One industry, two markets

Editor's note: Mark DiDomenico is chief insights officer at Elohi Strategic Advisors. He can be reached at

Food and beverage spending occurs in two distinct markets: food-at-home, served primarily by the retail grocery channel, and food-away-from-home, covered by the foodservice channel. The channels differ widely from one another and even though manufacturers often produce products for both markets, they generally employ separate sales and marketing teams for each. 

Similarly, measuring spending, volumes and market share – not to mention consumer attitudes and perceptions – varies greatly for each market. Though research professionals regularly move between the retail and foodservice markets, standard practices for one market often do not apply to the other. Understanding the unique needs of executive leadership, sales teams and marketing professionals in each channel helps researchers provide the most valuable, relevant and important information and insights.

Food-at-home: The retail channel

In 2022, the USDA found food-at-home spending was $1.05 trillion, or 44% of total food spending, with the roughly 63,000 supermarkets in the U.S. accounting for the largest share.

Food and beverage manufacturers seek to influence grocery store shoppers’ purchase decisions using consumer-focused marketing techniques, including everything from television commercials to internet ads to print coupons and of course, social media. For example, two brands of sandwich bread compete on the shelf, with branded packaging and placement, and the consumer chooses.

Data about these choices comes from scans at the checkout counter, allowing for detailed analyses of sales and dollar volumes, product movement or velocity, promotion effectiveness and market share by brand. The scan data that is available today provides foundational insights for nearly all strategies and tactics in the retail channel.

Food-away-from-home: The foodservice channel

According to the USDA, food away-from-home spending was $1.34 trillion in 2022, or 56% of the total food dollar in the U.S. This spending is spread across approximately 1.5 million foodservice locations also referred to as stores or units.

With nearly 23 times as many stores or units as the retail grocery channel, the size and complexity of the foodservice channel makes detailed analysis of product movement and tracking nearly impossible, requiring an altogether different approach to research and insights. 

Industry professionals who measure and track the foodservice channel specialize in both B2B and B2C research and have a different mind-set than their retail colleagues, who focus on consumer and shopper research.

Foodservice – all businesses selling food and beverages for immediate consumption – includes three main channels: commercial restaurants, non-commercial or onsite locations and retail foodservice locations. The most familiar of these, the commercial restaurant channel, is further divided into the quick-service, fast-casual, midscale or family dining, casual dining and fine dining segments. 

Somewhat less understood, the non-commercial or onsite channel consists of segments where food and beverages are sold, but only in support of a different main business purpose: hospitals; nursing homes and other health care facilities; K-12 schools and colleges/universities; travel and leisure (airlines, hotels, entertainment venues, etc.); business/corporate cafeterias; prisons; and military bases. 

The third channel, retail foodservice, includes prepared foods sold in traditional retail locations, including grocery stores (deli/prepared foods), where you might buy a rotisserie chicken or a fresh-made deli sandwich and a cup of soup. Convenience stores, where you might pick up a hot dog off of the roller grill along with your gas fill-up, are another example. The lunch/dinner counter at other outlets like mass merchandisers and warehouse clubs also fall into the retail foodservice channel. 

According to the International Foodservice Manufacturers Association, commercial restaurants account for the largest share of spending (68%), followed by the non-commercial channel (22%) and then retail foodservice with the remaining share (10%). 

Tracking foodservice data

The sheer size and scope of the foodservice industry and the complexity of its supply chain create a significant difference in how the industry is tracked and measured via market research, analytics and insights. Multiple entities purchase and handle products before they even reach the kitchens of restaurants or other locations. (A full description of the foodservice industry supply chain would require a much longer article.)

This complexity, including an extended value chain, means that there is no single provider or service that can track 100% of the market, let alone do so at the SKU level. In fact, the largest tracking service available captures less than 60% of industry sales. In addition, SKU-level tracking only follows sales to the operator/store level, where most products then become ingredients – cheese on a pizza or turkey on a sandwich. At this point, the connection to the SKU is lost as the item becomes part of a menu item or even multiple menu items. There are no standards when it comes to how items are made and placed on menus, so standard tracking data, readily available in the retail CPG industry, does not exist in foodservice. 

Understanding this difference, rather than trying to build a better model with incomplete data, saves market researchers and marketing executives both time and effort, and avoids the pitfalls of “directional” data that relies on estimates and assumptions, rather than specific data, for measuring and tracking product performance.

Shift in mind-set

Executives and marketers transferring to foodservice, accustomed to the clarity of grocery store scans, must adjust to what might seem to be a comparatively data-poor industry. The right shift in mind-set, though, can flatten the learning curve. In reality, foodservice is not data-poor. There are more data sources than ever that can offer a comprehensive view of the industry and food/beverage trends, but the data are different. 

Menu items can highlight category trends and several companies track menu listings and provide insights regarding penetration of trending food items, flavors, ingredients and preparation methods. This reliable source helps marketers understand category trends and identify opportunities for new product development and innovation. After all, menu items start with the ingredients purchased by the restaurant or other foodservice location. 

Menu data, though quantifiable, is not the same as the product velocity and sales data readily available at retail. Does this make the data less insightful? Is this less actionable? No, of course not. In fact, marketers in the foodservice space have for over two decades been using menu penetration and trend data to help educate their customers and to develop new flavors and menu items. 

Exercise caution

Services that capture consumer purchases through panel surveys or credit card receipts can identify consumer demographics as well as attitudes and perceptions for meals purchased at foodservice. While the overall sample sizes for these services can be quite large, there are limitations, especially when researching smaller segments and/or product categories. While a “burger and fries” is a near ubiquitous meal, escargot is not. These nuances mean researchers and marketers alike should exercise caution when evaluating consumer data and remain mindful of the ways it differs from the more straightforward SKU data encountered in retail/CPG. 

In addition to the services mentioned above, many foodservice manufacturers and chain restaurant marketers commission primary research with consumers.  While retail/CPG manufacturers and outlets focus on the shopper, marketers in the foodservice space focus on someone slightly different – the end consumer, diner or eater. 

The retail shopper, usually the head of the household, makes purchase decisions at the grocery store on behalf of their family to fill their pantry. While useful for answering questions about eating at home, such shoppers don’t accurately reflect the full spectrum of the family’s eating and drinking behaviors. When asked about consumption habits, the shopper in many cases may not represent their household members accurately. Eating habits while at work or school can vary greatly from at-home habits, for instance, and accurately capturing insights around those eating habits requires a different perspective.

Consumers make different choices when eating away from home versus at home. And those choices are driven by more than just demographics:

  • specific consumer groups – students or white- or blue-collar workers, for example; 
  • specific price-points – quick-service restaurants or convenience stores (value-oriented consumers and occasions) or casual and fine dining (higher-income diners); 
  • specific dining times – second-shift workers heading home at night (convenience stores and some diners) or on-the-go occasions (bagels and sandwiches, not cereals or soups), and weekend family dinners, to name a few.

Occasions, pricing and logistics matter as much as demographics when considering foodservice consumer purchase decision drivers.

It bears repeating that in foodservice, the end-consumer does not make purchases from the manufacturer; instead, the foodservice operator is the manufacturer’s customer. Consumers generally do not see manufacturer brands (except for some soft drinks, condiments, alcoholic beverages and dessert toppings) on menus. From the meat on your burger to the cheese on your pizza, most consumers are unaware of manufacturer origin. 

In fact, the average consumer would not recognize the top brands operators count on for quality and value. As a result, foodservice manufacturers market directly to their operator customers. Therefore, market research professionals in the foodservice channel employ B2B research methodologies to gain a deeper understanding of how products are used in foodservice and help identify new product and innovation opportunities, including new flavors or formulations, packaging and/or storage options. A&U studies, concept tests and pricing research enable manufacturers to build their brand stories with operators and develop products and promotions targeting specific segments and customers. 

Most foodservice B2B research relies on a small sample of operator purchase decision makers from small chain or independent commercial restaurant operators, plus foodservice managers or directors in the non-commercial segments. Because business conditions and trends extend across the industry and across each channel and segment, a smaller sample, with appropriate coverage, allows researchers to capture significant insights.

Complexity of the channel

The complexity of the foodservice market, from a supply chain that is covered by multiple distribution and sales entities to the number and variety of locations available to consumers, means that foodservice research and insights require a different approach.

Far from being data-poor, foodservice research reflects the complexity of the channel. Attempting to use retail methodologies – or to read foodservice data with retail data expectations – leads to insights that lack meaning in a foodservice environment. Executive leadership, marketing and sales professionals and market researchers must recalibrate their focus to accommodate the different sources and types of data and insights available in foodservice. With that shift in mind-set, they can all glean the insights necessary to drive business success in the channel.