a.Definition of the industry
The industry is the fast food industry (“la restauration rapide”). I would define this industry as a mean of eating food where the aim is to eat quickly and to have the possibility to take away. It is often affordable. The most served food is Burgers, sandwiches, fries, soft drink but also hot dog, pizza, taco or sushi.
The turnover of the market increased for 66% in 7 years and reach 32,7 billion euros in 2011. This turnover still has been affected by the crisis. Because the average amount of money spent in the stores decreased a little. And the Sandwiches segment has decreased in number of sandwich sold but has an increasing turnover. But actually, the sandwich market took advantage of the crisis and increases its market share. They represent 20% of the fast food market with 6,4 billion euros. Also, 40% of the turnover of the outdoor eating is made with fast food.
The fast food industry should keep increasing with the development of the street vending. It is a real success for brand like Juju’s (fruit juice and smoothies), we love boon (yogurt and ice cream), sushiju (a truck of sushi) or Alto café. « Mobile fast food store » are success because in the fast food industry 50% of the food bought are to take away.
b.Market trends in the last three years
Here are some of the trends of the fast food market in France.
First, it’s important that the consumer became very demanding. He wants to have choice and like to eat in restaurant where you don’t have only one product. The other demand is that the consumer want to eat everywhere (cinema, supermarket, gas station, train station, …) and at any time. For example restaurant that close at 2 pm loose a lot of client. Because the economic context is hard and the increasing environmental concern the consumers behavior changed. For example we are changing our eating habit so we can adapt to the new work schedule, the increasing time of transport, the shortening time of the break, the increasing nomadism, people eat outside and have less time. The Second main trend is that, fast food chain needs to be very clear in their positioning. They can’t be the best and the cheapest at the same time. French consumer won’t trust a cheap product; it’s not good quality for them. Customers are very demanding concerning the quality criteria. Fast food restaurant really tries to position themselves as good food and not junk food like many people use to think. Indeed, they try to offer healthier food with salad, fruit juice …
To sum up the main trend is: faster (simple and easy to eat), healthier, and cheaper.
A very interesting trend is that a lot of restaurant tend to “frenchenize” their offer, in other word their adapt their product to the market and it seems to work pretty well. For example McDonald’s had to create a French menu to succeed with macaron, creation of the McCafé, table services and baguette sandwiches. Mc Donald’s France is far from the original US model.
This lead me to another trend, as some might think the French consumer don’t become American. For example in the US, Americans eat food all day, but in France even when we go to fast food we eat at certain hours. Our consumption of food outside of the meal hours is 8% while it’s 28% in the US. And we send about 31 minutes to eat our meal while American only take 19 minutes. And to finish, about 2 third of the sandwich bought in France are the famous « Jambon/beurre » (ham & butter).
c.Economic structure (pure competition, oligopoly, monopoly)
The fast food industry has a monopolistic competition economic structure because there is other company that sells the same type of product but not identical and the entry in the market is relatively easy. You just have to build a fast food restaurant or a bakery. As we talk the competition is not only around the price even if it’s an important criteria for the consumer. In fact the different sellers of food fight around competitive advantage like quality, design & ambiance of the restaurant (like subway or McDonald’s), concept of distribution (made to order with subway) and other. It’s a non-price competition. The idea is to distinguish from other. There is a considerable emphasis on advertising, brand names and trademark. Especially with US Company. In this market there is many company and product are differentiated. There is a little control over the price but with narrow limit. The restaurant/bakery can charge a price based on the perceived value by the customer but cannot charge a high price or it will loose customer. One store cannot really affect the market price.
d.Basic business models (differentiation strategies, cost-leadership strategies, and focus strategies)
There are a lot of competitors on this market; I will just talk about the main competitors of Subway to describe the strategies used in this industry. For example, McDonald’s in France is a very interesting case because it’s a successful attempt to combine two strategies: cost leadership and differentiation; also define as stuck in the middle. Differentiation is defined as a price higher than the market offer and the cost higher than the average cost of the market. For the cost leadership, the cost and the price are lower and they target as much people as they can. By gathering both strategies; they can have a dual advantages.
Indeed, McDonald’s France found a way to produce superior product at a lower cost. Thanks to their brand awareness and product consistency they can charge a higher price and their international development and standardization they do economy of scale and lower the cost of production. They have a superior competitive advantage over their competitor and a better profitability. So McDonald’s can be considered as the cost leader of the market but also offer a differentiate offer (American way of life). McDonald’s is still the market leader; it has a bigger market share (bigger turnover and bigger number of restaurant in France).
No brand comes to my mind when I think about a focus strategy. We could think about a fast food of only green product. The stores would then sell their product to a specific group of the population defined by the willing to eat only green product, very healthy product. This brand could achieve a differentiation strategy since their product would be very different and good quality. I heard about a fast food called East side burger that sells vegetarian burger only. This is a good example of focus strategy.
What about subway? Subway has a differentiation strategy because their aim is to sell a good product that offer unique attributes perceived by consumers. Moreover, Subway doesn’t focus on only one segment; they target a large part of the French population. The competitive advantage of Subway is the product uniqueness; you make your own sandwich. They can choose from a wide range of ingredient and customize their own meal. While McDonald’s is the leader, we cannot say that Subway adopt a follower strategy but rather a challenger strategy. They attack McDonald’s directly by expanding their network faster and offering a much healthier product. We will see how they use this argument to promote their restaurant.
In General, this market is non-price competition as I talked about, competitors are creating competitive advantage around differentiation. They create customer value and don’t necessarily try to be the cheapest.
2)Description of the company
Subway is a restaurant that serves sandwiches and actually makes them in front of their client. It’s an American fast food chain that has 400 restaurants in France. They are well known for their excellent and fresh sandwiches. They offer the possibility to eat varied food with a lot of different recipe. The main product is of course the sandwich but they also have salad and wrap. They sell dessert (yogurt, brownies, donuts, cookies) to make a menu and soft drink. They is five step to put you sandwich together: choose the size, what bred, meat, vegetable and the sauce
Subway is being delivered with the ingredient and the dessert, but the bred is made in the restaurant. It allows the restaurant to avoid big investment in machine and space to prepare everything. Also they don’t need to hire qualified staff in cooking.
b.Main geographical markets
Subway is the world leader fast food chain in number of stores. They have 37 881 restaurant in over 98 countries. The first French restaurant arrive in 2001 in Paris, then a second one in Paris follow by Lyon, Lille, Marseille and Aix en Provence, Rennes.
Unfortunately we don’t have much information about the geographical markets of subway and awe don’t know how much market share each part of the world represent. I cannot access the US website since I’m French, it always redirect me to the French website. We just now that they are basically all over the world and that there is 25503 stores in the US. Here is a chart that show the repartition of the restaurant among the world.
Since it is a franchise, they had a very fast international expansion and their mojo was “if you like subway, you think it’s a good thing, and you think it would work in you country, then we’ll teach you the concept and how it works and you go make it work in your country”. They used development agents to recruit franchises and assist in growth.
Plus, Subway does not really select the countries they enter since every single subway stores is owned by local business people that has the right to pick the place where they want to install their store.
3)Marketing mix of Subway in France
a.Main competitors (very brief)
The competitors of subway are all the company/restaurant/bakery/stores that offer fast food for less than 10€ like bakery, fast food chain, brasseries … The main competitors are McDonald’s, KFC and big bakery like Brioche Dorée.
b.Analysis of the marketing strategy in France (Segmentation, Targeting, Positioning)
Subway segmented their market according to criteria like geographic, which correspond to countries, location and cities. Mainly because some of their ingredient or menu change in specific countries like halal menu in middle east. The other criteria is demographic, I mean group based on age, gender or status (studying & working). The promotion can be adapted to an age group like student discount in France. The other criteria are psychological, subway look for customers that are health conscious. It’s also related with the trend. The last criterion is to my mind behavioral. I’m talking about the busy life lifestyle that people have in the today world.
But globally, their clients respond in the same way to their marketing effort.
I think that Subway target pretty much everyone whose looking for a quick way to eat for cheap and want a good quality sandwich. But their core target is young people from 15 to 35 years old. Subway identified its target market as “Demanding Young People Who Know Their Own Minds”. The customers in this industry are not very loyal and change often of restaurant. They target people that are health conscious who like to eat low calories food on the contrary of McDonald’s of KFC. They target people that look for healthy food rather than pizza, burger or fries. They target people who would like to try other varieties of food. They target people who look for an alternative, for a low fat option.
Thanks to the wide range of sandwiches offered, they can target a very diversified client.
According to their website, their positioning statement is: “we have a passion for delighting customers by serving fresh, delicious, made-to-order sandwiches for people seeking quick, nutritious meals that the whole family can enjoy.” An other website tell us that Subway Sandwich fast food restaurants focuses on freshness and customer satisfaction, which creates an exceptional Subway experience”. Subway tries to be seen as a healthy and fresh fast food restaurant where you can build your own sandwich. Subway tried and succeeds in being a restaurant with a style between the very French bakery and the American fast food style. For Marc Kreder, The CEO of Subway France, Subway is an alternative to McDonald’s. It’s a typical fast food but they don’t serve burger, they serve healthy food.
Their mission is to provide a fresh quality product made to match every customer taste
c.Analysis of the marketing mix
As I said, the main product is a sandwich. But the difference is that the customer makes his own sandwich and picks whatever ingredient he wants among a wide choice. He chooses the bread, the meat, the vegetable and the sauce. There is different type of bread (cereals, white, Italian, cheese, honey). Subway also suggest recipe. Ingredients are in little box to compose a sandwich, a wrap or a salad. You can add a dessert and a soda to make a menu. Time after time, Subway adds the wrap and the salad to its menu to satisfy the variety needs. To create a sandwich it takes about 3 minutes.
Here is a picture of a typical sandwich:
To be more specific, the bread is cooked on site and seven recipes contains less than 6gr of lipids. There is no frying and the mayonnaise is light. So the sandwiches of Subway are well known for the quality of the product, the quality of the fast service and the cleanliness of the restaurant. Their offer gather convenience, good price and value.
As I said, Subway has a differentiation strategy and they create a meal menu that is different than other competitor. They adopt a premium pricing strategy. Their prices are a little bit higher than competitors. But thee have great promotion like the sub that cost 2,90€. They have a good quality-price ratio.
Subway sells its sandwich through a restaurant where you can either take away or eat inside. In France, there is 408 restaurant and they predict to have 1 400 restaurants in 2015. The inside of the restaurant is the same as the original restaurant in the US. Here is a picture of a restaurant in Texas on the left and a French restaurant on the right. It is the exact same display. The subway restaurants tend to be small and they don’t have a lot of space (few table): 80m2 on average.
The spot that subway chooses are part of their strategy for 2013. They tend to choose non-traditional spot to get new customers. So subway will try to set stores in area like train station, subway station, highway and even universities. Subway developed a partnership with Elior (specialize in institutional catering) to open a restaurant on the highway between Bordeaux and Lyon in January 2013.They also created the first “kiosque store” inside a subway station.
Its advertising slogan is “mangez frais” (“Eat fresh”), same slogan in the US. And the official slogan is “préparés sous vos yeux” (“prepared under your eyes”).
Subway has also an in store promotion thanks to its unique smell (baked bread). Also the point of selling of Subway are a promotion because there are everywhere and it will even better when they will be settled in unusual spot. The brand decided to use the TV to increase its brand awareness and it worked well . According to a TNS Sofres study, Subway gains 30 point of brand awareness in 2 years. 26 of them are top awareness. This increase is mainly due to the expansion of the number of restaurant and the increasing budget spending in marketing and communication.
Subway also uses the product placement in TV shows like Chuck that is well known in France. And in France Subway is the sponsor of local sport team, they give coupons and has its own radio where there is advertising spot. They also use print.
Subway use corporate culture to promote the brand. Subway is involved in an environmental friendly development strategy. According to their website: “The SUBWAY® system is committed to providing a wide range of great tasting, healthier food choices while reducing our environmental footprint and creating a positive influence in the communities we serve around the world.”
Subway decide to prove that Subway sandwich were healthy by using the story of young men. Jared S. Fogle was obese by eating junk food and decided to eat subway instead of other well-known fast food chain. He lost 240 pound (109 kilos) due to the subway diet. The national campaign relating this story had a huge success and was follows by a sales increasing. Jared is now known as the subway guy and did a lot of promotion for subway. He did commercial, in-stores appearances; he gives regular talks on fitness and healthy eating. They even run a second campaign to point out the fact that Jared maintained his weight with subway.
Here is a link of a funny US commercial of Subway that focus on the nutritional value of their offer. http://www.youtube.com/watch?v=8_Hp70B6uTs It iq interesting to see that the communication is not the same. In the US, they focus on the nutritional value and loose of weight. In Europe and France, their commercial focus on Choice and customizing: http://www.youtube.com/watch?v=2Cb7Rmh4PU4
After this success story end in 2008, Subway decided to emphasis their communication on the cheap famous foot long sandwich (5$). A very different communication that don’t focus on the nutritional value.
d.Main environmental and market reasons behind the strategy?
Subway decided to use a standardized global marketing strategy. As we saw in the marketing mix, it is the same restaurant concept everywhere, same decoration, same spirit, and same display. Ingredients are the same (same, bread, same meat, same sauce and dessert). The suggested sandwiches are pretty much the same. I’ve been to a subway in France, UK and US and it was very similar, only the name of the ingredient changed. The only change was the consideration of the religious and cultural aspect but in France it’s ok. Subway thinks that their sandwich will overcome the cultural barriers. But Subway will always have to make minor adaptation, for example in China where they have different flavor preferences.
Also in France, Subway developed a partnership with Danone in order to offer a wider selection of dessert with yogurt. They also created a “raclette” sandwich (a French cheese) to satisfy French taste. Also as we talked about the communication is not exactly the same over the world. But whatever country you eat a subs you will always find the two same sizes: six inch. (15cm) and a foot long (30cm). Actually Subway created a 10 cm sub in France.
The main objective of Subway is to be the number one chain and the strategy was to use franchise. The concept of franchising is to copy a successful business model to multiple locations. It is the basics of standardization. This way of development allows a better control of the quality of service and the product and also the store management. Subway built a real global brand image around the world thank to the standardization. Subway uses the same marketing strategy and mix in every country. The technologies make the world smaller and consumer needs around the world tend to become similar
To seduce the French market, Subway use a very methodical strategy , they divided the country into 16 area managed by business developer in charge of finding sport, and finding people to buy a store, in other word developing the network. Speaking of strategy, Subway is not a public company in order to really focus on their product, quality, restaurant and not on issues related to Wall Street companies like financial press release.