Restaurants boost ad spending to sell limited-time items

Around its Dublin, Ohio, headquarters, Wendy’s is offering a new Pretzel Pub Chicken sandwich, a limited-time offering (LTO) that is expected to be introduced systemwide as early as this week. The build includes a chicken patty, Muenster cheese, lettuce, tomato, cheese sauce and honey-mustard sauce all served on the pretzel bun introduced in July with the Pretzel Bacon Cheeseburger. The premium-tier item is priced at about $4.79 a la carte.

And when that LTO has run its course, sources say Wendy’s could roll out a Spicy Santa Fe Burger with pepper-jack cheese and guacamole on a Cheddar-jalapeňo bun.

The chain-restaurant industry’s wildly accelerated pace of LTO introductions is an important reason for the wild advertising spending spree the industry is seeing. Rising five times fasterthan total U.S. ad spending, restaurants’ explosion is a response to a sluggish, slow-growth marketplace where stealing share is the best way to make gains.

But hand-to-hand share combat is expensive. During Q2 of 2013, restaurant sector advertising was $1.732 billion, a12.6% increase over the same period last year, according to data from Kantar Media. Consider that overall U.S. ad spending was up just 3.5% for the quarter and the size of restaurants’ ad bulge is in perspective. Automotive spending was up 6.9%; retail rose 0.1%.

The Q2 numbers are an acceleration of a trend that began at the beginning of this year. In Q1, the growth in restaurant ad spending was 8% over the prior year while total U.S. spending was actually down by 0.1%.

Through the first half of 2013, restaurant ad spending of $3.354.5 is 10% higher than during the first two quarters of 2012. Total U.S. ad spending was up only 2% in the first half. Restaurant spending is outpacing the total by a factor of five.

Visit BurgerBusiness.com’s New Menu Items Archive and a key driver for soaring ad spending is evident: During the first half of this year, the volume of new menu products—almost all of them LTOs—exceeded what would have been a full year’s marketing calendar not long ago. Burger King was a leader with its “seasonal waves” of new products, which included the BK Rib, Bacon Cheddar Stuffed Burger, Chipotle Whopper, Chipotle Chicken Sandwich, Turkey Burger, Veggie Burger, Philly Chicken Sandwich and Italian Chicken sandwich. That was just during the first two quarters, and doesn’t even include price promotions like the heavily advertised $1.29 Whopper Jr. offer.

But Burger King has been alone in revving up its menu expansion. Jack in the Box advertised several new items including the Hot Mess Burger, Big Stack Burger and Big Waffle Stack, Bacon Cheddar Potato Wedges, BLT Cheeseburger and Chipotle Chicken Club. McDonald’s revamped its Quarter Pounder with new flavors and added Fish McBites and a new Grilled Onion Cheddar burger for its Dollar Menu. Carl’s Jr./Hardee’s first two quarters brought a Jim Beam Bourbon Burger, Super Bacon Cheeseburger, Pork Chop ‘N Gravy Biscuit, Cranberry Apple Walnut Salad and more. Wendy’s introduced its Flatbread Grilled Chicken platform and Berry Almond Chicken Salad (with its major Pretzel Bacon Cheeseburger launch in the first week of Q3).

Last year, BurgerBusiness.com reported Mintel data showing QSRs’ usage of LTOs had increased nearly 50% over the preceding year. The restaurant marketplace hasn’t improved so far in the second half of this year so heavy spending is likely to continue. The difference likely will be that chains will spend heavily on a smaller number of new products. Burger King executives told analysts in July that it was stepping back from its previous strategy of launching multiple new menu items at once. Since then Burger King has added just two new products—the $1 French Fry Burger and Satisfries—one at a time. But with heavy advertising, of course.