WEBVTT - GLP-1 Patients Cut Snacking, Alcohol Consumption 0:00:23.120 --> 0:00:24.280 Welcome to Chopping It Up. 0:00:24.720 --> 0:00:27.040 I'm your host, Mike Halon Seen, a restaurant and food 0:00:27.040 --> 0:00:30.520 service analyst at Bloomberg Intelligence. Today we're joined by my 0:00:30.560 --> 0:00:33.040 friend Alan Hickock, senior advisor at BCG. 0:00:33.479 --> 0:00:36.400 Thanks for doing this, Alan, Thank you for the invite. 0:00:37.600 --> 0:00:40.839 For those of you that don't know Alan, he's he's 0:00:40.880 --> 0:00:44.800 got an extensive background in restaurants and food and and 0:00:44.880 --> 0:00:47.440 he's a great resource for me. He's very opinionated, So 0:00:47.520 --> 0:00:50.760 I think this is gonna make for a great episode. 0:00:52.120 --> 0:00:53.559 Why don't you start out by telling. 0:00:53.360 --> 0:00:55.840 The audience a bit about your professional background and what 0:00:55.880 --> 0:00:56.680 you do at BCG. 0:00:57.200 --> 0:01:00.360 Well, I'm a I'm a career consumer guy and i've 0:01:00.400 --> 0:01:03.760 been My power alley is restaurants and food. I've spent 0:01:03.880 --> 0:01:10.720 over thirty years in the industry. Much of my background 0:01:10.959 --> 0:01:14.880 and my participation is on the capital market side of 0:01:14.920 --> 0:01:20.479 the restaurant industry, with deep investment banking experience. I spent 0:01:21.360 --> 0:01:24.200 a bit of time as an equity research analysts a 0:01:24.240 --> 0:01:27.640 long time ago. I have operating expenses. I ran a 0:01:27.640 --> 0:01:32.040 couple of chains and now I'm among other things, I'm 0:01:32.200 --> 0:01:36.200 a senior advisor at Boston Consulting Group and if you're 0:01:36.200 --> 0:01:41.240 not familiar with PCG. We're big where the global leader 0:01:41.280 --> 0:01:47.400 in business strategy. We have enormous amount of muscle. Our 0:01:47.440 --> 0:01:51.880 revenues are north well north at ten billion, so we're 0:01:52.320 --> 0:01:57.040 big globally, and we're very deep in restaurants and food. 0:01:57.160 --> 0:02:00.000 We've worked with the majority of the top twenty five. 0:02:00.040 --> 0:02:04.480 I've actually the majority of the top fifty brands in 0:02:04.520 --> 0:02:08.600 the restaurant industries, so we're well versed on what's topical 0:02:09.240 --> 0:02:11.200 and top of mind. 0:02:12.800 --> 0:02:16.280 Good stuff. Thanks for that. Let's just jump right in here. 0:02:16.280 --> 0:02:18.919 Our GLP one's going to change the restaurant industry as 0:02:18.919 --> 0:02:19.359 we know it? 0:02:19.720 --> 0:02:24.000 Probably not, although there's there's there's a lot of question 0:02:24.160 --> 0:02:27.440 and and the caveat I would just throw out up 0:02:27.480 --> 0:02:31.280 front is that the long term impact is still kind 0:02:31.320 --> 0:02:36.520 of unknown because the studies to date, and we're you know, 0:02:36.600 --> 0:02:41.239 we are a data driven company, but the studies to 0:02:41.360 --> 0:02:44.600 date are limited to short term insights and kind of 0:02:44.760 --> 0:02:49.400 small sample sizes. So I'm destroying that out there because 0:02:49.440 --> 0:02:55.359 we will learn. But you know, GLP what really came 0:02:55.400 --> 0:03:00.679 to my attention not as a user, maybe a should. 0:03:00.400 --> 0:03:00.560 But. 0:03:02.240 --> 0:03:09.799 As I started to see you know, investment, well, there 0:03:09.840 --> 0:03:12.919 is going to be an impact on brands and operators 0:03:13.520 --> 0:03:20.000 and in and investors from an investment perspective. And starting 0:03:20.000 --> 0:03:22.960 a couple of months ago, I started to see published 0:03:23.040 --> 0:03:31.560 research reports from from analysts, you know, speculating on you know, 0:03:31.720 --> 0:03:36.840 perhaps investors should think about lightening their positions in certain 0:03:37.000 --> 0:03:38.120 types of companies. 0:03:38.160 --> 0:03:39.360 And I'm gonna I'm. 0:03:39.240 --> 0:03:43.240 Gonna use Krispy Krean just because it's such an easy target, 0:03:44.640 --> 0:03:47.520 you know, donuts and how does that work with weight loss? 0:03:48.640 --> 0:03:53.600 And and you know, you know, the research was suggesting, well, 0:03:53.680 --> 0:03:59.080 you should lighten up because with g l P there 0:03:59.160 --> 0:04:02.400 is going to be of you know, an impact on 0:04:02.760 --> 0:04:07.320 these type of companies as the demand for their products 0:04:07.360 --> 0:04:12.320 goes down. I think that's way overblown, and I'll give 0:04:12.360 --> 0:04:18.120 you some data to support that. Now. G LP drugs 0:04:18.200 --> 0:04:25.120 are driving shifts and consumer behavior which impacts you know 0:04:25.440 --> 0:04:31.120 you're thinking or you know for a QSR and consumer demand, 0:04:32.920 --> 0:04:39.320 and as the penetration of g LP drugs grow, that 0:04:39.600 --> 0:04:47.960 will affect calorie consumption. But it's quite small. Quite frankly, 0:04:49.560 --> 0:04:54.719 you know, the best data that we've seen say that 0:04:55.040 --> 0:05:00.520 you know, you know, at you know, full penetry of 0:05:00.560 --> 0:05:04.040 the sort of total addressable market you know, it might 0:05:04.040 --> 0:05:07.600 be ten percent of Americans and that's by you know, 0:05:07.680 --> 0:05:11.719 the year twenty thirty versus you know, maybe one percent, 0:05:12.440 --> 0:05:15.479 you know, one and a half percent or so using 0:05:15.520 --> 0:05:20.120 them today. And the reason for that is and these 0:05:20.120 --> 0:05:27.760 scenarios are based on patient adoption of the drug, but 0:05:28.000 --> 0:05:33.919 there are a couple of natural governors on adoption. Number 0:05:33.920 --> 0:05:37.839 one is right now, it's an injectable drug, and there's 0:05:37.880 --> 0:05:42.440 a number of them out there, but they're injectable. Number two, 0:05:42.440 --> 0:05:46.320 they're expensive, you know, and I don't know what the 0:05:46.360 --> 0:05:49.640 current pricing is, but I would say, you know, last 0:05:49.720 --> 0:05:55.840 I saw you know, over one thousand dollars you know, 0:05:56.040 --> 0:06:00.640 per per month. So it's expensive. And insuring companies have 0:06:00.839 --> 0:06:04.760 something to say about this because in many cases they're 0:06:04.839 --> 0:06:09.520 asked to pay for them, and that that's appropriate. If 0:06:09.640 --> 0:06:13.920 if it's you know, like a type two diabetes situation 0:06:14.160 --> 0:06:18.839 or you know, a customer that has obesity markers and 0:06:18.920 --> 0:06:22.680 this is you know necessary. But if it's you know, 0:06:22.839 --> 0:06:28.359 cosmetic or this is maybe the right word, but vanity 0:06:28.760 --> 0:06:34.400 use to just simply lose weight. That's where I think 0:06:34.480 --> 0:06:40.479 it is going to be a little less sticky. So 0:06:41.320 --> 0:06:46.640 where does it influence you know, consumer's behavior. Well, it 0:06:46.839 --> 0:06:54.360 has a disproportionate influence on snacks versus meals. So what 0:06:54.400 --> 0:06:58.040 we've seen is that the drug reduces snacking and in 0:06:58.120 --> 0:07:03.760 particular sweetened salty packaged foods, but not so much on 0:07:04.040 --> 0:07:13.160 poultry and red meat because they're immune to changing dietary preferences. 0:07:13.640 --> 0:07:18.720 But you know, sodas and sugary drinks are affected. But 0:07:18.840 --> 0:07:24.360 in many cases that's offset by the availability of you know, 0:07:24.560 --> 0:07:30.040 lower calorie and diet options. So the the impact is 0:07:30.280 --> 0:07:40.000 over indexes on well, consumer occasions, over index on meals 0:07:40.560 --> 0:07:43.240 and they under index and snacking occasions. 0:07:43.240 --> 0:07:45.200 That's just number one. 0:07:45.440 --> 0:07:47.600 And still when you think about the you know, the 0:07:47.640 --> 0:07:52.960 restaurant industry, I mean, what's really drives you know, fast 0:07:52.960 --> 0:07:57.960 food demand in particular, it's convenience, tastes, social connections. The 0:07:58.080 --> 0:08:01.120 use of these drugs at this kind of penetration level 0:08:01.200 --> 0:08:05.400 is really not going to have I don't think much impact. 0:08:06.920 --> 0:08:14.240 And in particular with QSR, which you know, in many 0:08:14.280 --> 0:08:19.480 cases is a lower broadly speaking of lower income demographic 0:08:20.440 --> 0:08:25.280 that has the lowest adoption rate of these drugs today, 0:08:25.720 --> 0:08:30.760 and the drug cost is going to likely be prohibitive, 0:08:32.760 --> 0:08:37.559 you know, at least in the short to short to 0:08:38.120 --> 0:08:46.319 medium term and when you think about adoption, Okay, so 0:08:46.559 --> 0:08:50.240 sort of you know, limited, moderate, or mass over this 0:08:50.480 --> 0:08:53.240 you know seven year period that we're looking at up 0:08:53.280 --> 0:09:00.000 to twenty thirty. You know, the limited adoption is maybe 0:09:00.000 --> 0:09:03.960 twelve million users and mass adoption of thirty six which 0:09:03.960 --> 0:09:11.319 would be about ten percent of the population. But interestingly, 0:09:14.040 --> 0:09:19.800 even at ten percent adoption ten percent of the population, 0:09:21.040 --> 0:09:31.839 the estimate of total caloric consumption reduction is less than 0:09:31.840 --> 0:09:32.440 two percent. 0:09:32.800 --> 0:09:35.880 Yeah. Yeah, yeah, we did that math. 0:09:36.000 --> 0:09:38.840 So you know, so what we'd like to say is like, 0:09:38.920 --> 0:09:41.320 you know, McDonald's can't figure out how to re engineer 0:09:41.360 --> 0:09:43.880 a smaller burger two and a half, you know, decrease 0:09:43.920 --> 0:09:45.400 the size of the burgers two and a half percent 0:09:45.400 --> 0:09:48.560 by twenty thirty. I mean, I think just because of inflation, 0:09:48.640 --> 0:09:51.800 they've been shrinking as it is. So yeah, that's that's 0:09:51.840 --> 0:09:55.040 an interesting point. I still have some more questions too. 0:09:57.720 --> 0:10:00.560 You know, is there some sort of a new bias 0:10:00.640 --> 0:10:04.640 in this right in East coast bias or a bias 0:10:04.640 --> 0:10:07.080 for people on the coast right where people can afford this, 0:10:07.200 --> 0:10:09.760 and we see people that we know that are on 0:10:09.800 --> 0:10:12.600 this drug, and we think this is gonna you know, 0:10:12.840 --> 0:10:14.800 so the investment community thinks this is going to be 0:10:15.200 --> 0:10:19.560 a massive issue, when maybe people in Middle America may 0:10:19.600 --> 0:10:20.680 not care as much. 0:10:21.520 --> 0:10:26.000 Oh well absolutely, I mean again, it's you know, the 0:10:26.000 --> 0:10:32.280 the the use, adoption and just simple you know, wherewithal 0:10:32.360 --> 0:10:37.920 to take these drugs, at least right now is greatly 0:10:38.120 --> 0:10:46.520 influenced by income and wealth. Now that now, that could 0:10:46.679 --> 0:10:55.360 that that could change. You know, if insurers or employer 0:10:55.960 --> 0:11:01.640 coverage increases and they're you know, there are compounding pharmacies 0:11:01.640 --> 0:11:05.240 that are creating their own formulations and they're you know, 0:11:05.400 --> 0:11:08.960 aiming for around you know, two hundred a month in 0:11:09.000 --> 0:11:14.360 a pill form versus a thousand plus and an injectable product, 0:11:14.480 --> 0:11:19.720 so that there is potential for greater adoption. I've changed 0:11:19.720 --> 0:11:22.480 the pill or other low cost forms, but at least 0:11:22.559 --> 0:11:28.920 right now, no, But yeah, you know, if you think 0:11:28.960 --> 0:11:34.960 about you know, higher wealthier demographic areas, yeah, absolutely, there's 0:11:35.000 --> 0:11:36.960 going to be more chatter about it, There's going to 0:11:37.000 --> 0:11:43.120 be more use. And but again, you know, broadly speaking 0:11:43.160 --> 0:11:49.560 for America at large, I have a hard time believing 0:11:49.600 --> 0:11:53.360 there's going to be widespread adoption. You know, more than 0:11:53.600 --> 0:11:57.120 you know, the sort of ten percent that we're predicting right. 0:11:57.000 --> 0:11:59.280 Now, I was gonna say that I'd have to imagine 0:12:00.120 --> 0:12:03.880 that a risk to this thesis would be side effects. 0:12:04.000 --> 0:12:09.280 Right if over time people start experiencing, you know, some 0:12:09.360 --> 0:12:12.360 side of some unwanted side effects that that that this 0:12:12.880 --> 0:12:16.760 would you know, impact adoption of this drug, right. 0:12:17.520 --> 0:12:25.880 Well, I agree with that, especially since we have just 0:12:26.000 --> 0:12:38.160 concluded a very interesting national adoption of brand new drugs 0:12:38.600 --> 0:12:43.160 and we're finding out that these are not riskless and 0:12:43.360 --> 0:12:49.120 there's already you know, sort of anecdotal you know, discussions 0:12:49.200 --> 0:12:55.080 about side effects for the way laws of drugs. So 0:12:57.000 --> 0:13:00.440 but again that falls into that opening caveat that I had, 0:13:00.559 --> 0:13:04.160 which is, you know, we just simply have limited data 0:13:05.040 --> 0:13:09.440 right now in terms of you know, how this is 0:13:09.480 --> 0:13:14.199 all going to work and limited data sets. But absolutely 0:13:14.559 --> 0:13:20.520 the potential for meaningful side effects is going to be 0:13:20.520 --> 0:13:22.280 a big part of that calculus. 0:13:22.679 --> 0:13:24.600 Yeah, I know what, And you and your team did 0:13:24.600 --> 0:13:27.439 a great report that that you shared with me, so 0:13:27.800 --> 0:13:30.839 thanks for that. But what I found really interesting was 0:13:30.880 --> 0:13:32.480 that you know, to your point, you mentioned that there's 0:13:32.520 --> 0:13:35.079 a lot less snacking and that there's a lot less 0:13:35.120 --> 0:13:38.840 alcohol consumption, right, and I understand that these drugs work 0:13:39.040 --> 0:13:42.560 very quickly, right. But you know, if anyone with a 0:13:42.559 --> 0:13:45.400 weight problem just stop snacking and stop drinking alcohol, I 0:13:45.440 --> 0:13:50.040 feel like you can make massive progress and maintain that 0:13:50.120 --> 0:13:52.280 progress over time if you keep those habits. 0:13:52.320 --> 0:13:57.640 Right. Yeah, and and and that's a you know, an 0:13:57.679 --> 0:14:04.400 important point because the largest negative calorie impact in terms 0:14:04.480 --> 0:14:08.960 of consumption, you know, for the folks that are using 0:14:08.960 --> 0:14:13.560 these drugs as some snacks alcohol products with sugar, and 0:14:13.600 --> 0:14:18.880 in those general categories well snacks, alcohol, alcohol, you know, cookies, 0:14:19.760 --> 0:14:24.760 you know, confections, you know, the the change in consumption 0:14:24.960 --> 0:14:29.520 is like sixty to sixty five percent negative. But if 0:14:29.520 --> 0:14:35.000 you look at and this intuitively, this you'll I mean 0:14:35.040 --> 0:14:38.240 this is true, but intuitively you'll understand it if you 0:14:38.240 --> 0:14:42.640 look at the categories like fruits and vegetables, poultry and fish, 0:14:43.280 --> 0:14:48.360 those increase fruits and vegetables is like plus forty percent. 0:14:48.440 --> 0:14:51.840 In poultry and fishes plus twenty percent. So I mean 0:14:51.960 --> 0:14:55.880 that makes sense because you're you know, you're actually thinking 0:14:55.960 --> 0:15:03.160 and acting on you know, tactics to eat healthier and 0:15:03.160 --> 0:15:07.720 lose weight, so you know, off, you know, so poultry 0:15:07.720 --> 0:15:09.720 and red meat, I don't think that there's going to 0:15:09.760 --> 0:15:13.560 be a significant impact on demand yes, there will be 0:15:13.640 --> 0:15:17.360 on sugar and snack options. But in the restaurant industry, 0:15:17.440 --> 0:15:20.800 once again, you know, it's it's more about meals and snacks, 0:15:21.960 --> 0:15:26.240 and so does we have options with diet And you 0:15:26.240 --> 0:15:29.920 know there will probably be a lingering hangover with carbs 0:15:31.800 --> 0:15:36.320 because they're just painted as being the enemy by a 0:15:36.320 --> 0:15:45.720 lot of folks. It doesn't the impact across food categories 0:15:46.040 --> 0:15:51.040 is widely dispersed, which makes sense. 0:15:52.600 --> 0:15:56.120 Okay, cool, So so your customers aren't going to be 0:15:56.160 --> 0:15:59.920 adding GLP penetration to their site selection models anytime soon's 0:16:00.080 --> 0:16:00.360 I was. 0:16:00.320 --> 0:16:06.000 Like, I don't think so, all right, I could. 0:16:06.040 --> 0:16:09.200 We'll find some other things you know in that location 0:16:09.400 --> 0:16:15.320 location location idea other than GOP adoption. 0:16:15.840 --> 0:16:19.360 Yeah cool, all right, so you did? 0:16:19.400 --> 0:16:23.520 You We're on a panel about generative AI at at 0:16:23.680 --> 0:16:28.440 r f DC. You know, chat EPT and these large 0:16:28.520 --> 0:16:32.000 language models have really shined a light on AI, probably 0:16:32.080 --> 0:16:37.440 made most Americans aware that AI existed, right. You know, 0:16:37.520 --> 0:16:41.480 I tell people that I know that I've been relying 0:16:41.680 --> 0:16:45.480 on research from a from an AI, a machine learning 0:16:45.520 --> 0:16:48.480 company since twenty sixteen, and people's minds are blown. 0:16:48.680 --> 0:16:48.880 You know. 0:16:50.040 --> 0:16:53.400 McDonald's investor Day, their management talked about how AI will 0:16:53.440 --> 0:16:56.280 be used to support their gms and their hourly workers. 0:16:56.920 --> 0:16:59.280 It's going to be the backbone for their their customer 0:16:59.320 --> 0:17:02.560 facing software where and right now, there's a lot of 0:17:02.640 --> 0:17:07.879 hype about generative AI. So I'm not completely versed on 0:17:08.040 --> 0:17:10.560 generative AI. I'm sure a lot of people that are 0:17:10.560 --> 0:17:13.200 listening in aren't. So can you talk a bit about 0:17:13.240 --> 0:17:14.560 it and what you think it's. 0:17:14.400 --> 0:17:15.840 Going to do for the restaurant industry. 0:17:17.840 --> 0:17:23.320 Yeah, well, well, first of all, there is a distinction 0:17:23.400 --> 0:17:27.119 between AI and gen AI, which we'll talk about briefly 0:17:27.160 --> 0:17:31.000 at a high level. But I think that my advice 0:17:32.040 --> 0:17:34.919 to operators and brands when it comes to this is 0:17:34.960 --> 0:17:41.720 buckle up because it's coming and it's gonna you know, 0:17:41.800 --> 0:17:45.520 it could come pretty it could come pretty fast. And 0:17:45.800 --> 0:17:50.800 why because there are some great tool sets available here 0:17:51.400 --> 0:17:56.919 for operators and they make sense and it's you know, 0:17:56.960 --> 0:18:01.159 it's just sort of next gen technology that you know 0:18:01.400 --> 0:18:04.399 will be an integrated part of your you know, tech stack. 0:18:06.040 --> 0:18:10.840 But it's coming because it works. And the first waves 0:18:10.880 --> 0:18:15.679 started a few years ago. And this is AI, not 0:18:15.840 --> 0:18:19.320 jen Ai, because jen a jen Ai is new, but 0:18:19.359 --> 0:18:22.040 it start started a few years ago as a response 0:18:22.119 --> 0:18:26.360 to changes in consumer behavior. And so you know, restaurant 0:18:26.400 --> 0:18:30.560 brands have made investments and you know, commercial use cases 0:18:31.240 --> 0:18:34.560 sort of usually top line oriented like third party delivery, 0:18:34.640 --> 0:18:38.720 and you know, thinking about ways to improve your marketing 0:18:40.320 --> 0:18:46.080 and in many cases changed the nature of interactions with customers. 0:18:47.280 --> 0:18:55.760 And and and especially when you think about the pressures 0:18:57.520 --> 0:19:03.320 that restaurant brands are experience seeing today, which is, as 0:19:03.359 --> 0:19:08.679 we all know, well above average and not normal. To 0:19:08.720 --> 0:19:14.359 protect the unit level economics, it's probably smart to build 0:19:14.400 --> 0:19:18.520 on the foundations established in the first way the data 0:19:18.520 --> 0:19:24.280 platforms and point point the activity and point some of 0:19:24.280 --> 0:19:29.879 the investment more towards operations focused use cases like things 0:19:30.119 --> 0:19:34.359 you know that can you know, directly impact profitability, like 0:19:34.480 --> 0:19:39.320 you know, just through a couple of inventory optimation, optimization, 0:19:39.760 --> 0:19:44.639 you know, and things like that. You know, where we 0:19:45.520 --> 0:19:49.480 know that there are going to be significant use cases 0:19:50.680 --> 0:20:00.199 that can can affect profitability. Now, there there's a lot 0:20:00.200 --> 0:20:03.919 of glamour and myth, you know when people talk about 0:20:04.119 --> 0:20:07.399 ai and jen ai and and you've seen it, and 0:20:07.560 --> 0:20:10.159 you know the popular press cheese we're not even going 0:20:10.240 --> 0:20:14.200 to need humans anymore. Well, that's not going to happen, 0:20:15.800 --> 0:20:19.120 but it is going to have an impact on you know, 0:20:19.640 --> 0:20:25.520 you know, the company's human capital, as there is increasingly 0:20:25.760 --> 0:20:32.960 a shift in focus from transactional activities to strategic you know, 0:20:33.040 --> 0:20:34.879 sort of knowing the what to knowing the how, and 0:20:34.960 --> 0:20:37.399 most workforces are under skilled and. 0:20:37.440 --> 0:20:40.000 The how and how. 0:20:41.400 --> 0:20:44.600 I think the consensus and how this you know, gets 0:20:44.680 --> 0:20:49.080 rolled out and adopted. Obviously it's going to the big 0:20:49.119 --> 0:20:52.680 brands first, right, I mean, this is big right now, 0:20:52.680 --> 0:20:59.720 it's big brand sandbox because it's expensive, and I mean 0:21:01.119 --> 0:21:04.600 and the idea that well, it's expensive in it. And 0:21:07.240 --> 0:21:10.199 I think there's sort of four common myths. And one is, 0:21:11.280 --> 0:21:16.439 you know, there's an illusion of instant savings, you know, 0:21:16.480 --> 0:21:21.760 and this promise of efficiency gains, you know, is attractive, 0:21:22.080 --> 0:21:29.280 but organizations are often not ready because they don't they 0:21:29.320 --> 0:21:33.440 don't have their digital capabilities up to snuff. 0:21:34.320 --> 0:21:34.520 Yeah. 0:21:35.000 --> 0:21:42.440 And then the second myth is, you know, it's related 0:21:42.480 --> 0:21:49.800 to the confusion between AI and gen Ai. Most a 0:21:49.960 --> 0:21:55.240 I use cases are still going to be traditional and 0:21:56.080 --> 0:21:59.960 it's it's it's great for you know, you know, customer 0:22:00.200 --> 0:22:09.160 sentiment analysis and some you know, rudimentary operational considerations, but 0:22:09.160 --> 0:22:13.800 but only some are well suited for jen Ai to 0:22:14.560 --> 0:22:20.399 you know, have a material impact like supply chain optimization 0:22:20.600 --> 0:22:28.520 from demand you know, more sophisticated demand forecasts. And then 0:22:30.040 --> 0:22:33.879 a third kind of myth that we're going to find 0:22:33.880 --> 0:22:38.399 out is a myth is and we know this is 0:22:38.440 --> 0:22:42.280 true because it's happened in just about every other category 0:22:42.320 --> 0:22:46.720 of tech that you know has been rolled out all 0:22:46.800 --> 0:22:55.040 of the big vendors. And if you think about you know, Microsoft, Google, 0:22:55.440 --> 0:23:00.000 and you know sales Force, they are all busily word 0:23:00.119 --> 0:23:04.360 get an investing on their out of the box solutions, 0:23:05.640 --> 0:23:08.480 and so there's going to be a partner to pick. 0:23:10.400 --> 0:23:12.399 You know, do you pick the right partner? Well, this 0:23:12.680 --> 0:23:15.760 it almost goes back to like when we were rolling 0:23:15.800 --> 0:23:19.360 out you know, point of sale systems. Did you pick 0:23:19.400 --> 0:23:22.560 the right partner or did you invent it yourself? You know, 0:23:22.640 --> 0:23:27.040 inventing it yourself didn't work out so well. But the 0:23:27.119 --> 0:23:34.320 vendors provide invaluable resources in backbone backbone and capabilities, but 0:23:34.400 --> 0:23:38.159 there's almost always a level of customization that's that's needed. 0:23:38.960 --> 0:23:43.120 And then the other bald fact is this is tech 0:23:44.160 --> 0:23:49.960 and there's a constant question, constant question about whether the 0:23:50.000 --> 0:23:55.520 solutions that are being proposed today or enabled today will 0:23:55.560 --> 0:24:00.840 still be advantaged. You know, in the future and the 0:24:00.840 --> 0:24:05.520 future like when in the future, Well, let's let's start 0:24:05.560 --> 0:24:09.399 with you know, six months, you know, not five years, 0:24:10.240 --> 0:24:13.040 you know, so because it's it's going to be moving 0:24:14.119 --> 0:24:22.440 very very quickly. And again, you know, the the real 0:24:22.520 --> 0:24:25.520 game changer is is the impact it's going to have 0:24:25.600 --> 0:24:29.840 on your human capital and how you integrate it and 0:24:30.119 --> 0:24:42.760 use it to impact profit productivity. And that the obviously, 0:24:42.960 --> 0:24:50.640 the the ability to make significant impacts there is all 0:24:50.680 --> 0:24:54.960 over the map, depending on a the sophistication of the 0:24:55.000 --> 0:25:00.399 company and b, you know, resources and don't know how 0:25:00.560 --> 0:25:03.959 too many operators that wake up with the warnings said, cheese, 0:25:04.840 --> 0:25:06.439 you know, you know what our problem is, we have 0:25:06.480 --> 0:25:14.040 too many resources that I don't hear that very. 0:25:14.200 --> 0:25:16.280 Yeah, yeah, it's interesting. 0:25:16.320 --> 0:25:18.960 I mean, you know, marketing obviously is one I think 0:25:19.400 --> 0:25:25.040 is interesting. Customer service obviously it could improve. One thing 0:25:25.080 --> 0:25:27.080 I saw on the list which I found interesting was 0:25:27.200 --> 0:25:29.240 store design. And I think one of the first companies 0:25:29.240 --> 0:25:33.320 that I recall hearing that had sensors and would track 0:25:33.480 --> 0:25:38.560 everywhere people will go in the store, Waskava. So I 0:25:38.600 --> 0:25:41.000 thought that was pretty interesting when I read that as 0:25:41.040 --> 0:25:47.439 a potential, you know, I put a potential, you know, 0:25:47.720 --> 0:25:48.920 use for generative AI. 0:25:49.320 --> 0:25:52.000 But another one's loyalty. 0:25:52.560 --> 0:25:55.439 It seems like every company I cover is in the 0:25:55.480 --> 0:25:59.400 process of upgrading their loyalty program right now. 0:25:59.480 --> 0:26:03.480 So what motivating this with loyalty? 0:26:03.600 --> 0:26:09.320 Yeah, yeah, Well we've been talking about loyalty for how 0:26:09.359 --> 0:26:18.120 many decades now, and you know, I mean quite frankly, 0:26:18.880 --> 0:26:24.840 if if you go back in time and at BCG, 0:26:25.000 --> 0:26:29.439 we've done an enormous amount of research on this because 0:26:32.480 --> 0:26:36.080 when it works, it could be magic. And we gave it. 0:26:36.600 --> 0:26:38.600 We gave a talk about this at r f DC. 0:26:39.240 --> 0:26:41.960 You know, boy, I'm want to say, almost ten years 0:26:41.960 --> 0:26:46.679 ago on loyalty, and the punchline at the time was 0:26:47.280 --> 0:26:52.600 most loyalty programs do not create value for the enterprise. 0:26:54.440 --> 0:26:57.399 And the reason was because they were very simple, and 0:26:57.440 --> 0:27:00.200 they were points based and they were earning burn learn 0:27:01.920 --> 0:27:04.920 and in some ways you know the way I described 0:27:04.920 --> 0:27:10.800 it as you know, they were very efficient aggregators of discounts, 0:27:12.280 --> 0:27:15.679 but in terms of really having you know, really driving 0:27:15.720 --> 0:27:20.280 the business, you know, in most cases they didn't. But 0:27:20.400 --> 0:27:24.520 today is different. You know, loyalty today is no longer optional. 0:27:26.440 --> 0:27:30.000 You know, you have to It's critical if you want 0:27:30.000 --> 0:27:35.080 to be really competitive, you have to you have to 0:27:35.080 --> 0:27:45.600 be in the loyalty game. And I mean loyalty creates 0:27:45.600 --> 0:27:51.360 a points currency with redemption, with redemption options that can 0:27:51.760 --> 0:27:59.879 help protect economics by actually avoiding inefficient discounting, you know, 0:28:00.119 --> 0:28:02.439 rather than you just give it to everybody just because 0:28:02.480 --> 0:28:04.000 you came in and you spent a butt. 0:28:04.119 --> 0:28:05.760 Well that was the problem with Tim Morton's right when 0:28:05.800 --> 0:28:08.119 they launched it. They gave discounts to people that were 0:28:08.119 --> 0:28:09.240 going to come anyway. 0:28:09.040 --> 0:28:22.560 Right exactly. And so if to active evate, to activate 0:28:23.160 --> 0:28:26.879 a program today, you know, there's three areas. There's in restaurant, 0:28:29.080 --> 0:28:33.919 there's your digital channels, and then there's targeted messaging you know, 0:28:34.080 --> 0:28:42.400 slash personalization and and and and it and the other thing. 0:28:42.440 --> 0:28:47.560 It has to be simple and easy to understand so 0:28:47.680 --> 0:28:53.560 you can incentivize incremental customery behaviors. Otherwise it's it's really 0:28:53.600 --> 0:29:04.120 easy to get lost. And but where where I think 0:29:05.600 --> 0:29:09.080 And if you look at if you we do a 0:29:09.080 --> 0:29:14.640 massive restaurant survey every year, if you when you look 0:29:14.680 --> 0:29:20.760 at what consumers say about loyalty, the bottom line is 0:29:20.800 --> 0:29:28.520 earning points is still number one, but guests are increasingly 0:29:28.680 --> 0:29:37.239 value personalized and other benefits. So you know, what do 0:29:37.320 --> 0:29:41.760 they really like. They like points for purchase, they like 0:29:41.800 --> 0:29:48.040 bonus cash back, they like member sales and promotions you 0:29:48.080 --> 0:29:53.240 know that are targeted, targeted just for them. You know what, 0:29:53.600 --> 0:29:58.960 don't they care so much about exclusive events? You know? 0:29:59.640 --> 0:30:02.480 Interesting? Think what about uh like what about like a 0:30:02.520 --> 0:30:03.200 great table? 0:30:03.760 --> 0:30:06.520 You know, like stuff like that, Because I've heard of 0:30:06.640 --> 0:30:11.120 some some chains that will, uh you know, try to 0:30:11.520 --> 0:30:14.840 have kind of a loyalty program that rewards people with 0:30:15.000 --> 0:30:18.000 like the best table in the restaurant. They'll let them 0:30:18.080 --> 0:30:21.320 try things before there you know, that are coming to 0:30:21.360 --> 0:30:22.400 the menu before they're. 0:30:22.240 --> 0:30:25.200 Available for everybody else to. 0:30:25.120 --> 0:30:27.840 Your point, events, But but those don't seem to be 0:30:28.720 --> 0:30:30.720 uh drivers for for. 0:30:30.880 --> 0:30:32.440 You know, most customers. 0:30:32.480 --> 0:30:35.480 Perhaps is the best way I can answer that, because 0:30:36.680 --> 0:30:40.240 is that best table is at a concierge level service, 0:30:40.800 --> 0:30:45.440 very few concern consumers care about that? Is it a 0:30:45.480 --> 0:30:51.440 personalized reward if you put it in that bucket? Well, actually, 0:30:51.760 --> 0:30:56.000 you know about about a fifth of the consumers care 0:30:56.040 --> 0:30:59.720 about that a lot. Okay, so it sort of depends. 0:30:59.760 --> 0:31:03.280 But so I guess it all comes back down to personalization. Right. 0:31:03.320 --> 0:31:05.000 So that's what it sounds like to me from your 0:31:05.040 --> 0:31:09.360 answer that these chains are realized that their previous systems 0:31:09.560 --> 0:31:12.360 aren't doing a good enough job of personalizing their offers 0:31:12.360 --> 0:31:14.480 for their their loyalty customers. 0:31:15.960 --> 0:31:18.400 Yeah, but you still have to be in the game, 0:31:18.920 --> 0:31:27.400 you know, because it's loyalty is increasingly the hook into 0:31:27.440 --> 0:31:30.800 the rest of the enterprise digital the rest of your 0:31:31.040 --> 0:31:40.480 digital ecosystem. So, for example, nearly sixty percent this is 0:31:40.480 --> 0:31:46.760 a quorean for a survey of loyalty program members use 0:31:46.960 --> 0:31:55.520 the brand's mobile app, versus five percent for non loyalty 0:31:55.640 --> 0:31:59.320