In Focus
EXECUTIVE INSIGHTS | , UK
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EXCLUSIVE: How Subway's Proving They're About More than Just Subs

2017 is going to be a busy one for Subway as they are looking to introduce a raft of new products to freshen up their menu and compete more fiercely in the breakfast and healthy food-to-go markets.

While their guiding brand principals including local community engagement and reducing their environmental impact haven’t changed, they are putting renewed focus on new product development and a national campaign aimed at getting families fit.

Having just launched a new BBQ Beef Burnt Ends product, for a limited 8 week period, QSR went to find out more about their plans.

How does your NPD process work?

Initially we pull together a range of different ideas and concepts after reviewing current food trends, sales data as well as working closely with our suppliers and other international SUBWAY markets.

From there we whittle the list down to about 30 ideas and online concept research them with consumers.

We then conduct taste tests of the top six products with 100 consumers at our test centres in the Wirral and Watford. The point of this is to get a deeper understanding of what consumers like and don’t like about our products. So overall 200 people have tested each product before they get test launched as a trial and we can refine if required.

The new product trials run in 5 stores to test whether they work without any operational challenges before they are regionally trialled in a minimum of 100 stores. This gives us a really deep understanding of how well the product will perform before national roll out. We may even test 3-4 products in regional trials. If they all work well then we have a great NPD pipeline, but we always look to have plan B’s and C’s in the event that not all products perform as we would hope. This is because we set tough targets before introducing a new product nationally.

What targets and thresholds do new products need to meet before being rolled out nationally?

We ask franchisees who test the products for detailed feedback to ensure we have their endorsement and that there are no operational challenges in rolling out the new items. A new Sub being trialled should deliver a minimum of 4% of product mix and this would rise to 5% for a national launch.

How long does the process take?

From start to finish it takes about 12 months. We have about 2400 stores nationally so our process has to be robust. We put a lot of time and investment into it the process to help ensure the products we eventually launch will be successful.

With test centres in the north and south of the country, is there a North / South divide in the taste tests?

Not so much. The people we test in the south may be slightly more familiar with foods trends coming out of London, but on the whole we tend not to see too many significant differences.

What new products can we expect to see from you this year?

Well we can’t go into specifics, but so far this year we’ve launched a free-range poached egg which has been really successful, and we’ve just launched our new BBQ Beef Burnt Ends product. And it won’t end there either in August we will be launching a low fat Rotisserie-Style Chicken sub which will also be available as a salad.

Salads are an area that we’ll be really focussing on this year too. All stores will also carry an enhanced salad range so customers will be given more choice for their subs as well as their salads. We’re also looking at introducing higher end salad products.

We’ll also be looking at how to expand our breakfast and meat free offerings as we see huge potential here too.

How long have your salads been on offer for?

We’ve always offered salads, we just haven’t focussed on them enough. But what makes Subway different in the salad space is the ability for customers to customize their salads. Each salad has 2 of your 5 a day. We’ll be looking to encourage our customers to try our salads. We don’t have a national price point but an average would be £2.80 for a fully customisable salad. We think that offers great value, and there is limited competition in the customisable salad market.

How much of your product mix is comprised of salads?

Salads are about 6.5% of our product mix but we see that it has huge potential to grow.

How will you be getting the message out about these new products?

We’ll be promoting them with advertising on TV for the first time as well as radio and outdoor support. We are also promoting them more effectively in stores on our menu boards now to raise awareness with our customers. We’ve also grouped together our healthier sub range and received positive feedback from customers on the change and have seen our low fat range sales boosted too.

Your new product developments seem quite up-market- is Subway heading in a new direction?

We’re trying to follow what our customers wants and needs are. Some of our new products are a little more upmarket, but we’re just trying to keep our menu fresh, exciting and up to date for our customers.

We’ve seen a rapid change in the taste palate of customers over the past 5 years in the out of home market. We are just making sure that we continue to meet and exceed our customer needs.

It also appears if there is a renewed focus on NPD at Subway- is this true?

We have a renewed focus on NPD in Subway as a business. It is critical that we change to meet customers needs in a fast paced changing environment. This is true of Subway globally. We’re putting more resource and efforts behind this to put in place the best possible menu changes we can.

The benefit of being a global brand is that we can tap into Subway trends and new products around the world. However, we always do our own research to see what is working and take best practice into what we do.

What trends do you see in consumers?

We see a slow cooked American style food trend. We see also see trends for a wider breakfast offering focussing on lower carb, protein based items as well as healthier, vegetarian options. Combinations for sweet and spicy food is another thing we’re seeing coming out of the London food market scene eg. Korean food.

More generally, customers are increasingly looking for choice, freshness and provenance. So for example free range eggs are now being used by everyone and the expectation is that coffee is bean to cup and either Fairtrade or Rainforest Alliance certified. In order to compete you have to have really good quality products and innovate. If you stay still the competition will jump ahead of you.

Within the sandwich industry we feel we’re in a strong position because very few competitors can offer fresh, made to order sandwiches and salads.

What are your top selling subs?

Our top selling sub is the Italian BLT, followed by the Chicken Tikka and then our Tuna Sub.

Have you seen an impact from Brexit?

Like the rest of the industry, we have already begun to feel the impact of rising food prices linked to the weakness of the pound. IPC Europe, our Franchisee-owned purchasing organisation, buys for the whole of Europe so we benefit from the purchasing power that brings. Wherever possible, they try to balance sourcing between UK and European suppliers to mitigate risk. It is still too early to tell what the longer term impact of Brexit will be but together with IPC Europe, we are watching developments closely and forming contingency plans for the future.

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