Bloomberg News

Olive Garden Woos Millennials With Tapas to Revive Sales: Retail

September 09, 2013

Olive Garden Woos Millennials With Tapas to Revive Sales

The Pizza Fritta Napoli is lightly fried pizza dough, topped with alfredo and served with choice of dipping sauce: five cheese marinara, sun-dried tomato or meat sauce. Source: Darden Restaurants Inc. via Bloomberg

Olive Garden, purveyor of the Never Ending Pasta Bowl, has discovered portion control.

In an effort to attract millennials and boost flagging sales, Darden Restaurants Inc. (DRI:US)’s Italian restaurant chain is introducing small plates, including Parmesan asparagus and grilled-chicken tapas. This amounts to a 180 degree turn for a chain that has long sold big portions to eaters who like a deal.

The challenge for Olive Garden will be encouraging diners in their 20s and 30s, many of whom shun chain restaurants, to drop by for nibbles without alienating loyal customers who convene for regular family feasts.

For millennials, “social occasions generally don’t tend to be large meals in a traditional sense,” said Darren Tristano, executive vice president at Technomic Inc., a Chicago-based research firm. “They’re looking for items they can share, sample, that allow them to graze.”

Small plates may not be “a clean fit” for Olive Garden, given its focus on families and boomers, he said.

Olive Garden created the tapas recipes about six months ago and began testing the food earlier this year in cities including Atlanta, Los Angeles and Grand Rapids, Michigan.

After offering the dishes for a limited time last month, the chain plans to add them to the permanent menu in December. It’s also trying out more small plate varieties such as garlic hummus, chicken meatballs and tortelloni stuffed with cheese, to gauge customer response before introducing them nationwide.

Cash-Strapped Diners

Olive Garden has been struggling in the aftermath of the downturn as Americans eat out less. Efforts to lure cash-strapped diners with such deals as three-course dinners and $6.95 lunches haven’t helped much because Brinker International Inc. (EAT:US)’s Chili’s and Applebee’s, owned by DineEquity Inc. (DIN:US), are also advertising cheap eats.

As a category, sit-down restaurants are lagging behind fast food and fast casual joints. Sales at full-service restaurants will rise 2.9 percent this year to $208.1 billion, compared with a 4.9 percent gain for fast-food eateries, according to National Restaurant Association estimates.

Same-store sales at Olive Garden, which has about 820 locations, have declined in five of the last eight quarters. Darden, which also owns Red Lobster and LongHorn Steakhouse, recently announced it is “significantly” cutting Olive Garden store openings to focus on attracting new customers.

“It’s wise to slow down that growth a little bit,” said Stephen Anderson, an analyst at Miller Tabak & Co. in New York. “They’re getting very close to that saturation point in the U.S.,” which would be between 900 and 1,000 stores, he said.

Trading Discount

Darden has become less valuable to investors during the past 12 months. While it was trading (DRI:US) at a premium to the Standard & Poor’s 500 Index a year ago on a price-to-earnings basis, the shares are now trading at a discount. The company has lost 11 percent in the past year through Aug. 6.

The shares (DRI:US) rose 0.5 percent to $47.68 at 9:34 a.m. in New York.

The company is reworking the recipe for its crispy chickpeas after the seasoning and breading didn’t resonate with diners in testing. It also increased the size of its grilled chicken tapas from one to two skewers of meat after customers said the portion was too small to share.

“If you only have one, people are fighting,” said Jay Spenchian, executive vice president of marketing.

The small plates, priced at $4, are “expanding the way people think about Olive Garden,” he said. “The reaction has been excellent.”

While some customers grab a quick glass of wine and a small plate, others eat them as appetizers to a larger meal or to sample something they’ve never tasted before, he said.

Millennial Competition

Olive Garden has plenty of competition in the race to win over millennials. Applebee’s has introduced late-night specials such as half-price appetizers and girls’ night out to attract younger customers. Its Club Bee’s locations stay open until 2 a.m. and sell sangria and bahama mamas to the party crowd.

Outback Steakhouse, owned by Bloomin’ Brands Inc. (BLMN:US), recently sold a $10.99 steak-tasting option with two or three pieces of beef with different sauces including brandy peppercorn and Bearnaise. Cheesecake Factory Inc. (CAKE:US) has small plates including chicken samosas and fried zucchini.

More millennials are dropping by the Olive Garden in Irving, Texas, to sample the small plates, Alex Aragon, the restaurant’s general manager, said in an interview.

The tapas are “closing the gap between lunch and dinner,” said Aragon, who noted that it’s easier for the younger crowd to text and check their phones while munching hand-held bites.

To contact the reporter on this story: Leslie Patton in Chicago at lpatton5@bloomberg.net

To contact the editor responsible for this story: Robin Ajello at rajello@bloomberg.net


Burger King's Young Buns
LIMITED-TIME OFFER SUBSCRIBE NOW

(enter your email)
(enter up to 5 email addresses, separated by commas)

Max 250 characters

Companies Mentioned

  • DRI
    (Darden Restaurants Inc)
    • $46.88 USD
    • 1.96
    • 4.18%
  • EAT
    (Brinker International Inc)
    • $45.83 USD
    • 0.51
    • 1.11%
Market data is delayed at least 15 minutes.
 
blog comments powered by Disqus