“Olive Garden is known for its generously portioned, craveable Italian food at a strong value—with unlimited salad or homemade soup and breadsticks served with every meal,” Jennifer Arguello, executive vice president of Marketing at Olive Garden, said in a press release. “And we regularly hear how much our guests love our timeless dishes like Chicken Parmigiana and our classic meatballs. So, in the spirit of Italian generosity, we’re serving up them up bigger than ever before with the introduction of Giant Italian Classics.”
Of course, we have no way to prove (right now at least) that Olive Garden created this menu in response to its larger Chicken Alfredo success. But it fits so snuggly into what’s happened lately that it’s impossible not to believe it played a role.
Some of Olive Garden’s incentive-laced deals, like the Buy One, Take One deal, are among the most recognizable in the industry. And they drive traffic no question. In Q2, for example, Olive Garden saw its comparable guest counts drop 0.8 percent, year-over-year, thanks, primarily, to less incentives, especially email promotions. It ran 16 fewer weeks during the quarter and that included some weeks where Olive Garden presented multiple offers in the comparable period.
Why did Olive Garden do this? Partly because its healthy margins and top-line sales allowed it to. Also, it gave Darden’s team a chance to shift focus to sales profitability and not seasonal fluctuations, which are tough to predict and, sometimes, even more difficult to implement consistently across an 860-unit system. Returning to what Lee preaches constantly: less incentives and more everyday value helps execution. It aids the process from servers to cooks to marketing teams. What it does as well is create pent-up demand for past deals, and puts Olive Garden in a position of strength amid an undeniably heightened discounting environment.
What you’re seeing large chains do today is take share thanks to increased advertising budgets. It’s an area casual dining stalwarts are fighting back against independents. The industry is becoming far more promotional and check average growth is sub-2 percent, which is an anomaly compared to past years. Will large brands continue to give up margin to advertise and promote this intensely? Probably.
And, for the most part, most of the ad spend increase will come from food aggressive in price. That’s simply the game being played right now. Lee said earlier in the year, “This is putting tremendous pressure on their margins, and we’ll see how long they’re willing to eat into their margin growth to have this kind of intensity out there.”
He uses the word “their” in that context because Olive Garden has travelled a different path. The chain is not so much aggressive on price as it is on abundance and consistency. Olive Garden is focused on building a healthy consumer base. In doing so, it also opens the door for future opportunities where, if need be, Olive Garden can pulse back some of these incentives into its business. That direction is a powerful perch compared to brands that race to the bottom and then try to climb back up.