Home News Latest Reports 2016 Value Wars – A New Twist On Combo Meal Deals

Value Wars – A New Twist On Combo Meal Deals

Foodservice Brief — April 2016

The QSR segment has been known for offering consumers combo meal deals and lower-priced value menu options. The focus on lower-priced options has been relatively quiet for a number of years, particularly following the recent recession. In an attempt to move consumers away from expecting ongoing steep discounts and to compete more effectively with fast casual operators, many large quick service chains had focused their marketing strategies on quality and more premium product offerings.

It was back in the early to mid ‘90s that combo meal deals were launched by the major quick service hamburger chains. The offer encouraged consumers to buy three items for a bundled price that was less than the sum of the three items purchased individually. Consumer acceptance of combo meals was immediate; the deals increased movement of especially profitable menu items and increased order size. However, more recently combo meals lost their appeal and have been declining in popularity for several years. This was disconcerting to QSR hamburger operators as they had become heavily dependent on purchases of combo meals, particularly at main meal occasions. 

As a result of the ongoing combo meal sales decline, we conducted a study in 2012 to gain a better understanding of this trend. The topline findings from that study revealed the following:

Putting a new twist on combo meals has a way of making them new again

The importance of combo meals to the industry pointed to the need to find a way to address this declining servings trend in order to rebuild consumer demand. To that end, a number of chains across the U.S. are returning to their value-driven ways, particularly the major hamburger chains. Over the past six months, one chain after another has introduced value-oriented combo meal choices. In October 2015, Wendy’s introduced a 4 for $4 Meal. At the beginning of 2016, McDonald’s contributed to the value menu war by launching the McPick 2 for $2 offering. Soon thereafter, McDonald’s changed the offer to 2 for $5, with a different product offering. Following the launch of McPick 2 for $2, Burger King followed suit with a 5 for $4 deal. A number of other QSR chains have added a value proposition of one kind or another to their menu, and there are still many others trying to determine if they need to enter the fray to stay competitive.

Obviously, it’s working for some

These new combo meal deals seem to be resonating with consumers. For the first time in a long while, combo meals ordered at QSR hamburger outlets for lunch/dinner are on the rise. Combo meal visits at the hamburger category for these main meal occasions rose 3 percent for the year ending January 2016 compared to the same period a year ago. Simultaneously, visits to the QSR hamburger category for lunch/dinner are down 3 percent.

Combo meal deals drive traffic

The lift in combo meal visits at QSR burger outlets is being driven by consumers indicating that their combo meal purchase was a deal offer. Combo meals purchased on a deal rose from 6 percent for the year ending January 2015 to 7 percent during the same timeframe in the most recent year. While this may seem like a rather small increase, when we consider the size of the hamburger category, this increase translates into a substantial number of combo meal purchases on deal. Specifically, 567 million combo meal visits were reported on deal for the year ending January 2015. For the year ending January 2016 that number rose to 670 million servings – an 18 percent increase. This once again suggests that given the right promotional offer at the right time, dealing can generate positive traffic growth. Further, combo meal visits that were not reported as part of a deal held fairly steady at 2.8 billion for the year ending January 2016 time period vs. 2015. While not increasing in overall volume, this trend was an improvement from prior years.

Impact of recent value wars

A number of questions have been raised by foodservice operators with regard to the impact that these recent value offers are having on the chains that are offering this new value proposition. To better understand the impact of these new “value wars,” we have designed a study to answer questions specific to these new combo meal offers, including:

  • Did the offers attract new buyers?
  • Did the offers increase loyalty at the chains?
  • How broad was the appeal of each offer?
  • What are the purchase dynamics for each operator?
    • Purchase frequency
    • Spend per visit
    • Average spend per buyer
  • Do these offers appeal to value-seekers who are not chain loyal – what is the buyer overlap?

We’ll use our Checkout TrackingSM solution to help answer these questions. This solution provides longitudinal transaction information straight from consumers’ purchase receipts. The analysis will include information on McDonald’s, Burger King, and Wendy’s. The report is scheduled to launch mid-April 2016.

For details about the report or to purchase, please contact your client service representative or call Bonnie Riggs at 847-692-1767, or email bonnie.riggs@npd.com.

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