, 2016

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REPORT #1 – 04.05.2016

Figure 25 Consumer foodservice by type, chain vs. independent, foodservice value, 2009 – 2014

Source: Adapted from Euromonitor, 2016. In the last 5 years’ new taxes and laws affecting consumer foodservice were brought into force. In particular, VAT increased from 7% to 10%, increasing the difficulties some channels were already facing. It was particularly difficult for self-service cafeterias which have now to compete with packaged ready-meals available in supermarkets. The decrease in sales value for independent self-service cafeterias is likely to be due to the fact that they are now competing with offers proposed in supermarkets. The most promising types of independent foodservice in terms of sales value are the street stalls/kiosks and fast-food with a respective growth of 14% and 19% between 2009 and 2014. On the contrary, independent self-service cafeterias, cafés-bars, and 100% home delivery take-away are encountering some difficulties. Related to self-service cafeterias, both independent and chained have reduced their sales value. This is likely to be due to the increased offering of ready-meals available in supermarkets at an advantageous price competing directly with their offers. For the independent cafés-bars, we can observe that the chained cafés-bars have drastically increased their sales value by 37% between 2009 and 2014, exerting strong pressure on independent operators.

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Evolution market size by type of foodservice – 2009-2014

Figure 26 Evolution market size by type of chained foodservice, No. of outlet, 2009-2014

Source: Adapted from Euromonitor, 2016 Figure 27 Evolution market size by type of independent foodservice, No. of outlet, 2009-2014


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Figure 28 Evolution market size by type of independent foodservice, Foodservice value, 2009-2014

Source: Adapted from Euromonitor, 2016 Figure 29 Evolution market size by type of chained foodservice, Foodservice value, 2009-2014


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Consumer foodservice by type, Food vs. Drinks

The split between food and beverage sales confirms the importance of the food sales weight in the consumer foodservice market. In full service restaurants, food generates 67% of all revenue (Figure 30). The café/bar activity compensates the low level of food revenues in fast food, street stalls or self-service as well than the quasi inexistence in 100% home delivery. Figure 30 Split between Food and Drink sales value, 2014



Retail location chained operators are expected to continue to move from inside to outside of malls to reduce rents they have to pay. Apart from stand-alone, lodging is the most valuable location with a 6.5% share of outlets in 2014. But along with the stand alone outlet it is one of the two sectors facing a decrease of their share. The travel sector (+22%) and retail (+6.95%) took over these shares (Table 32 and Table 33). The comparison between the shares in sales values and the share in outlets confirms that the stand alone and the lodging category are facing problems. In fact, lodging experienced difficulty attracting non-customers of their establishments. In addition, tourists opted for cheaper all-inclusive packages, whereby accommodation and meals were included. As consumers have less time to eat and purchase food, they preferred point of sales which allowed them to eat on-thego, or located in retail areas allowing them to purchase other goods at the same time. That trend could explain the growth in sales in travel (+17.7%) and retail (3.3%) locations. In general, travel locations tend to have a large number of branded outlets and very few independents. This is likely to do with the fact that chained outlets are better-positioned to respond to high level requirements of tenders and have more financial means to invest. The number of independent operators is higher in retail locations than in travel locations.

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Table 32 Market Sizes by location of Foodservice, % Foodservice Value, 2009-2014 2009

2010

2011

2012

2013

Δ food service value 2009-2014 -0.24% 4.84% 3.22% -7.40% 17.73%

2014

Standalone 83.44 83.35 83.40 83.35 83.29 83.24 Leisure 1.61 1.62 1.66 1.67 1.69 1.69 Retail 5.24 5.33 5.30 5.37 5.40 5.41 Lodging 7.03 6.96 6.84 6.69 6.58 6.51 Travel 2.67 2.74 2.81 2.92 3.05 3.15 TOTAL 100.00 100.00 100.00 100.00 100.00 100.00 Source: Official statistics, trade associations, trade press, company research, trade interviews, trade sources, 2016 Table 33 Market Sizes by location of Foodservice, No. of Outlets, 2009-2014 2009

2010

2011

2012

2013

2014

2014 (%) 86.60% 1.45% 2.33% 7.86% 1.76% 100%

Δ no outlets 2009-2014 -3.41% 3.28% 6.95% -8.74% 22.27% -3.18%

Standalone 135'768 132'648 133'990 132'771 131'552 131'144 Leisure 2'131 2'098 2'175 2'190 2'194 2'201 Retail 3'293 3'328 3'365 3'413 3'467 3'522 Lodging 13'040 12'680 12'603 12'248 12'036 11'900 Travel 2'182 2'239 2'350 2'471 2'582 2'668 Consumer 156'414 152'993 154'483 153'093 151'831 151'435 Foodservice Source: Official statistics, trade associations, trade press, company research, trade interviews, trade sources, 2016 4.2.8

McDonald’s, METRO and restaurant – Geographical distribution

The three maps below show clearly that France has concentrated areas such as: Paris, the “Côte d’Azur”, Bordeaux and around the Swiss and German border (Figure 31). Figure 31 Geographical distribution across France of Mc Donald’s, METRO warehouses and restaurants

Source: Google Map, METRO webpage and Guide Michelin.

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REPORT #1 – 04.05.2016 FRANCE – OPPORTUNITIES & THREATS

•

•

•

OPPORTUNITIES Consumer foodservice operators are likely to invest further in new outlets located in travel environments, in order to profit from the growing number of people who tend to eat on-the-go. More than 10 major travel development projects, focused on multimodal and ecological themes being implemented by Gares and Connexion (SNCF). These projects are betting on a surge of commuters, and represent an opportunity for new generation of outlets that are positioned on ecological and sustainable concepts. As a result, fast casual dining outlets may benefit the most from these developments. “Loi des finances” with certified POS in every restaurant (restaurants will have to update their systems and will probably rethink their entire business processes to counteract the loss of earnings).

•

•

THREATS The low confidence of consumers, in relation to the improvement of their economy, is one of the major threats to forecast growth. Individuals are likely to remain cautious regarding investment in new businesses; thus reducing the growth potential of developments through franchising. At the same time, consumers will likely continue to be careful with their expenditure when eating out of the home, thus diminishing the performance of all types of location. “Loi de finances” with certified POS by 2018 in every restaurants (less “black”, less margins)

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4.3 France – Technological landscape 4.3.1

Digital consumer

The French telecom sector, one of the largest in Western Europe, is also one of the region’s most advanced. Mobile internet penetration is high and investment in advanced 4G LTE networks is growing. The government has adopted a plan to implement nationwide broadband coverage and address the relatively low next generation broadband penetration. France is one of the largest e-commerce markets in Western Europe. However, a weak economy and high unemployment has affected spending on telecom services. 4.3.2


1. Mobile operators investing in advanced LTE and rural 3G networks 2. Mission “France Très Haut Débit” plan to provide nationwide broadband by 2022 3. One of the largest e-commerce markets in Western Europe 4.3.3

Public connectivity

France had 49.9 million internet users in 2014, an 18.9% expansion since 2009. This also put the country in third position in terms of total internet users in Western Europe in 2014, ahead of all other countries in the region except Germany and the UK. The Internet user base is expected to increase to 58.4 million by 2030, a growth of 14.5%. Current internet penetration: 83.1% (percentage of the population using internet). Expected to reach 91% by 2030. 4.3.4

Online ordering

Online ordering is gaining ground in fast food, becoming a major sales channel in many markets, even overtaking traditional phone or in-person orders for some 100% home delivery/takeaways. This global trend is also observed in France, and has been increasingly used due to the relatively high penetration of internet usage, possession of smartphones and local participation from local chained players. In 100% home delivery/takeaways, online ordering represented 50% of overall value sales in 2014. However, looking at other consumer food service channels, the share of online ordering was still relatively low. The majority of full service restaurants do not offer this service. Even so, as consumers use the internet to obtain information about outlets (environment, prices, menus, phone numbers to book a table, …), chained operators have proved to be attentive to the evolution of this service in other consumer foodservice channels. The share of online ordering is expected to gain ground over the forecast period.

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Penetration of smartphones & internet

Table 34 Penetration rates of Smartphones, Internet, Consumer electronics and Internet retailing, 2010-2015 Categories Possession of Smart Phones

2010

2011

2012

2013

2014

2015

18.10

26.30

39.10

50.30

57.50

61.80

2010

2011

2012

2013

2014

2015

% of households

73.60

75.90

80.00

81.70

83.00

84.40

% of households

66

70

77

78

77

79.20

'000

22'905

27'750

32'800

36'550

42'810

45'479

% of mobile telephone subscriptions

39.60

46.40

52.70

57.70

66.00

69.70

2012 67 17 75 78

2013 67 32 63 93

2014 67 42 50 105

2015 67 46 40 115

Mobile Internet Retailing | Historic | Retail Value RSP excl. Sales Tax | % breakdown Categories Subsector 2011 2012 2013 Internet Retailing Mobile 1.80 4.00 5.60 Internet Retailing Other 98.20 96.00 94.40 Internet Retailing Total France 100 100 100 Source: Adapted from Euromonitor, 2016

2014 7.40 92.60 100

Categories Percentage of Households with Access to Internet Percentage of Households with Access to Broadband Internet Mobile Internet Subscriptions Share of Mobile Internet Subscriptions to Mobile Telephone Subscriptions

% of households

Penetration Rates | Historic | % households Categories Subsector Consumer Electronics Laptops Consumer Electronics Tablets Consumer Electronics Feature Mobile Phones Consumer Electronics Smart Mobile Phones

4.3.6

2015 9.80 90.20 100

New payment methods

In France, regulations oblige companies with more than 25 employees to provide a catering facility. From April 2014, food service vouchers could be reduced with electronic cards that lowered the risk of loss and theft. Mobile phone payment was another payment method to gain ground in 2014. This payment method has the ability to drive revenue. If consumers have a fast and easy experience, they will return more often. In addition, mobile payment provides a platform for an enhanced loyalty programs, potentially lower interchange rates and possibly more secure payments. A mobile wallet enables companies to easily analyse consumer purchasing behavior, and they can in turn use the data to influence consumer behavior. Although mobile payments in consumer food service are still in the early phase of deployment, the industry is moving quickly toward mass adoption. As shown in Figure 32, the 4G coverage in France is still very limited and only concentrated to limited areas. It is interesting to note that the areas were 4G is available are similar to the ones showed previously in Figure 31. This again highlights the fact that France’s power decision is very much centralized.

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Figure 32 Network coverage, 2G, 3G & 4G

Source: http://opensignal.com/coverage-maps/FRANCE 4.3.7


France drops one spot to 26th, despite improving its score. Its performance is remarkably consistent and strong, but not outstanding: the country ranks between 14th (in the Skills pillar) and 25th in eight of the ten pillars. It places much lower when it comes to the quality of the business and innovation environment (45th). Due to market rigidities and some resistance, France has not yet become an innovation-based economy in the same way Switzerland, Germany, and the Nordics have. This is despite widespread useage of ICT and a strong push by the government, who have recently put in place incentives to accelerate this transition. France’s government is one of the most e-ready in the world: the United Nations ranks it 1st for the quality of its online services offerings and 4th in the E-Participation Index, which assesses the availability of online information and participatory tools and services to citizens.

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Figure 33 France - Networked Readiness Index 2015

Source: World Economic Forum, 2015. 48


REPORT #1 – 04.05.2016 FRANCE – SWOT – DIGITAL LANDSCAPE

• •

• •

STRENGTHS Advanced telecom market with high 4G LTE, and video-on-demand penetration. One of the largest e-commerce markets in Western Europe. OPPORTUNITIES Mission “France Très Haut Débit” plan will implement nationwide broadband coverage by 2022, primarily fibre-optic. Rural 3G penetration to increase, with the government setting a deadline of 18 months for operators.

• •

• •

WEAKNESSES Next generation broadband penetration below regional average. Sharp decline in telecom services spending.

THREATS Continued economic weakness may impact operators’ capital investment plans. Persistently high unemployment among low-income consumers could skew telecom among social classes.

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4.4 End-consumers 4.4.1

France’s culture & values through Hofstede variables

Source: http://geert-hofstede.com/france.html What is Hofstede’s cultural dimension theory? Hofstede's cultural dimension theory is a framework for cross-cultural communication, developed by Geert Hofstede. It describes the effects of a society's culture on the values of its members, and how these values relate to behavior, using a structure derived from factor analysis. These results will enable us to better understand the cultural drivers of France’s culture relative to others. POWER DISTANCE With a score of 68, France scores fairly high on Power Distance. Children are raised to be emotionally dependent, to a degree, on their parents which will then be transferred to teachers and later on to superiors. France is therefore a society in which a fair degree of inequality is accepted. Power is not only centralised in companies, and government, but also geographically. Superiors have privileges and are often inaccessible. INDIVIDUALISM France, with a score of 71, is shown to be an individualist society. Parents make their children emotionally independent in regard to groups in which they belong. Meaning that one is only supposed to take care of oneself and one’s family. The combination of high power distance and high individualism could suggest that subordinates normally pay formal respect and show deference to their boss, however behind his/her back they may do the opposite of what they promised to do, as they may think that they know better, yet are not able to express so. MASCULINITY With a score of 43, France has a somewhat Feminine culture. At face value this may be indicated by its famous welfare system (securité sociale), the 35-hour working week, five weeks of holidays per year and its focus on the quality of life. 50


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However French culture in terms of the model has another unique characteristic. The upper class scores Feminine whilst the working class scores Masculine. This characteristic has not been found in any other country. UNCERTAINTY AVOIDANCE At 86, French culture scores high on Uncertainty Avoidance. This is clearly evident in the following: -

The French don’t like surprises. Structure and planning is required. There is a strong need for laws, rules and regulations to structure life. This, however, doesn’t mean that most French citizens will try to follow all these rules, also the case in other Latin countries. Given the high score on Power Distance, which means that power holders have privileges, power holders don’t necessarily feel obliged to follow all the rules which are meant to control the people in the street. At the same time, commoners try to relate to power holders so that they can also claim the exception to the rule.

LONG TERM ORIENTATION France scores highly (63) in this dimension, making it pragmatic. In societies with a pragmatic orientation, people believe that truth depends very much on situation, context and time. They show an ability to adapt traditions easily to changed conditions, a strong propensity to save and invest, thriftiness, and perseverance in achieving results. INDULGENCE France places somewhat in the middle (48) where it concerns Indulgence versus Restraint. This, in combination with a high score on Uncertainty Avoidance, implies that the French are less relaxed and enjoy life less often than is commonly assumed. Indeed, France scores not all that high on the happiness indices of Hofstede’s study. FRENCH FOODSERVICE CONSUMERS Despite rapid societal evolution in past decades, French society remains generally characterized by typical patterns and behaviors. The aspects of conviviality, pleasure and longer time spent to prepare-cook-eat are still highly prevalent in today’s French society. French society is characterized by the taking of three major meals: breakfast, lunch and dinner taken at fixed rather than flexible times. Lunch is considered the most important meal of the day, with an average of 30minutes. Over the years, the amount of time for lunch has been gradually decreasing in France. Whilst in large companies, employees have access to a canteen, for smaller companies, employees have restaurant vouchers that they can use to purchase their lunch. END CONSUMERS – Next step The end-consumer’s digital behavior, needs, and trends will be studied throughout the SBP – METRO Chair of innovation. Please see Student Business Project – METRO Chair for more details.

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5 Country profile – Italy 5.1 Italy – Macro environment ITALY - MACRO ENVIRONMENT KEY POINTS • • • • • • •

Slow growth of the GDP in 2016. Leading to a stagnating economy. The country is divided into a highly industrialized and developed Northern region, and a less-developed remainder of the country, this situation is a barrier to growth. Unemployment continued to fall at a slow pace in 2015, with a lot of long term unemployed people. The economy should strengthen modestly in the medium term, but real GDP will still grow by only about 1.2% per annum. Youth are not sufficiently educated and a large number are unemployed. Aging of the population will be an issue for the future. Whilst the economy is stagnating, the disposal income for households decreases as well as the customer expenditure. However, forecasts show an improvement of the situation for the upcoming years. The sector of hospitality will experience one of the highest growths in expenditure.

Italy, officially the Italian Republic, is a unitary parliamentary republic in Europe (Figure 34). Italy covers an area of 301,338 km2 with 61 million inhabitants, it is the 4th most populous EU member state. Located in the heart of the Mediterranean Sea, Italy shares open land borders with France, Switzerland, Austria, Slovenia, San Marino and Vatican City. Figure 34: Italy in Europe

Source: PRS-Group, 2010

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The economy virtually stagnated in 2011 and contracted in each of the next three years. Weaknesses in domestic demand were a major problem, owing to tight lending conditions and the on-going process of fiscal consolidation. In 2015, real GDP rose by a feeble 0.7% see Table 35. Cheaper oil prices, modest growth in investment and a relatively stable political environment provided most of the support. The slow pace of structural reforms is a drag. Italy's economy has seen a decline in potential economic growth as costs have risen and productivity growth stagnated. These problems are rooted in country specific factors. The country is divided into a highly industrialized and developed Northern part, where approximately 75% of the nation's wealth is produced; and a less-developed, agriculturedependent South. The economic gap between Italy's North and South is especially striking. In the North, thousands of small and mediumsized firms are geared mainly to serve buyers in Germany. These firms specialize in the manufacture of premium finished products that are bought by German multinationals for assembling high-end goods, which include everything from cars to washing machines. In contrast, most industry in the South is controlled and financed by the state. Income in the North is roughly equal to that in Germany, but in Italy's South per capita income is less than that of Portugal. Unemployment in some parts of the South is as high as 40%. The economy grew by just 0.2% in the third quarter of 2015. The economy's considerable excess capacity eliminates almost all upward pressure on prices. Inflation was 0.1% in 2015 and prices will rise by 0.8% in 2016. Unemployment was 11.9% in 2015 and it will fall to 11.3% in 2016. Long-term unemployment contributes to more than half the total. According to OECD, more than 13% of all employees are temporary. The percentage has roughly doubled over the past two decades. A combination of feeble growth in productivity, rigidities in the labor market and wage increases push up labor costs thus reducing competitiveness. To boost employment, officials have introduced a threeyear social contribution exemption for new permanent hires. Labor productivity is low owing to a lack of investment in human capital. Italy spends much less (as a share of GDP) on education than most industrialized states. The proportion of those aged 25-34 that have completed higher studies is just 21%, compared with an average of 39% for all OECD countries. Youth unemployment is particularly high at around 40% for 15-24 year-olds. Italy's population totaled 60.8 million in 2015. This represented an increase of 3.9 million from the figure of 2000. Median age was 45.0 years in 2015 - 4.9 years older than the figure for 2000 and significantly higher than the regional average see Figure 43 . As measured by median age of population, Italy currently has the third oldest population in the world (behind Japan and Germany). The fertility rate has risen slightly in recent years, but at 1.4 births per female it is well below the replacement level. Fertility will remain unchanged over the next 15 years. Virtually all population gains in recent years are due to immigration. More than six million immigrants are presently living in Italy - either legally or illegally. Policy to limit the immigration will not benefit to the economy. The stagnating economy, the economic gap between North and South, the long term unemployment with the rigid labor market and the situation surrounding the youth leaves see very little prospect of growth for the HoReCa industry. Ageing population might provide an opportunity for an educated youth generation of entrepreneurs to start a new generation of restaurant. But it will also affect negatively the economy.

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Table 35: Italy domestic indicators, 2015 Domestic Economic Indicators 2010 2011 2012 2013 2014 2015 27'127.70 27'606.60 27'185.70 26'922.80 26'551.30 26'885.10 Per Capita GDP (€) 1.70 0.60 -2.80 -1.70 -0.40 0.70 Real GDP Growth Rate (%) 1.50 2.70 3.00 1.20 0.20 0.00 Inflation Rate (%) 59'190.10 59'364.70 59'394.20 59'685.20 60'782.70 60'842.70 Population Unemployment rate 8.40 8.40 10.60 12.10 12.70 11.90 (% of economically active population) Source: Official statistics, trade associations, trade press, company research, trade interviews, trade sources, 2016 Figure 35: Total Unemployment Rate Vs. Youth Unemployment Rate In Italy: 2009-2014

Source: Official statistics, trade associations, trade press, company research, trade interviews, trade sources, 2016 Table 36: Age Pyramid 2014-2030

Source: National Statistics/UN 54


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Income and expenditure

According to the national statistics office, about 10% of the Italian population is living in poverty. This figure almost doubled between 2012-2014. Italy's savings ratio is relatively high. In 2015, savings were 10.6% of disposable income and it will dip to 10.2% in 2016. In 2015, consumer expenditure per household totaled €36’866. In 2016, the indicator will rise by 0.7% in real terms (see Table 37 and Table 38). During the period of 2015-2030 communications, hotels and catering and housing are expected to be the categories demonstrating the strongest growth in expenditure. Total consumer expenditure (in real terms) will rise by 1.0% in 2016. In the period 2015-2030, total consumer expenditure will grow at an average annual rate of 1.1%. It will increase by a cumulative value of 18.1% during that period. Whilst the economy is stagnating the disposal income for households decreases as well as the customer expenditure but forecasts show an improvement of the situation for the upcoming years. The sector of hospitality will see one of the highest growths in expenditure Table 37: Disposable income evolution 2010-2015 2010 2011 2012 2013 2014 2015 Disposable income 18'419 18'842 18'314 18'339 18'005 18'137 (Euro per capita) Evolution of the Disposable income 1.00% 2.30% -2.80% 0.13% -1.82% 0.73% per capita Disposable income 43'555 44'028 42'286 41'850 40'625 40'484 (Euro per household) Evolution of the Disposable income 1.00% 1.08% -3.96% -1.03% -2.93% -0.35% per household Source: Official statistics, trade associations, trade press, company research, trade interviews, trade sources, 2016 Table 38: Consumer Expenditure evolution 2010-2015 Categories

2010

2011

2012

2013

2014

2015

Δ 2010-2015

Consumer Expenditure € Per 39'321 39'919 38'967 37'777 36'925 36'866 -6.2% Household Consumer Expenditure on 2'820 2'839 2'841 2'802 2'772 2'786 -1.2% Catering € Per Household Disposable Income 43'555 44'028 42'286 41'850 40'625 40'484 -7.1% € Per Household Source: Official statistics, trade associations, trade press, company research, trade interviews, trade sources, 2016

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Tax and regulations

In Doing Business 2015, Italy ranked a lowly 141st out of 189 countries for ‘Paying Taxes’, demonstrating a challenging tax environment for businesses. Its ranking was below both Spain (76th) and France (95th). According to Eurostat, the shadow economy (income and activities that avoid government regulation or taxation) equated to 21.6% of total GDP in 2012 (latest data available), significantly above the EU-27 average of 14.9%, which suggests that the economy is losing a large amount of tax revenue, estimated to cost the government €300 billion each year (15% of GDP). In a bid to enlarge its output, Italy adopted new guidance set out by the EU to incorporate illicit activities to work out its total GDP in 2014, including narcotics, prostitution and trafficking, which could increase its figures by 1.0-2.0% per annum. Taxes and VAT increased in 2013 and 2014. Very high taxation lowers competitiveness and does not facilitate hiring. That could be really problematic for the restaurant industry who require flexible contracts. Shadow economy in Italy, by its intensity, does no help the country to grow

ITALY – MACRO ENVIRONMENT – SWOT

•

STRENGTHS Fourth largest economy in Western Europe, with strong manufacturing capabilities and a large tourism industry. Provides a certain stability to the economy.

• • • •

• • • • •

OPPORTUNITIES Strength of tourism could help to somewhat revive the economy. Labor market reforms introduced in 2012 may improve competitiveness. Customer expenditure will grow for the forecast period. Migrant crisis might be an opportunity against the aging of the population. Aging of the population could be a chance for young educated entrepreneurs to become owners of new restaurant concepts.

• • • • • • •

WEAKNESSES Second highest debt public ratio in the European Union. High youth unemployment rate and rigid labor market. Shadow economy in Italy, by its intensity, does not help the country to grow. Stagnating economy, economic downturn continues to impose a heavy burden. THREATS High taxes could choke business investment. Costly wages could further weaken the manufacturing sector. Very high taxation lowers competitiveness and does not facilitate hiring. Wider economic gap between North and South might slow down the economy. Low education investment and brain escape will not be favorable to the economy. Long delay in and inadequacy of the structural reforms. Taxes and VAT increased in 2013 and 2014.

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5.2 Italy – HoReCa industry The economic downturn continued to impose a heavy burden on the development of consumer foodservice in Italy, resulting in declines in value, outlets and transactions in 2014 (see Table 39 and Table 40). Italy has not yet succeeded in overcoming the crisis that began in 2008 and this limited the possibility of public and private investment. This factor, along with the long delay in and inadequacy of the structural reforms, the increase in the rate of unemployment, the closure of many companies, a lack of confidence in future economic prospects, high taxation and labor costs, hindered any recovery and development of consumer foodservice. The combination of these factors, even if there was a slight economic improvement in 2014, negatively affected consumer foodservice. This led to a very cautious consumer approach to expenditure, and made customers less likely to spend money on goods and services deemed as non-essential. One result of these circumstances was a downturn in consumer foodservice, as Italians tended to eat out only when they absolutely had to do so, or as a treat. This caused a large number of foodservice outlets to cease their activities, leading to a decline in outlets of 7.2% since 2009. Table 41 show that the forecast for the following year the situation is not getting better with a drop of the number of outlets and transactions, but with an increase of almost 7% of the foodservice value. Table 39: Units, Transactions and Value Sales in Consumer Foodservice 2009-2014 2009 317'079

2010 314525

2011 314325

2012 305121

2013 298522

2014 294316

Transactions (mn)

8'814

8’721

8’613

8’390

8’220

8’096

Value Sales current prices (€ - mn)

76'887

77’337

77’436

76’239

75’222

74’045

Value sales (€ - mn) constant prices

76'887

76'176

74'233

70'927

69'135

67'744

Units

Source: Official statistics, trade associations, trade press, company research, trade interviews, trade sources, 2016 Table 40: Units, Transactions and Value Sales in Consumer Foodservice: % Growth 2009-2014 % Growth

2013/14

2009-14 CAGR

2009/14 TOTAL

Units

-1.4

-1.5

-7.2

Transactions

-1.5

-1.7

-8.1


-1.6

-0.8

-3.7

Value constant prices -2 -2.5 -11.9 Source: Official statistics, trade associations, trade press, company research, trade interviews, trade sources, 2016

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Table 41: Forecast units, transactions and value sales in consumer foodservice, 2010-2014 2014

2015

2016

2017

2018

2019

Δ 20142019 -1.24% 6.79%

8'096'124 8'022'816 7'985'510 7'969'406 7'977'617 7'995'356 Transactions - '000 Foodservice Value RSP 74'045 74'015 74'687 75'842 77'361 79'072 - € mn - Current Prices 294'309 291'683 290'141 288'998 288'545 288'081 -2.12% Units/outlets Source: Official statistics, trade associations, trade press, company research, trade interviews, trade sources, 2016 5.2.1


Independent foodservice operators lost ground in favor of chained operators (Table 42 & Table 43). Independent players had limited financial capabilities, due to the difficulties in acquiring bank loans during the crisis, and a slower ability to react to market threats or opportunities due to the lower liquidity they enjoyed, in comparison with chained operators. Conversely, chained operators benefited greatly from brand awareness, marketing and promotional activities and the technical and management support guaranteed by franchising chains. Several franchising chains became increasingly affordable to a larger target audience of investors, who were looking for accessible and rapid employment solutions. A growing number of Italian and international chained operators invested significant resources in the design, implementation and management of simple and easily identifiable business formats. These operators aimed at a clear specialization in terms of products, which were often of high quality and were combined with local recipes. Food was generally fresh, flavorsome and cooked in sight of the customer. Outlets were carefully designed to create a warm and welcoming environment, as well as providing furniture that was designed to be comfortable and functional. This trend was evident in the development of specific or niche products, such as burgers, mozzarella, rice, soups, pasta, fish, and chicken. Top 3 chained operators are Autogrill, McDonald’s with 23% of share and Vesevo with 4% (Table 44) Table 42 Chain Vs. Independent Outlets, Foodservice Value Rsp, % Breakdown 2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

Δ 20052014

Chained 4.60 4.80 5.00 5.30 5.70 5.90 6.10 6.20 6.40 6.70 46% Foodservice Independent 95.40 95.20 95.00 94.70 94.30 94.10 93.90 93.80 93.60 93.30 -2% Foodservice Source: Official statistics, trade associations, trade press, company research, trade interviews, trade sources, 2016

Table 43 Chained vs Independent| Historic | Units/outlets | % breakdown 2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

Δ 20052014

Chained 1.2 1.2 1.3 1.3 1.4 1.5 1.5 1.6 1.8 2 67% Foodservice Independent 98.8 98.8 98.7 98.7 98.6 98.5 98.5 98.4 98.2 98 -1% Foodservice Source: Official statistics, trade associations, trade press, company research, trade interviews, trade sources, 2016

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Table 44 Company Shares (Global - Historical Owner) | Historic | Foodservice Value RSP | % breakdown 2009

2010

2011

2012

2013

2014

1.Autogrill SpA

27.40

25.90

25.10

24.60

24.00

23.00

2.McDonald's Corp

19.20

20.60

22.80

21.70

22.10

22.80

3.Vesevo SpA 3.60 3.80 3.90 4.30 4.10 4.20 Source: Official statistics, trade associations, trade press, company research, trade interviews, trade sources, 2016 5.2.2

Consumer foodservice by type, Chained vs. Independent, no. of outlets & foodservice value, 2009-2014

Due to the on-going impact of the recession, Italians tends to eat out less frequently especially in independent full-service restaurants. However, this trend has not affected chained players as they offer cheaper alternatives to independent operators. Whilst independent restaurants represent 98% of the total number of outlets (Table 45), they registered a decrease in number of outlets in every type, apart from 100% home/delivery take away and street stalls/kiosks. This shows that those two types of restaurant grew in popularity due to their lower prices. The chained however dramatically increased their presence in Italy. Self-service cafeterias are decreasing in terms of outlets and value, Self-service cafeterias are negatively affected by the lack of a service component, which is valued among consumers. In terms of value (Figure 36), the most promising sector for independent outlets are the street stalls/kiosks and home delivery and take away. Those two segments are positively impacted by consumers’ need for quick and inexpensive meals. American chains of full service restaurant register the highest growth, with chained fast food and chained home delivery and take away, due to the important marketing power of those chains. Table 45 Consumer Food Service, Chained vs. Independent, No of Outlets, 2014 Δ no outlets independent 2009 - 2014


Independent

Chained

Total

% independent outlets

288557

5752

294'309

98.05

-7.74

30.85

Consumer Foodservice by Type 100% Home Delivery/Takeaway Cafés/Bars

17'376.00

400.00

17'776

97.75

2.17

33.33

149'102.00

1'517.00

150'619

98.99

-9.30

14.66

Full-Service Restaurants

103'934.00

807.00

104'741

99.23

-8.41

41.58

9'552.00

2'281.00

11'833

80.72

-0.42

60.97

636.00

645.00

1'281

49.65

-7.42

-5.29

7'957.00

102.00

8'059

98.73

4.61

-2.86

Fast Food Self-Service Cafeterias Street Stalls/Kiosks

Source: Official statistics, trade associations, trade press, company research, trade interviews, trade sources, 2016

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Figure 36: Consumer Food Service, Chained vs. Independent, value, 2009-2014



In 2014, consumer foodservice experienced a decline of 2% overall in value terms. Consumers had an extremely cautious approach to out-of-home spending, as a result of political and economic uncertainty and instability. The growth of foodservice outlets in travel locations was adversely affected by the Italians’ efforts to limit their travel and related expenses, but this was balanced and positively impacted by international tourist flows in Italy. In 2014, these outlets recorded value growth of 2%, and over the review period dealt with the crisis better than other locations, along with retail. Standalone outlets accounted for a 76% (Table 46) share of overall value sales in 2014 and 81% of total outlet numbers in Italy. Indeed, the vast majority of Italian foodservice sales were via standalone. Most standalone establishments were cafés/bars and full-service restaurants. In 2014, standalone outlets experienced a 2% decline in value sales, as a result of the numerous closures that took place due to the recession. Many independent full-service restaurants and cafés/bars closed down as a result of the economic crisis. Non standalone operators generally registered a less severe decline than standalone ones, sustained by travel and retail locations. In fact, travel and tourism, which remained one of the largest markets in Italy, positively impacted travel locations, whilst the Italians’ fondness for shopping drove sales in retail locations in shopping centres. Chained franchising players increased their presence in semi-captive locations, such as motorways and railway stations, shopping centres, historical city centres, airports and multiplex cinemas. Italians were more willing to compromise their quality standards in these locations in favor of increased convenience and comfort. In addition, chains faced less competition in these venues, with independent operators generally unable to afford the high rents charged by shopping centres, airports or cinema operators. Tourism also helped the fortunes of chains, with foreign visitors accounting for a significant percentage of sales for chained operators. The increasing number of retail, travel, and leisure locations was linked to a decline in the share of standalone locations over the review period. This phenomenon is thought to have been caused by the high set up costs of a standalone location, in addition to the intensified competition from other locations, including travel, such as at fuel stations, airports, railway stations, and retail locations, including shopping centres. 60


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In Italy some of the most prevalent locations for consumer foodservice outlets were lodging (the second most prevalent), travel and retail (the third and fourth most prevalent, respectively). Travel was in third place in terms of value sales in 2014. These outlets were mostly cafés/bars, full-service restaurants, and 100% home delivery/take away outlets. In travel locations, foodservice outlets were primarily in service stations on motorways, or in airports and railway stations. Table 46 Market Sizes, % Foodservice Value, 2009-2014 2009

2010

2011

2012

2013

2014

Standalone

77.77

77.27

76.85

76.42

76.15

75.88

Leisure

3.91

4.05

4.12

4.19

4.25

4.30

Retail

3.87

4.03

4.17

4.32

4.44

4.57

Lodging

10.51

10.54

10.55

10.56

10.54

10.49

Travel

3.95

4.12

4.30

4.52

4.61

4.76

TOTAL 100.00 100.00 100.00 100.00 100.00 100.00 Source: Official statistics, trade associations, trade press, company research, trade interviews, trade sources, 2016 Table 47 Market Sizes, Units/outlets, 2009-2014 Categories

2009

2010

2011

2012

2013

2014

%2014

Δ no outlets 2009-2015

Standalone

265'979

261'689

259'731

250'421

243'712

239'179

81%

-10.08%

Leisure

8'275

8'646

8'901

8'838

8'820

8'857

3.25%

7.03%

Retail

9'571

9'900

10'202

10'241

10'340

10'443

3.55%

9.11%

Lodging

22'569

22'899

23'095

22'216

22'017

21'973

7.5%

-2.64%

Travel

10'765

11'440

12'441

13'425

13'632

13'857

4.7%

28.72%

Consumer 317'159 314'574 314'370 305'141 298'521 294'309 100% -7.20% Foodservice Source: Official statistics, trade associations, trade press, company research, trade interviews, trade sources, 2016

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McDonald’s, METRO and Restaurant – Geographical distribution

The three maps are clearly showing correlation between economic wealth and restaurant, McDonald’s and METRO distribution. Northern Italy is clearly showing the strongest concentration of restaurants, whilst the South is less served except for its large cities. Figure 37: Geographical distribution across Italy of Mc Donald’s, METRO warehouses and restaurants

Source : Google map, restaurant.michelin.fr, metro.it

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ITALY – HORECA INDUSTRY – OPPORTUNITIES & THREATS

• • •

• • •

OPPORTUNITIES Greater political stability following government actions in 2014, which help owners to continue through the difficult period. The economic crisis was ruthless for the weak but extremely efficient for the strong players. Chained operators performed notably well when they were specializing in a particular product or with a specific theme. The reason for this success is due to the combination of a need for quick and informal or casual cooking, and the desire for a simple yet welcoming environment. The economic crisis is an opportunity to leverage “Italianism” and NewFormulae. Tourism remains a very good asset for the hospitality industry in the country. Consumers are increasingly looking for quick and inexpensive meal.

•

• • •

THREATS The recession is still negatively impacting the overall performance of consumer foodservice. With an increased number of companies ceasing operations and a level of trust among customers falling, customers are less likely to spend money on goods and services deemed non-essential. Large disparity between North & South. Chained operators are winning more and more market share, to the detriment of independents. Future is not bright for Italy with no forecast growth.

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5.3 Italy – Technological landscape 5.3.1

Digital consumer landscape

The competitive and fairly advanced Italian telecom market has been severely affected by years of economic contraction and fiscal austerity. However, 4G LTE and fibre-broadband investment in underserved areas is expected to rise with improvements in the economy. Mobile players have already seen strong 4G LTE and m-commerce uptake in cities. Businesses are adopting the cloud and e-governance is improving. The North-South digital divide and weak spending pose challenges for telecom growth. 5.3.2

Market overview

Italy is one of the largest telecom markets in Western Europe with fairly advanced infrastructure, especially in the affluent Northern region of the country. However, years of economic turmoil have affected the telecom sector and impacted network investments in the poorer Southern regions. Italy lags behind regional peers in terms of next generation fibre broadband access and internet penetration is the lowest in Western Europe. The government is looking to implement a project to provide high-speed broadband to all citizens by 2020. High unemployment and the North-South digital divide continues to pose challenges for telecom services uptake among low-income households. 5.3.3


1. Operators expand 4G LTE networks, amidst expected economic recovery 2. Government launches strategy to extend nationwide broadband coverage by 2020 3. One of the fastest growing e-commerce markets in Western Europe 5.3.4 -

-

5.3.5 -

Physical infrastructure The Italian telecom sector has been hit hard by the ongoing economic turmoil, which has led to a sharp contraction in telecom investment. However, major telecom networks are expanding their 4G LTE networks. Despite growth in mobile internet subscriptions, penetration rates remain below major regional peers. The Italian cloud computing market has also been growing because of the weak economic environment and business focus on cost optimization. Businesses are increasingly adopting cloud services and are also making infrastructural investments. According to the European Commission, in 2014, 18.0% of Italian internet users used e-government services compared to the 33.0% EU average. This was due to lower digital skills among the population and inadequate IT infrastructure in poorer parts of the country. Figure 40 shows mobile internet coverage, 2G and 3G are now everywhere, but 4G is absent in the country and less present in the South, which is also correlated with the map studied in the preceding chapter. Mobile connectivity M-commerce registered strong growth. Today it represents 25% of retail value (Figure 39). More than one of every two telephone subscriptions is bought with internet access. We can observe a significant growth of smartphone penetration, with 128% of households in 2014 (Figure 38), and a stagnation of tablet and laptop in 2014 with 25% and 43% respectively. Feature mobile phones dropped significantly to 28%.

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Home connectivity

Italy has lower next generation broadband penetration when compared to Western European peers, despite higher fixedbroadband coverage over the 2009-2014 period (Table 48). 75% of households have access to broadband internet. 5.3.7

Online business participation

Italian businesses use technology extensively to operate more efficiently; promote their brands; and engage customers. Italy is one of the largest telecom sectors in Western Europe with fast growth in 4G LTE penetration and m-commerce uptake. Table 48: Internet Penetration 2010

2011

2012

2013

2014

2015

Access to Internet % of households

59

61.6

62.9

68.9

72.6

75.6

Access to Broadband Internet % of households

49

52

55

68

71

74.8

Share of Mobile Internet Subscriptions to Mobile Telephone Subscriptions

24.4

28.1

31.3

38.7

46

52.7

Source: Official statistics, trade associations, trade press, company research, trade interviews, trade sources Figure 38: Penetration Rates % households 140 120 100 Laptops

80

Tablets Feature Mobile Phones

60

Smart Mobile Phones 40 20 0 2012

2013

2014

2015

Source: Official statistics, trade associations, trade press, company research, trade interviews, trade source

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Figure 39: Retail Value % breakdown 120 100 80 60 98

88.5

96

81.3

75.3

18.7

24.7

2014

2015

40 20 0

2 2011

11.5

4 2012

2013 Mobile

Other

Source: Official statistics, trade associations, trade press, company research, trade interviews, trade sources Figure 40: Coverage Maps of Italy, 2016

4G - Coverage

2G, 3G & 4G - Coverage

Source: http://opensignal.com/coverage-maps/ITALY

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Italy is in 55th position. The country’s political and regulatory framework remains its weakest spot, with a very inefficient judicial system, which requires on average more than a thousand days to enforce a contract (131st). Italy’s innovation environment is also hindered by low venture capital availability (127th), the result of a shortage of private capital for investment. Business lacks the support of public investment in advanced technologies (129th) and is penalized by a very high level of taxation (131st). Italy’s performance in terms of skills (37th) and affordability (36th) is similar to that of other high- income countries. Business usage (60th) is below that of most advanced economies, and only 35 percent of the workforce is employed in knowledge-intensive jobs. The government has made huge improvements in delivering online services (23rd) and allowing citizens’ e-participation (19th). However, it is still unable to adequately promote ICT (139th). The government agency formed in 2012 to implement the national digital agenda has largely failed to deliver on its promises. The country’s lag is considerable when it comes to ultra-broadband and next-generation access (NGA) technologies. The new government strategy, passed in March 2015, aims to bridge this gap through €6 billion worth of public investment and an equal amount of private funds.

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Figure Italy – Network Readiness Index 2015

Source : World Economic Forum, 2015 68


REPORT #1 – 04.05.2016 ITALY – DIGITAL CONSUMER SWOT

• •

• •

STRENGTHS One of the largest telecom sectors in Western Europe with fast growth in 4G LTE penetration and m-commerce uptake. One of the regional e-commerce growth leaders along with fast improvement in e-government development. OPPORTUNITIES Government’s broadband strategy will universalize high-speed broadband penetration by 2020. Increased adoption of cloud services can help businesses optimize costs and operate efficiently, amidst a weak economic landscape.

•

• •

WEAKNESSES Low next generation broadband penetration compared to the regional average.

THREATS Any worsening of economic conditions coupled with high unemployment can affect telecom spending and revenues. Lower digital skills and inadequate network investment can widen the digital divide between Northern and Southern Italy.

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6 Country profile - Spain 6.1 Spain – Macro environment SPAIN - MACRO ENVIRONMENT KEY POINTS • • •

•

•

Spain is in its second year of post-crisis economic expansion. Real GDP should increase by 2.8% in 2016 after growth of 3.1% in 2015. An upturn in private investment, improvements in the labor market and a rebound in exports drive the recovery. The economy slowed in the third quarter, growing by just 0.8% (quarteron-quarter). Private final consumption (in real terms) rose by 3.4% in 2015 with growth of 2.5% expected in 2016. Consumer spending will benefit as private sector deleveraging eases and credit constraints for both firms and households is relaxed. However, gross household disposable income (in real terms) is still more than 8% below its peak in 2009. The unemployment rate was 22.2% in 2015 and it will dip to 20.1% in 2016. This will still be one of the highest rates in the EU. Madrid hiked the minimum wage by 0.5% in 2015. The economy created one million new jobs between the beginning of 2014 and mid-2015 and officials promise another three million new jobs between 2015 and 2020. However, a majority of these jobs are likely to be temporary or part-time. Spain experienced a record number of tourists in 2015.

Officially the Kingdom of Spain is a sovereign state largely located on the Iberian Peninsula in Southwestern Europe (Figure 41), with archipelagos in the Atlantic Ocean and Mediterranean Sea, and several small territories on and near the North African coast. Its mainland is bordered to the South and East by the Mediterranean Sea except for a small land boundary with Gibraltar; to the north and Northeast by France, Andorra, and the Bay of Biscay; and to the West and Northwest by Portugal and the Atlantic Ocean. Along with France and Morocco, it is one of only three countries to have both Atlantic and Mediterranean coastlines. Extending to 1,214 km (754 mi), the Portugal–Spain border is the longest uninterrupted border within the European Union. With an area of 505,990 km, Spain is the second largest country in Western Europe and the European Union, and the fourth largest country in Europe. By population, Spain is the sixth largest in Europe and the fifth in the European Union. Figure 41: Spain in Europe

Source: http://www.operationworld.org/germ 70


REPORT #1 – 04.05.2016


Spain has the fourteenth-largest economy by nominal GDP in the world. The Spanish economy is the fifth-largest in the European Union, and the fourth-largest in the Eurozone, based on nominal GDP statistics. Figure 42 Spain domestic indicators, 2015 Domestic Economic Indicators GDP - Euro Per Capita

Real GDP Growth Rate (%) Inflation Rate (%) Total Population - 000

2010

2011

2012

2013

2014

2015

23'252

22'937

22'275

22'070

22'385

23'355

0.00

-1.00

-2.60

-1.70

1.40

3.10

1.80

3.20

2.40

1.40

-0.20

-0.50

46'487

46'667.

46'818

46'728

46'512

46'440

Unemployment rate 19.90 21.40 24.80 26.10 24.50 22.20 (% of economically active population) Source: Official statistics, trade associations, trade press, company research, trade interviews, trade sources, 2016 After enduring six long years of ‘la crisis económica,’ the second half of 2014 and early 2015 finally saw some tentative signs of recovery, with GDP growth picking up, real GDP should increase by 2.8% in 2016 after growth of 3.1% in 2015 (Figure 42). General deflation and lower oil prices in particular have boosted purchasing power. An uptick in private investment, improvements in the labor market and a rebound in exports drive the recovery. Prices fell by 0.5% in 2015 and inflation of 0.8% is predicted for 2016. High levels of public and corporate debt limit an investment revival that would lead to a more balanced recovery. This recovery will lead to higher purchasing power for the household and investment capacities for companies. So we can imagine a positive impact on the restaurant industry. Spain’s population was 46.4 million in 2015 (see Figure 43), up from 40.1 million in 2030. Total population will fall gradually between 2015 and 2030, amounting to 45.6 million in the latter year. Both the country’s workforce and its population are ageing rapidly. In 2015, the median age was 42.3 years, significantly higher than the regional average. By 2030, the median age will reach 49.4 years. In line with the ageing process, Spain’s fertility rate has been steadily dropping for several decades. In 2015, it amounted to just 1.3 births per female – well below the regional average. Aging population will have a clear impact on the economy of the country, for the HoReCa industry it may lead to a shift with the young generation taking the place of the retired restaurant owners. That’s might increase the pace of digitalization of the country.

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Figure 43: Age Pyramid in 2014 and 2030

Source: Official statistics, trade associations, trade press, company research, trade interviews, trade sources, 2016 Figure 44: Unemployment rate evolution

Source: Official statistics, trade associations, trade press, company research, trade interviews, trade sources, 2016 The unemployment rate was 22.2% in 2015 and will dip to 20.1% in 2016. This will remain one of the highest rates in the EU, despite a return to economic growth, the rate of youth unemployment is still above 50%. Officials promise the creation of three million new jobs between 2015 and 2020. A majority, however, will probably be temporary or part-time. The high level of structural unemployment persists and will slow the pace of the recovery. 72


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We will see further that the unemployment issues provide opportunities for the development of a collaborative economy, unfortunately this will keep the young generation, with the highest degree of digital acceptance, with a low purchasing power. 6.1.2

Income & expenditure

Figure 45: Household Disposable income and expenditure evolution 2010-2015 2010

2011

2012

2013

2014

2015

Disposable income 37'955 37'525 35'604 34'719 34'479 34'942 (Euro per household) Evolution of Disposable Income per 1.00% -1.13% -5.12% -2.48% -0.69% 1.34% Household Consumer Expenditure 35390 35074 34219 33276 33595 34336 (Euro per household) Evolution on Consumer Expenditure -0.9% -2.4% -2.8% 1.0% 2.2% Consumer Expenditure on Catering 5089 5076 4840 4711 4753 4834 (Euro per household) Evolution of Consumer Expenditure on -0.2% -4.6% -2.7% 0.9% 1.7% Catering Source: Official statistics, trade associations, trade press, company research, trade interviews, trade sources, 2016 • • •

• •

Household disposable income grew by 1.34% (see Figure 46) but is still more than 8% below its value in 2010. Private consumption expenditure rose by 2.2% in 2015. Consumer spending will ease private sector deleveraging and relaxed credit constraints. However, the impact of this recovery should not be exaggerated, many are still struggling to make ends meet, and it remains very difficult for young Spaniards to become economically independent. Many households, including some that would once have considered themselves to be middle class, are now constantly on the lookout for ways to reduce their spending in order to make ends meets. The saving ratio follows a constant decrease to reach almost 6.5% in 2015 and 6% in 2016. The recovery of consumer expenditure on catering is slower than the total expenditure.

The increase of consumer expenditure will be beneficial for the HoReCa industry, improving their investment capacities and facilitating employment of staff. The young Spaniards who are the most interested by digital services do not yet have enough purchasing power, it might be getting better, but slowly.

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REPORT #1 – 04.05.2016

Figure 46: Annual disposal income, spending and saving ratio


Business environment

To help SMEs, the government has reduced the applicable VAT and beefed up the regime for credit guarantees. Regulations governing the establishment of small retail stores and retail business hours have been relaxed. The Spanish government has implemented some measures during this decade in an attempt to reduce rigidity in the labor market and fight unemployment. However, these reforms remain insufficient and the country’s labor market remains rigid when compared to most other OECD countries. In the GCI 2014, Spain ranked 117th (out of 144 economies) for ‘Flexibility of wage determination’, and 116th for ‘Hiring and firing practices’. Madrid plans to reduce marginal rates on income and lower corporate tax from 30% to 25% in 2016. The government has also taken significant steps to make labor markets more flexible. Maximum lay-off payments have been cut from 44 months to 12 months, whilst other reforms make it easier for companies to hire and fire workers and allow more wage deals to be struck at the factory level. Finally, officials are working to reduce the private sector’s debt overhang, especially for SMEs. On the Global Competitive Index (World Economic Forum) Spain places at 33rd position out of 148 economies, for the past 2 years, it stood at 35th position. In the World Bank’s Ease of Doing Business 2016 report (‘Doing Business 2016’), Spain ranked 33rd out of 189 countries, it maintains the same ranking than the 2014 report. Spain spends far less than other EU countries on research and development and lags behind in product development. Small and medium-sized enterprises (SMEs) have been acutely sensitive to a lending crunch. In 2008-2013, 450,000 SMEs failed according to the Spanish SME Association. These firms employ almost three out of every four workers but roughly twice as many SME loan applications are rejected compared to those of large companies. In 2015 Spain experienced the highest levels of tourism in its history with 60 million visitors. High total tax rate compared to other countries. Especially labor taxes (Figure 47).

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REPORT #1 – 04.05.2016

Figure 47: Tax rate comparison

Source: Official statistics, trade associations, trade press, company research, trade interviews, trade sources, 2016 The new regulations of the government would be a great help for the restaurant industry to increase its turnover, facilitate investment, reduce financial pressures and ease recovery of the industry. However small businesses remain fragile. The affluence of tourists will certainly lead to an improvement of restaurant turnover. The weak quality of education in Spain and the low investment in R&D would really be a problem for the short and long term, as the digitalization of the economy required skilled employees or entrepreneurs to make the shift happen. The numerous bankruptcies of small businesses could be a great opportunity for new concepts of restaurant to emerge.

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REPORT #1 – 04.05.2016 SPAIN – MACRO ENVIRONMENT - SWOT

•

•

•

• • • •

•

STRENGTHS The new regulations put into place by the government would be a great help for the restaurant industry to increase their turnover, facilitate investment, reduce financial pressures, and ease recovery of the industry. However small businesses remain fragile. The increase of consumer expenditure will be beneficial for the HoReCa industry, improving their investment capacities and facilitating employment of staff. The young Spaniards, who are the most interested by digital services, do not yet have enough purchasing power, it might be getting better but slowly. This recovery will lead to higher purchasing power for households and investment capacities for companies. So we can this having a positive impact on the restaurant industry.

OPPORTUNITIES Positive reforms would support economic growth and the expansion of income and spending. The numerous bankruptcies of small businesses could provide a great opportunity for new concepts of restaurant to emerge. The affluence of tourists will certainly lead to an improvement of restaurant turnover. We will see further that the unemployment issue is an opportunity for the development of a collaborative economy, unfortunately this will keep the young generation, with the highest degree of digital acceptance, with a low purchasing power. Aging population will have a clear impact on the economy of the country, for the HoReCa industry it might lead to a shift, with the young generations taking the place of the retired restaurant owners. Which may help in the process of digitalization.

WEAKNESSES Spain’s economic recession had a significant negative impact on income and expenditure, recovery is slow and that does not help the HoReCa industry. Income inequality has risen since the crisis of 2008. Higher total tax rates and a rigid labor market restrain the country’s competitiveness.

• • •

•

• •

THREATS Extremely high unemployment rates, will affect the income growth especially for the low income segment, generating brain drain and fuels social tension. New shocks may affect smaller Spanish firms that are still fragile. The weak quality of education in the Spanish system could, and the low investment in R&D would, provide a problem for the short and long term. As the digitalization of the economy requires skilled employees or entrepreneurs to make the shift happen.

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6.2 Consumer foodservice During 2014, Spain finally managed to emerge from the economic crisis which plagued the country’s financial system and suppressed consumer income between 2008 and 2013. This allowed consumer foodservice to register stabilization in terms of number of outlets, transaction volumes and current value sales (See Tableau 1 & 2). Spanish consumers are slowly regaining their previous purchasing power and returning to their previous social habits of eating in bars and restaurants during lunch and eating out more, at least once during the week. In addition, rising inbound tourism flows are set to give additional impetus to positive growth in consumer foodservice, with the country recording high numbers of arrivals for several years in a row. Between 2009 and 2014, consumer foodservice declined annually by an average of 3% in current value terms, the consequence of Spanish consumers avoiding all unnecessary expenses and reducing their visits to bars and restaurants. In addition, sales were undermined by promotions such as ‘Caña a €1’ (a small beer for €1) and the price war started between chained operators, such as Cervecería 100 Montaditos, and other players competing for consumer preference. We also observe a drop of almost 10% in the number of outlets, which might be due to the high levels of bankruptcies during the crisis. Figure 48 details a drop in number of transactions and in revenue, that might be a clear sign of the crisis, Spaniards were no longer willing to visit restaurants as often. And when they visit one of them they spend less than usual. Tableau 3 & Tableau 4 show a constant growth of all indicators until 2019, which might be due to the favorable macro environment described in the precedent chapter. This drop significantly impacts the restaurant industry, restraining their investment capabilities and capacity to hire staff. They are now slowly recovering. The numerous bankruptcies might lead to new opportunities for chained operators and entrepreneurs to create new outlets. The conjuncture is now favorable for the restaurant industry, which should register positive performance on a regular basis according to the forecast. Which will overcome many barriers to free their investment capacities. Tableau 1: Consumer expenditure on consumer foodservice, 2009-2014 2009

2010

2011

2012

2013

2014

Units 321103 319108 308610 302291 295932 290002 Transactions (mn) 11667 11572 11192 10638 10361 10182 EUR million current prices 88251 87371 84188 78387 75963 75188 EUR million constant prices 88251 85829 80138 72837 69595 68792 Source: Official statistics, trade associations, trade press, company research, store checks, trade interviews, 2016

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Tableau 2: Transactions and Value Sales in Consumer Foodservice: % Growth 2009-2014 2009-14 2009/14 CAGR TOTAL Units -2 -2 -9.7 Transactions -1.7 -2.7 -12.7 Value current prices -1 -3.2 -14.8 Value constant prices -1.2 -4.9 -22 Source: Official statistics, trade associations, trade press, company research, store checks, trade interviews, 2016 % Growth

2013/14

Figure 48 Consumer expenditure on consumer foodservice, 2009-2014

Source: Adapted from Euromonitor, 2016. Tableau 3: Forecast Units, Transactions and Value Sales in Consumer Foodservice, 2014-2019 2014

2015

2016

2017

2018

2019

Units 290002 289080 289556 292891 297367 302515 Transactions (mn) 10182 10201 10277 10475 10708 10969 EUR million 75188 75715 76754 78274 80135 82290 Source: Official statistics, trade associations, trade press, company research, trade interviews, trade sources, 2016

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Tableau 4: 4 Units, Transactions and Value Sales in Consumer Foodservice: % Growth 2014-2019 2014-19 2014/19 CAGR TOTAL Units 1.7 0.8 4.3 Transactions 2.4 1.5 7.7 Constant value 2.7 1.8 9.4 Source: Official statistics, trade associations, trade press, company research, trade interviews, trade sources, 2016 % Growth

6.2.1

2014/15

Chain vs. Independent

Independent operators represented more than 90% of consumer foodservice value sales in 2014. Nevertheless, the market share of chained consumer foodservice increased slightly over the course of the review period. See Tableau 5 The continued poor performance of independent outlets is the direct consequence of the fast expansion of chained outlets. Chained consumer foodservice operators increased their transaction volume in 2014 thanks to massive promotions and lower prices, which are more difficult to sustain for independent outlets. On the other hand, some independent players have decided to shift towards the franchising business model, in order to ensure that they retain the financial and logistical support of a large-scale consumer foodservice group. Growing consumption is set to help independent players to compete against chained consumer foodservice operators, with no end to the expansion of the outlet networks of the leading chained players in sight. Chained operators showed great dynamism in consumer foodservice in Spain during the review period, and in 2014 these companies undertook massive expansion plans under franchising systems. In 2009, only 2% of consumer foodservice outlets in Spain were owned by chained companies, a percentage which had risen to 3% after the 3% growth registered in 2014. Independents in 2014 represented 93% of the Spanish consumer foodservice market in value terms and 97% in terms of the number of outlets. The popularity of franchising continues to grow in Spain, both as a way of increasing revenues and improving brand loyalty. Some independent players have decided to shift towards the franchising business model in order to ensure that they retain the financial and logistical support of a large-scale consumer foodservice group. Spanish operators represent more than 80% of chained consumer foodservice and these local players demonstrated more dynamism than international operators in terms of new outlet openings towards the end of the review period. Independent players are expected to continue suffering from strong price competition and the expansion plans of chained operators. Tableau 6 shows that chains are mainly present in the Self-service cafeteria, Fast food and 100% Home Delivery/Takeaway. Tableau 7 demonstrates that the top 3 brands in terms of market share are Mc Donald’s, Burger King and Telepizza. The chain operators are threatening independent restaurants in terms of market share and it’s going to last. Independents register poor performance due to their low levels of communication power, price competition and chained expansion. The franchising model become increasingly appealing for independent restaurants, after it strengthened the power of chained consumer foodservice. Independent restaurants compete with American chains, which are highly effective in all their processes

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Tableau 5: Chain vs. independent, foodservice value RSP, outlets, % breakdown Market sizes, value € bn % breakdown

2009

2010

2011

2012

2013

2014

Chained Foodservice

5.8%

5.7%

6.0%

6.5%

6.7%

7.1%

Independent Foodservice

94.2%

94.3%

94.0%

93.5%

93.3%

92.9%

2.2%

2.2%

2.3%

2.5%

2.6%

2.8%

Market sizes, outlets % breakdown Chained Consumer Foodservice

Independent Consumer Foodservice 97.8% 97.8% 97.7% 97.5% 97.4% 97.2% Source: Official statistics, trade associations, trade press, company research, trade interviews, trade sources, 2016 Tableau 6: Consumer foodservice, independent vs. chains, no of outlets, 2014 % Independent 100% Home Delivery/Takeaway 275 1'063 1'338 79% 21% Cafés/Bars 208'648 2'183 210'831 1% 99% Full-Service Restaurants 69'383 1'243 70'626 2% 98% Fast Food 2'337 2'865 5'202 55% 45% Self-Service Cafeterias 18 159 177 90% 10% Street Stalls/Kiosks 1'304 524 1'828 29% 71% Pizza Consumer Foodservice 6'293 1'000 7'293 14% 86% Consumer Foodservice 281'965 8'037 290'002 3% 97% Source: Official statistics, trade associations, trade press, company research, trade interviews, trade sources, 2016 Independent

Chained

Total

% Chained

Tableau 7: Chain consumer foodservice company shares, % value, 2009-2014 % Value

2010

2011

2012

2013

2014

McDonald's Corp

17.2

18.2

18.7

18.7

19.2

-

-

-

-

10.6

Restaurant Brands International Inc.

Telepizza SAU 7.3 7.2 6.9 6.9 6.6 Source: Official statistics, trade associations, trade press, company research, trade interviews, trade sources, 2016 6.2.2


Some consumer foodservice concepts became more popular and expanded in Spain during 2014. Breweries and burger fast food were among these. Independent players, Cervecería 100 Montaditos and La Sureña, drove the popularity of breweries, buoyed by the rising popularity of the concept of freshly brewed beer combined with fast food and Spanish tapas. Offering high-quality burgers, TGB “the Good Burger” rode the wave of gourmet burgers which had already emerged in the largest Spanish cities earlier in the review period. Tableau 8 shows that the Spanish food service market is mainly composed of Café/Bars and Full-Service Restaurants. They both are declining in terms of number of outlets and value, as well as Self-service Cafeteria, due to the crisis during the review period.

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Even during the crisis, the restaurant type mainly held by chains continued to grow 100%. Home Delivery/Takeaway rose by 14% and fast food by 5% in term of outlets. It means that the crisis didn’t stop their project of expansion and maybe it helped them to grow, as independents might have chosen the franchising option to reduce the risk. On Figure 49 the big drop observed in self-service cafeteria’s from 2009 to 2014 is due to the inability of operators to face the competition of café/Bar and fast food on travel location. The growth of home delivery is due to the increasing habit to eat at home. The Street Stalls/Kiosk are also growing because of the increased interest of Spaniards relating to food trucks and kiosk’s inside shopping malls. For the fast food segment it’s the “premiumisation” that lead growth. Opportunities for independent’s in terms of home delivery and kiosk and premium fast-food is still present in the Spanish market. Chains are winning market shares of independent restaurants especially in the area where rationalization is easier which are Fast-Food, Home delivery. Tableau 8: Consumer foodservice by type, no of outlet, 2009-2014

100% Home Delivery/Takeaway Cafés/Bars Full-Service Restaurants Fast Food Self-Service Cafeterias Street Stalls/Kiosks Consumer Foodservice

% Growth 09-14 TOTAL

2009

2010

2011

2012

2013

2014

% 2014

1'176

1'144

1'192

1'189

1'254

1'338

0.5%

14%

237'888

236'793

229'053

223'538

217'359

210'831

72.7%

-11%

75'142

74'347

71'342

70'538

70'235

70'626

24.4%

-6%

4'975

4'898

4'959

4'856

4'974

5'202

1.8%

5%

309

286

291

253

208

177

0.1%

-43%

1'613

1'640

1'773

1'917

1'902

1'828

0.6%

13%

321'103

319'108

308'610

302'291

295'932

290'002

100%

-10%


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Figure 49: Consumer foodservice by type, no. of outlet, evolution 2009-2014 % growth 2009-14 TOTAL

13%

0.60%

0.10%

5%

-43%

-6%

-11%

0.50%

1.80%

14%

24.40%

72.70%

2014 in %


Consumer foodservice by location

Consumer foodservice through retail drove the bulk of new chained outlet openings in 2014, Tableau 9 & Figure 50 show that retail experienced the lowest decrease in terms of value and the number of outlets. Consumer foodservice through retail was the most dynamic location in 2014.Consumer foodservice through leisure is set to be the most dynamic location over the forecast period. Standalone locations are the primary location of foodservice outlets followed by Retail and Leisure locations. From 2009 the industry observed a contraction in terms of the number of outlets and value. Especially for standalone, Leisure and Lodging locations in terms of outlet and Travel, Standalone and Lodging location in term of value. Opportunities for niche growth could be in retail and leisure locations.

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Tableau 9: Consumer foodservice by location, no. of outlet, 2009-2014

2009

2010

2011

2012

2013

2014

% 2014

% Growth 2009-14 TOTAL

Consumer 321'103 319'109 308'607 302'291 295'933 290'001 100% -10% Foodservice Standalone 242'852 241'117 233'038 228'159 223'084 218'643 75% -10% Leisure 22'041 21'935 21'269 20'892 20'377 19'668 7% -11% Retail 25'888 25'741 24'959 24'669 24'295 23'947 8% -7% Lodging 16'643 16'497 15'939 15'475 15'304 15'024 5% -10% Travel 13'679 13'819 13'402 13'096 12'873 12'719 4% -7% Source: Official statistics, trade associations, trade press, company research, trade interviews, trade sources, 2016 Figure 50: Consumer foodservice by location, foodservice value RSP & Outlets, evolution 2009-2014


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McDonald’s, METRO, Restaurant – Geographical distribution

We can observe congruency between the three maps on Figure 51. Business is concentrated on the coast, mainly to the North and the East. Madrid and Valladolid are the main spots in the centre. It corresponds well as the touristic areas. It’s also correlated to the distribution of GDP distribution, which is mainly produced in the North of the country and Madrid. Other areas are less concentrated in terms of population and restaurants. Figure 51: Geographical distribution across Italy of McDonald’s, METRO warehouses and restaurants

Source: Guide Michelin, https://www.makro.es/, https://maps.google.com/

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SPAIN – HORECA INDUSTRY – OPPORTUNITIES & THREATS

•

• • •

• • •

OPPORTUNITIES Spanish consumers are slowly regaining their previous purchasing power and returning to their previous social habits of eating in bars and restaurants. 2015 will be the year for growth in the HoReCa industry. Number of outlets and value sale are expected to grow. So it might increase the investment and employment capabilities of restaurant owners. Rising inbound tourism flows will reinforce the positive conjuncture for the restaurant industry. Fast Food and Street Stalls/Kiosks are showing growth in both value and number of outlets, as they better suit consumers with lower income with their attractive prices. 100% home delivery/Take away also grow in term of outlets but not in value. Opportunities for independents in home delivery and kiosk and premium fast-food are still present in the Spanish market. Opportunities for niche growth could be in retail and leisure locations. The numerous bankruptcies may lead to new opportunities for chained operators and entrepreneurs to create new outlets.

• •

• • • •

• •

THREATS Poor performance of independent operators due to the marketing power of chains and it’s going to last. Rising unit prices combined with the remaining high rate of unemployment are set to be the main factors preventing faster growth in consumer foodservice. The numerous bankruptcies might lead to new opportunities for chained operators and entrepreneurs to create new outlets. Franchising model becomes increasingly appealing for independent restaurants after strengthening the power of chained consumer foodservice. Independent restaurants compete with American chains, which are highly effective in all their processes. Chains are eating the market share of independents, especially in the areas where rationalization is easier, these are Fast-Food and Home delivery service. Independent operators are still weakened by the crisis that lowered their capabilities to grow and improved their probability of failure. Local chain operators show more dynamism than international chain operators, more adapted to local tastes.

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6.3 Spain – Technological landscape 6.3.1

Infrastructure

Next generation broadband access has grown following the adoption of the Digital Agenda in 2013, but regional disparities in broadband connectivity continue to exist. We can also see these disparities Figure 52 with 4G coverage. Spain partnered with Alcatel-Lucent to conduct trials to achieve data speeds of a maximum 400Gb/s over the optical fiber network between Madrid and Zaragoza. Vodafone Spain has introduced LTE-Advanced (LTE-A) technology in Barcelona, Valencia and Madrid with download speeds of up to 300Mb/s. IBM has also invested in cloud centers that will provide services to both SMEs and large organizations. Spanish businesses have witnessed the relatively slow adoption of cloud computing, despite the benefits of cost optimization that cloud services offer to small and medium enterprises (SMEs). Risk-aversion and concerns about data security have affected the uptake of cloud services. Spain was ranked 4th in the world out of 143 surveyed countries for e-government development. (Global information technology report 2015, World Economic Forum) The 4G coverage is concentrated in the business areas observed in the food service section, on the coast and in and around its capital, Madrid. Spaniards are very well equipped in terms of telecommunication infrastructure, digital divide inside the country is still present. They have access to all services provide by the internet. Local Cloud is available for companies so they can take advantage of it. Figure 52 Coverage Maps of Spain, 2016

Source: http://opensignal.com/ 6.3.2

Internet

One of the top ten markets in Western Europe in terms of mobile Internet penetration. There were 13.2 million broadband subscribers in Spain in 2015, an increase of 24% since 2010. The number of broadband subscribers is forecast to grow to 15.6 million by 2030, an increase of 22.2% from 2015. 100% of the country is covered by internet and internet mobile and almost 80% of the population use the Internet. Approximately 75% of Spaniards who owned a mobile have internet on it. See Table 49

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Mobile

Despite their limited purchasing power, even Spanish consumers on relatively low incomes have been keen adopters of smartphones. Many perceive them as an investment that will help to save them money in the long run (by using chat apps like WhatsApp, rather than SMS, for example). The fact that smartphones can now be purchased for less than €100 and the spread of high-speed 4G (fourth generation) mobile networks have played a role in this increase. Smartphones have also facilitated a boom in collaborative consumption, with a growing demand for apps, such as carsharing app BlaBlaCar. Airbnb is popular with those seeking accommodation. Local collaborative consumption start-ups include crowdfunding website Lanzanos, time bank Comunitats and Uolala, a social network that aims to connect those with similar interests. Spain’s household mobile phone penetration stood at 96.6% in 2015 compared to 94.6% in 2010. By 2030, the penetration rate is expected to reach 98.1%. The country’s mobile market is at a saturated state. Spain occupied 8th position in terms of its mobile internet penetration in Western Europe as of 2014. Growing 4G LTE penetration and a wider uptake of m-commerce and mobile gaming have driven the mobile revenue share higher. Mobile internet subscription reaches 37million. The number of mobile subscriptions remained stable for the past 5 years, but the Mobile internet subscription grew by 242% over the same period. Now 73% of mobile subscriptions include a mobile internet subscription. Since 2014 100% of the population is covered by the mobile cellular network. Spain is ranked 34th out of 143 countries according to the Network Readiness index 2015 (World Economic Forum). 6.3.4

Tablet

38% of households own a tablet, which represents a growth of 217% since 2012 and 27% since 2014. 6.3.5

Internet-retailing

Internet retailing grows by 11% in current value terms during 2015 to reach €6.4 billion, Mobile internet retailing now represents 10% of the total value, it corresponds to 260% growth for the past 5 years. As internet connections within Spain increase, internet sales also grow with it. There is a consensus within the industry that the extraordinary performance of the category’s leader, Amazon.com, was one of the main reasons behind the strong growth seen in 2015. Food and drink products are the most popular product type sold via internet retailing in Spain. However, the importance of internet retailing within grocery retailing still has room to grow. It is clear that despite the high unemployment figures, those that do have a job are increasingly leading busy lifestyles. Time-starved families, where both parents work outside of the home, are increasingly turning to internet retailing due to the convenience and time-saving advantages it offers, which is boosting the category’s performance. The importance of m-commerce is also growing in Spain. According to the latest report published by Telefonica Foundation at the beginning of 2015, Spain is one of the European countries with the highest penetration of smartphones and tablets. In particular, 80% of the mobile phones being used in the country are smartphones. This high penetration benefits the performance of m-commerce. Over the review period most players within internet retailing developed an App for mobile shopping. Although m-commerce is mainly processed through tablets in Spain, because the size of the screen is larger, the latest mobile phones include larger screens which may change this dynamic in the near future. The average profile of an mcommerce user is a young full-time working professional, who likes to browse and shop whilst performing another activity, such as watching television. In 2014, 30% of businesses placed orders online compared to 21.3% in 2009. The proportion of businesses receiving orders online also increased from 11.8% in 2009 to 20.0% in 2014. 87


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Price-comparison websites have grown in popularity; full-service restaurant meals have been replaced by many with fast food or home cooking, and the collaborative economy is growing fast. Table 49: Internet penetration 2010

2011

2012

2013

2014

2015

Growth period

Growth 20142015

Percentage of Population Using The 65.80 67.60 69.80 71.60 76.20 78.40 19% 3% Internet - % of population Share of Mobile Internet Subscriptions to Mobile Telephone 21.40 32.90 48.90 62.50 71.40 73.40 243% 3% Subscriptions - % of mobile telephone subscriptions Percentage of Population Covered by a Mobile-Cellular Network - % of 99.80 99.80 99.80 99.80 100.00 100.00 population Source: Official statistics, trade associations, trade press, company research, trade interviews, trade sources, 2016 Figure 53: Penetration Rates % households


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Figure 54: Retail Value % breakdown

Source: Adapted from Euromonitor, 2016 Figure 55: Internet subscription evolution 2010-2015

Source: Adapted from Euromonitor, 2016.

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Network Readiness Index (NRI)

Other studies conducted by the World Economic Forum (Figure 56) show that Spain perform particularly well in affordability and individual usage. Meaning that the end-consumers are really well equipped by digital technology and they use it in an extensive way. But the lowest scores are in Business usage, Economic impact and Law and regulations, it means that business are not really catching up with digital technology. It might have a gap between customer expectations and what businesses provide in terms of digital technology, but also laws do not follow the pace of evolution with up-to-date regulations. Figure 56: Spain Network Readiness Index, Performance Overview

Source: The Global Information Technology Report 2015 6.3.7 6.3.7.1

Micro-environment: Technology in the foodservice industry Digital consumer behavior

Internet and mobile devices are already playing a major role within consumer foodservice in Spain. The complementation of the product ranges on offer in some outlets with online services, is a strategy that has been adopted by both chained and independent operators. Digital technology is increasingly present in bars and restaurants. Wi-Fi connected tablets are now used to take orders and manage table service, while Wi-Fi availability is a determining factor in the choice of bars and cafés for many Spaniards. Internet and mobile devices invaded consumer foodservice towards the end of the review period, increasingly becoming a strategic factor in determining the success of a brand or outlet. Spaniards are becoming increasingly accustomed to consulting websites such as TripAdvisor before visiting a restaurant and they are increasingly booking tables online. 90


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100% home delivery/takeaway is the channel that took most advantage of new technologies during 2014, boosting online ordering and new services. Third-party internet home delivery websites have become a major ally for 100% home delivery/takeaway operators, as well as full-service restaurants that include home delivery and takeaway in their services. Just-Eat.es and LaNeveraRoja.com are the most popular websites for online orders in Spain, whilst Resto-in.com serves full-service restaurants. In 2014, online direct orders represented 2% of the entire Spanish consumer foodservice market. This percentage rose to 7% in the case of 100% home delivery/take away. According to FEHR, the Spanish foodservice association, in 2014, 20% of restaurant bookings were placed online, whilst 40% of them were made through a mobile device, according to an ElTenedor.com survey. Telepizza is one of the most dynamic companies making use of these new technologies, and in 2014 it launched innovative services such as Click & Pizza, a button connected to the consumer’s Telepizza online account that, when pressed, immediately orders the consumer’s favorite pizza according to what was registered in the consumer’s account. Consumers are also making substantial use of internet and mobile devices when eating out. The internet is the ideal instrument for choosing a restaurant, consulting them about opening hours, booking a table, obtaining discounts and offering feedback after visiting the outlet. According to FEHR, around 76% of Spaniards consult online opinions before visiting a restaurant. TripAdvisor, 11870.com and El Tenedor are the most popular websites for obtaining opinions and leaving comments. During the 5 year period, the bonds between new communication technologies and consumer foodservice are expected to strengthen further. Online direct ordering is expected to represent 5% of the total consumer foodservice value sales by 2019. Higher percentages are expected to be registered within 100% home delivery/take away, full-service restaurants and fast food. Within these categories, online ordering is expected to represent 20%, 9% and 7% of each of the categories’ respective value sales in 2019. Online services are expected to become a fundamental part of the commercial strategy of both chained and independent consumer foodservice operators. Gathering online opinions is set to become a fundamental step in the management of the consumer foodservice and the main indicators of positive and negative features of the brand or outlet. In 2015, Google is expected to enter this area, after it began collaborating with OpenTable.com in 2014. Users will be able to book a table directly using Google Maps. The service is currently available only in the US and it is expected to be launched in Spain at some point during the next 5 years. Spaniards are becoming more and more attentive and demanding in relation to food, this is boosting demand for and expanding the offer of high-quality and super healthy food. This trend is most visible in packaged food, but it is also prevalent in consumer foodservice. Independent consumer foodservice has shown itself to be much more sensitive and receptive to health and wellness issues when compared to chained brands. Two main tendencies can be determined and defined in this respect: healthy/organic; and gourmet. END CONSUMERS – Next step The end-consumer’s digital behavior, needs, and trends will be studied throughout the SBP – METRO Chair of innovation. Please see Student Business Project – METRO Chair for more details.

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SPAIN – DIGITAL LANDSCAPE – SWOT

•

• • • • • • • • •

OPPORTUNITIES First class infrastructure network supports business activity, one of the top 5 telecom markets in Europe, with growing 4G LTE and next generation broadband coverage. Smartphone adoption, Tablet adoption, Mobile internet subscription and retailing are constantly growing. As internet connections within Spain grow, so do internet sales. Economic recovery can bridge the digital divide in regions underserved by broadband. The bonds between new communication technologies and consumer foodservice are expected to strengthen further. Online services are expected to become a fundamental part of commercial strategy. Online direct ordering is expected to represent 5% of the total consumer foodservice value sales by 2019. 100% home delivery/takeaway is the channel that best capitalized on new technologies. Digital technology is increasingly present in bars and restaurants. Google is expected to enter this market.

• • • •

THREATS Slow adoption of cloud computing. Persistence of regional disparity in fixed-broadband penetration, despite digital agenda 2013. Low consumer penetration among less affluent households. Business are slow to adopt digital technologies.

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7 Country profile - Japan To be started in May.

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8 Technological context and trends In order to understand the technological context, we are going to study the evolution of Information & Communication Technology (ICT) in relation to the HoReCa Industry.

8.1 Definition and context Technology became the biggest story in business throughout the course of the year, it now influences everyone’s lives and all enterprises by creating numerous new possibilities whilst removing constraints. This era started during the 1980s and is ongoing. The Digital Revolution also marks the beginning of the Information Era. The Digital Revolution is sometimes also referred to as the Third Industrial Revolution. The technology wave has been building for a long time, however it has accelerated in recent years. The past decade has seen a remarkable run of progress in digital tech (see Figure 57). It is important to add: 2004 Web 2.0, 2007 iPhone, 2010 iPad, 2010 Cloud computing. With this new technology, companies and individuals are both able to do things that would have been impossible a decade ago.

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Figure 57: Successive waves of innovation

Source: McKinsey Global Institute Analysis

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METRO CHAIR OF INNOVATION 8.1.1 8.1.1.1

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Social, Mobile, Analytics, Cloud (SMAC) SMAC

SMAC (social, mobile, analytics and cloud) is the concept that four technologies are currently driving business innovation. Today's business transformation is being driven by a group of technologies collectively and broadly referred to as SMAC (social, mobile, analytics and cloud computing). Within the SMAC classification, the Internet of Things, cognitive computing and robotics process automation (RPA) are expected to significantly change how companies operate. SMAC creates an ecosystem that allows a business to improve its operations whilst getting closer to their customer with minimal overheads and maximum reach. The proliferation of structured and unstructured data that is being created by mobile devices, sensors, social media, loyalty card programs and website browsing is creating new business models built upon customer-generated data. None of the four technologies can be an afterthought as it's the synergy created by social, mobile, analytics and cloud working together, which creates a competitive advantage. Social media has provided businesses with new ways to reach and interact with customers. Mobile technologies have changed the way people communicate, shop and work. Analytics allow businesses to understand how, when and where people consume certain goods and services Cloud computing provides a new way to access technology and the data a business needs to quickly respond to changing markets and solve business problems. While each of the four technologies can impact a business individually, their convergence is proving to be a disruptive force that is creating entirely new business models for service providers (techtarget.com). 8.1.1.2

Cloud

A style of computing in which scalable and elastic IT-enabled capabilities are delivered as a service using Internet technologies “in the cloud.” It also refers to using software that is owned, delivered, and managed remotely by a third party on a pay-for-use basis or as a subscription (a.k.a. “software as a service” or “SaaS”). 8.1.1.3

Social media

Any technology that facilitates social interactions and is enabled by a communications capability, such as the Internet or a mobile device. Examples are social software (e.g., wikis, blogs, social networks) and communication capabilities (e.g., Web conferencing) that are targeted at and enable social interactions. 8.1.1.4

Big data

High-volume, high-velocity, and high-variety information assets (both “structured” data in traditional databases and “unstructured” data in text files and other documents) that demand cost-effective, innovative forms of information processing for enhanced insight and decision making. 8.1.1.5

Mobile device access and management

The deployment of mobile devices like smartphones and tablets, or the creation of software applications (“apps”) for these mobile devices for customers, partners, suppliers, and/or employees. Mobile also refers to mobile device management (MDM) software that provides the following functions: software distribution, policy management, inventory management, security management, and service management for smartphones and tablets. 8.1.1.6

Information communication technology (ICT):

Applied computer systems - both hardware and software, and often including networking and telecommunications, usually in the context of a business or other enterprise. (foldoc.org) 8.1.1.7

The digital revolution

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Refers to the advancement of technology from analog electronic and mechanical devices to the digital technology available today. 8.1.1.8

Digital business transformation

This is Organizational Change through the use of Digital Technologies to materially Improve Performance. Digital transformation closes the gap between what digital customers already expect and what analog businesses actually deliver. (Marchand and Wade, 2014) 8.1.1.9

E-business

Is an English expression denoting all the technical, business, administrative and processes of an individual, a company or organization, leveraging the capabilities and resources of telematics networks, the Internet and / or the web. E-business is fundamentally based on the exchange and management throughout the information value chain dematerialized and conveyed on telematics networks. The e-business includes ecommerce. Facilitating access to information, data exchange and interaction between the actors, the e-business naturally raises issues of authentication, electronic securing and validating information as users of such information. (e-marketing.fr) 8.1.2

Application service provider

On the back end, software programming tools and Internet based services make it easy to launch new global software powered startups in many industries, without the need to invest in new infrastructure and train new employees. Today innovation technology opens a lot of opportunities, we are able to see the growth of many companies using these new capabilities. Especially application service providers. An Application Service Provider (ASP) is a business providing computer-based services to customers over a network; such as access to a particular software application (such as customer relationship management). Digital ecosystem became more and more vast and complex and address almost all business processes (See Figure 58 & Figure 59)

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Figure 58: Application Service Providers 2016

Source : Chiefmartec.com

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Figure 59: Application Service Providers Evolution

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8.1.3

Application service provider in the HoReCa industry

In the foodservice Industry we observe the same phenomena with the growth of application service providers (ASP). Figure 60 & Figure 61 show a sample of ASP in the restaurant and food tech industry. Many types of services are provided to help restaurant owners deal with daily operations along their value chain, allowing them to develop new services. Figure 60: Overview: Restaurant & Food Tech 2015

Source: METRO Accelerator, 2016.

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Figure 61: Food Tech & Media Industry 2015

Source : www.leonmayer.com 101

HIGHLIGHTS – TECHNOLOGICAL CONTEXT & TRENDS • • • • •

In order to perform digital transformation, companies should embrace the latest technologies and take advantage of SMAC. Application service providers (ASP) are here to help businesses to integrate those technologies. For our study it would be interesting to measure which of the services provided are the most used by restaurant owners. In our studies we should measure at what level the HoReCa industry is integrating the SMAC in their operations. SMAC represents a higher degree of innovation nowadays, this will help us to classify adopter profiles.

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8.2 Innovation diffusion & adoption process 8.2.1

Diffusion of innovation

Understanding how ideas and technologies diffuse or spread amongst people has been studied in many fields. To explain the factors that promote or hinder the acceptance of a technology, several models have been proposed, such as the Technology Acceptance Model (Venkatesh & Bala, 2008) and the Lazy User Model (Tetard & Collan, 2009). Perhaps the leading and most influential model, however, is Everett Rogers’s Diffusion of Innovations (2003). Diffusion is the process by which an innovation is communicated through certain channels over time among the members of a social system. Innovation is any new idea, new behavior, new product, new message i.e. a new thing that one brings to you for your adoption. Not all individuals in a social system adopt an innovation at the same time. Rather, they adopt in a time sequence, and they may be classified into adopter categories on the basis of when they first begin using a new idea. We could describe each individual adopter in a social system in terms of his or her time of adoption, but this would be a significant task. It is much easier and more meaningful to describe adopter categories (the classifications of members of a system on the basis of innovativeness), each of which contains individuals with a similar degree of innovativeness. Figure 62: Diffusion of Innovation

Source: Rogers - 1995 - Diffusion of innovations Innovativeness is the degree to which an individual or other unit of adoption is relatively earlier in adopting new ideas than the other members of a system. Rather than describing an individual as "less innovative than the average member of a social system," it is more useful and efficient to refer to the individual as being in the "late majority" or some other adopter category. (Figure 62) 103


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There is much practical usefulness for change agents if they can identify potential innovators and laggards in their client audience, using different strategies with each such sub-audience. As research suggests that trying to convince the mass of a new idea is useless. Convince innovators and early adopters first. The time variable allows researchers to classify adopter categories and to plot diffusion curves. Past research has generally shown that the adoption of an innovation follows a normal, bell-shaped curve when plotted over time on a frequency basis. If the cumulative number of adopters is plotted, the result is an s-shaped curve. Figure 6 shows that the same adoption data can be represented by either a bell-shaped (frequency) or an s-shaped (cumulative) curve. The continuum of innovativeness can be partitioned into five adopter categories (innovators, early adopters, early majority, late majority, and laggards) on the basis of two characteristics of a normal distribution, the mean and the standard deviation. These five categories are ideal types, conceptualizations based on observations of reality and designed to make comparisons possible. Dominant attributes of each category are: innovators—venturesome; early adopters—respectable; early majority— deliberate; late majority skeptical; and laggards—traditional. A series of generalizations summarize research findings about the socioeconomic characteristics of adopter categories. The relatively earlier adopters in a social system are no different from later adopters in age but they have more years of education are more likely to be literate, have higher social status, a greater degree of upward social mobility larger-sized units, like farms, companies, and so on, a commercial rather than a subsistence economic orientation, a more favorable attitude toward credit and more specialized operations. 8.2.2

Adoption process

The innovation adoption process (Figure 63) is the process through which an individual (or other decision-making unit) passes from first knowledge of an innovation, to forming an attitude toward the innovation, to a decision to adopt or reject, to implementation of the new idea, and to confirmation of this decision. This process consists of a series of actions and choices over time through which an individual or an organization evaluates a new idea and decides whether or not to incorporate the new idea into ongoing practice. This behavior consists essentially of dealing with the uncertainty that is inherently involved in deciding about a new alternative to those previously in existence. It is the perceived newness of the innovation, and the uncertainty associated with this newness that is a distinctive aspect of innovation decision making (compared to other types of decision making).

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Figure 63: Adoption Process

Source: Rogers - 1995 - Diffusion of innovations Adoption probability grows if innovation has clear advantages for product, service or current behavior. The more innovation is consistent with pre-existing, higher the adoption probability. Complex changes involved in innovation, reduce adoption likelihood. A chance to try an innovation before making a final decision increase adoption likelihood. The more obvious innovation benefits the greater adoption likelihood. I. II. III. IV. V. 8.2.3

Person becomes aware of an innovation and has some idea of how it functions Person forms a favorable or unfavorable attitude toward the innovation Person engages in activities that lead to a choice to adopt or reject the innovation Person puts an innovation into use Person evaluates the results of an innovation-decision already made The innovativeness-needs paradox

Those individuals or other units in a social system who most need the benefits of a new technological idea (the less educated, less wealthy, and the like) are generally the last to adopt that innovation. The units in a system who adopt first generally least need the benefits of the innovation. This paradoxical relationship between innovativeness and the need for benefits of an innovation tends to result in a wider socioeconomic gap between the higher and lower socioeconomic individuals in a social system. Thus, one consequence of many technological innovations is to widen socioeconomic gaps in a social system. The reason for the paradoxical tendency of those who most need an innovation to adopt it last, is that change agents often follow a segmentation strategy of least resistance, in that they especially contact the socioeconomic elites, who are often most receptive to innovations. 105


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HIGHLIGHTS – INNOVATION DIFFUSION AND ADOPTION • • • •

Degree of innovativeness is a key measure for our study, as it will allow us to classify restaurant owners into different categories. Then try to understand the factors that influence the adoptions. We will measure the degree of innovativeness by measuring which technology they choose to adopt. It will be important to define how to measure the level of digitalization of restaurant owners. The innovation adoption process will be key for us, especially to give recommendations. As well as the innovativeness need paradox.

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8.3 Adoption process in HoReCa industry A study conducted in 2012 by “Strategy&” observed that the hotel and restaurant sector, one of the digital laggards in this study (14th in the industry digitization index, Figure 64 ), has heavily invested in digitization (Figure 65), mainly in infrastructure and customer-facing processes. The hotel and restaurant industry had the third-highest digitization growth rate (+3.0 index points). This solid overall growth is driven by strong digitization efforts in the output (customer-facing) dimension (+4.8 index points) as well as a strong increase in the infrastructure dimension (+5.7 index points). Companies in this industry finally seem to be taking advantage of the availability of inexpensive digital infrastructure. Figure 64: Industry Digitalization Index 2012

Source: Industry Digitization Study, 2012.

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Figure 65: Digitalization index for hotels and restaurants 2011-2012 in index points

Source: Industry Digitization Study, 2012. A more recent study in 2015, conducted by McKinsey, revealed that the hospitality industry is still lagging in terms of digitalization (Figure 66). The study measured Digital assets, Usage and Labor (Figure 67). These two studies were conducted focusing on big companies. SMEs and Micro enterprises have not been taken in account. However, the hospitality industry is going through a fast evolution, major digital platform providers (such as Google, online travel agents, etc.) are increasingly launching products in the hospitality sector (Figure 68). Leaders of the web are taking advantage of the HoReCa digital transformation. As well as investors who are increasingly investing in food tech (Figure 69). The largest investment and deals are made by individuals from Asia, with the US second and Europe in third (Figure 70 & Figure 71).

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Figure 66: MGI Industry Digitalization Index

Source: McKinsey social technology survey, 2015. 109


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Figure 67: Metrics included in the MGI Industrialization Index

Source: McKinsey Global Institute analysis, 0000 110


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Figure 68: Industry boundaries are blurring

Source: Capital IQ : company website and press releases from McKinsey Global Institute analysis. 111


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Figure 69: Food Tech Investment activity

Source: cbinsights.com Figure 70: Food Tech Investment activity per country, value

Source: cbinsights.com

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Figure 71: Food Tech Investment activity per country, deals

Source : cbinsights.com

HIGHLIGHTS – ADOPTION PROCESS IN HORECA INDUSTRY • •

Hotel & restaurant industry is lagging in terms of digitalization but we can observe an acceleration in the number of products and services dedicated to digitalize this industry, we also observe a strong dedication of the industry to invest in new technologies. Europe is still behind in terms of investment in Food tech startups, so the digitalization may be slower in this region.

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8.4 Benefits of digitalization The quick, broad and deep expansion of hardware, software networks and data with new capabilities provides many benefits for companies. Figure 72 shows the different benefits identified by McKinsey. These benefits will be of interest to restaurant owners, helping them to embrace digital transformation. Figure 72: Benefits of digitalization

Source: McKinsey Global Institute Analysis, 0000 Another study conduct by the MIT identified two levers for digital transformation: Digital capabilities and Digital leadership. The study also (Figure 73) identified that companies who master these two elements have higher revenue generation, profitability and market valuation.

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Figure 73: Financial benefits of digitalization

Source: Westerman et al. – 2011

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METRO CHAIR OF INNOVATION 8.4.1 8.4.1.1

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Benefits of ICT in the restaurant industry Front & back of house technologies

Many studies were conducted to evaluate the benefits of adopting digital technologies in the HoReCa industry, their conclusion was that digital technologies strongly effects the restaurants’ performance by: • • • • • • •

Shortening time spent in the ordering process (e.g. handheld terminals) Enhancing processing in food production (e.g. Kitchen technology) Speeding up the service time (e.g. table management systems) Providing faster payment (e.g. handheld terminals) Shortening seat turnover or turnaround time (e.g. near field communications and/or table management systems) Decreasing labor costs (e.g. labor management systems, online reservation systems and POS integration into online ordering) The customization of customer preferences

Providing management with the right information at the right time, resulted in fewer costly mistakes, better forecasting, higher productivity, and improved marketing know-how. They continue by saying that to compete effectively in the markets of today, and tomorrow, all stages of the restaurant production and service chain must act in unison, in order to ultimately deliver quality products at the right prices to the right guests at the right times. Failure to do so can result in: • • • • •

Excess inventory Poor food quality Poor guest service Underutilized capacity Unnecessary costs.

Restaurant technology helps management to monitor and coordinate these activities in a more timely and focused manner. The major areas were digital technologies could have the most impact in the restaurant industry are the following: • • • • • • • • 8.4.1.2

Feedback systems (e.g. customer relationship management (CRM)) Social media activity integrated into CRM platforms Real time web-based reporting Repeat business management applications (e.g. e-reservation systems, point of sale (POS) integration into online ordering) Marketing management systems (e.g. POS software and handheld terminals) Operational restaurant systems (e.g. wireless credit card authorization or mobile POS and revenue management system, accounting/financial software, and integrated cost control software or inventory management tools) Human resource management systems (e.g. labor management systems, labor screening and recruitment systems, and company intranet) Back of house management systems (e.g. kitchen technologies, kitchen management systems, kitchen displays, and kitchen printers). Web

Nowadays restaurant operators have to build a web strategy. They must invest in the web to take advantage of the numerous opportunities provided by this technology (see Figure 74).

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Figure 74: Benefits of the Web for HoReCa

Source: XERFI, 000

HIGHLIGHTS – BENEFITS OF THE WEB IN HORECA INDUSTRY • • •

There are many benefits to adopting digital technologies, the end result is an optimization of the performance by reducing costs and increasing the turnover. For the HoReCa industry there are many digital technologies already on the market that will help to prevent failure and bring many benefits. There are specific areas where digital technologies might have the stronger impact. We will use those areas and measure their usage by restaurant owners to evaluate their level of digitalization.

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9 Methodology To conduct the (1) Audit IT and (2) the Barriers & Opportunities’ research, we will follow the following methodology described in Figure 75. In this chapter, we will briefly describe the different phases of our methodology. Figure 75 Methodology

• Literature review Phase 1 • Research model conception • Validation of the research model by panel of experts Phase 2 • Questionnaire creation Phase 3 • Validation by panel of expert & respondent • Questionnaire distribution amongst the countries Phase 4 • Result Analysis Phase 5 • Conclusion & Recommendations Source : Researcher, 2016.

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9.1 Phase 1 During phase one, we will conduct secondary research in order to build a comprehensive literature review of our subject or research. The output will be the construction of a research model, providing an organized list of the elements that we would like to measure.

9.2 Phase 2 This research model will be validated by experts in our field of research. The selection will be conducted among our network.

9.3 Phase 3 We are then going to create our questionnaire based on our research model and it will pass through 2 sets of tests: -Tested by experts in the field - Tested by a small panel of respondents that will be similar to our sample

9.4 Phase 4 After correction, we will distribute our questionnaire through the Salesforce of Metro in our 5 countries. In order to be representative the panel has to be composed of individuals similar to the population that we want to study. Figure 76 represents the categories that will make up our panel. 9.4.1

Sample

Our sample is composed of independent restaurants. Divided by restaurant type into 6 categories: • • • • • •

100% Home Delivery/Takeaway Cafés/Bars Full-Service Restaurants Fast Food Self-Service Cafeterias Street Stalls/Kiosks

See Annex Definition – Types of foodservice, for the definition of the different types of food service we are going to study throughout our research. We chose to use the Euromonitor definition of Independent restaurant, which is the following: “Independent units are those, which not having 10 or more outlets or a branded formula, would not feature in the chained subsector. Small businesses with a branded formula with under 10 units are also included.”

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The distribution by restaurant type among the different countries are the following: Figure 76 Sample size

Source: Researcher, 2016 – Adapted from Euromonitor, 2016.

9.5 Phase 5 Results will be analyzed with statistical techniques and conclusions and recommendations will be made.

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10 Audit IT Following on from the technological context and trends section, we set the following objective and output, in order to understand the barriers and opportunities of digital transformation in the HoReCa industry. Objective: Understand the level of digitalization present in independent restaurants, in relation to the key business processes. Meaning to answer questions such as, “who has what technology?” and “how are they using that technology?”. Including Technology Assets and digital usage in Front of the House, Back of the House and on the Web. Output: This audit IT will allow us to classify: • •

Restaurant owners in different categories depending on their level of technological adoption (e.g. innovators, early adopters, majority and laggards). Restaurant infrastructure, in terms of their overall level of digitalization sorted by business processes (Operation focus, Process and management focus, Web focus).

To build our model of research we will need to: • • •

Map the digital landscape of the HoReCa Industry in order to measure the asset. Identify key points of web strategy and measure the restaurant’s usage. Identify key business processes where ICT has the most impact, in order to measure the usage of ICT by business process.

10.1 Mapping the HoReCa digital landscape There are many technology systems used in the restaurant industry. Technologies used in restaurants are divided into two main groups: systems/applications that are used in Front of House (FOH) operations, and those used in Back of House (BOH) operations. Cavusoglu (2015) conducted a literature review of restaurant technology, the study provided the following findings: 10.1.1 Back of House (BOH) It is difficult to manage a restaurant without measuring and controlling important key performance indicators. With the help of BOH operation systems, it is possible to measure and monitor these indicators, such as: the cost of food, inventory, financial status and labor scheduling and productivity. Some of the important BOH operation systems are: accounting / financial software, labor management systems / labor screening and recruitment tools, customer relationship management systems, business intelligence systems, inventory management applications, company intranet, kitchen management systems (kitchen displays and kitchen printers), integrated cost control systems, cloud-based applications, enterprise management systems, enterprise reporting systems and real-time based reporting. 10.1.1.1 Accounting / financial software This is a software application connected with POS systems that creates sales transaction reports and economic events. Many BOH operations software programs include a variety of accounting modules, however most programs generally include at least: accounts receivable, accounts payable, payroll accounting, inventory accounting, purchasing and financial reporting modules. 10.1.1.2 Labor management systems /labor screening and recruitment tool Labor management systems help the restaurant to create working schedules for improved and more efficient work force forecasting, additionally giving the managers a better opportunity to analyze the performance of employees and to control clock-in/clock-out hours. 121


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10.1.1.3 Customer relationship management systems This is an information technology management system allowing restaurants to primarily focus on customer activities in order to maintain profitable customer loyalty in the long run. With the help of the customer relationship management systems, contact information (e.g., email, mailing address, cell phone numbers etc.) of the restaurants customers can be stored and promotional campaigns can be sent to customers using their contact information. 10.1.1.4 Business intelligence systems This is an integrated module with BOH operation systems providing detailed reports such as: budgets, profit/loss statements, balance sheets and daily reports (e.g. guest count, food costs and labor costs) enabling mangers to keep an eye on what is going on. 10.1.1.5 Inventory management applications This is an integrated module with an accounting system, providing detailed information on the quantity and price of the products, also providing the capability to monitor the replacement period of the inventory. Additionally, inventory management systems make the process of ordering and receiving inventories easier for the restaurant operators. 10.1.1.6 Company intranet This is an internal network, requiring Internet access, enabling communication amongst the employees of the company. Intranet is an important and flexible system providing “access to operations manuals, discussion forums, company news items, a corporate documents library, e-mail between sites and many other purposes”. 10.1.1.7 Kitchen management systems The Kitchen management system is crucial to the success of service in restaurants. The main components, which facilitate the kitchen management system, are: kitchen display systems, and kitchen printers. Kitchen display systems are made of video monitors that “can be used to help the kitchen better manage orders, ensuring that orders are prepared in a timely fashion”. In addition, kitchen display systems serve as a communication tool between the kitchen staff and servers. Kitchen printers serve the same purpose as the kitchen display systems but they are used when there is a need for paper copies for an internal control system, or if the printed copies are critical for the production operations. 10.1.1.8 Integrated cost control systems This is an integrated application on the POS, which uses the current price of the products to calculate the cost of the menu. Based on each recipe’s portion size, cooking or preparation method, and ingredients, which are identified on the system before hand, the selling price can be calculated with a viable percentage of profit. The benefits of integrated cost control systems are keeping track of the perpetual inventory, accessing the cost information and keeping track of costs instantly, having the ability to make correct decisions about cost on time. 10.1.1.9 Cloud-based application According to Mell and Grange (2011), cloud computing also known as virtual computing is defined as “a model for enabling ubiquitous, convenient, on-demand network access to a shared pool of configurable computing resources (e.g., networks, servers, storage, applications, and services) that can be rapidly provisioned and released with minimal management effort or service provider interaction”. The cloud represents the delivery of the software via the Internet. In other words, the software is distributed to the clients with the help of the Internet. The restaurant industry is in the process of switching to cloud-based applications. 10.1.2 Front of House (FOH) FOH operations can be defined as a process, starting with taking orders and delivering food to guests and finishing with the payment process. There are many technology applications that are used in this process. Most of the important 122


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technologies that are used in Front of House are: point of sale systems (POS), POS integrated modules, POS integrated payment applications and some emerging technologies used in FOH operations. 10.1.2.1 Point of Sale (POS) Systems A POS system is “a network of cashiers and server terminals that typically handles food and beverage orders, transmission of orders to the kitchen and bar, guest-check settlement, timekeeping, and interactive charge posting to guest folios”, for restaurants the POS system is the core system. The POS hardware systems are installed on computers and provide the capability of connecting any piece of equipment or device to the POS such as: touch screen terminals, integrated credit card swipe devices and table side ordering devices, such as, handheld terminals. Advancement in POS technology results in user-friendly POS hardware, such as, touch screen terminals that are very informative and easy to use. An integrated credit card swipe device is now an inseparable part of the advanced POS systems. Another piece of user-friendly POS hardware is the handheld POS terminal, which is also known as a mobile POS device or tableside ordering device. A handheld POS terminal is a portable device which has all the main functions of a pre-check POS system, as well as integrated tableside ordering and payment devices. Other than POS hardware, there are many modules or programs compatible with POS systems, such as: gift card modules, POS integration into online ordering, social media activity integrated into POS, table management systems, reservation systems, menu management systems, and take-out/delivery systems used in the restaurant industry. Furthermore, POS systems provide some payment applications, such as: wireless credit card authorization, tableside payment devices, near field communication, and bill pay via the customer’s mobile phone. In addition to payment applications, the advanced POS systems integrate some emerging FOH operation technologies, which are: digital signage devices, energy efficient POS, barcode scanners, and biometric readers. 10.1.2.2 POS integrated modules POS systems are becoming more powerful, with the ability to connect different modules. Gift card integration, POS integration into online ordering, social media activity integrated into POS, table management systems, reservation systems, takeout/ delivery systems, and menu management systems are some commonly used modules in the restaurant industry. • • • • • • •

A gift card module is a piece of integrated POS software that tracks gift card sales and redemption. POS integration into online ordering is another beneficial module for the restaurant industry. It is another type of distribution channel for the restaurant industry to increase sales, whilst decreasing labor costs. Social media activity integration into POS is another interface that enables restaurants to advertise their menus online and receive orders through social media. Some POS modules help restaurateurs to organize and handle table management, reservations and menu management much better. Table management systems are one of the most efficient modules for organizing and handling table status and reservations. The reservation module is a part of the table management system that monitors the call-in and walk-in reservations, showing the current status of the tables and forecasts seat turnover. The take-out/delivery system is addressed to the people who demand online ordering. The take-out/delivery system is an order placement system that includes restaurant customers’ addresses, map directions to the customers, phone number, and any previous preferences for delivering food their address. Another effective POS module is menu management. Monitoring the entire menu is as important as monitoring the reservations. It helps the restaurants to assign prices, keeps track of entire menu items, provides detailed 123


•

• •

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recipe and nutritional information and also gives management the opportunity to control inventory usage and the cost of items. Customer-facing payment technologies (which are basically tableside payment devices, mobile wallets and mobile remote payment/wireless credit card authorization) have been increasing in popularity amongst both restaurants and consumers. A tableside payment device enables customers to make their payment on-site by using their credit or debit card, retaining their credit card information during the payment process. Another popular customer-facing payment technology is mobile payment. The mobile payment system is a module integrated into the POS system, enabling customers to pay their bills through smart phones. Digital menu boards and signage can be used as interactive digital menus, for promoting special meals and discounts, sharing photos and videos about the restaurant and informing the guests about forthcoming events. HIGHLIGHTS – AUDIT IT

•

Based on those different elements we will be able to identify the key business processes and the ICT available to restaurant owners in order to conduct our Audit. All these elements will be rated by restaurant owners to understand their level of usage.

The result of this study is translated into the following model ( •

Figure 77)

Figure 77 Audit IT model

Source: Researcher, 2016 124


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10.1.3 Digital strategy on the web According to the business intelligence company Xerfi, nowadays the implementation of a digital strategy should be a priority for restaurant owners. There are three objectives of a digital strategy (See Figure 78) Figure 78: Objectives of digital strategy

Source: Xerfi The challenge for restaurant owners to enter into the digital world are varied Figure 79 provides a good overview. Figure 79: Digital challenges for HoReCa

Stand out from the crowd • Platforms reference hundreds of restaurants e-Reputation management • Increased importance of customer reviews Reduce margin

• In order to have a good reference, offering deals is essential

Customer retention

• Who comes from the web platform?

New logistic solution

• To be referenced on take away and home delivery platform

Source: Xerfi

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To create their strategies restaurant owners have three tools available (Figure 80). Figure 80: Available Media for digital strategy

Media "Bought"

Media "Win"

Media "Owned"

Search Engine Marketing

Referencing Portal

Web Site

Marketplace

Apps

Blog, Press

Social Media

Advertising Display E-mailing Mobile Marketing Source: Xerfi

HIGHLIGHTS •

Based on the different elements identified, we will be able to identify key web practices for restaurant owners and measure their level of usage. See Figure 81.

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Figure 81: Media Used model

Source : Researcher, 2016.

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10.2 Model chosen for the Audit IT Source The model presented below will be used for our study, it is based on the literature review presented in the previous section. Research Model The model is composed of 4 parts, shown in Figure 82. Figure 82: Research Model

Part 1 Part 2 Demographic characteristics

Current ICT usage, by business processes

Part 3 Part 4 Attitude towards ICT, by business processes

Web: Media Used

Source : Researcher, 2016.

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10.2.1 Part 1: demographic characteristics To be able to measure the correlation between ICT usage, attitude toward ICT and demographics, we should identify key elements in order to understand the profile of owners and restaurants. It will help us to create a typology of adopters. Table 50 Demographic characteristics CONSTRUCTS

MEASURES

1.a. Respondents demographic Gender

Male; Female

Age

Years

Position

Manager; Owner

Education Level

Elementary; Junior high; Senior high; University

Hospitality education

Yes; No

Level of ICT knowledge

Experience of Director in relation to the use of ICT

METRO Customer

Yes/No

1.b. Restaurant demographic Restaurant's Name

Identify the restaurant for further research

Year of creation

Date of creation

Location

City name

Location 2

City centre; Rural; Suburban

Annual Turnover & Evolution

Euro/year ; Decrease, stable, increase

Profit margin

% of turnover

Number of seats

Number of seats available

Number of employees

Number of employees working both full time and part time

Number of outlets

Number of outlets owned

Type of outlet

100% Home Delivery/Takeaway; Cafés/Bars; Full-Service Restaurants; Fast Food; Self-Service Cafeterias; Street Stalls/Kiosks

Franchisee

Yes; No

Ownership

Established; Inherited; Repurchased

Family business

Yes; No

Source of Capital

Personal savings; Joint venture with partners; Family investment; Third party investment; Other

Interne Budget

% of turnover or value

Wi-Fi

Wi-Fi available for customer

Internet Connection

Internet Satellite Connection, Very High Speed (T1, T2), High-Speed Broadband (ISDN,ADSL or DSL), Dial Up (less thank 56 Kbps)

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10.2.2 Part 2: Current usage of ICT by business process 10.2.2.1 Business processes The business processes have been selected from the literature review. However, there are many other business processes. We will focus on the key processes identified in the literature. Figure 83 Business Processes

Table reservation

Accounting/Finance management

Table management

Labor management system (payroll, planning)

Menu board

Customer relationship management

Online food ordering

Reporting system

Procurement BACK OF THE HOUSE

FRONT OF THE HOUSE

Take away & home delivery Menu display

Inventory management

Food ordering Accounts payable

Serving Kitchen management

Cost control

Payment Gift & Loyalty card

Menu engineering

Source : Researcher 2016

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10.2.2.2 Software in use at the restaurant Figure 84 Software in use at the restaurant

No software used Business productivity software

Software used

Company software

Dedicated apps

POS module Source: Researcher 2016 Table 51 Software in use at the restaurant CONSTRUCTS

MEASURES

No software used Business productivity software

Word, Excel, Powerpoint, Mailbox, etc.

Enterprise software

Specialized software for business processes (e.g. Accounting)

Enterprise software with apps

The software is built on an apps dedicated to mobile devices

POS module

The software is integrated at the POS

Source : Researcher 2016

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10.2.2.3 Hardware Implemented Figure 85 Hardware Implemented

Hardware implemented

No hardware implemented

Fixed line

Fax

Mobile devices

Computer/ laptop

POS/mPos

Other? Which?

Customer Mobile

Source : Researcher 2016 Table 52 Hardware Implemented CONSTRUCTS

MEASURES

No hardware Implemented Fixed line

Telephone with fixed line

Fax

Fax

Mobile devices

Tablets, smartphone

Computer/Laptop

Computer/Laptop

POS/mPOS

Point of Sales system or a mobile version

Other? Which one?

Sensors, buzzer, etc.

Customer Mobile Source: Researcher 2016

The mobile of the customer is implemented

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10.2.2.4 Data & network implemented Figure 86 Data & network implemented

Network implemented

Intranet Web Analog

Data implemented

On hardware On the cloud

Source: Researcher 2016 Table 53 Data & network implemented CONSTRUCTS

MEASURES

Network Implemented Intranet

Use of Intranet

Web

Use of the web

Data Implemented Analog

Data stock on paper, etc.

On hardware

Data stock on a hard drive

On the Cloud Source : Researcher 2016

Data stock on the cloud

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10.2.3 Attitude towards ICT by business processes Figure 87 Attitude towards ICT by business processes

Attiude towards ICT

Satisfaction

Importance

Need for ICT

Plans to adopt ICT

Seniority of the system in place

Externalized

Source: Researcher 2016 Table 54 Attitude towards ICT by business processes CONSTRUCTS

MEASURES

Satisfaction

Satisfaction of the system in place

Importance

Importance of the business process in the operation

Need for ICT

ICT will provide benefits to the business process

Plans to adopt ICT Seniority Externalized Source : Researcher 2016

Plans to adopt ICT for the business process Seniority of the system in place Business process is externalized

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10.2.4 Web usage As seen in the literature review there are 3 areas where restaurant owners can deploy their digital strategy. 10.2.4.1 Media bought Table 55 Media Bought CONSTRUCTS Search Engine Marketing

MEASURES Buying advertisement displays on various websites

Social media ads

Buying advertisement displays on social media

Emailing

E-mail customers

Mobile marketing Source : Researcher 2016

Use of mobile capacity to market customer

10.2.4.2 Media win Table 56 Media Win CONSTRUCTS

MEASURES

Platform presence, number of platforms and e-reputation management Online reservation platform

Platform that allows table reservation

Online ordering platform

Platform that allows ordering food to eat in, take away or home delivery

Restaurant guide

Referencing and recommendation of restaurant website

Restaurant guide with online reservation module

Referencing and recommendation of restaurant website with online reservation module

Coupon site

Website that proposes deals for dining with coupons

Review websites

Websites that gather restaurant reviews

Blog website

Influential bloggers who give restaurant recommendations

Press website

Press article about the restaurant

Directory

Online directory

mapping service and itinerary Source : Researcher 2016

Mapping service and itinerary website

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10.2.4.3 Media owned The media owned are divided into 3 categories: RESTAURANT WEBSITE Table 57 Restaurant website CONSTRUCTS

MEASURES

Company website

Presence of a company website

Mobile website

Presence of a Mobile Website

Date of creation

Idem

Date of last big update

Idem

Opening hours displayed

Opening hours visible on the website

Menu with prices displayed

Menu with prices visible on the website

Geolocalization displayed

Geolocalization visible on the website

Search engine optimization

Optimizing referencing on research portal

Online Table reservation available

Presence of a Online Table reservation module on the website

Order online/ eat in available

Presence of an Order online module on the website

Order online/ home delivery available

Presence of an Order online/ home delivery module on the website

Order online/ take away available

Presence of an Order online/ take away module on the website

E-shop available

Presence of a E-shop on the website

Loyalty access available

Presence of a Loyalty access on the website

Blog Source : Researcher 2016

Presence of a blog on the website

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RESTAURANT APPS Table 58 Restaurant Apps CONSTRUCTS Company Apps

MEASURES Company apps available

Operating system

Operating systems where the app is available: Android; iOS

Geolocalization

Geolocalization function available on the apps

Online reservation

Online reservation module available on the apps

Order online Source: Researcher 2016

Order Online module available on the apps

SOCIAL MEDIA Table 59 Social Media CONSTRUCTS

MEASURES

Social Media Presence, number of followers, number of posts per month Facebook

Presence on Facebook

Twitter

Presence on Twitter

Google +

Presence on Google+

Instagram

Presence on Instagram

Pinterest

Presence on Pinterest

YouTube

Presence on YouTube

Other: Which one ? Source : Researcher 2016

Presence on other social media

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10.3 Point of Sales (POS) The Point of Sales System (POS) is no longer considered as a payment tool, but more as an integrated system centralizing all processes. Starting from this observation, we decided to contact POS providers in order to get further insight, from the technology providers’ perspective, into POS usage in the restaurant industry in the five countries of the research. To this date, the following POS/Tech providers have accepted to help us in our research: • • • • • • • • • • • •

XnProtel/Protel Hotel software Bookatable Atma.Life MenuModo Resdiary Tevalis Oracle La Fourchette (TripAdvisor) 21 Genussgesellschaft Orderbird AG Infor iKentoo POS – Next step

New POS/Tech providers will be invited to take part in the research. As of the beginning of May, first interviews will be conducted with POS/Tech providers. With the objective of obtaining further insight about their market share per country and the use of digital technology amongst independent restaurants from the providers’ perspective. Results from this focused study on POS will be used in comparison with the results from the Audit IT (from the restaurants’ perspective).

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11 Barriers & opportunities The objective is to identify and classify the enablers (opportunities) and inhibitors (barriers) of ICT adoption along the value chain for independent restaurants. This will enable us to identify specific recommendations for the HoReCa industry helping them to embrace digital change. Several studies have already researched barriers to implementation of IT in SMEs. We have selected 6 research models that have previously studied the barriers and opportunities of implementing ICT in SMEs. These models are presented below. We combined the six models to develop our own, which is specific to the restaurant industry. Figure 88 METRO Chair, Model for Barriers - Framework

Source : Researcher, 2016

11.1 Models from the literature 11.1.1 Model 1 11.1.1.1 Source Wymer, S.A. and Regan, E.A. (2005) Factors influencing e-commerce adoption and use by small and medium businesses, Electronic Market, Vol. 15(4). 11.1.1.2 Objective Conduct a thorough review of the literature to develop an extensive list of variables suggested as barriers or incentives to the adoption and use of technology. They used a systematic qualitative process of charting, matching and consolidating variables to identify the factors that appeared to be most prevalent in the literature. At the end they had 26 factors that they used in their survey. 11.1.1.3 Model and dimensions The final model and dimensions they came up with is presented in Table 60. The 26 dimensions have been classified in between four general factors: Environmental, Knowledge, Organizational and Technology. 139


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Table 60 Factors influencing EEIT adoption decisions, and the description of the factors as they appear in the survey instrument.

Source : Wymer and Regan, 2005.

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11.1.1.4 Results It is important to understand what the researchers meant by the terms: Adopters, Intend to adopt and Will not adopt. This is related to the intention to adopt (or not) a website for the respondent’s business. Table 61 Factors considered as barriers All respondents

Adopters

Intend to Adopt

Will not Adopt

Cost

1

1

1

2

Priority

2

-

2

-

Security

3

-

-

1

Capital

4

-

3

-

Market

-

-

-

3

Partners/Vendors

-

-

4

-

Factors considered as barriers

Source : Wymer and Regan, 2005. Table 62 Factors considered as incentives. Factors considered as incentives

All respondents

Adopters

Intend to Adopt

Will not Adopt

Need

1

2

1

-

Innovativeness

2

3

2

-

Competitive pressure

3

1

-

-

Value

4

7

3

-

Government

5

9

-

-

Reliability

6

4

-

-

EC Technology

7

8

-

-

Models

-

5

-

-

Prior Experience

-

6

-

-

Executive Experience

-

7

-

-

Source : Wymer and Regan, 2005.

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MODEL 1 Out of the 26 factors, 6 were considered as barriers (cost, priority, security, capital, market and partners/vendors) (see Table 61), whilst 10 other factors were classified as incentives (need, innovativeness, competitive pressure, value, government, reliability, EC technology, models, prior experience, executive experience) (see Table 62). Significant differences were observed between adopters and non-adopters in terms of their perception to barriers. This means that for our recommendations, we will need to address specific barriers to specific segments. In our model we will measure the barrier perception of different segments according to their actual use of technology.

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11.1.2 Model 2 11.1.2.1 Source Cohendet, P. (2003) The digital divide in the European enlarged economic scenario: An assessment of the socio-economic effects. 11.1.2.2 Objectives This research looked into the digital divide concept and what factors could increase or diminish the current digital divide in Europe. 11.1.2.3 Model and dimensions According to this study, in terms of access to and the use of ICT, the population of a given country can be broken down into 6 relatively distinct sub-categories as shown in Table 63. Non-users and users of technology fall into 3 categories. Table 63 Access to and use of ICT of a given population. Categories

“Haves not”

“Haves”

Sub categories

Definitions

Represent (Total population)

Radical non-users

Probably will not accept to be connected whatever the efforts made by public authorities.

15%

Distant users

Not interested in being connected to the internet. Have no interest in the content of what is available on the internet.

15%

Quasi users

Express the willingness to be connected but cannot. For example because of the cost of access, or the level of accuracy.

20%

20%

Occasional users

Individuals belonging to this group have limited connections to the Internet and use it moderately mostly for cost reasons.

15%

Regular users

Individuals belonging to this group are generally under 45. They use ICT in their professional lives as well as at home, but with clear differentiation of the use (professional use in the office, educational purposes at school, entertainment at home).

Creative class

For the individuals belonging to the creative class continuous on-line access to ICT is inherently part of their activities.

15%

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Table 64 identifies different socio-economic factors that are contributing to the digital divide in the European Union. Table 64 Factors influencing digital divide in Europe Categories

Definition

Major cities vs. rural areas

Tech tends to be adopted by central cities and then slowly disperses to peripheral and rural areas. Disparity in telecommunication access.

Differences distribution

in

Level of education

Age

income

One of the primary contributors to the digital divide, either in terms of PC penetration or internet access. The higher the level of education, the more likely individuals are to have access to ICT, and use ICT in both the home and the workplace. Internet use declines sharply with age. The digital divide related to age reflects a combination of factors including the issue of access opportunities, skills, perceived needs, attitudes and overall lifestyle. The ageing population in the EU, could be considered as one of the most important challenges facing EU.

Gender

Men usually outpace women in the use of internet.

Linguistic divide

English is the overwhelming language of the internet, this could represent a challenge for the European population.

Firm size

Smaller business units are less likely to have invested in the use of technology.

Industrial sector

Information-intensive services have the highest penetration rates, whilst transport, retail, trade and food services, generally have the lowest penetration rates.

Source : Cohendet, 2003. MODEL 2 The sub-categories of “Haves” and “Haves-not” will help us to categorize the restaurants in order to classify them depending on their level of technological use (Table 63). The categories presented in Table 64 represent factors that influence the digital divide. These will be taken into consideration when building our model and dimensions.

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11.1.3 Model 3 11.1.3.1 Source Wielicki, T. and Cavalcanti, G. (2006) Study of digital divide: Measuring ICT utilization and Implementation Barriers among SMEs of Central California, Business Information System - BIS. 11.1.3.2 Objective The objectives of this study were to (1) identify how information technology solutions are being used by SMEs, and (2) to identify barriers for non-use. 11.1.3.3 Model & dimensions In order to fulfill their objectives, the researcher started by conducting an analysis and then made two hypotheses. Analysis In recent years, large corporations have benefited greatly in productivity levels due to IT. Although, SMEs seem to be lagging behind in terms of ICT driven productivity, despite very favorable changes in price/performance ratio of new ICT tools and products. Hypothesis 1 Statement that mere access to hardware, software and connectivity does not translate into evident enhancement of specific business processes conducted within SMEs. In other words, we will question to what degree potential or actual access to advanced ICT tools really contributes to the bottom line of SMEs. Hypothesis 2 Statement that in spite of popular perception it is not only cost of hardware and software anymore that constitutes a main barrier causing the technology gap, but lack of education and management skills, which limits ability of SMEs own ICT applications to potentially improve its business processes. They were looking for a confirmation of Champy’s rule of education as a driving force behind BPR. The study was divided into 5 sections as shown in Table 65.

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Table 65 Sections, purpose and variables measured Title section

Purpose of the section

General background info

To be able to map the exact sampled independent restaurant of our study

Intensity of current ICT usage

Identify the intensity of current ICT usage within the company. The main focus was not the technology itself but ways in which it was used to support specific business processes. Our assumption was that lots of ICT tools (hardware, software, connectivity solutions) existing within SMEs were not actually linked in any way to strategic goals of these businesses, thus did not contribute to performance enhancement.

Use of ICT by business processes

(1) Identify use of ICT in the context of various business processes already utilizing ICT, (2) and the processes which could be enhanced by ICT This section focused on the link between uses of IT and the specific business processes that company was engaged in; i.e. trying to determine how the use of IT was impacting the company's performance within specific business processes.

Barriers for utilizing ICT

Identify the barriers for utilizing ICT

Perceived Capturing the subjective opinions of barriers to respondents about perceived barriers to implementation implementation of ICT in the independent of ICT restaurants Source : Wielicki and Cavalcanti, 2006

Variables measured Size Type of business Revenue Number of employees 1st part: Hardware: # of PCs used by the business Software Connectivity: speed of used connectivity 2nd part: (look at the use of internet) From low (eg. typical to individual and private use) to high level use (eg. interactive internet applications directly supporting business processes such as ecommerce, order processing, procurement, ebanking, ...)  none-email-e-commerce-purchase/suppliesbroadcast/promotion-browse/collect info Q1: Used business process (Wanted to know which business process the interviewee could identify in their company with nine very typical and standard business processes that the interviewed company could choose from)  ordering, purchasing, customer support, advertising, sales, billing, manufacturing, and shipping Q2: Utilization of ICT in these business processes (about utilization of ICT in each of the 9 processes described above) Q3: (potential for improvements with ICT as seen by participants of the survey. "Missed IT opportunities" in terms of areas where the respondents thought the company could benefit from future implementations of IT.) Funds IS plan Software Long term strategy SOP Employees Understanding of BP Knowledge/Skills Respondents were asked to rate specific barriers to the implementation of ICT on a scale of 0 to 4,  with 0 being “no barrier” to implementation and 4 being “extreme barrier.”

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11.1.3.4 Results of the research Figure 89 presents the answers of the questions asking respondents to identify which of their business processes would benefit from IT support. In general, in spite of a high level of connectivity and relative saturation of small and mid-size businesses with PC related technology, business processes used by SMEs are not sufficiently supported by ICT based solutions. Figure 89 Business processes in need of IT support

Source: Wielicki and Cavalcanti, 2006 Figure 90 reports on barriers to the incorporation of IT into business processes, as perceived by either owners or managers of small and mid-size business. The respondents were asked to rate specific barriers to the implementation of ICT on a scale of 0 (“no barrier”) to 4 (“extreme barrier”). Overall, the respondents perceived relatively low barriers to implementation of IT. None of the barriers exceeded 2, suggesting that no one specific barrier is consistently perceived as extreme by SME’s owners and managers. However, the large size of the sample could have produced a strong averaging effect. The analysis of the perception of “extreme barriers” across the sample were consistent with averaged results shown in figure 2. This would confirm the second hypothesis of the study, stating that Digital Divide among SMEs is no longer about lack of access to funds and technology, but more about lack of education, training and management skills.

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Figure 90 Perceived ICT implementation barriers

Source: Wielicki and Cavalcanti, 2006 MODEL 3 This study has identified the business processes in need of IT support according to SME owners and managers. We are conducting the Audit IT and the study of barriers in relation to the business processes in restaurants. This model will help us to identify how we can conduct our survey. Additionally, the classification of the perceived ICT implementation barriers is important as it will provide targeted recommendations to SME owners and managers. For our study, the objective is not only to have a list of barriers but to determine the specific weight of each of the barriers, in order to provide specific recommendations to restaurant managers.

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11.1.4 Model 4 11.1.4.1 Source Tan, K.S., Chong, S.C., Lin, B. and Eze, U.C. (2010) Internet-based ICT adoption among SMEs. Journal of Enterprise Information Management, 23 (1), pp. 27-55. 11.1.4.2 Objective The purpose of this research was to investigate the demographic characteristics of SMEs in regards to their patterns of internet-based ICT adoption, taking into account the dimensions of ICT benefits, barriers, and subsequently adoption intention. 11.1.4.3 Model & dimensions The research framework in Figure 91 shows the variables the researcher used (Industry type, Size of full-time employees, Size of annual sales turnover, Year of business start-up, Years of internet experience) to determine their influence on ICT adoption. Figure 91 Research Framework

Source: Tan, Chong, Lin and Eze, 2010

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A comprehensive study of existing research, enabled the researchers to establish a list of common barriers and benefits associated to ICT implementation. This list of barriers and benefits is presented in Table 66. Table 66 Common barriers and benefits to ICT implementation Barriers

Benefits

Unsuitability for business as SMEs are not convinced of the financial benefits to be attained.

Reduced operating cost in communicating with customers and suppliers.

Lack of qualified IT personnel to develop and maintain the e-commerce system of the enterprise.

Increased speed in the delivery of goods by suppliers through improved communication.

Unavailability of a proper network infrastructure in the company.

Enhanced efficiency through better co-ordination of firms in the value chain.

High cost of IT equipment and setup.

Closer working relationship among trading partners.

Software prices are expensive.

Effective communication tool with customers.

Imbalance between investment costs and return on investment.

Larger market exposure, opening the enterprise to new business opportunities.

Uncertainties with ICT laws.

Enhanced access to market information and knowledge by means of improved information exchange with customers and suppliers.

Lack of confidence in ICT security.

As a future tool, in terms of facilitating new ways of managing and organizing businesses.

Source: Tan, Chong, Lin and Eze, 2010

MODEL 4 This model established a list of both barriers and benefits, commonly found in SMEs. This will help us determine which ones we will use for our study.

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11.1.5 Model 5 11.1.5.1 Source Arendt, L. (2007) Barriers to ICT adoption in SMEs - How to bridge digital divide, The Institute of Labour and Social Studies. 11.1.5.2 Objective The paper argues that the primary barrier for better utilization of ICT and e-Business, thus the main reason why SMEs face the Digital Divide, is not a lack of access to information technology (“material access” barrier), it is the lack of proper knowledge, education and skilled owner-managers and employees within the enterprise. 11.1.5.3 Results During this study, the researchers focused on internet usage by employees in relation to specific business processes, as shown in Table 67. In addition they focused on the barriers to ICT implementation by the countries of study, as shown in Figure 92. Table 67 Internet usage by employees (%) Business Process

Spain

Portugal

Poland

E-mail

90

100

84

E-learning

25

29

3

Work related information

76

76

86

Training related information

35

38

15

Information about events

22

29

41

Health and hobby information

35

19

17

Contact with public institutions

35

57

39

Discussion forums

18

5

8

Communicators

18

19

27

E-commerce

23

76

29

61

38

41

E-banking Source : Arendt, 2007.

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In Figure 92, the scale (0 to 4) has its mid-point at 2, interestingly none of the analyzed barriers exceeded this value. This means that micro and small enterprises surveyed perceive these barriers as relatively insignificant obstacles to ICT application, although the differences between countries turned out to be noticeable. Figure 92 Barriers to ICT implementation

Source : Arendt, 2007.

MODEL 5 Table 67, representing internet usage of employees by business processes, is interesting as it shows to what extent the employees are actually using internet. This will be used in our Audit IT. Figure 92 provides a comparison of the importance of barriers as perceived by different countries. Our recommendations will be tailored to the results of each country.

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11.1.6 Model 6 11.1.6.1 Source METRO Accelerator (2016) METRO Start-up Study. Retrieved from: http://www.metro-startupstudy.com/digitisation-inthe-industry [13.04.2016] 11.1.6.2 Objective This study surveyed entrepreneurs in Germany’s food service and hotel industries. 11.1.6.3 Results (related to obstacles and benefits) Figure 93 Entrepreneur’s perspective From the entrepreneur’s perspective: What do they think were the benefits of, and obstacles to, digitalizing their business?

Source : METRO Accelerator, 2015. MODEL 6 The results of this study, conducted in 2015 and based solely on the German market, will be compared to our results to determine if the German market has evolved in terms of the entrepreneur’s perspective on barriers and opportunities to digitalize their business. The food service and hotel industry’s barriers and benefits identified in this study will be taken into account for our final model. Additionally, we will be able to see if the results from Germany correlate (or not) with other European countries.

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11.2 Model chosen to identify barriers and opportunities 11.2.1 Source The model presented below will be used for our study, and is based on a combination of the six models previously presented. 11.2.2 Objective The objective is to identify and classify the enablers (benefits) and inhibitors (barriers) of ICT adoption along the value chain for independent restaurants in the five countries of the study. 11.2.3 Model & dimensions The demographic characteristics, will be the same as the Audit IT presented in Table 50. The factors have been classified following four different categories (Environmental, Knowledge, Organizational and Technological factors) accounting for seven factors considered as “Benefits”, and eleven other factors considered as “barriers”. The following list of barriers and benefits, presented in Table 68, have been chosen for our study following a careful examination of the six models presented above. Figure 94 Framework to identify and classify barriers and benefits of ICT adoption

Source: Researcher, 2016.

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Table 68 Factors to identify and classify the barriers and benefits of ICT adoption

CONSTRUCTS B or I Environmental Factors

Factor

MEASURES BARRIERS & INCENTIVES (B & I)

Description

I

Competitive Pressure

Competitive pressure from other ICT adopters within my industry.

I

Government

Government rules and regulations.

B

Market

Viable market or customer base for e-commerce.

B

Partners/Vendors

Availability of the right partners with whom to work.

B

Supplier Readiness

Readiness of suppliers for electronic business.

Knowledge Factors B

Director experience

Experience of Director with the use of ICT.

B

Employees experience

Experience of Employees with the use of ICT.

I

Innovativeness

Your company’s willingness to adopt new technology.

I

Models

Models of successful use in my industry.

I

Need

I

Value

Perceived need for change and implementation of new technologies. Perceived value or relevance to the business

Organizational Factors B Funds B Priority B Strategy B IS plan Technology Factors B Cost B Infrastructure I B B

Reliability Security Technology availability

Access to funds. Priority relative to other projects that require existing resources and time. Long term strategy for the company. Information System plan. Cost to setup and maintain. Access to network services or infrastructure to support Web and Internet Technologies. Reliability of Web and Internet Technologies. Security issues. Availability or adequacy of existing technology and tools.

Source: Researcher, 2016.

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12 Student Business Project – METRO Chair of Innovation For our Student Business Project (SBP), we chose to provide the students the following mission and deliverables: MISSION Identify End-consumers technology trends and behaviors. DELIVERABLES Based on the five countries of France, Germany, Italy, Spain and Japan: • • • •

Consumer technology trends for HoReCa Digital end-consumer behavior per segment Digital end-consumer behavior per segment for the HoReCa industry Booklet: Digital end-consumers behavior per segment, per country

The SBP mission will help us in identifying end-consumers technology trends and behaviors, which is essential for us in order to provide accurate recommendations to the HoReCa industry. TIMELINE SBP – METRO CHAIR OF INNOVATION 18.04.2016: Opening Ceremony 19.04.2016: First meeting METRO chair team (Arnaud Durand & Caroline Guigou) & SBP’s students 27.04.2016: Project plan signed by the coaches and client (METRO chair team) 17-19.04.2016: Mid-term presentations 27.05.2016: Draft report is due. 10.06.2016: Final report is due. 13-17.06.2016: Final presentation. 24.06.2016: Closing ceremony.

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13 Bibliography Arendt, L. (2007) Barriers to ICT adoption in SMEs - How to bridge digital divide, The Institute of Labour and Social Studies. Cavusoglu, M. (2015) An analysis of technology applications in the restaurant industry, University of South Florida Scholar Commons. Cohendet, P. (2003) The digital divide in the European enlarged economic scenario: An assessment of the socio-economic effects, ESA. Demen Meier C. (2007) Les TPE d’un secteur en difficulté, stratégies et performance : la restauration de l’Arc Lémanique Suisse, Université de Caen/Basse Normandie. Euromonitor (2015) Business Environment: France, Euromonitor International Passport. Euromonitor (2015) Business Environment: Germany, Euromonitor International Passport. Euromonitor (2015) Business Environment: Italy, Euromonitor International Passport. Euromonitor (2015) Business Environment: Spain, Euromonitor International Passport. Euromonitor (2014) Consumer Types: France, Euromonitor International Passport. Euromonitor (2014) Consumer Types: Germany, Euromonitor International Passport. Euromonitor (2014) Consumer Types: Italy, Euromonitor International Passport. Euromonitor (2014) Consumer Types: Spain, Euromonitor International Passport. Euromonitor (2016) Country Profile: France, Euromonitor International Passport. Euromonitor (2016) Country Profile: Germany, Euromonitor International Passport. Euromonitor (2016) Country Profile: Italy, Euromonitor International Passport. Euromonitor (2016) Country Profile: Spain, Euromonitor International Passport. Euromonitor (2015) Digital Consumer: France, Euromonitor International Passport. Euromonitor (2015) Digital Consumer: Germany, Euromonitor International Passport. Euromonitor (2015) Digital Consumer: Italy, Euromonitor International Passport. Euromonitor (2015) Digital Consumer: Spain, Euromonitor International Passport. Euromonitor (2015) Economy, Finance and Trade: France, Euromonitor International Passport. Euromonitor (2015) Economy, Finance and Trade: Germany, Euromonitor International Passport. Euromonitor (2015) Economy, Finance and Trade: Italy, Euromonitor International Passport. I


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Euromonitor (2015) Economy, Finance and Trade: Spain, Euromonitor International Passport. Friedrich, R., Koster, A., Groene, F. and Maekelburger B. (2013) The 2012 industry digitization index, Booz & Company. Insee (2016) INSEE Databases. Retrieved from: http://www.insee.fr/en/default.asp Marchand, D. and Wade M. (2014) Digital business transformation: Where is your company on the journey, Global Center for Digital Transformation IMD. McKinsey & Company (2015) Digital America: A Tale of The Haves And Have-Mores, McKinsey Global Institute. METRO Accelerator (2016) METRO Start-up Study. Retrieved from: http://www.metro-startupstudy.com/digitisation-inthe-industry Rogers E.M. (1995) Diffusion of innovations. New York: Macmillan Publishing Co. Inc. Statistics Time (2016) Projected GDP Ranking. Retrieved from: http://statisticstimes.com/economy/projected-world-gdpranking.php Tan, K.S., Chong, S.C., Lin, B. and Eze, U.C. (2010) Internet-based ICT adoption among SMEs, Journal of Enterprise Information Management, 23 (1), pp. 27-55. Westerman et al. (2011) Digital Transformation: A Road-Map for Billion-Dollar Organizations, MIT Sloan Management Capgemini Consulting. Wielicki, T. and Cavalcanti, G. (2006) Study of digital divide: Measuring ICT utilization and Implementation Barriers among SMEs of Central California, Business Information System - BIS. Wymer, S.A. and Regan, E.A. (2005) Factors influencing e-commerce adoption and use by small and medium businesses, Electronic Market, Vol. 15(4). XERFI (2015) Les stratégies digitales dans la restauration commerciale – La transition numérique : nouveaux concepts et nouveaux usages au service de la croissance, Precepta.

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14 Annexes 14.1.1 Definition – Types of foodservice Consumer foodservice by type Consumer foodservice is composed of cafés/bars, full-service restaurants, fast food, 100% home delivery/takeaway, selfservice cafeterias and street stalls/kiosks. Chained consumer foodservice Chained units are defined by 10 or more units. An exception is made for international chains that have a presence of fewer than 10 units in a country. In this case, they are still considered to be chained units. Independent consumer foodservice Independent units are those, who not having 10 or more outlets or a branded formula, would not feature in the chained subsector. Small businesses with a branded formula with under 10 units are also included. 100% home delivery/takeaway Fixed units which provide no facilities for consumption on the premises. Food can either be picked up by the consumer, or delivered, often for an additional charge. Common offerings include: pizzas, Chinese, Indian, Mexican, Middle Eastern, West Indian, North African and other local national offerings. Companies offering a mixture of table and delivery service are excluded and fall under the FSR sector. 100% Home Delivery/Takeaway outlets differ from street stalls/kiosks in that outlets tend to be more permanent, often with more elaborate on-site cooking facilities, including ovens. Menus tend to be larger and more meal-based, with street vendors more often specialising in snacks or a particular dish. Chained 100% home delivery/takeaway Fixed units which provide no facilities for consumption on the premises. Food can either be picked up by the consumer, or delivered, often for an additional charge. Common offerings include: pizzas, Chinese, Indian, Mexican, Middle Eastern, West Indian, North African and other local national offerings. Chained foodservice operations have a minimum of 10 branded outlets. Independent 100% home delivery/takeaway Fixed units that provide no facilities for consumption on the premises. Food can either be picked up by the consumer, or delivered, often for an additional charge. Common offerings include: pizzas, Chinese, Indian, Mexican, Middle Eastern, West Indian, North African and other local national offerings. Companies offering a mixture of table and delivery service are excluded and fall under the FSR sector. Independent foodservice operations have one or more (but fewer than 10) foodservice outlets and are not affiliated with any other business. Mainly relates to family businesses or partnerships. Pizza 100% home delivery/takeaway Fixed units which specialize in pizza and provide no facilities for consumption on the premises. Food can either be picked up by the consumer, or delivered, often for an additional charge. Other 100% home delivery/takeaway Fixed units which provide no facilities for consumption on the premises. Food can either be picked up by the consumer, or delivered, often for an additional charge. "Other" 100% home delivery/takeaway includes all non-pizza offerings such as Chinese, Indian, Mexican, Middle Eastern, West Indian, North African and other local national offerings. Cafés/bars This category encompasses all establishments where the focus is on drinking (either alcoholic or non-alcoholic beverages). While a wide variety of snacks and full meals are offered, it is not uncommon for consumers to only order a drink. As a general rule, establishments deriving 50% of their income or more from the sale of drinks are included here. III


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Chained cafés/bars This sector encompasses all chained establishments where the focus is on drinking either alcoholic or non-alcoholic beverages and where food is also served. While a wide variety of snacks and full meals are offered, it is not uncommon for consumers to only order a drink. Chained Cafés/Bars includes Chained Bars/Pubs, Chained Cafés, Chained Juice/Smoothie Bars, and Chained Specialist Coffee Shops. Chained foodservice operations have a minimum of 10 branded outlets. Independent cafés/bars This sector encompasses all independent establishments where the focus is on drinking either alcoholic or non-alcoholic beverages and where food is also served. While a wide variety of snacks and full meals are offered, it is not uncommon for consumers to only order a drink. Independent cafés/bars includes Independent other cafés/bars and independent coffee specialist. Independent foodservice operations have one or more (but fewer than 10) foodservice outlets and are not affiliated with any other business. Mainly relates to family businesses or partnerships. Bars/pubs This includes all of the following establishments: Bars, lounge bars, and wine bars which are characterized by the sale of alcoholic beverages and the food menu is limited to simple dishes. Beer halls, branded or theme pubs, and traditional pubs, where beer is the main alcoholic drink consumed. Nightclubs, discos. Cafés Outlets classified as cafés will have a wide selection of both food and drinks, often including alcoholic beverages such as wine or aperitifs. The focus is primarily on non-alcoholic beverages, however, a wide variety of food is offered and in some establishments this could account for a large portion of value. Cafés offer table service and consumers tend to eat-in. In fact, it is not often possible to order a coffee or tea to go in these types of establishments. Juice/smoothie bars Beverage focused outlets that specialize in juice or fruit smoothies. Please note that only those juice or smoothie bars that have a full sized establishment are classified in this category. Juice/smoothie establishments in a kiosk or street stall type format are categorized under Street stalls/kiosks. Specialist coffee shops Specialist coffee shops correspond to “coffee-themed” outlets, which focus primarily on serving coffee: coffee is the main item on the menu, with a large variety of different coffee types and coffee-related products. Such drinks are sold on their own or with pastries, biscuits, cakes and sandwiches for consumption either on or off the premises. However, these outlets are currently developing a wider range of food items, such as salads and other light snacks. They usually offer takeaway and present a modern environment and designer décor. The concept includes both coffee-to-go chains and independent coffee houses. Can include outlets which sell coffee beans, such as Lavazza. Full-service restaurants FSR (full-service restaurants) encompasses all sit-down establishments where the focus is on food rather than on drink. FSR is characterized by table service and a relatively higher quality of food compared to quick-service units. Menus offer multiple selections and may include breakfast, lunch and dinner. Preparation of food products is often complex and involves multiple steps. NOTE: restaurant types catalogued in this segment refer to table-service only (outlets with a proper “full table service:” wait staff attending customers and taking orders at the tables). Outlets with “limited table service” are excluded from FSR. For example: outlets where customers order their food at the counter are excluded (even though the waiter will then bring the food at the table). Chained full-service restaurants Full-service restaurants encompass all sit-down establishments where the focus is on food rather than on drink. It is characterised by table service and a relatively higher quality of food offering to quick-service units. It also includes à la IV


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carte, all-you-can-eat and sit-down buffets within restaurants. Merchandising sales are excluded. Chained foodservice operations have a minimum of 10 branded outlets. Independent full-service restaurants Full-service restaurants encompass all sit-down establishments where the focus is on food rather than on drink. It is characterised by table service and a relatively higher quality of food offering to quick-service units. It also includes à la carte, all-you-can-eat and sit-down buffets within restaurants. Merchandising sales are excluded. Independent operations have one or more (but fewer than 10) foodservice outlets and are not affiliated with any other business. Mainly relates to family businesses or partnerships. Fast food Fast food outlets offer limited menus that are prepared quickly. Customers order, pay and pick up their order from a counter. Outlets tend to specialize in one or two main entrees such as hamburgers, pizza, ice cream, or chicken, but they usually also provide salads, drinks, dessert etc. Food preparation is generally simple and involves one or two steps, allowing for kitchen staffs generally consisting of younger, unskilled workers. Other key characteristics include: A standardised and restricted menu; Food for immediate consumption; Tight individual portion control on all ingredients and on the finished product; Individual packaging of each item; Counter service; A seating area, or close access to a shared seating area, such as in a shopping centre food court; For chained fast food, chained and franchised operations which operate under a uniform fascia and corporate identity. Take out is generally present, as is drive-through in some markets Independent fast food Fast food outlets are typically distinguished by the following characteristics: - A standardised and restricted menu; - Food for immediate consumption; - Tight individual portion control on all ingredients and on the finished product; - Individual packaging of each item; - A young and unskilled labour force; - Counter service. Independent operations have one or more (but fewer than 10) foodservice outlets and are not affiliated with any other business. Mainly relates to family businesses or partnerships. Self-service cafeterias Self-service cafeterias are outlets where there is no (or limited) service content. Rather than table service, there are foodserving counters/stalls where customers take the food they require as they walk along, placing it on a tray. In addition, there are often stations where customers order food and wait while it is prepared, particularly for items such as hamburgers or tacos which must be served hot and can be prepared quickly. For some food and drink items, customers collect an empty container, pay at the check-out, and fill the container after check-out. Free second servings are often allowed under this system. For legal purposes (and the consumption patterns of customers), this system is rarely or never used for alcoholic beverages. Self-service cafeterias do not have a cover charge, customers are either charged a flat rate for admission (as in a buffet) or pay at the check-out for each item. Some cafeterias also charge by weight. Self-service cafeterias resemble contract catering self-service cafeterias such as canteens, dining halls and cafeterias located within institutions such as a large office building, school and universities. However, fully captive contract self-service cafeterias are excluded from consumer foodservice. Unlike fast food, self-service cafeterias feature a menu comprising full, regular meals, often with a large choice of first course, main course and desserts. As cafeterias can effectively serve large number of customers with comparatively few employees, they are often found within larger complexes, for example, department stores, shopping malls, travel foodservice (motorways stations, railway stations, airports). Self-service cafeteria examples include: Ciao (Autogrill), Flunch (Agapes Restauration SA), IKEA (Inter Ikea Systems BV) Chained self-service cafeterias Chained self-service cafeteria outlets provide no (or limited) service content. Food is presented on counters or available made-to-order. The customer chooses the items they want and pays for everything at a separate pay station or check-out. Chained foodservice operations have a minimum of 10 branded outlets. Independent self-service cafeterias V


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Independent self-service cafeteria outlets provide no (or limited) service content. Food is presented on counters or available made-to-order. The customer chooses the items they want and pays for everything at a separate pay station or check-out. Independent operations have one or more (but fewer than 10) foodservice outlets and are not affiliated with any other business. Mainly relates to family businesses or partnerships. Street stalls/kiosks Small, sometimes mobile, foodservice providers characterised by a limited product offering and by low prices. Includes street stalls, street hawkers and foodservice kiosks where food is prepared in some way and served through a hatch or over a display counter to take away. Also includes kiosks and carts located externally or internally e.g. in shopping malls etc. As a rule, street stalls/kiosks outlets tend to be smaller than 100% home delivery/takeaway outlets, while menus are more limited, often (though certainly not always) with a greater emphasis on snack items, rather than full meals. Chained street stalls/kiosks Chained small, mobile foodservice providers characterised by a very limited product offering and by low prices. Chained foodservice operations have a minimum of 10 branded outlets. Independent street stalls/kiosks Independent small, mobile foodservice providers characterised by a very limited product offering and by low prices. Independent operations have one or more (but fewer than 10) foodservice outlets and are not affiliated with any other business. Mainly relates to family businesses or partnerships. Pizza consumer foodservice All outlets that specialize in pizza including fast food pizza, pizza full-service restaurants, pizza 100% home delivery/takeaway. Please note: Pizza consumer foodservice is including three sub-sectors (pizza fast food, pizza fullservice restaurants and pizza 100% home delivery/takeaway). These sub-sectors are already included in the total fast food, total full-service restaurants and total 100% home delivery/takeaway sectors. Chained pizza consumer foodservice All chained outlets that specialize in pizza including fast food pizza, pizza full-service restaurants, pizza 100% Home Delivery/Takeaway. Chained foodservice operations have a minimum of 10 branded outlets. Independent pizza consumer foodservice All independent outlets that specialize in pizza including fast food pizza, pizza full-service restaurants, pizza 100% Home Delivery/Takeaway. Independent operations have one or more (but fewer than 10) foodservice outlets and are not affiliated with any other business. Mainly relates to family businesses or partnerships. 14.1.2 Definition – Location of foodservice Consumer foodservice by location Consumer foodservice is composed of cafés/bars, full-service restaurants, fast food, 100% home delivery/takeaway, selfservice cafeterias and street stalls/kiosks. Consumer foodservice by location breaks out each foodservice sector according to its location - leisure, lodging, retail, standalone, travel. Consumer foodservice through standalone Freestanding foodservice establishments. Consumer foodservice through leisure Foodservice establishments located in leisure locations including museums, health clubs, cinemas, theatres, theme parks and sports stadiums.

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Consumer foodservice through retail Foodservice establishments located in retail locations including supermarkets, grocery stores, convenience stores, hypermarkets, department stores and mass merchandisers. Consumer foodservice through lodging Foodservice establishments located in hotels. All food that is included in the accommodation price as well as catering services for private parties are considered fully captive and are excluded. Consumer foodservice through travel Foodservice establishments located in travel locations including motorway service stations or fuel stations, airports, rail stations and coach stations. This excludes all in-flight or on board service which would be considered fully captive. 14.1.3 Network readiness index (NRI) The NRI is the result of the collaboration between the World Economic Forum and INSEAD. The NRI provides policymakers, business leaders, and concerned citizens with valuable insights into current market conditions and the state of connectivity across the world, and it helps to identify where more can be done to accelerate the Internet’s positive impact on the world we live in. The networked readiness framework rests on six principles: (1) a high-quality regulatory and business environment is critical in order to fully leverage ICTs and generate impact; (2) ICT readiness—as measured by ICT affordability, skills, and infrastructure—is a pre-condition to generating impact; (3) fully leveraging ICTs requires a society-wide effort: the government, the business sector, and the population at large each have a critical role to play; (4) ICT use should not be an end in itself. The impact that ICTs actually have on the economy and society is what ultimately matters; (5) the set of drivers—the environment, readiness, and usage—interact, coevolve, and reinforce each other to form a virtuous cycle; and (6) the networked readiness framework should provide clear policy guidance. The framework translates into the NRI, a composite indicator made up of four main categories (sub-indexes), 10 subcategories (pillars), and 53 individual indicators distributed across the different pillars. 14.1.4 Hofstede’s cultural dimension theory Power distance “This dimension deals with the fact that all individuals in societies are not equal – it expresses the attitude of the culture towards these inequalities amongst us. Power Distance is defined as the extent to which the less powerful members of institutions and organisations within a country expect and accept that power is distributed unequally.” Individualism “The fundamental issue addressed by this dimension is the degree of interdependence a society maintains among its members. It has to do with whether people´s self-image is defined in terms of “I” or “We”. In Individualist societies people are supposed to look after themselves and their direct family only. In Collectivist societies people belong to ‘in groups’ that take care of them in exchange for loyalty.” Masculinity “A high score (Masculine) on this dimension indicates that the society will be driven by competition, achievement and success, with success being defined by the winner / best in field – a value system that starts in school and continues throughout organisational life. A low score (Feminine) on the dimension means that the dominant values in society are caring for others and quality of life. A Feminine society is one where quality of life is the sign of success and standing out from the crowd is not VII


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admirable. The fundamental issue here is what motivates people, wanting to be the best (Masculine) or liking what you do (Feminine).” Uncertainty avoidance “This dimension, Uncertainty Avoidance, has to do with the way that a society deals with the fact that the future can never be known: should we try to control the future or just let it happen? This ambiguity brings anxiety with it, and different cultures have learnt to deal with this anxiety in different ways. The extent to which the members of a culture feel threatened by ambiguous or unknown situations and have created beliefs and institutions that try to avoid these is reflected in the score on Uncertainty Avoidance.” Long term orientation “This dimension describes how every society has to maintain some links with its own past while dealing with the challenges of the present and future, and societies prioritise these two existential goals differently. Normative societies. which score low on this dimension, for example, prefer to maintain time-honored traditions and norms while viewing societal change with suspicion. Those with a culture which scores high, on the other hand, take a more pragmatic approach: they encourage thrift and efforts in modern education as a way to prepare for the future.” Indulgence One challenge that confronts humanity, now and in the past, is the degree to which small children are socialised. Without socialisation we do not become “human”. This dimension is defined as the extent to which people try to control their desires and impulses, based on the way they were raised. A tendency toward a relatively weak control over their impulses is called “Indulgence”, whereas a relatively strong control over their urges is called “Restraint”. Cultures can be described as Indulgent or Restrained.

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