Page 147 - Tom Finocchiaro - RPI Apple Onboarding

PROCUREMENT

APPLEBEE’S MARKET BASKET out-performance in the poultry, produce, bakery, and beef
Applebee’s 2017 full year Market Basket ended down categories, aided by our continued aggressiveness in driving
(favorable) by 2.3% versus full year 2016. This is the second cost out through our sourcing strategies, competitive leverage,
year of lower ingredient costs for Applebee’s, comping over the alternate sourcing, and specification changes–all accomplished
4% reduction in 2016. Favorability was driven by lower costs in concert with Applebee’s.
for the two key spend categories-Beef and Poultry-which were
down 8% and 5% respectively. FOOD
With continuing year-over-year growth in total supplies of
Six of the twelve product categories we track in the Market proteins (all meat and poultry supply up 2.6% in 2017) due
Basket, which accounts for over 70 specific ingredient items, primarily to low feed costs and good producer returns, we’ve
cost less in 2017 than they did in 2016. The chart below been able to take advantage of softer markets. This has
shows the Applebee’s 2017 Market Basket costs versus 2016, resulted in lower beef and poultry costs, even with specification
by product category. changes and cost increases on Chicken Chunks and Diced
Chicken.
Annualized Annualized $ Chg 2017 $ Chg 2017
Category 2017 2016 vs. 2016 vs. 2016 Bakery and Paper/Packaging categories were also favorable,
Spend/Store Spend/Store Fav/(Unfav) Fav/(Unfav)
driven by decreases in pasta costs and re-engineering of the
Beef $89,769 $97,568 $7,799 8% Applebee’s Carryout Bag.
Poultry $100,607 $105,302 $4,695 4.5%
Seafood $35,538 $34,030 ($1,509) -4.4% Seafood category cost was up, driven almost entirely by
Dressings significant increases in Salmon costs in the early part of 2017.
Sauces & $48,135 $48,776 $641 1.3%
Soups We had a very strong result in the Produce category, where our
Grocery $53,160 $53,177 $16 0.0% contracts enabled us to provide protection in what were very
Dairy $39,065 $37,783 ($1,282) -3.4% strong spring and fall markets for Broccoli and Leaf items due
to weather events. Those agreements saved approximately
Pork $26,964 $26,435 ($529) -2.0%
$1200 per restaurant versus the marketplace.
Bakery $26,840 $28,803 $1,963 6.8%
Produce $26,974 $26,491 ($484) -1.8% CSCS played a leadership role, along with Applebee’s, in
Paper & $11,990 $12,328 $338 2.7% evaluating and making recommendations on improvements to
Packaging the Hand-Cut Top Butt program that was implemented in 2016.
Oils $6,728 $6,326 ($402) -6.4% We have secured suppliers and some protections in pricing to
Chemicals $2,475 $2,471 ($4) -0.2% support a Q1 launch of the new pre-cut steaks.
Grand $468,247 $479,490 $11,243 2.34%
Totals Bar/Beverage LTO’s implemented by Applebee’s have been
supported exceptionally well by CSCS and our suppliers–with
very short lead-times, limited forecasts, and short duration
MACRO events. We’ve worked well with Applebee’s and our suppliers to
In a year of generally steady and positive economic activity in deliver and maintain supply.
the U.S. and world economies, a U.S. dollar that lost some of
its strength, and few significant disruptions on the supply side, PACKAGING & INDIRECT
volatility was mostly minimal but we began to see a move to Much of 2017 was spent supporting Applebee’s in testing and
slight inflation in overall markets. commercialization of Applebee’s To-Go Excellence Program.
Multiple suppliers, products, testing and validation processes
After two years (2015 and 2016) of lower Producer Price have been undertaken to support this program that is expected
Index (PPI) moves for food, the PPI was up 1.2% for Consumer to launch in early 2018.
Foods in 2017. Our “Modified” Produce Price Index, which
mimics the Applebee’s Market Basket more closely, was also Non-traditional restaurant support and Local/Regulatory
up 1.2%. Our lower Market Basket cost was driven by our requirements relating to packaging continue to become more

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