Ethnic fast casuals will be strong in 2010

Ethnic fast casuals will be strong in 2010
Tags: Asian, Ethnic, Food & Beverage, Fresh Mex
December 29, 2009

The Subway sandwich chain and other limited-service restaurants have maintained resilient sales gains over the past couple of years, in large part by sticking close to aggressive marketing of low-priced menu items and fresh ingredients. But another influence on the restaurant industry's growth, particularly the fast casual segment, is the expanding popularity of ethnic fare.

Al Bhakta, president and CEO of the Mongolian stir fry concept Genghis Grill, was so certain about the potential prominence of ethnic food he and his partners purchased the Dallas-based brand in 2004.

"The Asian segment was untapped and has been dominated by mom and pops for a very long time," Bhakta said. "(The market) needed someone who has a good concept to grab that business. We've grown every year so we feel we made a good choice."

Customers at Genghis Grill build their own stir fry bowl from a variety of fresh ingredients separated into five main steps: protein, seasoning, vegetable, sauce and starch. Bhakta said top ingredient choices hover around shrimp, chicken, steak, broccoli, mushrooms and island teriyaki sauce. After ordering their bowl, customers take a number, sit down and wait for servers to bring their food to the table. Besides his love of Genghis' food (he and his partners, under the umbrella, The Chalak Group, were loyal patrons and franchisees), Bhakta said his confidence in the concept arose from understanding the world is growing more global in communication and palate.

Bhakta estimates 2009 sales at around $45.9 million for the chain's total 40 units, an increase from 2008's estimated systemwide sales of $29.5 million. Much of that increase is attributed to the aggressive expansion Genghis has enjoyed the last couple of years. The chain opened 14 stores in 2009 and has another "35 deals in the pipeline."

"We're trying to open 20 of those in 2010," Bhakta said.

A steady rise

In October industry analyst Mintel Menu Insights released research that showed sales of ethnic foods have climbed steadily since 2004 and were set to reach a record high of $2.2 billion in 2009. Mintel also forecasted a solid growth of ethnic foods by nearly 20 percent over the next five years.

In addition to growing diversity of people and cultures in the United States, Mintel ascribes the broadened popularity of international foods to an increased following of cooking shows, as well as a rise in international travel. David Browne, a senior analyst at Mintel, said in October that since 2005, more than one million foreigners have become legal permanent residents in the U.S. each year.

"This escalating group is influencing the American palate and piquing Americans' interest in new cuisines," Browne said.

Although Mexican/Hispanic foods represent the largest segment of the ethnic foods market with nearly two-thirds of sales, it is the Asian and Indian food segments driving the market's growth, with 11-percent and 35-percent growth from 2006 through 2008, respectively.

Maria Caranfa, executive director of Mintel Menu Insights, said she predicts regional ethnic food will continue to be popular in 2010.

"Cuisines like Mexican, Chinese and Italian have become so mainstream, however, that it's time to dig deeper," she said. "Restaurants will increasingly pinpoint specific regions -- Tuscany, Brazil, Morocco, or even within the U.S., such as North Carolina barbecue -- to develop tomorrow's ethnic food. According to Mintel's Fast Casual report, fast casual appeals with -- and owes its success in part to -- menu dishes that weave ethnic heritage and worldly aspiration into mainstream packages."

Paul Mangiamele, president and CEO of Charlotte, N.C.-based Salsarita's Fresh Cantina, said consumers are experiencing "burger and French fry fatigue."

Also, most consumers are tight on cash in this down economy, which drives them to the fast casual dining environment.

"People are looking for another option. I've done extensive research and whether it's fusion or another style, Mexican-Latin food as a niche is very popular," Mangiamele said.

Sales at Salsarita's increased nearly 4 percent to $66 million in 2008, but in the beginning of 2009, were negative over 2008. They turned flat in the middle of the year and moved into total positive year-over-year increases of between 1.5 percent to 2.5 percent "depending on how strong December is," Mangiamele said.

The Salsarita's brand includes a total of 80 restaurants in operation with another 100 additional units licensed and sold, though not yet operational.

With more units comes greater marketing strategies and both Bhakta and Mangiamele say social networking sites such as Facebook and Twitter play significant roles -- a fact that reflects the growing popularity of ethnic foods is driven in part by young adults.

"The younger consumers, Generation X and Generation Y, are not scared to try to experience bold flavors and the sales are catching up," Bhakta said. "But of course it's not only that. The world is becoming more global, people are doing more business globally and there is a familiarity with more cultures. The Internet has changed the world, and the economy -- all of that has played a role."